Often not considered by a contracting seller is the seemingly wide discretion vested in a court, under section 49(2) LPA 1925, to award a return of a buyer’s 10% deposit. Section 49(2) reads: “Where the court refuses to grant specific performance of a contract, or in any action for the return of the deposit, the court may, if it thinks fit, order the repayment of any deposit.”
In Midill (97PL) Ltd. v Park Lane Estates Ltd & Anor [2008] EWCA Civ 1227, (a case involving a contract for the sale of shares, but where the parties had conceded that section 49(2) should apply) the Court of Appeal reviews the circumstances in which a buyer may be entitled to a return of its deposit, despite its failure to complete. Ultimately, the court concludes that the mere fact that the seller has been able to rescind the contract and resell the property at a profit is not enough, on its own, to justify a return.
The practical implications of this case will be considered in the CPI Update for December.
*Postscript: On the subject of section 49(2), an interesting letter appears in this week’s Law Society Gazette. Sadly, the answer to the question posed by the strap-line, in the context in which it is put, is surely “no”?