Conditional Contracts In The Spotlight

After Prince Charles expressed his dislike of the proposed designs for the Chelsea Barracks site, the public was treated to a court case with everything – royals from two nations, a peer with a penchant for modern architecture, rags-to-riches property developers and a battle over millions of pounds.

Strip all of that away, and the court challenge came down to something relatively common in property deals – the conditional contract agreed when the state-backed Qatari Diar and the Candy Brothers shook hands on the deal.

Legal property expert Elaine Dobson, of Bircham Dyson Bell, said: "The case may have had much in the way of hype and glitter due to the parties involved, but the root of it is really just a large scale version of a very ordinary, if sometimes complicated, legal agreement."

In this instance, the Candys argued that they had been effectively cheated out of £81m when the Qataris withdrew their planning application; one of the conditions in the contract covered payment to the Candys if and when planning permission was achieved. With the planning application withdrawn, clearly planning consent couldn't be given. In this case, the judge found that the Candys were not entitled to that payout although they can claim damages. "The argument boiled down to whether the Qatar Diar had acted in good faith, and the judge found they hadn't not acted in good faith – they were caught between a rock and a hard place," explained Elaine.

The very public dispute around the Chelsea Barracks did serve to highlight the complexities that can arise from conditional contracts – something which should be borne in mind, says Elaine, as these types of contracts are not only put in place for substantial property developments; they are also commonly used for smaller commercial and domestic property deals. And agents are often the parties advocating them.

One reason for their popularity with agents is that they seemingly bind buyer and seller together – but, warns Elaine, that is very much an illusion.

"Of course, there is a psychological advantage to having a conditional contract in place but that doesn't mean the sale is guaranteed to go ahead. Conditional contracts can be very complex – for example, planning permission might be required before the sale goes through, but is that outline permission or detailed, if it fails who is responsible for appealing, at what point can the condition be waived and by whom? Other common conditions include landlord's consent...