Sunday, 6 December 2009

Purchase Conveyancing – The Danger Of Failing To Complete On Time

Years ago, a completion of a conveyancing transaction would take place in person with the buyer’s solicitor visiting the seller’s solicitor’s office to inspect all the documents before releasing the purchase monies. These days, however, provided the transaction is not complicated, completion takes place through the post.

Occasionally, problems may arise on completion and completion is delayed as a result or the transaction can even fail to complete entirely.

The contract will specify the date the purchase conveyancing transaction is due to complete. This date is agreed upon by the parties during exchange of contracts. The Standard Conditions of Sale , currently the 4th edition, provide for what happens if completion is delayed or if the transaction fails to complete at all. If for some reason the Buyer is unable to complete on time his Solicitor should notify the Seller’s Solicitor as soon as possible. The Seller’s Solicitor will serve a ‘Notice to Complete’ on the Buyer’s Solicitor (the costs of which are usually borne by the defaulting party and most contracts will include a special condition stating what these costs are) and the clock will effectively start ticking. The Buyer then has ( normally ) ten working days from the date of completion in which to complete the transaction. If the Buyer fails to complete at the end of the Notice period, he forfeits the deposit of 10% of the purchase price. If the deposit paid on exchange was less than 10% the Seller is entitled to pursue the Buyer for the shortfall. The Seller may also sue the Buyer for breach of contract and damages.

If the Buyer completes within the ‘Notice to Complete’ period then he is still liable to pay a daily rate of interest as set out on the front page of the Contract. The deposit, however, is not forfeited if the Buyer is simply late in completing. Sometimes, the Seller’s solicitor may include a special condition in the contract stating that if the Buyer is late in completing he is liable to pay for other costs incurred by the Seller as a result of the delay, e.g., bridging finance, removal costs etc. It is good practice and in the interests of the Buyer Client if the Buyer’s Solicitor strikes through such a clause when approving the draft contract. If the Seller’s Solicitor does not agree to the clause being removed or modified, the position must be clearly explained to the client as they will find themselves paying rather more for failing to complete on time as opposed to a client whose contract does not include such a clause. This special condition is sometimes seen in contracts where there is a chain and solicitors may not wish to delete it if it appears in each contract in the chain.

The Standard Conditions of Sale state that completion must take place by 2.00pm on the day of completion. One can often find a conveyancer or solicitor insert a special condition in the contract varying this time to make it earlier. The Seller may have a mortgage to pay off which means that the lender will need to receive the redemption monies by 3.00pm or thereabouts to treat the mortgage as having been redeemed on that day. For this reason the time for completion is often brought forward to midday or 1.00pm. This should be taken into account by the Buyer and his client. If the Buyer is relying on mortgage finance and/or there is a chain involved then his Solicitor may wish to request the mortgage funds the day before completion to ensure there are no delays in sending the purchase monies to the seller’s solicitor. Solicitors should always advise their Buyer clients to send the completion funds for the purchase of the property, to their solicitor, at least a day before completion to avoid the risk of completing late.

If the Seller is the defaulting party and completion is delayed, the Seller must pay a daily rate of interest to the Buyer as stipulated in the contract. If the Seller fails to complete within the ‘Notice to Complete’ period, the Buyer may pursue him for breach of contract.

Delayed completion can therefore be extremely costly for the Buyer and the danger of failing to complete on time should be clearly explained to the Buyer client beforehand in the form of clear, written advice, especially where the Standard Conditions of Sale have been varied.

Other popular conveyancing sites include :

Lease Extensions Hackney
Find a solicitor on the Nationwide Conveyancing Panel 
Transfer of Equity Conveyancing 

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