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Head of Practice Area - Conveyancing
There are a number of implications if you are intending to tie in your sale and your purchase - especially if you intend to move out of your existing property and into your new property on the same day.
The Completion Date is not set until we exchange contracts. Any moving dates discussed before then are purely tentative and you should not rely on them for the purpose of booking removals or making any other arrangements that depend on a definite moving date.
We cannot exchange contracts on your purchase until we have satisfactory replies to all our searches and other enquiries. We also need to make sure that all necessary conditions and any legal requirements imposed by your lender have been satisfied, and a completion date has been agreed with your seller.
Correspondingly we cannot exchange contracts on your sale until your buyer’s solicitors are satisfied with their own enquiries and searches, and that their own mortgage requirements are complied with, and we have agreed a completion date with them.
When you are a party in a chain of transactions, we’re unable to exchange contracts until all the other buyers and sellers have finished their enquiries and are able to complete on the same date.
The longer the chain the more difficult it is likely to be to achieve an early exchange of contracts and to agree a completion date. If just one party in the chain experiences a delay, it delays the whole chain. The difficulty for us is that we are only dealing with your own buyer's solicitor and own seller's solicitor and have to rely on them to pass on relevant information.
At Brethertons we are accredited under the Law Society's Conveyancing Quality Scheme (CQS). Among other things this means we subscribe to a Protocol which is designed to ensure that relevant information is passed to other parties in the conveyancing process (only where you agree to this). Where the other solicitors we are dealing with are also CQS accredited, the communication of information is greatly improved.
Where there is a relatively long chain and there is likely to be a delay on one of the sales, one solution is for somebody to agree to move out of their existing house first and go into temporary accommodation until they can move into their new house.
If you are minded to break the chain in that way, we recommend that we at least exchange contracts simultaneously on your sale and purchase in order to reduce the risk that something unforeseen happens on the purchase and the seller delays further or even pulls out altogether.
If there is pressure to complete a purchase but the dependent sale is delayed, sometimes someone will suggest that you get a bridging loan so that you can buy the new house first, and pay off the loan when you complete the sale. Bridging loans are extremely expensive and banks can be reluctant to lend. In most circumstances we would strongly advise against taking a bridging loan. Certainly you should not enter into a commitment of this nature unless you have already exchanged contracts and have a fixed completion date for your sale, so that you definitely know how long the loan will run and what its final cost will be.
Where you are tying in your sale and your purchase, we will need the money to complete your sale to be transferred to us from your buyer’s solicitor on the day of completion before we can send the money to complete your purchase to your seller’s solicitor. Even though in practice you are making one move, your sale and purchase are two separate legal transactions. If the buyer’s solicitor in turn is relying on funds from their own sale, they will be in a similar position. The longer the chain, the greater the risk of delay.
Generally the solicitors, mortgage lenders and banks are conscious of the need to transfer funds relating to house purchases quickly. Unfortunately there are occasions when transfer of funds to us is delayed for reasons beyond our control.
In our experience this is more likely to happen on days when there is a large volume of transactions for the banks to handle, such as Fridays, the last working day of the month, or the working day before a bank holiday so we would recommend you avoid fixing completion for any of those days if you can possibly do so.
Some lenders will also stipulate that they must have a certain number of days’ notice between exchange of contracts and completion, we therefore generally recommend allowing at least 7 working days between exchange of contracts and completion if possible.
If the money is not received in the seller’s solicitor’s bank account until after 1pm, it is treated as being received on the following working day.
If we fail to get the purchase money to the seller’s solicitor’s bank account until after the completion date, then interest is payable at a very high rate. In practice, instances of failure to complete on the legal completion date are very rare, though the risk of it happening is greater the longer the chain.
Until the seller’s solicitor receives the purchase money from their buyer’s solicitor they are entitled to refuse to let the buyer have the key to move in. So if the money cannot be transferred until the following day, the buyer will incur overnight accommodation and storage costs, as well as the interest penalty.
It is unusual that a sale and purchase fail to complete until after the date legally fixed for completion. It is extremely rare for the transaction never to complete if contracts have been exchanged.
Once a buyer has failed to complete their purchase on time, then provided that the seller was ready, willing and able to complete on time, the seller’s solicitor is able to serve a formal notice stating that a breach of the contract has occurred and require the buyer to complete within a further period (usually 10 days) by payment of the purchase price and the relevant interest.
If the buyer should then fail to complete in that further period, the seller is entitled to keep the deposit that the buyer paid on exchange of contracts and put the house back on the market. They can also claim for wasted legal and other expenses. If the seller then has to sell at a lower price than that which the defaulting buyer was due to pay, they can claim for the difference.
If it is possible, it is far less risky to complete the sale of your own house first and then move somewhere temporarily before buying another house. It is understandably less convenient to do so, as you have to move twice, and on the face of it more expensive as you may have to pay rent for a while, and house prices could go up between the time of the sale and the purchase. But if you have already completed your sale when you are looking for your next house you will find yourself in a far better bargaining position, and the chances of suffering inconvenience and financial loss by something going wrong at completion through no fault of your own are minimised.