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Property maintenance prior to transfer. Who is liable?

A recent court case dealt with the above question and provides food for thought.

Quite often a purchaser of immovable property takes occupation of the property prior to transfer and in return pays “occupational rental” to the seller until transfer is effected.  Most deeds of sale contain provisions which deal with the liability for the payment of the rates and taxes and the passing of risk.  In some “standard” deeds of sale the passing of risk to the purchaser and the purchaser’s liability for the payment of rates occurs on the date of occupation and in other “standard” agreements it occurs on the date of transfer.   However few “standard” deeds of sale are specific about whether the seller or purchaser is liable for the maintenance of the property between the date of occupation and the date of transfer.

In a recent case the purchaser took occupation of the property prior to transfer and was liable for occupational rental.  A clause in the deed of sale read as follows: “The risk in and to the property, and liability to pay all rates, taxes and other outgoings shall pass to the purchaser on the date of transfer.”    It was clear from the above clause when risk passed and also when the purchaser’s liability to pay rates and taxes commenced (namely on transfer).  However the question of who was liable for maintenance of the property prior to transfer was less clear.   Prior to transfer the purchaser incurred costs relating to security, gardening, general cleaning, fire protection and other maintenance services and deducted these amounts from the occupational rental which was payable as it (the purchaser) claimed that these expenses constituted “other outgoings” mentioned in the clause set out above.

The seller contended that the purchaser was not entitled to deduct these amounts as the purchaser was liable for the cost of “maintaining” the property from the date of occupation onwards.  The seller further contended that “outgoings” meant rates and taxes or any other charges payable to the municipality or other authority.

The court held that the words “other outgoings” should be interpreted to include every expense in relation to the property which in the ordinary course of occupation would be required in order to maintain, protect, secure and keep it in a fit state.   The court accordingly held that expenditure relating to security, gardening, general cleaning, maintenance and protection services were properly incurred and reasonably necessary to keep the condition of the property at an acceptable standard.  The court further held that in addition to the rates and taxes the seller was liable to pay the abovementioned expenses until date of transfer.

When a purchaser intends taking occupation of a property which he or she has purchased prior to transfer it would be prudent for the seller and the purchaser to reach agreement on the issue of liability for maintenance of the property prior to transfer and then ensure that an appropriate clause reflecting the agreement reached is included in the deed of sale.

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