Contract crashed on incomplete DA works, seller saved by interim occupancy certificate

It is not uncommon for residential sales contracts to require the seller to complete specified works or obtain a local authority occupancy certificate prior to completion.

Woolloomooloo waterfrontDetailing the precise extent of those works is critical to avoid a contractual dispute.

Consider the June 2018 sale of a $2.8m three-level harbor-side residence in Sydney – for which a DA had been issued – at a time when the approved works were only partly complete.

Buyer Joseph Pollak wisely instructed his solicitors require the seller to warrant that ”all works had been carried out in accordance with the DA” and that “all development consent conditions will be satisfied and an occupation certificate provided” prior to completion.

He refused though to settle on the Woolloomooloo property in October because seller Ian Yapp had not constructed numerous items that had been detailed in the DA.

The incomplete works were extensive and included a kitchen extension, a level 3 bedroom, a walk-in robe and ensuite, ducted air-conditioning and an above garage outdoor living area.

He purported to terminate on those grounds and was swiftly sued by Yapp for specific performance.

Pollak defended, asserting that the seller should have completed all DA works and that the production of an interim occupation certificate did not satisfy the special condition.

The NSW Supreme Court was not convinced.

The special condition did not, in its view, require the Seller to construct everything that was permitted by the DA. Rather, it was to ensure that those works that were performed would comply with it.

The court accepted that another special condition – that the purchaser “bought the property relying on his own inspection… in its present condition” – prevailed.

Pollak was not surprisingly ordered by the court to complete the buy.

On appeal, Justice Richard White in delivering the lead decision, noted that “the fact that works were permitted to be carried out did not oblige the Seller to in fact perform them”.

And on its proper construction, the contract carried no such implication.

The appeal judges recognised that a final “occupation certificate” could only be issued once all the works that were the subject of the DA consent had been completed.

They ruled that an interim certificate had nevertheless, the effect of certifying the sufficiency of the works that had been performed and allowed the premises to be occupied.

Because the contract did not specify any obligation to provide a final as opposed to an interim, certificate, the interim occupancy certificate entirely satisfied the seller’s contractual obligations.

Mr Yapp thus succeeded in overcoming the buyer’s appeal and ensuring the order that he be required to complete the purchase, was upheld.

Pollak v Yapp [2019] NSWCA 150 Bell P, Payne JA, White JA 20 June 2019 Read decision

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