When a notice to complete expires: time no longer of the essence

The High Court considered whether time remains of the essence following expiry of a notice to complete in the case of Hakimzay Ltd v Swailes [2015] EWHC B14 (Ch).

The case concerned a residential property that had been subject to an assured shorthold tenancy.  The seller had difficulty obtaining vacant possession (a condition of the sale), and consequently was unable to complete on the contractual completion date of 3 April 2014. 

The buyer served a notice to complete on the seller, but on its expiry date (29 April 2014), the seller was still unable to complete.  On 2 May 2014, the seller informed the buyer that they had obtained vacant possession and asked if they were ready to complete.  The buyer replied that it wished to inspect the property before completion took place, and that the earliest possible inspection date would be 12 May 2014.

On 6 May 2014, the seller informed the buyer that they intended to terminate the contract because the buyer had failed to complete, and served a notice of rescission on the buyer.

The High Court confirmed that the seller was unable to terminate the contract and ordered specific performance in favour of the buyer.  Service of the notice to complete had made time of the essence but the Court held that time did not continue to be of the essence once the notice expired.  The seller’s failure to complete on 29 April 2014 had been a repudiatory breach of contract, but the buyer had not accepted that repudiation, so the contract had continued.

This case provides useful guidance on the effect of failing to comply with a notice to complete.  A defaulting party should note that they cannot simply terminate a contract if the innocent party does not rescind the contract themselves.

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