UK: Don't Jump the Gun - Q&A: A Party Serving a Notice to Complete Should be Ready, Willing and Able to Complete

Last Updated: 23 November 2010
Article by Jessica McGoldrick

Article by Jessica McGoldrick and James Pickering

Originally published in Estates Gazette

IS THE NOTICE OF COMPLETION INVALID?

Question

I own a commercial property development company. We entered into an agreement with a company (PLL), under which we would construct offices and sell them to PLL. PLL paid a 5% deposit. The agreement stated that we could serve a completion notice when the offices had been constructed and all requisite planning permissions had been obtained, provided that we were ready, willing and able to complete.

We obtained planning permission, but this was conditional on us receiving written approval of certain works from the local planning authority. The latter indicated verbally that the works would be approved. The offices have now been completed but written approval has not been granted.

Following completion, we e-mailed a completion notice to PLL, requiring it to complete within 10 days of the date of the notice and to pay a further 5% deposit. The notice has expired and PLL has not completed the contract. What should we do?

Answer

You have not complied with the conditions attached to the planning permission. Verbal confirmation that the works will be approved is insufficient. Thus, because you were not ready, willing and able to complete when the notice to complete was served, the notice is invalid.

EXPLANATION

It is common for the original completion date agreed by parties to be delayed. Most of the time, this will be a temporary hiccup and the transaction will proceed after a slight delay: the contract will usually provide that the innocent party should be compensated for such delay. However, where the delay is substantial, compensation may be inadequate and an aggrieved party may consider serving a notice to complete. This will make time of the essence, so that if the contract is not completed before the notice expires, the party serving the notice can rescind the contract and recover (or forfeit) the deposit or enforce the contract and claim damages for breach of contract.

Timing is Everything

Some or all the standard commercial property conditions (2nd ed) (SCPC) are often incorporated into contracts. The SCPC contain various provisions on notices to complete. It is therefore important to look not only at the contract provisions but also at the incorporated SCPC provisions.

In your agreement with PLL, the notice to complete should be served once the offices have been constructed. Where the parties have agreed a fixed completion date, either can serve a notice to complete any time after the agreed completion date, provided that it is ready, willing and able to complete: see SCPC 8.8.1.

Prior to serving the notice, you should have ensured that you were ready, willing and able to complete. Courts have drawn a distinction between being ready to complete immediately and being ready subject to minor administrative matters. The party serving the notice is allowed a sufficient period in which to set up the necessary administrative arrangements for completion, such as compiling the documents required and obtaining the necessary signatures.

In Jeans v Taylor unreported 6 October 2009, the court also upheld a notice to complete having decided that it had been sufficiently clear to the reasonable recipient that the notice was intended to refer to only part of the land in circumstances where different parcels of land had different completion dates.

You were not ready, willing and able to complete when you served the notice to complete because you had not obtained the required written planning approval. Since this requirement is an express condition of the grant of planning permission, it is not a minor administrative matter. The notice is therefore invalid. You should obtain written approval for the works and, once you have received this, you can serve another notice to complete.

Next Steps and Requirements

Once the notice to complete has been served, time becomes of the essence for both parties. This means that if the party that served the notice is no longer able to complete by the new deadline, the other party will be able to rescind or enforce the contract.

Consequently, if you comply with the planning conditions and serve a valid notice to complete and by the date of expiry PLL is ready, willing and able to complete but you are not, PLL would be entitled to terminate the contract and recover its deposit, even though you served the notice to complete.

Under the SCPC, if the purchaser does not comply with the notice to complete, the seller can rescind the contract and keep the deposit together with any accrued interest. Previous editions of the SCPC provided that the seller could insist on the balance of a 10% deposit when serving a notice to complete.

However, the current edition does not provide that the seller can insist on the balance of a 10% deposit where a lower deposit has already been accepted. You cannot therefore require PLL to pay the balance of the deposit up to 10%, unless this has been specifically provided for in the agreement.

The SCPC provide that once a notice to complete has been served, the contract must be completed within 10 working days. If the notice was valid, the reference to 10 days would be construed as 10 working days.

The SCPC state that notices may validly be sent by e-mail to the e-mail address provided in the contract. However, some contracts exclude this provision. Once you have complied with the relevant conditions to be able to serve a valid notice, you will have to check that this provision is incorporated into the agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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