Contracts for the sale and purchase of Commercial Property are governed by the Standard Commercial Property Conditions (Second Edition) (“SCPC”). The SCPC provide guidance to both the Seller and the Buyer as to the procedure and requirements in each stage of the transaction. These conditions can be varied or removed depending on the agreement between the respective parties.
I’ve put together this post to help provide you with some information in case you are or anticipate being in a position where you are unable to complete on the contractual completion date.
The contractual completion date is usually agreed on the exchange of Contracts between both parties’ solicitors. Alternatively, if a date is not agreed - then SCPC 8.1.1 provides that completion is to take place within 20 working days after the exchange of Contracts; time is not of the essence for these purposes.
A rare situation where a Buyer may be unable to complete could be due to not having sufficient funds to be able to complete or alternatively, the Seller may be unable to complete if the transaction is part of a chain and the Seller’s purchase fails to complete in readiness of its own sale. In these circumstances, the defaulting party will be in breach of Contract and the innocent party is entitled to claim damages. If the Buyer is in default, SCPC 9.3 provides that the Seller will be entitled to interest which is calculated at the Contract rate on the purchase less any deposit monies paid.
In the event of delay and where the innocent party cannot foresee the defaulting party being able to complete, then the innocent party may serve a Notice to Complete (“Notice”). A Notice must be in writing and can be served at any time on or after the contractual completion on the defaulting party or its Solicitor. SCPC 8.8 states that the innocent party must be “ready able and willing to complete,” meaning that it must be in a position to be able perform its own obligations under the Contract.
Once a Notice is served, time is of the essence and the defaulting party must complete within 10 working days. Further, the Buyer must immediately pay the 10% deposit to the Seller.
In a situation where the defaulting party is unable to perform its obligations after the Notice has been served, then the following remedies are available:
SCPC 9.5.1 allows the Seller to rescind the Contract in the event the Buyer fails to comply with the notice to complete together with the following rights:
- To forfeit the Contract and keep any deposit and accrued interest;
- To resell the property; and
- To claim damages.
In the event that the defaulting party is the Seller, SCPC 9.6 allows the Buyer to rescind the Contract and the deposit is to be repaid by the Seller together with accrued interest.
In both events of default, the Buyer must return the documents to the Seller and cancel any registration of the Contract.
It is important to be mindful of the contractual completion date and how to observe and perform your obligations under a Contract.
If you have been served or anticipate being served with a Notice to Complete, it is important for you to discuss the options available to you and the remedies of the innocent party if you are unable to comply.
If you would like to discuss this further, please feel free to contact me or my colleague, Saima Ul-Haq, on 01908 660 966 (Commercial Property Department - Milton Keynes) or alternatively via email on: email@example.com or firstname.lastname@example.org