Court orders BD12,100 refund over flat sale

TDT | Manama

Email : editor@newsofbahrain.com

The High Civil Appeals Court has upheld a ruling to cancel a flat sale and order a BD12,100 refund to a Bahraini buyer after finding the property was already under mortgage and the seller had kept quiet about it, according to lawyer Sara Ali.

She said her client, a man in his thirties, had agreed to buy a freehold flat for BD28,000 from a projects company.

Before signing the final sale contract, he paid BD12,100, with the remaining BD15,900 due on signing.

Sale procedures

Both sides agreed that the flat would be handed over within five months, once the sale procedures were completed.

The lawyer explained that the seller did not deliver the flat.

The buyer then contacted the Survey and Land Registration Bureau, where he learnt that the unit formed part of a tower mortgaged in favour of another institution and that other complaints had been lodged about the same building.

Amount

Four months later, the buyer asked the seller to return the amount he had paid. No money was returned, so he brought a case before the civil court seeking to cancel the contract and recover the sum.

The lower court ruled in his favour, rescinding the contract and ordering repayment of the BD12,100.

The defendant appealed, but the High Civil Appeals Court upheld the earlier judgment.

Free

In its written reasons, the appellate court stated that the second defendant, a partner in the first defendant company, had attended a questioning session and told the court that the flat in dispute was ready and free of any mortgage.

After the court wrote to the Survey and Land Registration Bureau, it became clear that the flat was in fact mortgaged in favour of an institution.

The court said the case file contained nothing to show that the buyer knew about the mortgage before the agreement, while the two defendants were required to inform him of any burden on the property.

Duty

It added that, although a mortgagor may dispose of a property under the law, this does not relieve him of the duty to act in good faith and with honesty in dealings, and he ought to have told the buyer about the mortgage.

The court also rejected the defendants’ attempt to rely on the rules on earnest money and the bar on recovering it, finding that the BD12,100 formed part of the purchase price from the outset, not a separate deposit.

The judges went on to find that the second defendant had engaged in fraud. He appeared in court and stated that the flat was not mortgaged, while knowing that it was, in his capacity as partner and owner of the first defendant company.

Property He did not reveal the mortgage and instead confirmed that the property was free of it. On that basis, the court held him jointly liable with the company under Article 18 bis, paragraph 2, of the Commercial Companies Law. It ended by rescinding the contract, restoring the parties to their previous position and ordering the two defendants, jointly, to pay the buyer BD12,100.