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Villa Rental - legal position if Villa is sold

including wills and probate
Pheidippides
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Villa Rental - legal position if Villa is sold

#213313

Postby Pheidippides » April 7th, 2019, 11:51 am

Hi All,

I own a holiday property and have recently come across a problem from a previous guest who now has a current problem and are asking for advice. I know the normal advice is to "check the contract", but this question relates to who the contract is actually with.

Generically, most contracts are written with "the renter" agreeing to rent "the property" from reference to "the owners". Payment of the initial deposit (usually 20 to 25%) is non-refundable if cancelled by the renter.

In this particular instance the villa has been sold, but the new owners are (apparently) going to honour the booking. The renters were never told about any of this (borderline deceit by the old owners IMO). Now the renters are nervous and would prefer to cancel, but are keen to recover their deposit.

Does a contract between individuals become invalidated in this circumstance.?

How would a court rule now that the old owners are now not in a position to fulfil the contract, should the renters put in (or threaten) a small claims court (moneyclaim online) action.

Any opinions welcome

Regards

Pheid

didds
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Re: Villa Rental - legal position if Villa is sold

#213317

Postby didds » April 7th, 2019, 11:58 am

IANAL.

Presumably the new owners merely saying that they'll honour the original booking has created a contract - albeit maybe one with no actual clauses in it in effect.

The bigger issue is surely that the old owners hold the deposit, and the new owners do not?

didds

PinkDalek
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Re: Villa Rental - legal position if Villa is sold

#213329

Postby PinkDalek » April 7th, 2019, 12:35 pm

Pheidippides wrote:I own a holiday property and have recently come across a problem from a previous guest who now has a current problem and are asking for advice. I know the normal advice is to "check the contract", but this question relates to who the contract is actually with.

Generically, most contracts are written with "the renter" agreeing to rent "the property" from reference to "the owners". ...

Does a contract between individuals become invalidated in this circumstance.? ...


Is Privity of Contract of any relevance in this situation?

In this particular instance the villa has been sold, but the new owners are (apparently) going to honour the booking. The renters were never told about any of this (borderline deceit by the old owners IMO).


I'm confused by your apparently. Are you not the new owner(s).

dspp
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Re: Villa Rental - legal position if Villa is sold

#213360

Postby dspp » April 7th, 2019, 2:58 pm

I'm utterly confused as to whether this [is/was/still is/might be/once was] your own property.....

...... but in relation to the contract itself one needs to read it to see if it has an assignment/novation clause in it (https://www.pwc.com.au/legal/assets/inv ... eb16-2.pdf)

If so, then read the actual clause written in the contract carefully as it will probably provide an answer.

If not, then it is probably going to remain an ambiguous situation until someone tries to prove otherwise - and the person with the money tends to call the shots.

regards, dspp

AsleepInYorkshire
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Re: Villa Rental - legal position if Villa is sold

#213454

Postby AsleepInYorkshire » April 7th, 2019, 10:40 pm

Pheidippides wrote:Hi All,

I own a holiday property and have recently come across a problem from a previous guest who now has a current problem and are asking for advice. I know the normal advice is to "check the contract", but this question relates to who the contract is actually with.

Generically, most contracts are written with "the renter" agreeing to rent "the property" from reference to "the owners". Payment of the initial deposit (usually 20 to 25%) is non-refundable if cancelled by the renter.

In this particular instance the villa has been sold, but the new owners are (apparently) going to honour the booking. The renters were never told about any of this (borderline deceit by the old owners IMO). Now the renters are nervous and would prefer to cancel, but are keen to recover their deposit.

Does a contract between individuals become invalidated in this circumstance.?

How would a court rule now that the old owners are now not in a position to fulfil the contract, should the renters put in (or threaten) a small claims court (moneyclaim online) action.

Any opinions welcome

Regards

Pheid


All contracts have "essence". Often carefully worded contracts will singify exactly what the essence is. If not and the contract is tested in court the judge will determine the essence and proceeed to enforce that essence. Sometimes contracts are void in law as they do not meet statutory requirements. And sometimes "case law" will determine how to interpet certain aspects of a contract. Generic contracts are subject to many vagaries and unless they meet minimum standards they can often be easily challenged. However, that comes at a cost and inherent risk to anyone who decides ultimately to commence court proceedings. Based solely upon you comments I can't see any reason why the "renter" can set aside the contract and seek their deposit back based on the argument "that they lack faith in the [new] owners". There needs to be sufficient evidence that the [new] owners are going to forfeit the contract. The contract was "probably" novated under the terms of the sale of the property. If we assume that the "essence" of this contract was "to rent" at an agreed price a specific property at a specific time then in "essence" that has not changed. Perhaps the "renters" have perceived an opportunity to abscond from their own commitments under the contract?

I'm sorry it's a long winded answer but I wanted to try and convey the legalities of the contract. And I hasten to add I am not a lawyer or even close and my interpretation is probably very simplistic.

I would suggest the renters can really do as they see fit with regards to recovering their deposit. However, I think they would need to establish some other "essence" than that I have mentioned above and convince a judge that s/he should rule in their favour. Changes to price, availability and the actual property would possibly be grounds for an argument for a removal of essence but again that would be dependent upon other terms within the contract, the existence of any case law and the judges final interpretation of the contract and the law applicable to it.

AiY

Pheidippides
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Re: Villa Rental - legal position if Villa is sold

#213468

Postby Pheidippides » April 7th, 2019, 11:32 pm

Apologies if I did not make this clear.

The Renter is a previous guest of mine. A calendar clash meant that he has chosen to rent another villa for his upcoming trip.

In practical terms, whilst the contract do not explicitly allow novation they do not forbid it. There are also many cases where new owners do NOT honour existing bookings. this has a terrible reputational effect. It is accepted practice in these circumstances that renters are given the option to exit the contract, and anecdotally, many do.

The fact that the previous owner has decided to completely withhold that a sale has occurred is lamentable, and has destroyed much of the trust that this kind of arrangement is built upon. As a villa owner, my reputation is only as good as the last review that I have received, in the renter's shoes I would feel similarly aggrieved and seek to find another, more trustworthy, person from whom to rent. To complicate things still further, at this time, the new owner has still not taken the time or trouble to acknowledge the renter, despite the house being sold nearly 8 weeks ago.

I completely take the point that the contract itself, provision of house x for period y can still be successfully delivered and thus the essence of the contract remains.

Regards

Pheid

Clitheroekid
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Re: Villa Rental - legal position if Villa is sold

#213772

Postby Clitheroekid » April 9th, 2019, 12:47 am

Pheidippides wrote:I know the normal advice is to "check the contract", but this question relates to who the contract is actually with.

Generically, most contracts are written with "the renter" agreeing to rent "the property" from reference to "the owners". Payment of the initial deposit (usually 20 to 25%) is non-refundable if cancelled by the renter.

The normal advice still applies - check the contract.

For example, it may have a clause saying that if the property changes hands before the rental period starts the renters will agree to the contract being novated to the new owners. In that situation the renters would (subject to any consumer protection legislation) be bound by it.

But in the absence of any such provisions the original owners would be in breach of contract. As a result of their own deliberate actions, they would no longer be able to fulfil their contractual obligations.

This would be defined as a `fundamental' breach of contract - one going to the very root of the contract - and the renters would be entitled to damages for the breach.

The damages would include not only a return of the deposit but also reasonably foreseeable consequential losses. For example, if the renters had been forced to hire another similar villa but it was more expensive due to it being a late booking they could claim the additional cost. Or if they'd booked flights that were no longer of any use they could claim a refund.

So far as the new owners are concerned they would not (in the absence of any specific contractual provisions) owe any legal obligations to the renters.

I should add that this is all based on the assumption that the contract is subject to English law, and not the law of the country where the villa's situated. Normally a contract like this would specify which law applied to it.

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Re: Villa Rental - legal position if Villa is sold

#213941

Postby Pheidippides » April 9th, 2019, 5:07 pm

Clitheroekid wrote:For example, it may have a clause saying that if the property changes hands before the rental period starts the renters will agree to the contract being novated to the new owners. In that situation the renters would (subject to any consumer protection legislation) be bound by it.

But in the absence of any such provisions the original owners would be in breach of contract. As a result of their own deliberate actions, they would no longer be able to fulfil their contractual obligations.

This would be defined as a `fundamental' breach of contract - one going to the very root of the contract - and the renters would be entitled to damages for the breach.


None of the contracts I have seen make any reference to any potential sale and/or subsequent novation. The "contract" is really a set of T's and C's and are skewed quite strongly in terms of the Owner.

That aside - In the contract it states that "The Owner" agrees to supply "The Villa" to "The Renter" for "The Period" for "£x,xxx". It could be argued that, (if the new owner agreed), then the contractual obligations would be fulfilled inasmuch as the Villa would be available for occupation.


Clitheroekid wrote:I should add that this is all based on the assumption that the contract is subject to English law, and not the law of the country where the villa's situated. Normally a contract like this would specify which law applied to it.


As ever, a very good point. My contract (and I believe mine is typical) does not specify a jurisdiction. In this particular case I know that the old owners are most definitely English

Regards

Pheid

dspp
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Re: Villa Rental - legal position if Villa is sold

#213943

Postby dspp » April 9th, 2019, 5:14 pm

The Owner is not the villa, it is the individual(s). Even if the villa gets a new owner, the new owner is not The Owner. The client's contract is with The Owner. Of course The Owner is the old owner.

So what CK is saying is that the client can tell The Owner (i.e. the old owner) to make them good.

At least that is the case if there is no novation / assignment clause, and if English & Welsh law applying.

regards, dspp

didds
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Re: Villa Rental - legal position if Villa is sold

#214320

Postby didds » April 11th, 2019, 8:43 am

what dspp says ^^^ - AIUI.

the contract would normally specify some early on the definitions for such items as "The Owner" ie a person/company/ "The owner" then throughout means that defined party.

Normally, IME

didds


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