After sales service?
Posted by Susan Hart on 13th December 2011
A recent court decision has highlighted a seller’s liabilities, together with the wider implications of what needs to be done for the provision of services, when selling off farm buildings for development.
The facts
In Howard-Jones v Tate, a seller of outbuildings at a farm in Lincolnshire had contracted to provide new directly metered electricity and mains water supplies for the purchaser, within six months of completion. The seller did not comply with this obligation. After more than six months had passed, the buyer’s solicitors contacted the seller’s solicitors and eventually sent a letter requiring the seller to carry out the works by a certain date or the buyer would rescind the contract, request the return of the purchase price and claim costs and damages. The works were still not done. Although the buyer initially succeeded in his request to set the contract aside and put him in the position he would have been had he not entered into the contract, the seller successfully appealed.
The Court of Appeal
The Court of Appeal looked carefully at what should happen to the contract where the seller is in breach of a condition, which takes effect after the contract is completed by the transfer of the land to the buyer. In the circumstances, they decided that the buyer could not rescind the contract – i.e. he could not go back to square one and ask for the purchase price back in return for transferring the land back to the seller. The buyer would, however, receive compensation for the losses he actually suffered, which would equate to the costs involved in him installing the services, and the losses suffered because the services were not available in time.
Planning ahead
This case has highlighted what is a very common problem when selling off redundant farm buildings for non-agricultural use – sorting out the services, so that the seller and the buyer are able to utilise their separate parts of the farm after completion without reference to the other. A seller will be best served by sorting out, before his property is put on the market, how the property to be sold will be connected to the main services: water, electricity, gas (if available), sewerage, and telephonic and data communication. It is always advisable to put in separate and separately metered services for everything. This means that the buyer will be directly responsible for the costs of the supply and for the maintenance of the relevant supply conduit. Any service which is shared can, however well documented, be a source of dispute in future.
Drafting tips
It is not cost effective for a seller to make the separation before a sale contract is entered into; but the case highlights the fact that, if the seller contracts to put in new services, then he must do so. From the buyer’s point of view, the contract should provide that a sum of money is retained from the purchase price to cover the installation costs, so that there is a pot of money that the buyer can call upon if the seller fails to comply with his obligations. This would save on the costly litigation undertaken by the parties to Howard-Jones v Tate.
