Selling land for development

When selling land, it is vital that responses to pre-contract enquiries are updated if there is any change in circumstances. The consequences of failing to do so were highlighted in the case of Cleaver and another v Schyde Investments Ltd.

Cleaver owned a garage site and entered into pre-contract negotiations with Schyde, who planned to develop it into a block of flats. Another interested party wanted to develop it into a medical centre.

As part of his replies to the commercial property standard enquiries, Cleaver agreed to notify Schyde of any change in circumstance. However, when Cleaver learned that the other party had applied for planning consent to develop a medical centre, he failed to update his replies to Schyde before contracts were exchanged.

When Schyde became aware of the application, he was concerned that, if the local community wanted a medical centre and obtained planning permission for it, it was unlikely that he would be granted permission for any other use. He tried to rescind the contract and recover the deposit, but Cleaver objected and served a notice on Schyde  to complete.  The court found in Schyde’s favour. Cleaver’s failure to update his replies constituted a misrepresentation. Had Schyde been aware of the other planning application, he would not have entered into the contract.

As the case shows, a failure to notify buyers of such changes may lead to an abortive transaction, coupled with the possibility of court proceedings.

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