Prices on purchase may vary after contract

This is an interesting decision from the High Court where the Chancellor of the High Court, Lord Justice Wilson and Lord Justice Stanley Burton dismissed an appeal from a Mrs Refarun Nessa against the London Borough of Tower Hamlets Neutral Citation Number [2010] EWCA Civ 559.

Mrs Nessa, initially with her husband jointly purchased a flat in Silvester House, Bow with a discount of £16.000 and it was evaluated at a price of £175.000. The contract was based on Housing Act 1980 and consolidated with amendments in the Housing Act 1985, Section 122, that the price payable in due course would be based on the open market value of the Flat at the date of service of a notice under Section 125. That was the price on 1. April 2006. Yet another evaluation carried out, raised the price to £209.000 and another notice was served on 9 May 2006. Mrs Nessa initially agreed to the higher price but then changed her mind.

The court had to ascertain which price Mrs Nessa had to pay and Mrs Nessa appealed against a decision of his honour Judge Dight from the Central London County Court. The Court of appeal dismissed the appeal.

It is clear that the price stated in a notice served under section 125 is not set in stone. It may, for example, be affected by the variation of terms of the proposed lease with the consent of the parties or as a result of the determination by the county court of a dispute between them as to those terms: see, for example, paragraph 14 of Schedule 6. I note, also that section 126, which identifies the price to be paid on a conveyance or grant of a lease, does not define it by reference to the price stated in a notice under section 125. However, I would prefer to leave open the question whether there is any and if so what limit on the power of a landlord to vary the price stated in its section 125 notice for decision in a case in which the tenant has not abandoned the purchase originally proposed or agreed to proceed on the basis of a subsequent section 125 notice.

the conclusion of that judgement is if you do not have any spare cash then you might get into difficulties with a purchase if the price rises after a second and higher price evaluation.

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