What is a Reasonable Period?

Things seldom run smoothly in property developments, and where the intention is to offer sales off plan, it is important to ensure that the contract offered to purchasers is sufficiently flexible to take account of contingencies – especially as regards completion dates.

Where the contract is for a single dwelling, a date may be set for practical completion, subject to a relatively limited number of stated contingencies. However, where the development is for a number of properties or for a larger commercial development, care must be taken to prevent unavoidable delays which may significantly undermine the profitability of the development by the creation of liabilities to purchasers. This can prove particularly difficult where significant works are subcontracted to builders and are thus out of the direct control of the developer.

In general, the preferable approach is to have the right to trigger the completion by the issue of a notice to the purchaser by the developer following the practical completion of the works.

The general law of contract provides that a contract entered into must be completed in a reasonable period of time, and where there is a failure by either party to complete within a reasonable period, the other party is entitled to compensation. Regrettably, different decisions by the courts in recent years have led to the definition of what constitutes a 'reasonable period of time' being unclear.

In a recent case on this subject, the Court of Appeal concluded that whether or not a reasonable time had elapsed (thus triggering the right to damages for failure to complete) was a 'broad question' which depends on the particular circumstances of the case looked at in hindsight.

Given the lack of clarity of the law in this area, it is particularly important to seek what contractual protection you can.

Contact us for advice on the drafting of a contract which will protect your interests as a developer or contractor in the event of delays.
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DanielLewis
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The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.