This article from 2016 looks at a claim where the practitioner acted for a vendor selling their home under pressure from their mortgagee.
The property sold at auction but unfortunately the purchaser was unable to settle on the due date as they were short of funds. The vendor’s practitioner advised their client to agree to extend the settlement date subject to payment of penalty interest. When the purchaser failed to settle on the extended due date the practitioner issued a rescission notice.
The purchaser’s practitioner alleged the notice was defective and demanded settlement take place the following Monday. The vendor’s practitioner maintained the notice was valid and that as 14 days had passed, the contract was now at an end.
The purchaser issued proceedings seeking specific performance. Agreement was reached to allow the settlement of the property to proceed on advice from the vendor’s new lawyers that the rescission notice was defective.
When the purchaser defaulted on the first occasion, there were a number of options open to the vendor beside the one advised by his practitioner. The practitioner should have stopped to consider and advise the vendor client of all of the options available and the advantages and disadvantages of each option. The options include:
- negotiating a new settlement date
- demanding penalty interest
- issuing a default notice
- issuing a rescission notice
- issuing proceedings for specific performance.
The problem was compounded by the defective rescission notice. When the notice was challenged by the purchaser’s practitioner the vendor’s practitioner should have consider the available options. One option was that the rescission notice may have been defective and perhaps counsel’s advice should be sought to clarify the validity. Another option was to just issue another notice and start time ticking again.
Explaining all the options available to the client is in the client’s best interest, helps the client make an informed decision and is good risk management.