February 2, 2012

Do co-habitors get an equal share?

With growing numbers of cohabiting couples purchasing property together careful consideration should be given as to how the property will be divided if the property is to be sold or the relationship was to breakdown.

According to the Supreme Court in the Jones v Kernott, in the absence of an expressed intention of how the property is to be held, it is presumed that the property is owned as joint tenants meaning that the couple owns the property in equally shares.  However, if the couple’s common intention is shown as otherwise then they will each be entitled to a “fair share” of the property. The determination of what a fair share would be will be based on the facts of each case.

In this case, an unmarried couple purchased a property as joint tenants. Mr Kernott moved out and purchased a house in his own name. Ms Jones remained in occupation and was solely responsible for the property. After 12 years of separation, Mr Kernott severed the joint tenancy and claimed a half share in the property.  On the facts the court inferred that the parties intended that Mr Kernott would own only 10% of the beneficial interest after the separation.

Always document your intentions as to how you intend to hold the property.  You can document this by a simple Declaration of Trust which will make it clear and prevent having to spend time and money arguing it out in court. In the case of married couples, however, the court has a wide discretion as to how joint assets are divided between husband and wife. 

Can the seller terminate the contract due to the buyer’s failure to pay a deposit?

It is usual in property transactions that a deposit is paid upon exchange of contracts, however there may be circumstances when it is agreed that the deposit or part of the deposit is paid at a later date. This can put the seller in a risky position if the buyer fails to pay the deposit by the time agreed.

Samarenko v Dawn Hill Ltd will be a welcome decision for sellers contemplating accepting a deposit after exchange of contracts. In this case the contract provided that the buyer would pay the deposit several weeks after exchange, however the buyer failed to pay on time. The Court of Appeal found that this to be a serious breach of the contract allowing the seller to terminate the contract. The seller was then able to re-market the property and sell to another buyer.

This situation will be rare and sellers are advised to require a deposit on exchange of contracts as standard.

Sellers who are willing to accept a payment of all or part of the deposit after the date of exchange should make sure that the date of payment is clearly stated in the contract to ensure that the contract can be terminated should the buyer fail to pay on time.

September 30, 2011

Commercial tenants – fulfill your break clause requirements or be lumbered with your lease!

Commercial leases often include a break provision which allows either the landlord or tenant to end the lease prior to the expiry date. Where the tenant exercises the right to end a lease early, the right is usually subject to various conditions, which may include the tenant carrying out certain repair works, re-instating alterations, repairing damage and giving vacant possession.

It is important tenants are aware of their obligations and allow enough time for any repair or reinstatement works to be completed in good time and prior to the break date. It was recently decided in Ibrend Estates v NYK Logisitcis UK that the tenant had failed to give vacant possession, as their workmen continued to carry out repairs after the break date. As such they were not able to terminate their lease and had to continue to pay rent.

You should seek legal advice before entering into a new lease to make sure that the right to break conditions are easy to fulfill. Before exercising a break right get advice on the conditions and what is required to comply with them. Break conditions are strictly construed and if not complied with the lease will continue and you will be lumbered with it and the rent.

August 15, 2011

Can you prevent a party from relying on its own breach of contract?

In BDW Trading Ltd v JM Rowe Ltd the Court of Appeal considered whether the developer was able to exercise its right to terminate the contract when it was in breach. Under the contract, both parties were entitled to terminate by serving written notice at any time if the conditions were not met. However, a party was prohibited from serving a termination notice if it was in breach of its obligations under a particular clause.

The seller claimed that the developer had breached other terms of the contract and that the presumption that a party could not rely on its own breach applied. However, the Court of Appeal held that the parties had positively selected the breaches of contract that would prevent them from being able to terminate and the clause set out an exhaustive list when they could be prevented from exercising the right to terminate. As such the developer was able to terminate the contract.

This case illustrates the need to take care when qualifying the parties' right to terminate. If you wish to include a termination clause ensure, where possible, not to limit the exclusion of using this clause where a party is in breach of contract.

Driving a cart and horses through the Tenancy Deposit Scheme?

Where a tenant has a certain tenancy agreement the landlord is obliged by law to join a tenancy deposit scheme to hold any deposit paid by tenant for the period of their tenancy.  Where these requirements are not met the tenant can apply for an order to be made that the landlord compensates them for an amount equal to three times the amount of the deposit.

The High Court has held, in line with previous decisions, that the landlord has until the date of the hearing to comply with the requirements for dealing with the deposit even if the tenancy has ended!

Whilst the likelihood of a landlord having to pay a penalty under the Deposit Scheme legislation is almost eliminated as a result of this case it is always recommended that the correct procedures be followed if only to avoid the cost and aggravation of disputes.