Court Rules on Property Sale Retention

In deciding on the meaning of agreements regarding the construction and sale of a residential property, the Court of Appeal has ruled that £35,000 retained from the purchase price should be released, subject to any financial compensation to which the purchasers may be entitled in respect of non-performance of the contract by the vendors or the builders of the property.

The retained sum had remained in the hands of the purchasers’ solicitors since completion of the sale in 2001. The purchasers argued that there was no obligation to release the sum on the basis that the vendors had failed to comply with certain preconditions for such a release, including a requirement to arrange a ‘Section 106’ agreement (a form of agreement used in some planning consents) with the local authority and completion of various ‘snagging’ jobs.

However, the Court ruled that the interpretation of various agreements as advanced by the purchasers was, in some respects, ‘most improbable’. The purpose of the retention was to act as security for the purchasers by ensuring that they had a sum available to indemnify themselves in respect of any loss or damage they might suffer through a failure by the vendors, or the builders of the property, to address the various issues that remained outstanding upon completion of the sale.

In upholding an appeal by the builders, the Court ruled that they were entitled to the retained funds subject to a set-off in respect of any loss or damage suffered by the purchasers as a result of any failure by the vendors or the builders to perform their various obligations. The case was remitted to the County Court for a decision to be reached on the value of any such set-off and what part, if any, of the retained sum is due and payable to the builders.

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