The Problem:

Under a contract of sale for property, there is no default provision that entitles one of the parties to rescind or terminate a contract, if either party becomes mentally ill or dies. This means that if one of the parties dies, or becomes mentally ill, they are still bound by the contract, and required to meet their contractual obligations. When you apply this to a scenario of an elderly person, purchasing into a retirement home, there are serious complexities that might arise. If that purchaser passes away after exchange of contracts, and prior to settlement of the matter, their estate is left to either complete the purchaser, or terminate the contract, forfeiting the 10% deposit, and opening the estate up to litigation. In such a scenario, if the deceased were obtaining finance on the property, the bank would revoke their offer of finance on the death of that individual, so what happens then? Do we rely on the seller showing empathy towards the situation, and releasing the estate from the contractual obligation, at a huge financial cost to them?

While we as humans have an innate desire to believe the best in every scenario, the reality of the matter is, the worst-case scenario arise all too often.

The Solution:

While there are certain clauses that are not covered by the standard contract clauses, Lawyers can draft what is known as special conditions, to be added into a contract. Such special conditions can cover anything from penalty interest if the matter does not settle on time, through to release of deposit to enable the vendor to use the deposit monies prior to completion. One that I ensure I include every time is this:

Capacity or Death

Without in any way limiting, negating or restricting any rights or remedies which would have been available to either party at law or in equity had this clause not been included herein, it is agreed and declared that should any party prior to completion, die, or become mentally ill (as defined in the Mental Health Act 1958) then the other party may rescind this Contract by notice in writing whereupon the provisions of clause 19 hereof shall apply.

Don’t let yourself get caught out. The Lawyers who acts on your behalf in a property transaction can protect you from all sorts of issues, like the one mentioned above, that you might not even be aware of. Choose your lawyer carefully, and ensure that your special conditions have a Capacity or Death clause!

For support with your legal matters, contact us at O’Brien, Connors & Kennett