A buyer who pulled out of a house purchase has been ordered to pay compensation for the fall in value that took place in the two years after the deal fell through.
The buyer had argued that forfeiting his deposit should be adequate compensation, but the Court of Appeal disagreed.
The case involved a buyer who agreed to purchase a house and complete by 30 June, 2008. He failed to do so. The seller put the property back on the market but was unable to find another buyer and eventually had to move back into the property.
The house was valued at £605,000 at the time the sale was due to complete. This had fallen to £545,000 by October 2008 and to £495,000 by September 2010.
The buyer submitted that damages should be assessed on the basis of the property’s value at the time the purchase agreement was breached. The shortfall would therefore be covered by forfeiting the deposit and there would no more damages to pay.
However, the Court of Appeal disagreed. It held that the availability of a market was highly relevant to the assessment of damages where a buyer failed to complete a purchase of land. It was hardly ever the case that a new purchaser could be found who could proceed to contract immediately.
The seller in this case had been unable to find another buyer and so had to move back into the house. The property market had declined during that time and it was appropriate that he should be compensated for that loss. Damages should therefore be assessed in relation to the date the seller moved back into the property rather than the date the contract was breached.
Please contact us if you would like more information about the issues raised in this article or any aspect of buying and selling a property.
Anthony Wooding | Managing Partner