Since the peak of the housing boom in spring 2007, when work on many new build homes began, property prices have plummeted by about 30%, making them worth much less than the original selling price.
Many banks are now reluctant to agree mortgages for such properties, meaning some prospective purchasers face losing large deposits and in some cases, being held liable for the total cost of the apartments as agreed at the height of the boom. It not beyond the realms of possibility that an increased number cases come to the courts concerning new build conveyancing contracts as purchasers attempt to get out of contracts in a difficult market.
In a recently reported case North Eastern Properties Ltd v Coleman & Anor the High Court held that sale contracts remained binding and that the purchasers had not been entitled to serve the notice to complete and the contracts had not been rescinded. The contracts provided for completion to take place within ten days of the flats being constructed. Until this happened, the buyers could not serve notices to complete. In addition, the seller's breach of its obligation to construct the flats with all due dispatch was not sufficiently serious to amount to a repudiatory breach of contract.
The new build developer and purchaser had exchange contracts for the sale of 11 flats that were in the process of being constructed. Following a delay in the developer finishing the flats, the buyers served notices to complete. The developer did not complete within the period specified in the notices served by the purchasers. Once the flats were finally constructed, the purchasers did not complete. The seller brought a claim for specific performance.
This court decision highlights certain practical conveyancing points concerning conveyancing contracts for new build residential properties and notices to complete.