8th March 2013

Breach of contract for sale of land – Damages assessment date

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8th March 2013

Breach of contract for sale of land – Damages assessment date


In a recent Court of Appeal decision, it was held that the correct date for assessment of damages where a buyer failed to complete a purchase of a property in breach of contract was not the date of the breach, but a later date, following failed attempts by the sellers to re-sell the property. This was despite a dramatic fall in the value of the property attributable to a decline in the property market although the sellers were able to show that they had taken steps in the meantime to mitigate their loss.

The sellers had made reasonable efforts to re-sell the property but after 14 months of marketing they let it out (it was their second home) to cover the mortgage repayments for twelve months. Following the tenant’s departure, they re-marketed the property but again it failed to sell. They decided to move back into the property. Meanwhile, the value of the property had dropped significantly.

The Court held unanimously that the date of assessment of damages was the date that the sellers gave up trying to sell the property and took back occupation themselves. They had taken all reasonable steps to try and sell the property and thereby mitigate their loss. The Court held that the breach date would be the correct date for assessment of damages only where there was an immediately available market for the re-sale of the asset in question/purchase of an equivalent asset and this would not often be the case with land.

The sellers were awarded the difference in value between the contract price and the estimated market value as at the date that they stopped marketing the property for sale and moved back in. The Court emphasised the fact that the aim was to compensate the sellers for actual loss suffered. It was not the fault of the sellers that the property market had crashed causing the house to fall in value. They had acted in good faith and unfortunately for the buyer this resulted in a higher damages figure for which he was liable to pay. The case does, though, demonstrate that sellers must properly mitigate their loss in order to succeed in claiming the full entitlement to damages.