The Gazette 1992

GAZETTE

JULY/AUGUST 1992

Law Reform Commission Reports on Land Law and Conveyancing Law (LCR 39, 40 -1991) £6.00 As part of the Law Reform Commission's ongoing formulation of proposals for reform in conveyancing law and practice two further Reports have now been submitted to the Attorney General and have been published. 1. Passing of Risk from Vendor to Purchaser The first report deals with the passing of risk from vendor to purchaser. As a lawyer one never felt comfortable advising a purchaser that if the property was destroyed between contract and completion the law was that he was bound to buy the charred remains. As the Commission states in its report "it is unsatisfactory that the law as to the passing of risk does not accord with the reasonable expectations of the ordinary person." A few years ago the Conveyancing Committee of the Law Society did attempt to address the issue by providing in general condition 43 of the Incorporated Law Society Conditions of Sale that the vendor would be liable for any loss or damage to property between the date of sale and actual completion save where the purchaser had gone into possession prior to actual completion. While the Commission applauds the general thrust of these provisions in the Law Society's Contract it recognises that all sales of land are not governed by clause 43 of the Law Society's Contract and that the law should be changed by legislation.

purchaser goes into possession of the premises or on completion of the purchase whichever is the earlier; (ii) where the purchaser does not go into possession prior to completion the risk will remain with the vendor: (a) in the case of substantial damage the vendor must give notice of the damage to the purchaser whereupon the purchaser will have the right to rescind the contract within 10 days. If the purchaser elects not to rescind, or fails to do so, he will be entitled to an abatement of the purchase price to be assessed on the basis of the reduction in the value of the property. If the purchaser elects not to rescind, or fails to do so, the vendor will still be entitled to (b) where the purchaser accepts that the damage is substantial, or it is found on arbitration to be such, and agrees to complete or where it is agreed or held that the damage is non-substantial the purchaser is to pay interest to the vendor on the balance of the abated purchase price from the date of the damage or the agreed completion date, whichever is the later, up to the date of actual completion at a rate equivalent to the yield on the latest long dated government security ("the lower rate"); (c) in the case of non-substantial damage to the property the purchaser will be bound to complete but shall be entitled to damages only on the basis of reduction in value; seek specific performance with an abatement of the purchase price;

(d) where the purchaser claims that the damage is substantial and it is subsequently agreed or determined on arbitration to be non-substantial the purchaser shall pay interest at 4% above the lower rate; (iii)the vendor would not be liable for consequential damage arising from reasonable wear and tear not materially affecting value; provisions for charging of interest in the event of damage occurring after a valid completion notice had been served by the vendor; (v) parties would not be entitled to contract out of the legislation in the case of any sale of residential property where vacant possession is to be given on closing. implemented. They go further than the Law Society Contract in that they spell out the circumstances in which a purchaser may rescind. At present one cannot clearly advise a client as to his rights under contract in the event of damage. Is he still bound to complete after the vendor has made good the damage, complete subject to abatement of price or is the contract frustrated allowing him to rescind? These are questions which are never easy to answer. Under the Commission's proposals there would still be room for argument as to whether the damage is substantial or insubstantial. However, the provisions regarding interest may compel the parties to reach a fair and quick settlement of the matter on the hopefully rare occasion damage is caused to the property between contract and completion. These proposals are to be welcomed and will hopefully be speedily (iv) there would also be special

Briefly the Commission recommends that:-

(i) the risk will pass to the purchaser in all situations where the

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