House-buyers may struggle to pocket non-returnable deposits, says Rowena Meager
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Section 49(2) of the Law of Property Act 1925 (LPA 1925) confers upon the court the discretion to order the repayment of a deposit paid by a party who enters into a contract to purchase land but then fails to complete the transaction in accordance with his contractual obligations. In the recent decision of the Court of Appeal in Midill (97PL) Limited v (1) Park Lane Estates Limited and (2) Gomba International Investments Limited [2008] EWCA Civ 1227 the proper interpretation of s 49(2) was considered. As was noted by Lord Justice Carnwath, giving the judgment of the court, s 49(2) jurisprudence has followed an uncertain course. This decision will hopefully lend some welcome clarity to the approach which ought to be adopted by the courts in future.
Facts of the case
Park Lanes Estates Ltd (Park Lane) was wholly owned by Gomba International Investments Ltd (Gomba). Park Lane's only asset was a property at 97 Park Lane,
