Remedies for Delayed Completion — SQE1 FLK2 Property Law and Practice

A buyer misses completion. The seller serves a valid notice to complete, and the clock starts running. On the eighth working day the buyer's solicitor telephones with good news: the funds are in, and she can complete tomorrow.

But in the meantime the seller has been offered £15,000 more by a neighbour. So he replies that the notice was for the buyer's benefit, and that he no longer wishes to complete with her at any price. Can he walk away? No. He is now the one in breach, and it is his own notice that did it to him.

This is Remedies for Delayed Completion. Keep that neighbour's offer in mind. We come back to it.

Here is the route. Why a missed completion date does not, by itself, let anybody walk away. Then damages at common law, and what you have to prove. Then the automatic compensation the Standard Conditions give you instead. Then the notice to complete, which is the centre of this topic. Then rescission and what happens to the deposit. And finally specific performance, and when equity says no.

Start with the thing that surprises clients. Completion day passes, nothing happens, and your client wants out. He cannot have it. In a contract for the sale of land, time is not of the essence unless the contract says so. Missing the completion date is a breach that sounds in money, not a ticket out of the contract.

What the innocent party gets instead is a menu. Damages for loss actually suffered. Contractual compensation that needs no proof of loss at all. The notice to complete, which changes the character of time itself. And at the end of that road, rescission. Take them in order, because they build on each other.

Damages first. Late completion is a breach of contract, so the innocent party can recover the loss it caused. Mortgage or bridging interest. Lost rental income. Storage for the furniture. Alternative accommodation. Bank charges and arrangement fees run up because of the delay.

But you must prove actual loss, with mortgage statements, invoices and receipts. No evidence, no damages. And there is a second filter. The loss must have been reasonably foreseeable when the contract was made, which is the rule in Hadley v Baxendale, from 1854. Loss arising naturally from the breach is recoverable. Unusual loss is recoverable only if the special circumstances were known to the party in default.

Watch that bite. A woman's purchase completes four weeks late because the seller has not moved out. She claims £900 of extra bridging interest, £400 of storage, and £4,000 of profit lost on holiday lettings she had to cancel.

The interest and the storage she gets. Both are ordinary consequences of a late move, and the seller knew from the outset that she was buying on bridging finance. The letting profit she does not. Running the cottage as a holiday let over a peak fortnight is no ordinary consequence of buying a house, and nothing was ever said to him about it. Too remote.

Now the second remedy, and it is the one that actually gets used. Where the Standard Conditions of Sale are incorporated, and in most residential transactions they are, Standard Condition 7.2 gives compensation for late completion automatically. No proof of loss required at all.

Read the condition carefully, because it does not ask the question you expect. It does not ask who was late. It asks whose total period of default was the greater, and makes that party alone the payer. Both sides can be in default and only one of them pays.

Then the calculation. Compensation runs at the contract rate, on an amount equal to the purchase price, less, where the buyer is the paying party, any deposit paid. And it runs for the period by which the paying party's default exceeds the other's. Three moving parts, and candidates drop one of them under pressure.

Work one through. Completion is fixed for 5 March on a house at £320,000, with a 10% deposit paid on exchange. The seller cannot give vacant possession until 19 March. The buyer's funds are not ready until 12 March. Completion happens on the 19th, and each side says the other must pay.

The seller pays. His default ran from the 5th to the 19th, the buyer's from the 5th to the 12th, so his was the greater. The base is the full £320,000, because the deposit is deducted only where the buyer is the paying party and here he is not. And the period is seven days, the excess of his default over hers, not the whole fourteen.

What is the contract rate? The Law Society's interest rate from time to time in force, which is 4% above the base rate of a nominated clearing bank. Do not confuse it with the judgment rate, currently 8%, which is what a court awards on judgments. And check the contract, because the parties are free to substitute a rate of their own.

One more piece, and it prevents double recovery. Where a party also claims damages for loss caused by the delay, that claim is reduced by the compensation already paid under the condition. So a seller who proves £2,300 of loss and has already received £900 of compensation recovers a further £1,400. Not £2,300, and not nothing.

And a timing trap worth knowing. Completion money received after 2pm is treated as received on the next working day, so money that lands at half past two is a day late for these purposes.

Now the notice to complete, which is where this topic really lives. Its function is to do what the contract did not: make time of the essence. Under Standard Condition 6.8 the parties are to complete within ten working days of the notice being given, excluding the day on which it is given.

Working days exclude weekends and bank holidays, so a notice served before a long weekend runs on further in calendar terms. And the period is fixed by the condition. A client who wants it shorter because he is in a hurry cannot have it shorter.

Then the condition that catches people out. Only a party who is itself ready, able and willing to complete may serve the notice. Readiness is judged when the notice is given, not at its expiry, and it must continue.

So take a furious seller whose buyer has missed completion, who serves a notice three days later. His own house is still occupied by tenants with two months of their tenancy left to run, and the contract requires vacant possession. He is neither able nor willing to complete on the contract's terms. His notice is invalid.

And that is not a technicality. If he then rescinds on the expiry of an invalid notice and forfeits the deposit, the rescission rests on nothing, and it is his own wrongful repudiation. The tables turn completely. The same is true of a notice served by a method the contract does not authorise.

Which brings us back to our seller and the neighbour's better offer. Look again at the words of the condition. Time is of the essence of the contract. Of the contract. Not merely of the recipient's obligations.

So the notice is double-edged. It binds the server exactly as it binds the recipient. A buyer who tenders performance within the period is entitled to complete. A seller who refuses her is himself in breach, with time now essential. That exposes him to rescission by the buyer, return of the deposit with interest, damages, or an order for specific performance. The higher offer is legally irrelevant.

Nor can he simply take the notice back. A server cannot unilaterally revoke it. Withdrawal needs the other side's agreement.

Suppose the notice is valid and it does expire unanswered. Now the consequences split by who defaulted. Where the buyer fails to comply, the seller may rescind, forfeit and keep the deposit and any accrued interest, resell the property, and claim damages. Where the seller fails to comply, the buyer may rescind, recover the deposit with accrued interest, and claim damages.

Rescission ends the contract, and it is final. The parties are released, and the principle is restitution: put each side back where it stood, returning documents and payments. But the deposit is the standing exception. Where the rescission follows the buyer's own breach, the seller keeps it.

Which produces a nice piece of nonsense you should be ready for. A buyer defaults on an unregistered title and the seller rescinds. The buyer's solicitor writes to say that on unregistered land no more than 5% of the price may be retained. There is no such rule. Registration governs how title is proved, not what becomes of a deposit.

The conventional 10% is forfeit in full, and forfeiture does not depend on proving any loss. Two genuine qualifications do exist. A deposit set well above the conventional 10% may be attacked as a penalty. And under s.49(2) of the Law of Property Act 1925 the court has a discretion to order a deposit repaid, so forfeiture is not absolutely guaranteed.

One more warning about rescission. There is no strict time limit once the notice has expired, but do it promptly. Sitting on the right and continuing to treat the contract as alive can be read as affirmation, or as waiver of the right to rescind altogether.

Last remedy. Specific performance, a court order compelling the other side to complete. It is equitable and discretionary, never available as of right. It is ordinarily granted on contracts for the sale of land, because each property is unique and damages are presumed inadequate. But ordinarily is not always.

The court may refuse where enforcement would cause hardship amounting to injustice, and the hardship may arise from events after the contract was made. In Patel v Ali, 1984, specific performance was refused against a seller who had become gravely ill and disabled since exchange. She depended on the daily help of family and neighbours living within yards of the house. Moving would have isolated her.

The buyer had behaved impeccably throughout. He was left to his remedy in damages. Which tells you what specific performance really is: a discretion the court exercises, not a right the contract confers.

Two special situations worth a line each. In a chain, one party's delay cascades down it, so tell the other side early and try to agree a revised date that works for everybody. And if the buyer's mortgage offer expires before completion can happen, a fresh application may be needed. Where the seller's delay caused that, its cost is a head of damages.

And two smaller points to file. Abatement, a reduction in the price, belongs to defects discovered before completion rather than to delay; for delay the remedy is damages. And the parties can always agree their way out. A variation extending the completion date, a waiver, or a promise the other side has relied on to its detriment.

Which is usually the right advice. A notice to complete is a serious step that can collapse a fragile transaction altogether. If the deal dies, the seller may be left holding a property he has contracted to buy elsewhere. Negotiate the extension first. Serve the notice when negotiation has failed, not instead of trying it.

A word on how SQE1 tests this. You are not asked to recall case names or condition numbers. You get a scenario, five answers, and one instruction: pick the best. This topic runs almost entirely on the Standard Conditions, so the conditions are what to learn. Two names are worth keeping anyway.

Hadley v Baxendale, because it decides which of your client's losses are recoverable and which are simply too remote. And Patel v Ali, because it is the reminder that specific performance is a discretion and not a right. Beyond those two, learn condition 7.2, condition 6.8, and what happens to the deposit.

Four traps. One: a missed completion date is not a way out. Time is not of the essence unless the contract says so. A client who wants to walk away on the afternoon of completion day cannot, and telling him he can is the worst advice in this topic.

Two: check your own side before you serve. Only a party ready, able and willing to complete may give a notice to complete, and a notice given by a party who cannot perform is void. Rescind on the back of it and you have repudiated the contract yourself.

Three: compensation and damages are not cumulative. The condition pays without proof of loss, but any separate claim for loss caused by the delay is reduced by what has already been paid. Add the two together and you have overclaimed.

Four: the deposit is deducted only where the buyer is the paying party. A seller in greater default pays on the full purchase price, because he has had no deposit from which anything could be deducted. It is the commonest slip in a compensation calculation.

Quick check. A buyer missed the completion date under a contract incorporating the Standard Conditions of Sale. The contract gave a postal address, a fax number and a document exchange box for each conveyancer, but no email address. At half past four on a Friday the seller's solicitor emailed a notice to complete to the buyer's conveyancer. It reached his inbox that evening.

Ten working days later the seller purported to rescind and forfeit the deposit. Was the notice validly given, so as to start the ten working days? Three candidate answers. One: yes, because the conveyancer in fact received the notice in his inbox that evening.

Two: no, because a notice to complete must be delivered to the party rather than to his conveyancer. Three: no, because the contract gave no email address for service on the buyer's conveyancer. Pause here if you want a moment.

The answer is three. The conditions permit a notice to be sent by email, but only to an address for the intended recipient given in the contract. This one gave no email address. So email was not an authorised method, the notice was not validly given, and the purported rescission rests on nothing. It is itself a repudiation.

Why the others fail. One assumes actual receipt cures the defect. It does not: using a method the contract does not authorise is fatal however certainly the notice arrives. Two is wrong on the rules, because giving a notice to a party's conveyancer has the same effect as giving it to the party.

Five things to take away. One: time is not of the essence unless the contract says so, so a missed completion date is a breach sounding in money. Two: compensation under condition 7.2 needs no proof of loss and is paid by whoever was in default the longer, on the price less the deposit only where the buyer is paying.

Three: a notice to complete gives ten working days, can be served only by a party ready, able and willing, and makes time of the essence for both sides. Four: on the buyer's default the seller forfeits the whole deposit, subject to the penalty point and the court's s.49(2) discretion.

Five: specific performance is discretionary, and hardship arising after exchange can defeat it. And our seller with the better offer? He must complete, at the original price, because his own notice made time of the essence against him. Next time, Lease Structure and Content.

Practise this topic with exam-style questions at sqe1prep.co.uk. This episode is for education and exam revision only, not legal advice, and we are not affiliated with or endorsed by the SRA or Kaplan.