Breach of Agreement for House Purchase

Breach of Agreement for a House Purchase

The issue of a developer being unable or omitting to complete the construction of a building affects a number of purchasers, who are obliged to take delivery of the property purchased, perhaps without the communal areas and the roads being completed or even without electricity from the appropriate authority.

There may be other dimensions to the issue, such as late completion and delivery, snags and defects or the property not being completed.

In such a case, there is a breach of the sale agreement committed by the vendor and the question which arises is what remedies are available to the purchaser who is the innocent party.

The English precedents define the duty of care of the vendor being the contractor of a house who entered into an agreement to build it that he undertakes a threefold implied obligation that

• (a) he will do his work in a good and workmanlike manner,
• (b) he will supply good and proper materials, and
• (c) the house will be reasonably fit for human habitation.

The choice of the purchaser should be to place the vendor before his contractual obligations, making the relevant terms, expressed or implied, of the essence of the agreement. The purchaser is also entitled to request the vendor to comply with his contractual obligations within reasonable time set out in the written notice to be addressed to him and call the vendor to remedy the breach within the time set; otherwise the purchaser may exercise his right to terminate the agreement and be discharged.

The purchaser’s choice is not always easy, since there are a lot to be considered depending on the terms of the agreement, the nature of the breach and the potentials he has to recover his money and damages from the vendor. The purchaser may elect to keep the agreement valid and take delivery of the property with full reservation of his rights, claiming compensation from the vendor for the loss and damage he has suffered. The relevant provision in the Contract Law regulates the issue through the principle of compensation followed by the case law in the assessment of the damages.

The innocent party who suffers due to the breach is entitled to receive compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew when they made the contract, to be likely to result from the breach of the agreement. He must be restored to the position he would have been if the agreement had been executed and not for the damages he suffered having to face the consequences of the breach.

The right of the purchaser for compensation may be related to the loss of the use of the property due to late completion, the costs for repairing any defects or omissions or for completing any unfinished works, even for the decrease in the value of the property due to the non completion of the communal areas, the non construction of the roads and pavements and the lack of proper electricity supply or other facilities.

The aforesaid issues were examined by the District Court of Famagusta in a recent judgment whereby it awarded damages amounted to €100.000 including €52.187,30 for the loss of the goodwill of the complex reducing the value of the house accordingly. The loss of the goodwill, according to the Court, reduced the value of the sold house which would have been higher if the vendor did not create the problems to the house and the complex.

The judgment is expected to be appealed so that the Supreme Court to decide whether, in the particular case, the District Court correctly awarded damages based on the reduction of the goodwill of a residence complex and the amount assessed.

The precedents define the assessment of compensation in the case of loss of goodwill to be the profit made due to the business or the work carried on in the property.