Title Defect Allows Buyer to Rescind Contract

The Court of Appeal recently concluded that a potential property buyer was able to rescind the purchase contract owing to a defect in the title to the property concerned.

The buyer had contracted to acquire the property, which was sold at auction, with vacant possession. The sale documentation referred to there being a lease connected with the property, but stated that it had been surrendered under common law. The documentation also contained a condition which prevented the buyer from demanding proof that the lease had indeed been surrendered.

The lease had not, in fact, been validly surrendered. The buyer therefore sought to rescind the contract for purchase on the ground that there was an encumbrance to the title and no guarantee of full title was available.

However, by the time the buyer had taken steps to rescind the contract, the vendor had in fact obtained the termination of the lease. The buyer still refused to complete and demanded the return of his deposit.

The Court took the view that while the contract prevented the buyer from confirming the surrender, there was nothing which stopped the buyer from taking issue with the fact that the vendor was unable to give an unencumbered title at the completion date. This was not a technicality, as the vendor argued.

The buyer was therefore within his rights to rescind the contract.