Calvert raises a point which, during the downturn in the financial and property markets, could cause considerable grief for property buyers. This concerns a buyer whose deposit has been forfeited turning to his solicitor’s indemnity policy to recoup his loss.

Notwithstanding the fact that the Law of Property Act 1925 has been on the statute book for more than 80 years, ‘the learning in respect of section 49(2)’ has been surprisingly incoherent, resulting in expensively litigated disputes as to the exercise of judicial discretion.

Some courts have preferred the ‘generous’ approach of Lord Justice Buckley in Universal Corporation v Five Ways Properties Ltd [1979] 1 All ER 552, while others have leaned towards the ‘stricter view’ of Lady Justice Arden in Omar v El-Wakil [2001] EWCA Civ 1090. However, while the balance of academic opinion has favoured the generous approach, Lord Justice Carnwarth, with whom both his fellow Lord Justices agreed, has in the most recent (and therefore binding) case of Midill (97PL) Ltd v Park Lane Estates Limited and another [2008] EWCA Civ 1227 adopted Lady Justice Arden’s view.

The lesson is clear: conveyancers for buyers must look carefully at the draft contract submitted by the seller's solicitors and insist on protective amendments to the standard conditions of sale. For example, incorporating a right to rescind if, after exchange of contracts, the lender withdraws the mortgage offer. Such a calamity was once unheard of, but there is evidence that this is exactly what cash-strapped or cold-footed lenders are now doing, with increasing frequency. In a buyer’s market, the seller may well prefer such an amended contract to being left with no contract at all.

Frank D'Souza , John Smythe & Co, Kingston upon Thames