Lawbite: A solid investment, or not!

• United Kingdom

• Litigation and dispute management
• Real estate dispute resolution

14-11-2016

Solid Rock Investments UK Ltd v Reddy (unreported)

A purchaser, Solid Rock, failed to secure the repayment of its £43,000 deposit when the Court refused to exercise its discretion under s.49(2) of the Law of Property Act 1925 to order repayment.

The parties agreed the sale of a site for £430,000 and the 10% deposit was paid. However, one week before completion, Solid Rock indicated that it was experiencing difficulties obtaining funds from Nigeria.

The seller, Reddy, made two offers to extend the date for completion but having received no response it served notice to complete. Solid Rock was again unable to complete and Reddy rescinded the contract and forfeited Solid Rock’s deposit.

The following day Solid Rock confirmed that it was in a position to complete and was prepared to pay the requisite sum, together with interest and costs. Reddy insisted that it had rescinded the contract and later sold the site to a third party (at an increased price).

Solid Rock sought the return of its deposit, however, the master refused to order repayment and this decision was upheld on appeal.

Key points

The case highlights important points as to the Court’s approach when considering claims to exercise its discretion under s49(2) including:

-There needs to be special or exceptional circumstances to justify overriding the ordinary contractual expectations of the parties that the seller could retain the deposit if the buyer defaulted.

-The court can consider the economic impact on the seller when deciding whether the case is “exceptional”. However, the fact that the seller had not suffered any loss was not, on its own, sufficient ground to order the return of a deposit.

-It is relevant to consider how close the buyer came to completing and any alternatives that it proposed but where the buyer simply could not perform the contract or offer any alternative, the deposit would not normally be returned.

-It is also relevant to consider whether the seller has caused or contributed to the failure to complete, in this case it had not.