Up to 40 buyers in Belfast apartment blocks could be able to cancel contracts after a High Court judge identified flaws in the completion process.

Mr Justice Tom Burgess also ruled that the developer did not have legal rights to some overhanging balconies on the James Clow complex at one stage when it was seeking to finalise deals. He held that any purchasers under such contracts are entitled to rescind them and have deposits returned to them.

The verdict came in a test case expected to have wider implications for others who bought apartments in the Pilot Street development at the height of Northern Ireland’s property boom. It is one of the few times in such legal disputes where the court has found in favour of the purchasers.

The action brought by Joanne and Nigel McGarrity formed part of a group litigation against developer Sarcon (No 177) Ltd. Although the action was advanced on behalf of 10 buyers, legal sources said it will impact on as many as 30 others.

In May 2007, they agreed to buy an apartment in the two-block complex, also known as the Granary Building, for £282,500 (€392,480), putting down a 10 per cent deposit. But after completion dates for the development were extended from May 2009 to later that year, buyers commenced legal proceedings in a bid to have the contracts rescinded. Among a series of claims, their lawyers argued that when the vendor issued notices to complete, it was not ready, willing and able to do so. It was also contended that at one stage legal title could not be given to some balconies overhanging adjoining land not owned by the vendor.

Dealing with issues around the planning permission for building the apartment block, the judge said he found it “extraordinary” that no one would have realised there was a need to deal with the “encroachment”.

He added: “It is even more extraordinary that no steps were taken to address this deficiency until late 2009 at which stage, to all intents and purposes, and certainly as far as the vendor was concerned, the development was complete and fit to be occupied.”

The judge concluded that the seller did not have title to balconies overlooking Pilot Street and Princes Dock Street before December 2009. It was not in a position to complete deals on apartments where notices were served prior to that date, he ruled.

Any purchaser under such a contract at that stage is entitled to rescission and the return of their deposit, Mr Justice Burgess confirmed. But others who were served with a notice to complete after a licence covering the balconies was granted cannot get out of their contracts on that point.

Turning to wider planning issues, the judge again found a right to rescission based on meeting conditions by the time ownership of the apartments was to be transferred over.

He said there was no doubt the “catalyst” for the McGarritys seeking to cancel their contract was the collapse in the housing market which saw their apartment’s value fall below the purchase price. But their right to rescind was said to be based on the seller not being ready and able to complete at the time it sought to enforce the agreement. Mr Justice Burgess added that other purchasers will need time to consider their positions based on his determinations.

Outside court a solicitor who headed the case stressed the implications of the verdict. Barbara Creed of Tughans law firm said: "We are delighted with an outcome which we feel is very fair. This will mean that a substantial number of purchasers will be entitled to rescind their contracts and recover their deposits as a result of the finding that the developer not having been ready, willing and able to complete when it served notice to complete."