There is an implied term that a sale of land is with vacant possession

In Wong Yuk Ying v Chan Pui Shan May ([2016] HKEC 537, CA) S1 agreed to sell a workshop to S2. S2 entered into a sub-sale agreement with P. The workshop was divided into three units and each unit was subject to a separate tenancy. Details of the tenancies were contained in the sale and purchase agreements (both the head contract and the sub-sale). Two of the tenancies would determine by effluxion of time by the time of the completion date, the third would not. The tenants of the units whose leases expired did not vacate the property at the end of the term and were still in possession at the completion date specified in the sale and purchase agreements. P argued that the failure to give vacant possession on completion amounted to a failure to give good title and sought a declaration that S2 was in breach of contract and the return of the deposit paid to S2.

S2 argued that there was no express or implied term to the effect that sale was with vacant possession. Yuen JA disagreed: there is an implied term that sale is with vacant possession in the absence of agreement to the contrary ([22.1]). The fact that the sale was subject to and with the benefit of the tenancies did not amount to an expression of a contrary intention given that the tenancies would have expired by the completion date. In the absence of a contrary intention, the seller bore the risk that the tenants would remain in possession at the end of their leases ([30]); P’s knowledge of the existence of the tenancies and that the tenants might not vacate did not mean that there was any such contrary intention.

Michael Lower

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