Apartment buyer pulled out of purchase – must pay damages to condominium association
Apartment buyer pulled out of purchase – must pay damages to condominium association
The buyer of a condominium cancels the purchase agreement with the association before paying for the apartment due to lack of financial conditions. The association sees the cancellation as a breach of contract and therefore brings an action against the buyer in court with a claim for damages. However, according to the buyer, the cancellation was justified because the association was obliged to deny him membership due to his finances. The Court of Appeal finds, in the light of the Tenant-owned Housing Act, that there is no such obligation for tenant-owner associations and that the buyer is therefore liable for damages.
A man named P.L. has entered into a preliminary agreement with a tenant-owner association for the purchase of a condominium. According to the agreement, the final payment must be paid on the date of access. However, before the date of taking possession, P.L. realises that he does not have sufficient funds to pay for the right of occupancy, which is why he informs the association that he wishes to terminate the agreement. However, the association does not accept the cancellation and demands that P.L. pay for the condominium. When payment is still not made, the association decides to cancel the contract and sell the apartment to another buyer. However, the new purchaser pays a lower price than that agreed with P.L. in the preliminary agreement.
The association is of the opinion that P.L.’s termination constituted a breach of contract that resulted in financial loss as a lower purchase price was paid for the condominium. An action is therefore brought against P.L. in the District Court, claiming payment of the difference between the agreed amount under the pre-purchase agreement and the price paid by the new purchaser. However, P.L. argues that, in view of his financial circumstances, the association should not have granted him membership and that he was therefore entitled to terminate the contract. He further claims that he tried to sell the apartment on his own and has found buyers who seemed prepared to pay a higher price than what was agreed between himself and the association. However, according to P.L., the association has counteracted this, in particular by not allowing him to take photographs or have viewings of the apartment. In so doing, P.L. argues that the association has failed to limit its financial loss and is therefore not entitled to damages. According to the association, P.L. has not been hindered in his attempt to sell the condominium.
The District Court found, first of all, that the association had no obligation to refuse P.L. membership because of his financial circumstances and that his refusal to pay for the apartment therefore constituted a breach of contract. Regarding the allegation that the association has opposed P.L.’s attempt to sell the apartment, the court finds that it has been shown that this is the case. However, when P.L. began the attempts to sell, he had still not informed the association that he wished to terminate the contract, but had merely said that he would have difficulties with payment. According to the District Court, such a statement should have given the association reason to suspect that P.L. would commit a breach of contract in the future. However, since the tortious breach of contract had not yet been committed when P.L. tried to sell the apartment, the court considers that no obligation has yet arisen for the association to limit its damage. The District Court therefore finds that the association is entitled to damages in accordance with its claim. P.L. subsequently appeals to the Court of Appeal, which takes up the case.
The Court of Appeal begins by examining the question of the association’s possible obligation to deny P.L. membership.The court seeks guidance in Chapter 2. The Right-of-Occupancy Housing Act, which regulates the granting of membership in tenant-owner associations. Since there is no provision stipulating a responsibility to refuse members with insufficient financial conditions, it is found that the association was not obliged to deny P.L. membership. P.L.’s termination therefore constituted a breach of contract which resulted in financial loss for the association. It is also examined whether the association has failed to limit its damage. Since P.L. has not adduced any evidence to show that the measures he wished to take had led to an economically advantageous result for the association, the court considers that he has not succeeded in proving that the association failed to limit the damages.