Solicitors’ undertakings and completion
29th July 2016
Mark Loveday appeared for the landlord and solicitors and Ellodie Gibbons appeared for the tenant in the linked High Court cases of Greenpine v Howard de Walden and Greenpine v Charles Russell Speechlys  EWHC 1923 (Ch). Judgment was given on 27 July 2016. It is one of an increasing number of cases where chambers’ members appeared on both sides of a property dispute.
The cases each raised a question about completion of a leasehold sale:
- Precisely what kind of promise amounts to a formal solicitor’s undertaking?
- What is an “agreement” for the purposes of Leasehold Reform, Housing And Urban Development Act 1993 s.48(6)?
The disputes started as a claim for a lease extension under Leasehold Reform, Housing and Urban Development Act 1993 Pt I Ch.II. The tenant was a BVI company, so alongside the usual conveyancing formalities, the landlord’s solicitors required the tenant to provide a Foreign Legal Opinion before completion. The Opinion confirmed the tenant’s status, capacity and financial solvency and was to be signed by a BVI lawyer.
The parties agreed the premium and the terms of the lease in January 2015. They also agreed to vacate a hearing in the First-tier Tribunal (Property Chamber) which was listed to deal with the terms of acquisition. Minor amendments were made to the Foreign Legal Opinion. On 28 April, the tenant asked when completion would take place and the freeholder’s solicitor replied “we will complete on receipt of funds”. Eventually, on 7 May, the tenant transferred the completion money and provided the final version of the Foreign Legal Opinion. But the landlord refused to complete.
Greenpine v Howard de Walden
The tenant applied to the County Court for an order under s.48 of the 1993 Act and the claim was transferred to the High Court to be dealt with at the same time as the second case.
The dispute centred on whether the claim was issued within the four month timeframe in s.48(5). The tenant had agreed to provide the Foreign Legal Opinion within the four month period in s.48(5), but the final version was provided outside the time limit. The freeholder argued (1) the Foreign Legal Opinion was not a “term of acquisition” within the meaning of s.48(7), so it did not affect the time limits, and (2) it was in any event agreed within the timeframe. The tenant was therefore out of time to enforce the statutory contract for the new lease because it failed to apply to the court by the deadline of 7 May.
Timothy Fancourt QC held that:
- The Foreign Legal Opinion was a “term of acquisition” within the meaning of s.48(7): Cawthorne v Hamdan  3 E.G.L.R. 183, Westminster City Council v CH2006 Ltd  UKUT 174 (LC) and Bolton v Godwin-Austen  EWCA Civ 27,  H.L.R. 15 considered.
- The tenant’s failure to dispute that the opinion was required amounted to a final and unconditional agreement to provide one. The fact that the wording had to be changed a few times did not prevent there being an agreement in principle to the Foreign Legal Opinion in January 2015. It followed that the terms of acquisition were all agreed at that time.
- The tenant’s s.48 application was out of time and his claim for a new lease was therefore deemed to have been withdrawn.
Greenpine v Charles Russell Speechlys
The tenant brought a second claim against the landlord’s solicitors asking the High Court to exercise its supervisory powers to enforce an undertaking. The central issue was whether the words “we will complete on receipt of funds” were a solicitors’ formal undertaking.
Enforcement of an undertaking is a quasi-disciplinary matter and “undertaking” is defined in the glossary in the Solicitors Regulation Authority Handbook (2012) in wide terms as: “a statement, given orally or in writing, whether or not it includes the word “undertake” or “undertaking”, made by or on behalf of you or your firm, in the course of practice, or by you outside the course of practice but as a solicitor or REL, to someone who reasonably places reliance on it, that you or your firm will do something or cause something to be done, or refrain from doing something.”
The judge considered the question was how the tenant would reasonably have understood the 28 April statement. He held that:
- The words “we will complete on receipt of funds” were merely a polite answer to an enquiry about appropriate dates for completion. The tenant would not have been expecting a solicitor’s undertaking in response. The solicitor’s use of the word “will” did not change what would otherwise be an indication of the time for completion into an undertaking to complete.
- The 28 April statement did not, therefore, have the character of an undertaking.
- The claim was dismissed.
Significance of the cases:
- Solicitors need to be careful when dealing with collateral documents during the course of negotiations under enfranchisement legislation. In most cases, the “terms of acquisition” will simply be the lease terms/transfer terms and the premium. But in this case the statutory time limits were triggered by a Foreign Legal Opinion.
- Solicitors’ undertakings are an essential and common feature of conveyancing – and they can be enforced by the High Court. But casual statements about completion dates are unlikely to amount to such formal undertakings. Conveyancing solicitors can breathe a sigh of relief.