Remedies for delayed completion - Notice to complete

Learning Outcomes

After reading this article, you will be able to explain the legal effect and requirements of a notice to complete in property transactions, identify when and how time becomes of the essence, and outline the consequences of non-compliance under the Standard Conditions of Sale and Standard Commercial Property Conditions. You will also be able to apply these principles to SQE1-style scenarios and avoid common pitfalls.

SQE1 Syllabus

For SQE1, you are required to understand the remedies available for delayed completion in property transactions, with a particular focus on the operation and effect of a notice to complete. As you revise this article, pay close attention to:

  • The contractual position on completion dates and when time is of the essence.
  • The requirements and effect of serving a notice to complete.
  • The consequences of non-compliance with a notice to complete, including rescission, forfeiture of deposit, and damages.
  • The relevant provisions of the Standard Conditions of Sale (SCs) and Standard Commercial Property Conditions (SCPCs).
  • Practical considerations and common exam traps regarding readiness to complete and proper service of notices.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. What is the effect of serving a valid notice to complete in a property sale contract?
  2. Under the Standard Conditions of Sale, how many working days does the defaulting party have to complete after a notice to complete is served?
  3. What remedies are available to a seller if the buyer fails to comply with a notice to complete?
  4. What must the party serving a notice to complete be able to demonstrate at the time of service?

Introduction

Delays in completion are a common risk in property transactions. The law provides a structured remedy: the notice to complete. This mechanism allows a party who is ready, willing, and able to complete to set a strict deadline, making time of the essence and enabling termination and other remedies if the deadline is missed. Understanding how and when to use a notice to complete, and the consequences of non-compliance, is essential for SQE1.

Contractual Position on Completion Dates

In most property contracts, the completion date is not "of the essence" unless expressly stated. This means that a delay in completion is a breach of contract, but does not automatically entitle the innocent party to terminate the contract. Instead, the innocent party may be entitled to compensation for the delay.

Key Term: time of the essence
A contractual requirement that an obligation (such as completion) must be performed strictly by a specified date, so that failure to do so entitles the innocent party to terminate the contract.

The Role and Effect of a Notice to Complete

A notice to complete is the formal step that transforms the contractual position. Once served, it makes time of the essence for completion. If the defaulting party does not complete within the specified period, the innocent party may terminate the contract and seek further remedies.

Key Term: notice to complete
A written notice served by one party to a contract, requiring the other party to complete the transaction within a set period (usually 10 working days), after which time is of the essence.

Requirements for Serving a Notice to Complete

A party may serve a notice to complete only if:

  • The contractual completion date has passed and completion has not occurred.
  • The party serving the notice is ready, willing, and able to complete.
  • The contract contains a clause permitting service of a notice to complete (as in the SCs and SCPCs).

The notice must:

  • Be in writing.
  • Clearly state it is a notice to complete.
  • Specify the period for completion (10 working days, excluding the day of service, under the SCs and SCPCs).
  • Be served in accordance with the contract’s notice provisions (e.g., by post, email, or as otherwise specified).

Key Term: ready, willing, and able to complete
The party serving the notice must be in a position to complete the transaction themselves, except for the default of the other party.

Effect of a Notice to Complete

Once a valid notice to complete is served:

  • Time for completion becomes of the essence.
  • The defaulting party has 10 working days (excluding the day of service) to complete.
  • If the defaulting party fails to complete, the innocent party may rescind (terminate) the contract and seek further remedies.

Worked Example 1.1

A buyer is unable to complete on the agreed date due to a delay in mortgage funds. The seller, who is ready to complete, serves a notice to complete. The buyer still cannot complete after 10 working days.

Answer: The seller may rescind the contract, forfeit the deposit (if the buyer is in default), resell the property, and claim damages for any loss suffered.

Consequences of Non-Compliance

If the defaulting party fails to complete within the notice period:

  • The innocent party may rescind the contract.
  • If the buyer is in default, the seller may forfeit and keep the deposit and accrued interest.
  • The innocent party may claim damages for losses caused by the delay or non-completion (subject to deduction of any compensation already paid).
  • The innocent party may resell the property.
  • The defaulting party must return any documents received and cancel any registration of the contract.

Key Term: rescission
The right to terminate the contract and restore the parties to their pre-contract positions, available after non-compliance with a notice to complete.

Key Term: forfeiture of deposit
The seller’s right to retain the deposit paid by the buyer if the buyer fails to complete after a notice to complete.

Calculation of Compensation for Delay

Under the SCs and SCPCs, compensation for late completion is calculated at the contract rate of interest on the balance of the purchase price (less the deposit, if the buyer is in default) for the period of delay. Under the SCs, either party may be liable for compensation; under the SCPCs, only the buyer is liable.

Worked Example 1.2

The purchase price is £500,000. The buyer paid a 10% deposit. The contract rate is 4%. Completion is delayed by 5 days due to the buyer’s default.

Answer: Compensation = (£500,000 - £50,000) × 4% ÷ 365 × 5 = £246.58, payable by the buyer to the seller.

Practical Considerations and Common Pitfalls

  • The party serving the notice must be genuinely ready, willing, and able to complete. If not, the notice is invalid.
  • The notice must be served in accordance with the contract’s requirements. Incorrect service may render the notice invalid.
  • If the party serving the notice is also in default, they cannot rely on the notice until their own default is remedied.

Exam Warning

If a party serves a notice to complete but is not ready, willing, and able to complete themselves, the notice is invalid and cannot be relied upon to rescind the contract.

Revision Tip

Always check the contract for specific notice provisions and the required method of service before serving a notice to complete.

Summary

A notice to complete is the formal remedy for delayed completion in property transactions. It makes time of the essence and sets a strict deadline for completion. If the defaulting party fails to comply, the innocent party may rescind the contract, forfeit the deposit (if the buyer is in default), and claim damages. The process is governed by the Standard Conditions of Sale and Standard Commercial Property Conditions, and strict compliance with their requirements is essential.

Key Point Checklist

This article has covered the following key knowledge points:

  • A notice to complete is used to make time of the essence for completion in property transactions.
  • The party serving the notice must be ready, willing, and able to complete.
  • The notice must be in writing, specify the period for completion, and be served correctly.
  • The defaulting party has 10 working days (excluding the day of service) to complete.
  • If the defaulting party fails to complete, the innocent party may rescind the contract and seek further remedies.
  • Under the SCs, either party may be liable for compensation for delay; under the SCPCs, only the buyer is liable.
  • Forfeiture of the deposit and damages are available if the buyer is in default after a valid notice to complete.

Key Terms and Concepts

  • time of the essence
  • notice to complete
  • ready, willing, and able to complete
  • rescission
  • forfeiture of deposit
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