How Does the Duty to Preserve Affect Property Sellers?

As the property market continues to heat up it is worth remembering some of the obligations that affect buyers and sellers during a transaction.

Traditionally there was a delay between exchange and completion to enable the buyer to carry out its final searches and investigations. Due to advances in technology and the formal registration of most property in the UK, this delay has been reduced significantly; often to the point that exchange and completion is done simultaneously.

Although simultaneous exchange and completion is now commonplace, it is not always appropriate. Therefore it is important to remember that certain obligations exist in the intervening period, such as the duty to preserve, and to understand their limitations.

Standard Conditions of Sale

Buyers and sellers of both residential and commercial property will usually rely on the Standard Conditions of Sale or the Standard Commercial Property Conditions, as appropriate. The standard conditions in both cases set out various obligations such as which party is responsible for insuring the property between exchange and completion.

It should be noted that although the standard conditions are fairly comprehensive, they do not cover everything and they are not obligatory. Also, solicitors will often amend them. Where issues arise that are not covered by the standard conditions, the positions of the parties will be determined under the common law doctrine of equity. The duty to preserve is one such duty.

The Duty to Preserve

The duty to preserve is a well established principle of property law that had its early origins in the case of Lysaght v Edwards [1876]. The case held that the purchaser is entirely responsible for the property once it has acquire the equitable interest, i.e. there is a valid contract for sale, but the seller is under a duty to take reasonable care of the property while it remains in their possession.

In this way the seller effectively becomes a type of trustee for the buyer but this does not mean that the obligation extends beyond taking reasonable care to keep the property in a reasonable state. The obligation is simply to keep the property in the state which the buyer has agreed to acquire.

The 2005 case of Englewood Properties v Patel and Cornberry demonstrated the limits of this. In that case the court made it clear that the duty is to preserve only what is sold. The duty did not extend to imposing obligations on the seller in relation to other properties which it owned, even if failing to impose such obligations affected the value of the property in question.

Comment

Legal covenants, whether beneficial or restrictive, can significantly affect the value of property. It is essential that sellers are aware of their obligations and that buyers are properly advised to ensure that their proposed use of the property is not adversely affected. Contracts should be worded to deal with specific requirements for particular properties. If a potential dispute arises, parties should seek immediate legal advice.

For specialist advice contact Jane Canham today by email JCanham@rollingsons.co.uk or telephone 0207 611 4848.