Q I’m a small farmer in the west of Ireland and I have no one to take over the farm. I have a couple of nephews, but none of them even seem interested in a site not to mind the 40 acres or so that is the farm. So I decided so sell half of it that’s a bit away from where I live.
It’s a nice holding of three fields and I thought it would interest some of the farmers who have land near it. I had talked to a few of them and one, in particular, had said he was interested in buying. We talked a few times about the land and he was praising it highly saying he’d love to have it. But when I brought the sale up in earnest with him, he seemed hesitant and told me to put it on the market as he wasn’t sure about buying it. So I did and engaged an auctioneer to sell it.
On the day of the auction there were three bidders and eventually it was down to two, one being the neighbour and lo and behold he bought it bold as brass on the day!
The price paid was what I was expecting and similar to other land prices in the area in the past year or two.
My neighbour proceeded to pay the deposit to the auctioneer and everyone in the parish knew he’s bought the land. However, he rang me the other night and said that he wants to pull out. He said Covid was causing such uncertainty that he didn’t know if he could afford the land at all and wants to get his deposit back.
We’ve always had a good neighbourly relationship, borrowing bits and pieces from each other and helping move cattle and so on. And I’m reluctant to ruin this, but at the same time I don’t want to be made a fool of. I think he might be trying to pull a fast one and suggest he buys it for a lesser amount in a private deal.
Am I within my rights to hold on to the deposit?
A For the benefit of readers I will outline the difference between a sale by auction and a sale by private treaty. A sale by private treaty is where you engage an auctioneer to sell your property and interested parties can place bids with the auctioneer.
This process can go on for weeks and a prospective purchaser has time to decide whether or not to proceed. In a private treaty, once a sale price has been agreed, the purchaser will pay a booking deposit to the auctioneer which is fully refundable until the date he signs the contract. Thereafter, contracts for sale and copy title will issue to the purchaser’s solicitor who will have the opportunity of investigating same.
Such sales by private treaty often move at a much slower pace than sales closed at auction.
An auction completes much faster. It is a public sale and essentially, any interested party must come to the auction and be ready to sign a binding contract on that date, having secured finance and having had the contract and title reviewed prior to the auction.
At an auction, a prospective purchaser may only have seconds to make up their mind whether they wish to spend extra money on the property or not. Also, at auction there will be a reserve which is not disclosed prior to the auction and this a minimum price the property must reach before it is declared on the market and for sale. Once it is declared on the market, this means that it will definitely sell to the highest bidder after that point.
You say that there was a public auction of your land at which there were three bidders. Eventually, your neighbour bid the highest price on the day and proceeded to pay a deposit to the auctioneer. Although you do not say it, by virtue of this neighbour paying a deposit to the auctioneer on the day of the auction, he will have signed a contract for sale.
Such contracts are generally unconditional which means that there is no condition in the contract on which the purchaser can rely to pull out of the purchase.
Once the vendor and the purchaser have signed a contract and a deposit of 10pc is paid over, then there is a binding contract in place and neither party can then withdraw from the contract without consequence, unless they can rely on a special condition in the contract.
Assuming the purchaser signed an unconditional contract for sale, like all contracts of sale for property in Ireland, the contract will have attached to it the General Conditions of Sale. These set out what conditions apply to the sale of the property and can only be amended or removed by special conditions in the contract for sale.
One of the conditions relates to forfeiture which provides that if the purchaser shall fail in any material respect to comply with any conditions of the contract, then the vendor is entitled to keep the deposit and will be at liberty to resell the property.
In the event of the vendor reselling the property within one year after the closing date of the first contract for less than what was agreed in the first sale, the reduction in price and all costs and expenses incurred should be paid by the first purchaser to the vendor. If the vendor gets an increase in price, then that will belong entirely to the vendor.
So in this case, if the contract is unconditional and does not amend the General Conditions of Sale regarding forfeiture, you may keep the deposit.
A further course of action open to you is to refuse to return the deposit and sue your neighbour for Specific Performance which is essentially forcing your neighbour to complete the purchase of your land on the basis that he entered into a binding contract to do so.
You should ask the solicitor who acted for you in the sale to review the contract for sale signed by both you and your neighbour to assess your options in this regard. You say you always had a good relationship with your neighbour and you are reluctant to ruin this, but you may need to decide if your good neighbourly relationship is worth the deposit.
Deirdre Flynn is from a farming background and practices as a solicitor at Deirdre Flynn Solicitors, 4 Ivy Terrace, Tralee, Co. Kerry
The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information provided, Deirdre Flynn does not accept responsibility for errors or omissions howsoever arising. You should seek legal advice in relation to your particular circumstances at the earliest possible time.