Rescission of Contract - Use it or Lose it!

The Standard Conditions of Sale of Leasehold contain (at 8.3.3) conditions under which the contract for sale can be rescinded if one party does not complete at the time specified in the contract. The purpose of the condition is to allow both parties to consider their positions in the event that the landlord of the premises appears likely to refuse to agree the transfer of the lease to the proposed purchaser.

Under the standard condition, in such circumstances the buyer has a right to demand the return of their deposit. However, this right must be exercised promptly. In a recent case, a purchaser failed to give a notice rescinding such a contract either within three days before the completion date or within a reasonable period of time thereafter.

In the court's view, in such circumstances the vendor had been entitled to continue to work on the basis that the contract would be completed. It ruled that the purchaser's deposit was not refundable and made an order that the purchaser complete the purchase.

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