Pre-Completion

Interests of Seller and Buyer

Prior to 2009, the position following a majority Supreme Court decision, was that the buyer obtained a beneficial interest in the property to the extent of the purchase price paid. The  Supreme Court minority followed the traditional view that the buyer obtained a beneficial interest in the whole property upon signing a contract, albeit one that could be lost by failing to comply with the contract.

The seller retains possession of the property until the purchase money is paid and he has a lien for the purchase money. He has an insurable interest. In accordance with the modern form of standard contract, the responsibility for material damage remains with the seller. Therefore the seller should maintain insurance until completion.

re a judgement mortgage is registered against the seller after the contract, it is defeated upon completion of the sale. The above mentioned Supreme Court case held this to be so, notwithstanding that the seller retained the substantial beneficial interest.

The 2009 land and conveyancing law reforms reinstated the traditional position that upon a sale contract being entered, the beneficial interest in the property passes to the buyer. This takes priority over any later interests created by or against the seller. This is the case provided that there is an enforceable contract that could be specifically enforced by court order in accordance with the criteria applicable to specific performance.

Once a sale contract is in place, the seller’s interest is in the nature of money and the buyer’s interest is in the nature of real property. The seller is entitled to possession of the property as well as its rents and profits in the case of leased land, until the full purchase money is paid.

Rights & Duties of Seller

After the contract, the seller has a duty to maintain and take care of the property on behalf of the buyer. This is consistent with the notion that the buyer is the beneficial owner of the property. It appears that the seller is obliged to maintain the property even if this requires some positive action, while he retains possession of it. He may be obliged to take action against trespassers.

The seller has a lien for unpaid purchase money, before and after giving possession while the purchase money remains unpaid. After he gives possession it becomes an equitable lien so that it is liable to be defeated under certain circumstances. The lien allows the seller to sell the property in satisfaction if the obligation is unfulfilled. It may be registered as a burden on the property in the case of registered title.

The seller remains entitled to the rents and profits of the property until the date of completion. The common law rule is that the seller is entitled to interest only (and not also the rents) after the completion date, provided he is not in default. The Law Society General Conditions provide that the buyer is to pay interest where the sale does not complete by reason of his default on the closing date or such subsequent date thereafter while the fault is not that of the seller. The seller cannot claim interest if he is in default.

Under the Law Society General Conditions, a seller who is not in default is entitled both to interest and to retain the rents receivable of the property net of outgoings until completion. A seller is not entitled to delay completion only because of a dispute in relation to liability for interest or the amount of interest. Completion is to be without prejudice to the right of the seller to pursue an interest claim.

Death and Bankruptcy

The death of the buyer or seller before completion does not negate the contract. The estate of the respective parties are bound by the contract. The property is dealt with as purchase monies in the seller’s estate and as real property (land / buildings)  in the buyer’s estate.

The bankruptcy of the buyer or seller does not negate the contract. The seller’s or buyer’s interest in the property vests in the Official Assignee. The seller may theoretically enforce against the official assignee but his claim will be abated in accordance with bankruptcy provisions.

The Official assignee in bankruptcy can perform on behalf of the buyer’s bankruptcy estate, if this is possible and beneficial. The Official Assignee in bankruptcy may also disclaim the contract. See the sections on insolvency. Similar provisions apply in respect of the liquidation of a company. The liquidator is in a similar position to the official assignee.

If the seller permits the buyer into possession prior to completion and payment of the purchase monies, then his options for enforcement may be weakened if the buyer does not perform. Sometimes buyers are allowed to enter possession under a caretaker’s agreement which acknowledges that they do so only as a licensee of the seller. In practice, it may be difficult to obtain possession of the property back quickly in these circumstances f the buyer defaults. Therefore, the unpaid seller takes a significant risk.

The default common law position is that the buyer is entitled to gains and takes the risks of losses in respect of the property after the contract was made. The standard Law Society General Conditions reversed this position and make the seller liable for loss and damage, howsoever caused (other than by or on behalf of the buyer). Therefore the seller should maintain insurance in respect of material damage (e.g. fire et cetera) to the property until after completion.

Insurance

The buyer has an insurable interest in the property from the date of the contract. Under the default position which is reversed by the Law Society General Conditions, he must in practice insure against the loss of the property.

The seller is liable for any loss or damage howsoever occasioned (other than by the buyer or his agent) to the property (and the purchased movable goods) between the Date of Sale and completion. This liability (including liability for consequential or resulting loss) is not as to the amount thereof exceed the Purchase Price.

The liability imposed on the seller does not apply:

• to inconsequential damage or insubstantial deterioration from reasonable wear and tear in the course of normal occupation and use, and not materially affecting value
• to damage occasioned by operations reasonably undertaken by the Seller in his removal from, and
• vacation of the Subject Property, provided that the same are so undertaken with reasonable care
• where any such loss or damage has resulted from a requirement restriction or obligation imposed by a competent authority after the Date of Sale.

Limited Implications

The above position on risk does not  affect:

• the buyer’s right to specific performance in an appropriate case
• the buyer’s right to terminate or repudiate the Sale upon the Seller’s failure to deliver the property substantially in its condition at the Date of Sale (save where such failure shall have been occasioned by the buyer or his agent)
• the operation of the doctrine of conversion (see above)
• the buyer’s right to gains accruing to the Subject Property (or the Purchased Chattels) after the Date of Sale
• the buyer’s right to effect on or after the Date of Sale his own insurance against loss or damage in respect of the property or any part of the same (or the purchased goods)
• the rights and liabilities of parties other than the seller and the buyer
• the rights and liabilities of the buyer on foot of any Lease subsisting at the Date of Sale, or
• of any arrangement whereby the buyer shall prior to Completion have been allowed into occupation of the property or any part thereof (or into possession of the goods).

Registration of Contract

Under ordinary principles of priority, it would be possible in principle for a seller to sell the property to a third party free from the beneficial interest/equitable interest created by the contract. The seller will, of course, be in breach of the contract but the third party buyer without notice of it could take free from it.

If there is a long delay between the date of the contract and completion, consideration might be given to protecting the buyer’s interest under the contract by way of a caution or other note registered in the Land Registry or the Registry of Deeds.

Court Application on Legal Issue

There is a procedure whereby questions arising in the context of the sale of land may be referred for summary determination by a court. This was formerly in the Vendor and Purchases Act 1874 and is now in the 2009 Act.

Any party to a contract for the sale of land may apply to the court in a summary manner for an order determining a question relating to the contract. On such an application the court may make such order, including an order as to costs, as it thinks fit. This includes a question relating to any requisition, objection, claim for compensation or other question arising out of or connected with the contract, but does not include a question affecting the existence or validity of the contract

Apportionment Account

The seller’s solicitor is to furnish the buyer’s solicitor with the apportionment account where there is income and outgoings of the property. The standard Law Society contract provides that rents, profits, rates, taxes, outgoings and money (including rent, profit, rates, outgoings and money payable in advance) referable to the property are to be apportioned.

In the case of residential properties, local property tax, ground rent and service charges may apply. Commercial rates and statutory waters charges may apply to commercial property. In the case of investment properties, the rental income will be apportioned

The apportionment takes place to the date upon which the sale actually takes place unless otherwise agreed. The apportionment is made up to midnight on the apportionment date.

Income such as rent may fall due on a particular day and may be pre-paid in advance. Outgoings such as service charges and rates are invoiced periodically often yearly to the person who is the owner of that date. There will generally be prepaid.

The seller must account to the buyer for income such as rents and profits of the property which arise after the completion date. The buyer must account to the seller for all outgoings such as rent and rates rising in respect of the period after completion. The liability which will have arisen or the payment will have been received prior to that date must be apportioned with reference to the apportionment date, generally the completion date.

Interest

The rate of interest is specified by the terms of the contract. It may be changed on the memorandum page of the contract or in default is 4% above the Courts Act (interest on judgement rate)

If by reason of any default on the part of the buyer, the Sale has not been completed on or before the later of the Closing Date or such subsequent date whereafter delay in completing shall not be attributable to default on the part of the seller the buyer shall pay interest to the seller on the balance of the price remaining unpaid at the stipulated Interest Rate for the period between the Closing Date (or such subsequent date) and the Completion Date. Such interest shall accrue from day to day and shall be payable before and after any judgment.

The seller shall in addition to being entitled to receive such interest, have the right to take the rents and profits less the outgoings of the property up to the Completion Date.

If the seller by reason of his default is not able, ready and willing to complete the Sale on the Closing Date he shall after that, give to the buyer at least five Working Days’ prior notice of a date upon which he shall be so able ready and willing and the buyer shall not before the expiration of that notice be deemed to be in default. No such notice is required if the seller is prevented from being able and ready to complete or to give said notice by reason of the act or default of the Buyer.

Delay & Interest

If by reason of any default on the part of the seller the Sale shall not have been completed on or before the later of the Closing Date in the contract and such subsequent date after which delay in completing shall not be attributable to default on the part of the buyer, the seller shall pay compensation to the buyer calculated as the amount of the  Price at the Stipulated Interest Rate for the period between the Closing Date (or as the case may be the subsequent date as above) and the Completion Date. The seller shall not be deemed to be in default during the period of notice given above. Such compensation shall accrue from day to day and shall be payable before and after any judgment.

Neither the seller nor the buyer is entitled to delay Completion solely because of a dispute between the parties with regard to liability for such interest or compensation (if any) or as to the amount of such interest or compensation payable. This is provided that Completion and the delivery of any deed is strictly without prejudice to the right of the seller to pursue his claim for interest or the right of the Buyer to pursue his claim for compensation.

The submission of an apportionment account made up to a particular date or other corresponding step taken in anticipation of completing the Sale shall not per se preclude the seller from exercising his rights. In this case,  the apportionment account or the said other corresponding steps are deemed not to have been furnished or taken, for the purpose of the dispute and the seller is entitled to furnish a further apportionment account.

References and Sources

Primary Texts

Law society of Ireland: Conveyancing 9th Ed Brennan et al.

Investigating Unregistered Title- Magee 2012

Irish Conveyancing Law- Wylie & Woods 4th Ed 2019

Irish Conveyancing Precedents- Laffoy

Irish Conveyancing Statutes – Wylie 2020 6th Edition:

eConveyancing and Title Registration quantity

Complex Conveyancing Law Society PPG Hession 2nd Edition

 

Registration of Deeds and Title in Ireland – Deeney 2014

UK Textbooks

Conveyaning Handbook 28th Ed. Silverman et. al (annual)

A Guide to Conveyancing Residential Property by Alan Stewart

A Practical Approach to Conveyancing (22nd ED) Robert Abbey and Mark Richards

A Practical Approach to Commercial Conveyancing and Property 5th Ed Robert Abbey