The validity of the seller's financing reservation

On December 20, 2019, the lawyers won a case for a seller regarding the validity of the seller's financing clause in a purchase agreement.

The case concerned a property on Djursland, which was put up for sale by a local real estate agent. A purchase agreement was signed with a buyer, which was conditional, among other things, on the seller's bank being able to approve the purchase agreement with regard to the financial circumstances.

The seller's bank subsequently announced that the transaction could not be approved, as not all debts in the property had been taken into account and it was not possible for the seller to finance this deficit himself. The real estate agent then informed the buyer that the transaction had been cancelled.

Later that day, the real estate agent wrote to the first potential buyer that there were now two interested buyers, and both were asked to bid on the property. Both did, but the second potential buyer made the highest bid and thus purchased the property.

The first buyer then filed a lawsuit against the seller, initially demanding a title deed to the property, but later demanding compensation equal to the difference between the original bid and the amount for which the property was sold.

Both before the Randers Court and the Western High Court, the case concerned the validity of the bank's rejection of the first purchase agreement and the size of any loss.

Both the district court and the high court reached the same result, namely:
There is no basis for interpreting the condition in the purchase agreement that the SELLER'S bank should approve the transaction, as far as the financial content is concerned, restrictively. Taking into account the information about the SELLER'S financial circumstances, the BANK was entitled to refuse to approve the transaction. The High Court therefore accepts that a final purchase agreement had not been concluded between the parties.

The High Court has thus created clarity on the interpretation of a central and widely used clause in purchase agreements for the purchase and sale of real estate.

If you have any questions about the verdict, you are welcome to contact attorney (H) Søren Vasegaard Andreasen who conducted the case on behalf of the seller.