Conditional Contracts
A conditional contract is an exclusive, legally-binding contract between a buyer and a seller (or a tenant and a landlord), dealing with how a parcel of land or property is to be purchased or leased by one party from another, upon the occurrence of a particular trigger event. The trigger event might be the grant of a planning permission for the construction of a new building at the property, or the completion of a surrender of an existing lease held by an occupational tenant at the property. Completion usually occurs approximately 20 working days after a trigger even
Conditional Contracts
A client might wish to legally commit themselves to the assurance of an exchange of contracts, but want the comfort of an exit strategy, if a certain trigger event does not occur before a certain date.
For example, a client may want to secure legal exchange to purchase a development plot, in order to prevent it being sold to a third-party, but does not at the time of exchange have planning permission to build.
Within reason, a trigger event can be drafted on a bespoke basis, to cover any identifiable event. The conditional contract requires that the trigger event occurs before a particular date and if it does, completion of the transaction will then happen shortly afterwards – normally 20 working days.
If the trigger event has not occurred by the relevant date, the contract usually comes to an end and the parties walk away from the transaction.
What Can a Conditional Contract Be Used for?
A conditional contract is used in situations where a seller wants to sell and a buyer wants to buy a property or parcel of land and all other commercial terms and conditions are agreed – save that because of one particular event not having occurred, the transaction cannot quite proceed to legal completion.
Such a contract will give both parties a level of assurance that the transaction can and will happen once the remaining event is achieved and will deal with the mechanism to achieve that. Likewise, if the trigger event does not occur before an agreed date, a mechanism will control the method in which the contract comes to an end and how the parties walk away from the transaction.
