Could the property seller issue a Notice to Complete, terminate the contract and keep the 10% deposit? Which case won?
Property buyer to provide form of transfer of property
On 23 October 2014, two companies entered into a standard NSW contract for the sale of land with a sale price of close to $2 million. The contract specified a fixed completion date of 30 January 2015 and a paper-based settlement. The contract required that the buyer prepare and provide the seller with the form of transfer of the property at least 14 days before the completion date.
Property seller issues buyer with Notice to Complete
As the completion date approached, the buyer’s solicitor advised that the buyer would not be ready to settle on that day.
The seller issued a Notice to Complete to the buyer, advising the buyer that it must complete the contract “on or before 3pm Tuesday 17 February 2015”, adding that “in this respect time is of the essence of the contract.”
The buyer provided the seller with the form of transfer of the property. However, it was not in the correct form and the seller could not execute it as a company. The director for the seller instead executed the transfer in his personal capacity as an individual.
Defect in transfer document spotted at settlement conference
The parties agreed to complete the contract on 16 February 2015. At the settlement conference, the buyer’s agent pointed out that the transfer had not been properly executed. The parties decided to reschedule completion for the next business day, 17 February 2015.
However, the mortgagee for the seller later advised that it would not be able to effect settlement on 17 February 2015 as, due to an internal policy, it required three clear business days to reschedule a settlement. Nevertheless, the buyer’s solicitor advised that it remained “ready, willing and able” to complete the contract the next day.
The contract was not completed on 17 February 2015 and on 26 February 2015 the seller served a notice of termination of contract on the buyer, advising the buyer that the contract was terminated and that the 10% deposit paid by the buyer was now forfeited.
The property buyer commenced proceedings against the seller to recover the deposit.