Find a Solicitor for your

Conditional Contract

Conditional Contracts Lawyers

Conditional contracts are often used in the construction sector when the sale of a property relies on third parties.

Our network of experienced property lawyers can help buyers and sellers draw up comprehensive conditional contracts, provide advice on your options, and help you resolve a dispute with another party over a conditional contract.

They can also ensure that the wording of your contract is ironclad and the terms are enforceable under the law to protect your interests.

Get in touch with us today for a free case assessment and quote for the services of a specialist lawyer.

• What is a conditional contract?

• When are conditional contracts used?

• What should be included in a conditional contract?

• What are the most common conditions in a conditional contract?

• What are the recommended timescales for meeting conditions?

• What are the benefits of a conditional contract?

• What are the drawbacks of conditional contracts?

• What is the difference between a conditional contract and unconditional contract?

• Is a conditional contract binding?

What is a conditional contract?

A conditional contract is a legal agreement between two parties, commonly used for buying or selling property or leasing agreements.

How the agreement unfolds depends on a specific event happening, like getting planning permission or securing financing.

If the trigger event happens, the transaction usually takes place shortly afterward, often within 20 days.

If the event doesn't happen, the contract becomes invalid, and both parties can cancel it without any further obligations, except for any legal fees incurred.

Solicitors play an important role in making sure these contracts are legally valid and can be enforced if needed.

When are conditional contracts used?

Conditional contracts are frequently used for transactions relating to valuable properties or land.

They are also used when planning permission is required on a new building project at an existing site.

Some parties only use conditional contracts when necessary because they involve risk and uncertainty. They may be needed when property professionals are waiting for information from local authorities or planning permission. Similarly, businesses might wait for a premises license before completing a deal. These contracts offer assurance that agreements are in place but provide an exit option if a trigger event doesn't happen by a set date. Developers often use conditional contracts to buy land and secure it for development, ensuring it isn't sold to others without the necessary planning permission. These agreements are also useful when one contract depends on another. For example, a developer might delay completing a contract until they secure agreements with local authorities or statutory bodies regarding infrastructure, like new roads (known as section 38 and section 104 agreements).

What should be included in a conditional contract?

While they may seem straightforward, drafting one can be complex, and if mistakes are made parties can face considerable losses.

Contracts should include details of the type of permission needed, timetables for the planning permission to be gained, and an appeal process if the permission isn’t granted.

To ensure a conditional contract will hold up in court you need to ensure that it is clear, including:

• Contact addresses

• How the conditions will be satisfied and who by

• Whether and how a condition can be waived

• Termination rights if a condition is not satisfied by a specific date

What are the most common conditions in a conditional contract?

The most common conditions, also known as trigger events, as they trigger the terms in the contract to come into force, include:

• Planning permission being obtained

• A buyer obtaining a satisfactory survey

• A vacant possession order being obtained

• Consent for leasehold property consignment 

• Obtaining third party’s consent

• A site assembly condition

What are the recommended timescales for meeting conditions?

Typically, agreements have a timeframe of 6 months to ten years, with an average of around 5 years. The contract should outline who is responsible for each condition and the level of effort required.

Effort levels are categorised as:

• Best endeavours: The party must take all possible actions, even if it's challenging.

• Reasonable endeavours: The party can balance contractual requirements and financial interests.

The contract must clearly state the timeline, which should be reasonable and practical. Setting deadlines helps both parties recognise when their goals are not achievable, allowing them to limit damage and end the agreement. For instance, if a project requires planning permission, the contract should specify a reasonable timeframe agreed upon by both parties to obtain it.

What are the benefits of a conditional contract?

Conditional contracts can benefit both buyers and sellers when used appropriately. They allow parties to enter into a contract while certain conditions, like securing planning permission or completing necessary works, are addressed. The contract becomes enforceable, and the sale or purchase occurs only when these conditions are met.

For buyers

For buyers, the advantage lies in the seller's commitment to selling at an agreed-upon price once the conditions are fulfilled within a set timeframe. This prevents other buyers from intervening, giving buyers peace of mind to plan their business activities. If conditions aren't met, buyers can walk away without impacting their plans or projections.

For sellers

Sellers benefit from the certainty that buyers can't withdraw from the sale unless conditions aren't met. When confident in meeting the conditions, sellers secure a guaranteed sale at a satisfactory price. Moreover, sellers may benefit if conditions aren't met by selling the property or land at a higher price than agreed upon. This could happen if market conditions change or if they find another buyer willing to pay more.

What are the drawbacks of conditional contracts? 

One issue arises when the agreement lacks clarity regarding who is responsible for meeting the conditions and the level of effort required. Engaging a solicitor early in the drafting process can prevent this problem from undermining the agreement.

Another drawback is the potential for wasted time and costs if the project cannot be completed due to unmet conditions. Conditional agreements are complex to draft and fulfill, requiring significant time and financial investment. Moreover, parties may not fully understand their responsibilities, including timelines set in the agreement, leading to non-fulfillment. In such cases, sunk costs may be unrecoverable, and the intended business objectives may not be achieved.

What is the difference between a conditional contract and unconditional contract?

In a conditional contract, certain actions must occur before the sale can proceed. When these conditions, known as trigger events, are met, the deal can move forward. If not, both parties can walk away. In contrast, unconditional offers have no conditions attached from the start. Once signed, the agreement becomes legally binding, and both parties are obliged to complete the sale.

Is a conditional contract binding?

A conditional contract becomes binding at the time the conditions of the contract are fulfilled. 

How can Lawhive help?

Our network of property solicitors can help you implement a conditional contract.

Contact us today for a free case assessment and quote for the services of a specialist lawyer.