Buying / Selling House - Sol Exchanged On One But Not Other
Discussion
A friend is in a mess - or rather I think his solicitor is.
He is selling his house and buying another.
His buyer has been messing about from the start and has missed multiple deadlines to exchange
The last deadline was Monday and his solicitor exchanged with the house he is buying but NOT with the house he is selling
Every day the buyer's Solicitor is saying they will exchange and every day it doesn't happen - the excuse being used is that they are "still processing the draw down from the lender".
They are supposed to complete tomorrow (this has been going on almost 2 weeks)
So what happens tomorrow if as I suspect they either don't exchange or their buyer wants a chunk off the price ?
He is selling his house and buying another.
His buyer has been messing about from the start and has missed multiple deadlines to exchange
The last deadline was Monday and his solicitor exchanged with the house he is buying but NOT with the house he is selling
Every day the buyer's Solicitor is saying they will exchange and every day it doesn't happen - the excuse being used is that they are "still processing the draw down from the lender".
They are supposed to complete tomorrow (this has been going on almost 2 weeks)
So what happens tomorrow if as I suspect they either don't exchange or their buyer wants a chunk off the price ?
Wow, that sounds like negligence on the part of the solicitor. They should not have exchanged on the purchase until the sale exchange had happened - unless your friend specifically instructed them to do so.
I would suggest that he absolutely confirms with the solicitor that they have exchanged on the purchase (he will also have had to hand over the deposit) and what completion date has been agreed as it seems very unusual that a solicitor would do this.
If exchange has taken place on the purchase, then your friend is on the hook to complete on the date agreed in the exchange of contracts, and could be liable to lose the deposit as well as any incidental costs incurred by the seller of the house he is buying if he cannot complete. Where did the deposit money come from (usually 10% of purchase price, but can be negotiated lower)?
Now if your friend instructed the solicitor to go ahead and exchange against the advice of the solicitor (in writing) then he is in serious trouble and will need to find the money to complete the purchase (mortgage/bridging loan?) by the completion date in order to not lose the deposit or a good part of it.
If the solicitor has just gone ahead and done this, they will be liable and SRA rules will mean that they should have insurance to cover the costs, but it is going to be a drawn out, uncomfortable process. A real mess basically. I just can't imagine any right-minded solicitor doing this, unless they are one of these nationwide conveyancing companies that you never actually meet, where an intern basically does all the work and it is signed off by a solicitor and the intern has f***ed up.
Does your friend have sufficient funds available to complete the purchase without the sale of their current property going through?
It is possible to re-negotiate a completion date, but typically this will result in compensation needing to be paid to the party who is inconvenienced, and upwards through the chain. Depending on how long the chain is and whether contracts have been exchanged further up, this could get very expensive, with everyone further up the chain making claims which will all effectively end up on the shoulders of your friend (your friend's buyer has no legal obligation at the moment).
basically your friend has to doorstep the solicitor urgently and get answers from them.
I would suggest that he absolutely confirms with the solicitor that they have exchanged on the purchase (he will also have had to hand over the deposit) and what completion date has been agreed as it seems very unusual that a solicitor would do this.
If exchange has taken place on the purchase, then your friend is on the hook to complete on the date agreed in the exchange of contracts, and could be liable to lose the deposit as well as any incidental costs incurred by the seller of the house he is buying if he cannot complete. Where did the deposit money come from (usually 10% of purchase price, but can be negotiated lower)?
Now if your friend instructed the solicitor to go ahead and exchange against the advice of the solicitor (in writing) then he is in serious trouble and will need to find the money to complete the purchase (mortgage/bridging loan?) by the completion date in order to not lose the deposit or a good part of it.
If the solicitor has just gone ahead and done this, they will be liable and SRA rules will mean that they should have insurance to cover the costs, but it is going to be a drawn out, uncomfortable process. A real mess basically. I just can't imagine any right-minded solicitor doing this, unless they are one of these nationwide conveyancing companies that you never actually meet, where an intern basically does all the work and it is signed off by a solicitor and the intern has f***ed up.
Does your friend have sufficient funds available to complete the purchase without the sale of their current property going through?
It is possible to re-negotiate a completion date, but typically this will result in compensation needing to be paid to the party who is inconvenienced, and upwards through the chain. Depending on how long the chain is and whether contracts have been exchanged further up, this could get very expensive, with everyone further up the chain making claims which will all effectively end up on the shoulders of your friend (your friend's buyer has no legal obligation at the moment).
basically your friend has to doorstep the solicitor urgently and get answers from them.
Edited by TriumphStag3.0V8 on Thursday 12th July 11:35
You’ll find out tomorrow - anything could happen.
More to the point - how the f
k can a solicitor exchange on a purchase without the exchange on the sale happening too? I’ve never ever exchanged without my solicitor calling me to say “we’re ready to exchange, are you happy for me to proceed”?
More to the point - how the f
k can a solicitor exchange on a purchase without the exchange on the sale happening too? I’ve never ever exchanged without my solicitor calling me to say “we’re ready to exchange, are you happy for me to proceed”?Friend has never sold a house before, they did listen to me and went with a local solicitor and insisted on 14 days between exchange and completion - unfortunately they picked an idiot.
The Solicitor should not have exchanged with just one.
Current "advice" is that as they won't have the funds to complete (unless theirs exchanges and completes tomorrow) is that "everyone will just have to wait"
There are two homes above theirs in the chain, their "buyer" is a first time buyer.
The Solicitor should not have exchanged with just one.
Current "advice" is that as they won't have the funds to complete (unless theirs exchanges and completes tomorrow) is that "everyone will just have to wait"
There are two homes above theirs in the chain, their "buyer" is a first time buyer.
V8RX7 said:
So what happens tomorrow if as I suspect they either don't exchange or their buyer wants a chunk off the price ?
There's two choices, and it's entirely dependent on his financial position.If he can complete on the purchase, then he owns two houses for a bit - and will be paying the +3% SDLT until the sale does complete, when he can claim it back.
If he can't complete on the purchase, then he's in breach of the contract, and liable for all the vendor's expenses. It might be cheapest to go with the buyer's gazunder and get it done.
What deposit has been paid to the vendor on exchange? Anything? Nothing?
Also, to add, if your friend is supposed to be completing tomorrow, then their buyer will need to exchange AND complete on the same day, and all the funds from the various places will need to find their way through the financial systems.
It can be done (I have exchanged and completed on properties on the same day - but not as part of a chain of more than 3), and literally everyone needs to be ready to move! As in removal men or hire vans and friends booked and on their way.
Nightmare!
It can be done (I have exchanged and completed on properties on the same day - but not as part of a chain of more than 3), and literally everyone needs to be ready to move! As in removal men or hire vans and friends booked and on their way.
Nightmare!
Edited by TriumphStag3.0V8 on Thursday 12th July 11:49
V8RX7 said:
Current "advice" is that as they won't have the funds to complete (unless theirs exchanges and completes tomorrow) is that "everyone will just have to wait"
Wow! Are you sure this guy is actually a solicitor???????Everyone will just have to wait, well yes, and everyone will then put in claims for breach of contract and expenses incurred which could run into thousands depending upon the size of the chain and people's situations.
At the moment, the buyer at the bottom could still pull out for whatever reason and then the whole house of cards comes down.
Definitely a negligence claim against the solicitor once everything happens, but going to be a very uncomfortable few months, unless by some miracle the buyer comes good with the money and exchanges/completes tomorrow.
Not nice for all involved. Does your friends seller know about the issues or are they obliviously thinking that they are moving tomorrow and everything is in order (quite likely if your friends solicitor is as incompetent as he sounds)
We just bought another house recently and due to the bank missing payment of funds on completion date they gave us a overdraft but if we hadn't had the funds on completion date we would have lost our deposit and be on the hook for any costs. This sounds like what will happen to your friend. The exchange is a contract and it looks like he's going to break it. Is this also part of a chain? If he messes up the chain he might be liable for other costs in the chain.
V8RX7 said:
As his house is only £200k what's the chance of the solicitor / their insurer finding the funds to bridge to avoid a large bill later ?
Nil I suppose.
Other than calling the Senior Partner is there anything else they can do ?
Calling the senior partner and seeing what they suggest cannot hurt.Nil I suppose.
Other than calling the Senior Partner is there anything else they can do ?
its unlikely they will provide the funds to bridge the gap as your friend's buyer has not committed to the purchase yet, so in the event that they pull out they would be left with your friend owing them £200K that they may not (in their opinion) get back - they would likely prefer to be sued for the lost deposit and incidental expenses through the chain, which would likely be much less than the £200K (say £50K as an example).
Your friend needs to make sure that they have not signed something to instruct the solicitor to exchange on the purchase without exchanging on the sale first, and assuming they haven't then they would have a very good claim against the solicitor, and should also be reporting them to the SRA (too early to do that right now) so should not lose out financially in the long term - but it is going to be unpleasant until this is sorted and he is quite likely to lose the house he is buying.
I would urgently look into getting a bridging loan if he can, but there are risks associated with this (i.e. if the sale falls through he will have to keep paying off the bridging loan and there are normally time limits on these, but it could allow him to buy some time to sort things out.
Does your friend have mortgages involved either on the house he is selling or buying?
V8RX7 said:
Yes - on both
OK, so it sounds like the bulk of the funds on the new place should come from the mortgage - and he is "just" relying on the equity in the old place to be able to complete.Can he borrow money to cover the equity? bank loan/bridging loan? Its potentially expensive but may allow him to complete on the purchase. The new mortgage lender may also stipulate that the old loan has to be paid off so could be a non-starter. It is also very risky - because he could then be stuck with both if his buyer pulls out, but with a bridging loan (expensive) he could then remortgage one or the other, but it gets complicated and he could stand to lose much more if it goes tits up.
Best bet is to be all over the senior partner and confirm if his buyers are likely to exchange and complete or not. If not,pull plug on them now and take the hit. If they are, then negotiate with the chain to agree a new date and take the hit on compo that will need to be paid to them and then sue the solicitor for that amount. If the people in the chain are aware that the date is not going to be met early (although possibly already too late) they could mitigate some of the costs, and just on a human level, allow them to make arrangements!
Edited by TriumphStag3.0V8 on Thursday 12th July 12:15
Edited by TriumphStag3.0V8 on Thursday 12th July 12:17
V8RX7 said:
TriumphStag3.0V8 said:
Does your friend have mortgages involved either on the house he is selling or buying?
Yes - on bothSo he borrows to complete the purchase. He owns two houses, and owes a s
tload.He completes on the sale, and pays the other mortgage off.
Me and My partner had this on a flat we sold (No chain, cash buyer) Buyer (Who we know) wanted to know what was taking so long, we chased our solicitor he confirmed all paperwork had been sent 4 weeks prior, it turned out Buyers solicitor had been hacked lost a load of data but did not want to admit this to our solicitor/buyer
I wonder if this is a terminology thing. Maybe one party has signed the engrossment, but the counterparty hasn't.
I have come across this before, where people mix up signing a contract with exchanging it. It would extremely negligent of a solicitor to exchange on a purchase but not on the sale that part funds it.
The alternate is that the contract was conditional on the completion of the sale contract - very rare on basic resi transaction but reasonably common on complex land/property deals.
I have come across this before, where people mix up signing a contract with exchanging it. It would extremely negligent of a solicitor to exchange on a purchase but not on the sale that part funds it.
The alternate is that the contract was conditional on the completion of the sale contract - very rare on basic resi transaction but reasonably common on complex land/property deals.
blueg33 said:
I wonder if this is a terminology thing. Maybe one party has signed the engrossment, but the counterparty hasn't.
I have come across this before, where people mix up signing a contract with exchanging it. It would extremely negligent of a solicitor to exchange on a purchase but not on the sale that part funds it.
The alternate is that the contract was conditional on the completion of the sale contract - very rare on basic resi transaction but reasonably common on complex land/property deals.
Crossed my mind too.I have come across this before, where people mix up signing a contract with exchanging it. It would extremely negligent of a solicitor to exchange on a purchase but not on the sale that part funds it.
The alternate is that the contract was conditional on the completion of the sale contract - very rare on basic resi transaction but reasonably common on complex land/property deals.
People tend to be very loose with their language surrounding house sales. The number of times people have said to me that they’ve sold their house only to be told ‘no’ when asked if they’ve exchanged contracts.
blueg33 said:
I wonder if this is a terminology thing. Maybe one party has signed the engrossment, but the counterparty hasn't.
I have come across this before, where people mix up signing a contract with exchanging it. It would extremely negligent of a solicitor to exchange on a purchase but not on the sale that part funds it.
The alternate is that the contract was conditional on the completion of the sale contract - very rare on basic resi transaction but reasonably common on complex land/property deals.
Hopefully but I doubt it.I have come across this before, where people mix up signing a contract with exchanging it. It would extremely negligent of a solicitor to exchange on a purchase but not on the sale that part funds it.
The alternate is that the contract was conditional on the completion of the sale contract - very rare on basic resi transaction but reasonably common on complex land/property deals.
I raised my concerns on Monday when he said he'd exchanged on the purchase but not the sale.
I've gone over it several times since and now he's finally panicking... I haven't had a reply since this morning when I told him to speak to the Senior Partner
TriumphStag3.0V8 said:
Key question here - Has he actually paid a deposit to/via the solicitor? If he hasn't then he hasn't exchanged, if he has, then he has probably (but not definitely) exchanged.
Unfortunately, it's not as simple as that. What normally happens in a sale and purchase is that the deposit on the sale is used for the purchase. Although it's usually less than 10% nobody bothers, and the same deposit is often used all the way up the chain. For example, if a first time buyer (A) is buying B's house for £200k with a £20k deposit this will be used by B on their purchase from C at £400k and on C's purchase at £600k.
But not only is the same deposit used it doesn't usually even change hands. What happens in practice is that on exchange A's solicitor agrees to hold the deposit to the order of B and B's solicitor agrees to hold it to the order of C. This means that A hangs on to the deposit but is legally bound to pay it to B if B demands it. On completion the whole purchase price is then paid on each transaction.
So if this solicitor is as stupid / incompetent as he sounds he may have exchanged on the purchase agreeing to hold the deposit to order even though he hasn't yet got a reciprocal agreement from the buyer's solicitor. He may have been gambling that he would exchange on the sale very quickly and that he'd get away with it - insane, but by no means impossible.
From a practical point of view - and perhaps surprisingly - the buyer won't technically be in breach of contract if he fails to complete tomorrow. That's because `time is not of the essence' in this type of contract. What will happen is that the seller's solicitor will serve him with `Notice to Complete'. This is a formal notice making time of the essence and requiring completion on or before a specific date.
If (which they almost certainly will be) they're using the Standard Conditions of Sale then the specified date will normally be ten working days after service of the notice - two weeks – though this can be varied by agreement. Consequently, if he manages to get his sale completed within that time he will still be legally able to complete the purchase. If he can't, then the seller can forfeit the deposit and sue him for any losses that exceed the deposit.
It's frankly difficult to believe that any solicitor would be mad enough to do this. It's the one cardinal rule in conveyancing that you never exchange on a purchase without having done so on the sale unless the buyer insists. And if they did insist they would be required to sign a disclaimer admitting that they were doing so against the advice of the solicitor and releasing the solicitor from any liability.
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