Our London Litigation Solicitors Discuss Delays in Construction of New-build Apartments

New-build Home Contracts

Today our London dispute resolution lawyers look at new-build home contracts and whether reasonable endeavours and best endeavours clauses can assist purchasers facing lengthy construction delays.

New build apartments purchased “off-the-plan” have enjoyed a huge surge in popularity in the London market in recent years. Driven in part by the property price boom, areas such as Battersea and Nine Elms are seeing numerous luxury apartment towers being constructed, with literally tens of thousands of new-build apartments awaiting completion. It has been reported however that an oversupply of new-build luxury apartments are placing downward pressure on the values of such properties. This could see purchasers facing the prospect of having to complete on their new-build purchase at a price substantially over market value.

Purchasers finding themselves in this situation may wish to consider whether their new-build contract can be lawfully terminated and their deposits and any stage payments refunded. One avenue that is worth exploring is whether delays in construction on the developer’s part can give rise to any right of termination or rescission of the sale agreement.

best endeavours” and “reasonable endeavours

A developer’s obligation to construct a new-build apartment by a certain date will often be qualified by a “best endeavours” or “reasonable endeavours” clause. In construction, builders are naturally reluctant to enter into contracts which impose strict time lines for completion. New-build contracts will therefore stipulate that builders and developers must use their “best” or “reasonable” endeavours to complete the new-build by the date specified in the contract. But what exactly do these types of clauses mean and when will a developer have breached them?

reasonable endeavours

This article will focus on the meaning and possible effects of the “reasonable endeavours” clause. We look at “best endeavours” clauses in a related article.

A new-build contract may typically contain a clause obliging the developer to use its reasonable endeavours to physically complete the construction of a property by a certain date (sometimes called an “Estimated Completion Date”). These types of clauses may however be of limited use to purchasers seeking to rescind on the basis of construction delay. The effect of these clauses will oblige developers to apply reasonable effort to meeting specified timescales.

Claims for breach of contract against developers may arise where they have failed to take reasonable steps to progress a project. Courts will not expect developers to use all possible avenues to meet a deadline or to take responsibility for matters outside their control (such as inclement weather or the shortage of materials for example). So in that sense a reasonable endeavours clause will not fix an onus on the developer to disregard its own relevant commercial considerations and complete on time at any cost. But on the other hand, where it can be shown that a developer has not done all that it reasonably can to meet a completion date, then depending upon what the contract says, a claim in damages or the right to rescind the contract may arise.

Conclusion

There is a degree of subjectivity involved with interpreting reasonable endeavours clauses which may favour a developer, who may not be in breach of the clause for failing to prioritise timely completion of a new-build above their own commercial interests. Relying on a best endeavours clause however may allow purchasers to mount stronger breach of contract arguments against sluggish developers.

Separately, the Consumer Code for Home Builders may assist purchasers looking to terminate their new-build contracts on the basis of construction delays.

Our London litigation and dispute resolution solicitors have successfully represented purchasers of off-the plan properties seeking to terminate their sales contracts. You can contact us for a confidential discussion with a solicitor about any of the content you see on this website.