Relationship to Contract
When a contract of purchase is signed, the buyer commits himself unconditionally to buy the property in its actual state and condition subject to the terms and conditions of the title and ownership and the other matters set out in the contract.
In the case of an auction, the highest bidder will be obliged to buy and to that end, to immediately sign the purchase contract. If he does not, the auctioneer may sign on his behalf.
In the case of a private treaty sale, there is likely to be several weeks or more between the auctioneer’s note setting out the terms of sale in principle and the conclusion of a binding contract. Neither buyer nor seller is bound in this period and either can walk away from the transaction without any reason. From time to time legislation has been suggested against so-called gazumping. Ultimately such legislation has not been enacted.
Practice (to 2019)
The buyer’s solicitor or legal adviser will generally make preliminary enquiries and pre-contract enquiries in relation to the property. Once the estate agent’s letter has issued setting out the terms of sale, each party will usually nominate solicitors. The seller’s solicitor will prepare a draft sale contract and sale title and other legal compliance documents and send them to the buyer’s solicitor.
The contract will almost invariably incorporate the Law Society’s standard terms and conditions. They are commonly amended and modified, at least in some respects. The ultimate terms and conditions entail an allocation or reallocation of risk. Ts the seller’s solicitor prepares the contract, the first draft may unduly favour the seller and prejudice the buyer. There may follow a period of negotiation of the terms of the contract.
In tandem with the above procedures, the buyer’s solicitor will usually make pre-contract enquiries in relation to a range of matters which affect the property and will bind the buyer, once the contract is signed. The buyer’s solicitor may either make pre-contract enquiries in relation to matters precluded by the terms of the contract (which might otherwise be raised after the contract) and foreclose or may seek amendments to allow such enquiries to be made and the contract to be unwound if necessary, after contract and before closing.
There is no formal system of local authority or public authority pre-contracts searches in Ireland unlike the position in Northern Ireland and England and Wales. There are no standard pre-contract sets of enquiries for commercial or residential property. Nonetheless, there is a range of matters on which it is appropriate to raise pre-contract enquiries in Ireland.
To some extent, the terms of the standard contract are such as to make what would otherwise be pre-contract enquiries, post-contract enquiries. However, if the contract reverses any of the default provisions, then a buyer must take the relevant enquiries pre-contract.
There is the standard form of non-title information sheet which sets out general information about the property. This includes details of contents, fixtures, and fitting and details of how the property is serviced by way of water storage, electricity, telecommunications et cetera. The enquiries are relatively minimal and are premised on the assumption that there are fundamental flaws in terms of easements and rights and the provisions of services that they can be challenged as post-contract enquiries.
Practice from 2019
The Law Society recommended a change in conveyancing practice in relation to precontract enquiries, to apply from 1 January 2019. The form of requisitions on title with replies, the subject of later chapters is to be furnished prior to the contract.
Certain precontract information under pre-2019 practice is incorporated in the form of requisitions on title with replies to be issued prior to the contract by the seller. They cover
- contents included in the purchase price and fixtures and fittings;
- services taken in charge by the local authority;
- the position as regards sewerage and water;
- the position as regards rates, including commercial rates governed by the Local Government Reform Act 2014, and other periodic charges;
- Building Energy Rating (BER) Certificate
- Local Property Tax, Household Charge and NPPR,
The Law Society Pre-Contract Questionnaire for Property Sale may be used by the seller’s solicitor to take instructions in relation to replies
The buyer’s solicitor must consider the adequacy of the replies to precontract enquiries. Commonly further follow-up more probing questions, will be answered if the response is insufficiently precise or as unsatisfactory.
Unlike the position in Northern Ireland and England and Wales, it was not formerly practice to raise extensive pre-contract enquiries in the Republic of Ireland. However, despite wording in the standard contract that seeks to allow the right to terminate the contract on the basis of adverse matters, it has become common and seen as prudent in the last 20 to 30 years to raise more comprehensive pre-contract enquiries with the seller.
Although the seller is not obliged to answer, the failure to do so will place the buyer on notice that there may be a problem in the particular area. A false answer may have consequences in terms of the contract and possible compensation. See the section in relation to misrepresentations under contract law.
A negligent misrepresentation entitles the buyer to terminate the contract and seek compensation. A fraudulent misrepresentation may also have criminal consequences. The position with innocent misrepresentation is more difficult but will generally give a right to exit the contract. The position is more difficult where the contract has been completed.
The misrepresentation must be one which caused the buyer to enter the contract. In the case of an innocent misrepresentation, there will be a right to cancel or rescind the contract prior to completion. If the term becomes part of the contract (which would be unusual) a breach would have the consequence that there will be a right to damages or in the case of a fundamental breach, a right to terminate and/or damages.
A second-hand property is bought in its actual state and physical condition. In the absence of positive misrepresentation or deliberate concealment of defects, a seller may sell a tumbledown house. He has no obligation to disclose known or unknown defects. It is therefore highly advisable for a buyer to have an independent survey undertaken in respect of the physical state and condition of the property and the land.
The survey should be undertaken by a properly qualified and insured construction professional. A written survey report should be procured. Its terms and conditions should be carefully examined. Invariably there will be some general exclusions that may reflect limitations on the surveyor’s ability to assess certain hidden or concealed risks. Therefore, even a surveyor by a highly-qualified competent professional will not wholly eliminate the risk that there are undiscoverable defects in the property.
The buyer beware principle applies both to the building and the land. Land may be unsuitable for its intended purposes for a variety of reasons. It may contain physical contaminants and entail clean-up obligations under waste and environmental legislation. It may be physically unsuited for building or suited only at undue cost for example, with requirements for expensive foundations. Land may be liable to flooding and other physical shortcomings. All of these risks lie with the buyer under the “buyer beware” principle.
The above principles do not apply to the construction or sale of a new property. There are common law warranties on the part of the builder. It is implied at common law that the house will be reasonably fit for occupation and will be built in a good workmanlike manner with suitable materials. In practice, there will almost invariably be a building contract which will specifically so provide that the property will be the fit for human habitation built in a good workmanlike manner using good quality materials.
Generally, the obligations are owed to the first buyer only. Obligations may be owed to subsequent buyers by the builder under principles of tort/civil liability. This may apply to buyers who buy within a short number of years after construction. They may be deemed to be foreseeable by the original builder so that a duty of care is owed by way of tort/civil liability.
Takes Subject to Discoverable Rights
A buyer will generally take the property with notice of the legal rights which are apparent or discoverable from physical inspection. For example, a third party in the occupation of the property may have rights adverse to the legal owner’s right. He may have contributed to the purchase price. He may even be a squatter who is acquiring or has acquired title. He may be exercising rights such as right in the way or other rights for the benefit of adjoining property over the property concerned.
As a general principle, the buyer takes the matter subject to all rights and matters which are apparent from inspection. The buyer takes subject to the rights of persons in actual occupation of the property. The effect of this is that the buyer must make a careful examination of the property, with a view to ascertaining whether there are persons in occupation who may have rights. The buyer’s solicitor should communicate these to a solicitor and the solicitor should make appropriate enquiries and require proof that such persons do not have rights or interest in the property.
A seller of property is not obliged to disclose defects in the condition of the property. He does not give a warranty that it is habitable or fit for use. There are exceptions in the case of letting of a furnished property in which event there is a covenant or warranty by the landlord that it is fit for human habitation at the commencement of the tenancy.
A common cause of confusion in the past and the subject of professional negligence claims against valuers and solicitors, has arisen from the practice and statutory requirement by which lenders undertake a valuation report in considering the advance of finance. Such reports are rarely structural surveys and are most commonly a valuation with a superficial assessment of the physical property.
In some cases, buyers/borrowers have sought to take legal action either against the valuers or their solicitors for negligence, where they have relied on such reports which have not disclosed defects discoverable by a structural survey.
On signing contact the buyer will usually give a deposit which may be lost in the event that the sale does not proceed due to his default. This could be any figure but is conventionally ten per cent of the purchase price. The buyer is generally unconditionally obliged to pay the balance of the purchase price (Together with stamp duty and other outlay) on the completion date. Therefore, the signing of the contract represents a significant unconditional obligation.
It is therefore essential that the buyer is satisfied that he has the requisite finance in hand on the scheduled closing date. In many cases, he will require an unconditional loan offer or a loan from a financial institution. If the loan offer is conditional, the offer may be subject to conditions with which he cannot know he can comply. If, for example, the loan offer may require life insurance which entails a medical report, there is a risk that the loan monies will not be available.
The same principle applies to any other special conditions which are outside the control of the buyer. Traditionally parties sometimes signed contracts conditional on loan approval. From the seller’s perspective, such contracts may be undesirable as the buyer might readily be in a position to cancel the contract if loan monies were not available. The seller might prefer not to bind himself to a contract at all until the buyer was prepared to make an equal degree of commitment.
The courts have held in respect of such conditional contracts that the buyer is obliged to make bona fide efforts to secure loan finance. He cannot simply use the clause as a pretext for exiting the contract. The failure to buy must be based on a bona fide failure to get finance despite objective efforts.
During the banking crisis, bank loan offers commonly contained conditions which enabled the lender to withdraw for reasons unconnected with the buyer. Due to the risk, this presented, buyers provided conditions which enabled them to exit the contracts if such an eventuality arose.
References and Sources
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
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
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