Agreement Does Not Cover Unanticipated Event

The High Court recently concluded that a property sale could not be subject to an agreement made two decades previously, as the circumstances of the transaction were not envisaged by the original agreement.

The agreement related to a building divided into flats, one of which was occupied by a caretaker. The presence of the caretaker's lease potentially meant that a substantial profit could be realised once the caretaker ceased to occupy the flat. For this reason, when the building was sold in 1986, the vendor inserted into the sale agreement a clause stating that, should the flat not be needed for the caretaker, the purchaser would sell it on the open market and pay half of the proceeds to the vendor.

However, the law relating to such properties changed with the introduction of legislation giving leaseholders the right to buy their homes, and in 2004 the tenants exercised their right to buy the freehold of the property. As part of the process, the caretaker’s flat was valued and the tenants purchasing the building were required to pay £200,000 for it. The original vendor then sought half of that sum.

The court could not accept that the sale took place on terms which the original agreement had contemplated. The sale valuation was determined by a system outside the vendor’s control and which could not have been anticipated in the original negotiations. It therefore declined to construe the agreement in such a way that it applied to the events which happened.