> BUYING & SELLING PROPERTY
TIPS AND ADVICE
Sadly, with the complexities of life and property transactions, and the fact that there is often a chain involved when buying and selling properties, one small hiccup can have consequences for everyone in that chain.
Delayed completion happens when the buyer and seller agree on a price and exchange contracts, but the final completion of the sale is postponed, potentially for years.
There are many reasons that a property completion can be delayed:
- it could be that funds were not received from the mortgage provider in time;
- it could be that a buyer or seller was unable to action something as quickly as may otherwise have been envisaged;
- it might be something as seemingly innocuous as a removal van turning up late to clear items from the property to enable vacant possession to be given in time for the agreed completion date; or
- it could even be something as outrageous as a buyer demanding a discount to complete after exchange of contracts (yes, this has happened!).
Whatever the cause, by the time of the exchange of contracts, a buyer and seller will have agreed a time and date by when funds need to be transferred to complete the purchase. A failure to comply with that contractual term is a breach of contract.
What is the effect of this delayed completion date?
This means, for example, that a buyer towards the bottom of a chain who has remitted funds to their solicitor an hour too late, cannot complete until later than envisaged, leading to a delayed completion date. The next person up the chain cannot complete their purchase because they need the funds from the person below them in the chain, and they are buying their property in order to complete on their purchase, and so on.
By way of example:
Ms Scarlett is buying Professor Plum‘s property. In this transaction, both the buyer and the seller play crucial roles, with solicitors for both parties exchanging signed contracts and facilitating the payment of the deposit, marking the agreement as legally binding. But Ms Scarlett remits funds to Professor Plum late.
Professor Plum needs those funds from Ms Scarlett to purchase a property from Reverend Green and cannot complete until he has the funds. He then delays in completing his purchase with Reverend Green.
Because Reverend Green needs the money from the sale of his property to Professor Plum, he cannot complete his purchase of the property from Dr Black.
This will continue right up the chain and the losses that people incur can include additional storage costs or moving costs and hotel and accommodation expenses, for example. However, it does not end there.
Because of the legal principle of privity of contract, only the parties to a contract have the right to pursue each other. This means Dr Black cannot seek her losses from Ms Scarlett. Dr Black can only pursue Reverend Green for the delay, because they have a contract together.
Reverend Green would then have to include the claim against him in addition to his actual losses, such as additional storage charges, in his claim against Professor Plum. Professor Plum would then have to include Reverend Green and Dr Black‘s claims against him in his claim against Ms Scarlett, who was the person who caused the delay – all the way up the chain.
What can be claimed in a property transaction?
Most property transactions take place pursuant to standard terms and conditions. We have focussed on the standard residential, as opposed to commercial, conditions of sale.
Under the standard conditions of sale, an aggrieved seller is entitled to claim interest at the rate specified in the contract on the agreed purchase price, less any deposit paid, until completion takes place.
If that compensation is greater than the actual loss suffered (e.g. the interest is greater than the additional storage costs and any claim against them by their seller) then this is the most that can be claimed.
If the compensation is less than the actual loss suffered (e.g. the interest is less than additional storage costs and a claim being pursued against them by their seller) then the balance can be pursued.
It’s all a bit complicated, isn’t it? Understanding a property transaction
Solicitors don’t make the law, they simply seek to apply it to the facts of any case, and lenders are under no legal obligation to offer an extension for a mortgage offer. The reason why the principle of privity of contract exists is because the law has developed to say that, except in certain and very limited circumstances, only the parties to a contract should be allowed to enforce their rights or be pursued by the other contracting party for failing to perform them.
In property transactions, while sellers are committed to the exchange after a deal, lenders are under no legal obligation to extend mortgage offers if completion is delayed, potentially putting purchasers at a disadvantage.
Sadly it does get a little fiddly, and what happens in these circumstances depends on a number of facts.
So what do I do if there has been a delayed completion date? Your delayed completion strategy
There are some practical considerations to take account of but they will depend on the circumstances of any case.
For example, some parties may be willing to simply accept the loss, as they do not want the aggravation of pursuing a claim. Also, where you are in the chain may make a difference to what you do. The lower down the chain you are, the greater the potential that the claim against you would be larger.
An ‘exchange with delayed completion’ is a strategy where contracts are exchanged but completion is postponed to a later date. This can be due to mutual agreement or unforeseen circumstances and is often used by property investors to secure properties while awaiting factors like planning permission. It is crucial to have an experienced property solicitor to manage the complexities of this approach.
If you are the buyer at the bottom of the chain (like Ms Scarlett) who, directly or indirectly caused the delay, you are probably best placed to agree a settlement with your seller (in our example, Professor Plum) as soon as possible. If the terms of that agreement are sufficient to do so (and careful wording should be considered) then it may be possible to exclude all future claims.
This would mean that if the buyer at the bottom of the chain (Ms Scarlett) settles the claim with the person above them (Professor Plum), then they cannot be pursued further. If the person at the top of the chain (Dr Black) has not yet put his or her claim to their buyer (Reverend Green), then it may be some time before it works its way down the chain and it would stop at the person above you, because you have contractually agreed with them not to be pursued further.
If you are at the top of the chain (like Dr Black), you have the luxury of being able to decide whether or not to pursue a claim. For you, the losses may not be particularly high, as you do not have to worry about people above you bringing their claims.
If you are somewhere in the middle of the chain (like Reverend Green or Professor Plum), then the action you take may be dictated by the action taken by the person above you in the chain. As the losses tend to grow the further down the chain you are as the claims compound, generally the lower down the chain you are, the greater the risk that someone above you might want to claim their losses.
For all but the person at the top of the chain (Dr Black), agreeing a swift settlement with the person above you is probably the best way to complete your property transaction fast. This might be difficult, as the person above you might be waiting to see if the person above them intends to make a claim.
How can Cunningtons solicitors help?
We can assist in defending and bringing claims for breach of contract based on delayed completion.
However, much of the time, the value of the claim is comparatively low. This generally means that reclaiming your legal costs is not an option. We can generally offer fixed fees or fee caps for providing advice and liaising with the parties. Have a look at our Funding Your Claim page.
Please feel free to contact us if you would like our help.
It is also crucial to keep your estate agent informed about any potential delays in completion, as they play a key role in facilitating the exchange of contracts and the transfer of keys upon legal completion.
Points to remember
In terms of important things to remember:
• If it was you who caused the delay (whether or not it was your fault), try and settle the matter with the person above you as soon as possible and absolutely conclusively, so no further claims can find their way down the chain to you.
• If you are somewhere in the middle of the chain, don’t settle too early with the person below you. You want to be certain that the person above you is not going to pursue a claim against you before you agree to compromise your right to include their claim against your buyer.
• If you are at the top of the chain, you can pursue your claim at your leisure but be aware that the person below you in the chain is going to be reluctant to pay you your claim until they have received the same sum from their seller.
Contact your local conveyancing solicitors
Find out more about our specialist property solicitors in Braintree, Brighton, Chelmsford, Croydon, Hornchurch, Solihull, and Wickford.
Frequently Asked Questions
As you can see, buying and selling property is not always as simple as you think. We’ve tried to address some common questions below, but if you are still unsure please feel free to contact us for an answer.
Can I get compensation for delayed completion?
Yes. It will be a contractual term of the contract as to when completion takes place. It is therefore a breach of contract if it does not. Normally the contract will provide a remedy and say who pays what in the event of a delayed completion. This is normally interest on the sum paid and any reasonable expenses incurred (such as temporary accommodation or subsistence).
Is there a penalty for late completion?
No, there is not a “penalty” for late completion. “Penalty clauses” are a specific thing in law and are generally unenforceable. However, the contract will normally specify a financial remedy for the aggrieved party. If not, a claim for damages based on normal contractual principles relating to a breach of contract would apply. This is that losses which are reasonably foreseeable at the time of exchange of contracts can be claimed.
What happens if completion is delayed by buyer?
If it is solely the buyer’s fault that there is a delay, normally, the first thing the seller will do is serve a notice to complete. If that notice period expires, it then gives the seller the option to rescind (i.e. withdraw) from the contract and keep the deposit. In addition, the contract will normally say that the seller is entitled to claim their reasonable losses and interest calculated by reference to the purchase price, less any deposit paid until completion takes place or the contract is rescinded.
What happens if completion is delayed by seller?
If it is solely the seller’s fault that there is a delay, normally, the first thing the buyer will do is serve a notice to complete. If that notice period expires, it then gives the buyer the option to rescind (i.e. withdraw) from the contract and get back the deposit paid with accrued interest. In addition, the contract will normally say that the seller is entitled to claim their reasonable losses and interest calculated by reference to the purchase price, less any deposit paid until completion takes place or the contract is rescinded.
The buyer is delaying exchange of contracts. What can I do?
This will depend on the circumstances. Whilst serving a notice to complete on the seller is generally the first thing that can and probably should be done, it is a fairly unpleasant thing to do and can cause contention. Asking you solicitor to speak to the buyer’s solicitors and find out what is happening and the cause of the delay is worthwhile doing, as it might influence your decision.
Why is my solicitor not releasing funds after my house sale?
The basic position is that a solicitor should release funds to their client as soon as possible but there could be any number of reasons for not doing so. For example, the proceeds of sale might belong to the estate of a deceased seller, and the estate is yet to be finalised and distributed. It might be that there is a dispute between co-owners about the funds and who should get what, in which case the solicitor might have received conflicting instructions as to which of their clients receive what proportion of the proceeds of sale. It could be that a retention of some sort was agreed for something. This is not uncommon in leasehold property where service and other charges by the landlord are not certain at the point of completion, so the parties might agree that a certain sum be held back in one of the solicitor’s account until that figure is clear, at which point it can be sent to the seller after deduction of any such charges.
What can hold up the exchange of contracts?
Lots of things can hold up the exchange of contracts. The basic position is that the buyer will want to be satisfied as to what they are buying, so they will tend to ask questions and make enquiries of the seller. These do take time to respond to. The parties might be relying on third parties for something. For example, a mortgage lender to confirm that they are prepared to proceed further, the results of a formal search about the property which has yet to be sent back to the buyer, a variation of a particular lease term in a leasehold transaction. There is sadly no shortage of things that can happen and whilst the seller will generally be keen to proceed, especially if they have a linked transaction, the buyer will not exchange contracts until they are certain that they want to buy the property and are able to proceed.
What happens on remortgage completion day?
The solicitor would confirm to their mortgage lender client that the property has a good title to lend against by sending what is called a certificate of title (although this generally happens in advance of completion), the funds will then be remitted to the solicitor, who will also generally lodge an application at the Land Registry to register a charge against the title to the property and then the funds would be remitted to the solicitor’s client after payment of their legal charges.
Will my solicitor tell me when we exchange contracts?
Absolutely. In fact it is important to agree dates for exchange of contracts and completion with all parties, as a lot of the time, they are in a chain and will have linked transactions. For example, a buyer might also be selling a property in order to fund their purchase of your property, and you might be selling your property in order to purchase a new one.
Why do solicitors take so long to exchange contracts?
This is a subjective question but ultimately, exchange of contracts will only take place once the buyer is satisfied that they are happy to proceed and a seller is ready to do so.
My completion was due on a Friday, but the bottom of the chain did not request their funds in time. The funds came through at 4.50pm when the solicitors were closed and it was then too late to complete. The funds were then transferred late on the following Monday incurring a 5 day delay. I have had to pay out a second removal company and storage of my possessions, plus interest on my mortgage. Can I claim these costs and what is the best way?
Thank you for contacting Cunningtons and we are sorry to hear of your problems with delayed completion. Whilst your own conveyancing solicitor is best placed to advise on the specific Contract you have entered into, if it is based upon the Law Society’s Standard Terms & Conditions, then this provides for penalty interest in the event of late completion. Other expenses you have incurred as a result of late completion usually can be recovered from your buyer if they are at fault, but it will usually mean taking action via the courts (and depending on the size of any claim that may be the small claims court) to recover such sums.
I am moving home and I paid for the removal company. 16 hours to the move, I receive an email to say my buyer is not in funds and there will be a delay. I have had to cancel the movers and they have fined me for this. 2k. Who is liable for this cost?
Thank you for contacting Cunningtons and we’re sorry to hear you have had problems with your completion.
The position as to who is liable for those costs will depend on whether or not you have exchanged legally binding contracts for the sale of your property with the buyer. Your conveyancing solicitor is best placed to advise in this regard, but if you have exchanged Contracts then you may have a claim to recover these costs from the defaulting buyer. If you have not exchanged Contracts and were due to simultaneously exchange and complete on the same day, then unfortunately your buyer would not be responsible for those costs.
That does not mean, however, that you could not then renegotiate the agreement you have with the buyer if they have caused you unexpected costs. Provided there’s no legally binding exchange of Contracts then either party can withdraw, or seek to change the agreed price right up to the point of exchange.
We are currently in a position of selling our house due to the increase in mortgage rates pushing our mortgage up by £900 a month. Making it unafordable The sale was agreed back in September. The buyer is in rented accommodation and we are moving in with family. So there is no long change.
The buyers solicitor keeps no responding to estate agents or buyer. They claimed no to have received inquiries twice when all in the email chain had can see they had been sent. When they do respond they keep promising to send out contract to exchange the next day but its been 2 weeks and no response and no contracts
We stated this need to be completed by middle of December and the buyer agreed ,but we are still waiting and the buyer still hasn’t received contracts.
This has now cost us the seller, 2 months of increased mortgage, plus house hold bills. Leaving us in financial difficulty.
What are our options?
Thank you for your comment.
There is little you can do except change your buyer, or encourage your buyer to change their solicitor if they’re not happy with them. You don’t have any legal recourse against a buyer for not exchanging, or against their solicitor. Your buyer could raise a complaint against their solicitors to see if that prompts them into action, but there’s no monetary claim you can make. The only other option would be to seek to agree a higher price with the buyer to take account of the extra you are now paying out for the property, but you’d need to speak to your estate agent about whether the buyer is likely to agree, or if they can find a new buyer at a higher price.