The recent case of Kuznetsov v London Borough of Camden (1 April 2019) serves as a timely reminder for parties to be careful when conducting negotiations for the sale and purchase of land.
Facts of the case
Mr Kuznetsov had a long leasehold interest of a flat in north London. The property formed part of a block of flats within a larger estate, the freehold of which was vested in The London Borough of Camden.
Camden Council wanted to redevelop the estate and on 25 April 2013 obtained planning permission to construct 290 dwellings and three employment units. In order to proceed with the development, Camden Council required possession of Mr Kuznetsov's property. For a number of years the Council tried to negotiate the purchase with Mr Kuznetsov but ultimately proceeded with a compulsory purchase order. Mr Kuznetsov claimed that as part of those negotiations the Council's letter of 16 February 2017 created a binding contract for the purchase of the property.
Camden Council's letter of 16 February 2017 recommended that Mr Kuznetsov sought his own Red Book valuation and on receipt of the Red Book valuation the Council would be willing to purchase the property at that value and pay Mr Kuznetsov compensation and all reasonable expenses.
Mr Kuznetsov claimed that on receipt of this letter he added in manuscript at the bottom of the letter the words: "Thank you! I accept your offer and will instruct a valuer, as requested". Mr Kuznetsov then claims he added his signature and the date (5 March 2017) before returning it by hand to Camden Council's town hall. The Council deny ever receiving the countersigned letter.
Grounds of appeal
The Council initially had the claim struck out but Mr Kuznetsov sought leave to appeal. One of the grounds of appeal related to whether the exchange of correspondence amounted to a contract in accordance with Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
Section 2(1) of the 1989 Act states that "a contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each."
The judge allowed the appeal on the basis that there was a real prospect of Mr Kuznetsov establishing at a full trial that the letter of 16 February 2017, as countersigned by Mr Kuznetsov, amounted to an open contract for the sale of Mr Kuznetsov's leasehold interest in the property and that the contract complied with section 2 of the 1989 Act.
The letter set out the parties, the property and a mechanism for calculating the purchase price and was allegedly signed by both parties (although the question of whether Mr Kuznetsov had ever signed and returned the letter was a matter for the trial). As such, the dispute will now go to trial and we will have to wait for the outcome.
The case highlights the need to be careful when conducting written negotiations and to always make it clear that the negotiations are non-binding, such as ensuring that the correspondence is marked 'subject to contract'.