Standard Conditions of Sale - rules on sub-sales confirmed

Contracts for the sale of property (or the grant of a lease of property) are commonly based upon one or other of two standard sets of terms and conditions generally recognised throughout the legal profession.

The Standard Conditions of Sale (4th Edition) are used commonly for domestic residential conveyancing transactions whilst the Commercial Property Conditions of Sale (2nd edition) are more routinely used for commercial property transactions and those dealing with land development.

The recent High Court case of Pittack v Naviede (June 2010) highlighted a small but significant difference in the two sets of conditions of sale.

The Commercial Property Conditions expressly prevent the purchaser from calling for the property to be transferred to a nominated third party by way of a sub-sale but the Standard Conditions of Sale do not, merely preventing the purchaser from transferring the benefit of the contract as opposed to prohibiting sub-sales.

In the Pittack case the proposed seller tried to block the sub-sale of a lease of a property by the original buyer but the Court held that because he had used a contract which incorporated the Stadard Conditions of Sale and not the Commercial Property Conditions he could do so.

Sub-sales permit SDLT savings to be made within a series of sales and purchases and allow a buyer to make a quick turn by secretly re-selling at a profit on the same day. In addition they provide a means by which 3rd party intermediaries can enter into contracts to buy land for a developer without disclosing the identity of the developer. For these reasons they are relatively common.

Practice Points

Sellers of property or landlords proposing to grant a new lease who wish to have control over the identity of their purchaser should either deal directly with those controls within the terms of the contract or adopt the Standard Commercial Property Conditions of Sale as the basis of their contracts.

For further information contact Derek Ching. dching@boyesturner.com

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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