DLA Piper UK LLP - General Other - UK
Date: 04 Aug 2008
DLA Piper UK LLP ("DLA Piper") are delighted that in a landmark judgment delivered on 30 July 2008, the House of Lords has found in favour of their client, Yeoman's Row. Overturning the decisions of the both High Court and Court of Appeal, the House of Lords confirmed that expenditure in anticipation of a property joint venture based on an oral agreement between parties will rarely give rise to a claim.
Petra Billing, partner specialising in property litigation at DLA Piper based in Sheffield, said: "DLA Piper are obviously very pleased that we have been able to work closely with Yeoman's Row to secure such a successful outcome. We are also pleased that this case brings much needed clarity to what was a very confusing position. The decisions by the lower Courts in this case introduced uncertainty into commercial negotiations, not only in the field of property development. The decision sets out when and how the Courts will step in to regulate commercial life where no legally binding agreement has been made.
"Having to take this case all the way to the House of Lords to defend it has taken a long time and involved Yeoman's Row in a great deal of effort and expense. It is fortunate for the real estate industry that Yeoman's Row has been prepared to fight the case to re-establish the general principle that, until there is a property contract which complies with statutory requirements, parties to negotiations can discontinue them without any legal liability."
"The case reinforces just how important it is for parties in commercial negotiations, particularly those relating to land to properly document all agreed terms if litigation such as this is to be avoided."
In this case, a potential purchaser/developer of property near to the famous Harrods department store owned by Yeoman's Row hoped to buy, develop and sell on the property. He planned to share 50% of the gross proceeds of sale with the property owner and to keep the remaining profit out of which he would pay the development costs himself. Anticipating securing a deal, even though finance had not been obtained and important terms had not been agreed, the potential purchaser obtained planning permission. There was no written agreement. The lower courts awarded him a half share in the increase in value of the property attributable to the grant of the planning permission, running into millions of pounds.
The House of Lords, commenting that both parties were experienced in the property world, emphasised the need for a written contract for the sale and purchase of property and the courts' reluctance to try to regulate the parties' freedom to negotiate in their own self interest. The House of Lords substituted in favour of the half share, a right to a reasonable payment for time and expenses for work done towards obtaining the planning permission, which will now be assessed by the High Court.
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