Conditional Contracts are generally not desirable but in some cases parties will insist on entering into them. They are uncertain and come attached with risk so are not considered appropriate for use in your average Conveyancing transaction. However, they may be suited to the following scenarios:
- Where the Buyer has not had the opportunity to carry out local searches or enquiries of the property, conducted a Home Survey or where mortgage arrangements have not been finalised
- Where the contract is dependent on planning permission being granted
- Where the consent of the Charities Commissioner under Charities Act 1993 is required
- Where the sale is dependent on permission being granted by a third party, e.g. landlord’s consent under a lease
- Where the parties wish to be bound by a contract but some unresolved matter prevents them going ahead for the time being, e.g. the seller needs to acquire part of the estate
Conditional contracts leave an element of uncertainty so most conveyancers will advise their clients from entering into them unless they absolutely need to.
Conditional contracts should never be entered into where there is a related sale or purchase involving an unconditional contract. If the conditional contract failed to go ahead for some reason then there could be difficulties in terms of the related transaction which would have to proceed due to contractual obligations. If the related sale or purchase did not proceed this could lead to a breach of contract.
Before entering into a conditional contract the parties should consider whether there is another option, e.g. if planning permission is pending then it would be advisable to wait until the decision came through rather than enter into a conditional contract.
It is usual to insert a time frame in the condition so the parties know where they stand. If the condition is not fulfilled within the time frame the parties withdraw and the contract will be treated as if it never existed.
Care must be taken when drafting the condition and precise events on which the contract is based must be considered.
Consider the following when drafting the condition:
subject to a mortgage:
Specify the name of the lender, the amount of the advance, time limit by which application must be determined, should the buyer be entitled to withdraw from the contract if the mortgage offer is subject to certain conditions or a retention is to be made?
subject to survey:
Named surveyor, what type of survey, which defects revealed by the surveyor would entitle the buyer to bring the contract to an end, time limit for obtaining the survey
The terms of the condition must therefore be clear and certain otherwise the contract runs the risk of being declared void if the matter comes before a court.