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Proprietory Estoppel – Promises of a Third Party
| 02 July 2019

Proprietory Estoppel – Promises of a Third Party

In the recent decision of the High Court in Sahota v. Prior, the High Court has confirmed that a purchaser of the property will be bound by whatever terms are introduced by persons having conduct of the purchase, even if the purchaser is not aware of those terms.

The background to this particular matter, started with Mr and Mrs Prior, who sought to sell their property to a company known as Red 2 Black, to assist them with release of equity within their property to enable them to meet their debt which were causing them some financial difficulty.

The Priors at all times believed that they were selling the property to Red 2 Black, who had confirmed to them that when the property was sold, they would be provided with a tenancy for life in relation to the property, as long as they maintained the rent.

The true position however, was that Red 2 Black was selling the property to a third party, being Miss Sahota. They informed Miss Sahota that the tenancy for the property was only a 5 year tenancy, and indeed Mr and Mrs Pryor signed a document which on the face of it was a 5 year tenancy.  However, Red 2 Black repeatedly assured them on a verbal basis that they had no need to concern themselves, and that they were able to remain in the property for the rest of their lives as long as they paid the rent.

Mr and Mrs Pryor continued to pay rent to Red 2 Black, and on one occasion, Red 2 Black arranged for this rent to be paid to one of its directors.  This was discovered by Miss Sahota, who in turn then contacted the Priors, but reiterated that as long as they paid the rent they could remain within the property.

In reliance upon this the Priors continued to utilise the property as their home caring out various repairs and improvements.

At the end of the 5 year term Miss Sahota sought to obtain possession of the property, and issued proceedings in that regard. The County Court concluded that Miss Sahota was bound by the statements made by Red 2 Black, and the matter was then appealed to the High Court.

Upon the matter being appealed to the High Court, the Court affirmed the position of the County Court, indicating that Miss Sahota was bound by the statements made by Red to Black.

The Court specifically found that Miss Sahota was bound by the terms of the agreement which had been introduced by Red 2 Black, even though she had no knowledge of those terms, because she had agreed to ratify the agreement whatever its terms.  Miss Sahota had not played any role in the transaction, and had essentially left it to Red 2 Black, which had therefore resulted in Red 2 Black being able to bind Miss Sahota in relation to her representation.

The Court went further to indicate that the representation which had been made had been a simple promise (a proprietor estoppel) and therefore could be relied upon by Mr and Mrs Prior enforcing their status in the property.

The result of the case is that Mr and Mrs Prior would not be evicted from the property.

This has implications not only for buyers but also for sellers in relation to transactions where they leave matters to a third party to attend to that transaction on their behalf.  Consideration should be given as to whether that individual is make representations which would subsequently bind you, without you even being aware of their existence.

Should you have any further queries regarding the outcome of this matter and how it may impact upon yourself, you should contact either Lorraine Lancaster or Mustak Bari on: 01702 338338 llancaster@paulrobinson.co.uk or mbari@paulrobinson.co.uk

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