Can I pull out after exchange of contracts?

13/10/2015
We are often asked “Can I pull out after exchange of contracts?” and the answer is yes, however if you do pull out then be prepared to bear the costs. The reason for this is that under the standard conditions of sale, there are forfeit clauses that set out what a buyer or seller have to pay in the event of either one pulling out after exchange. Within the contract the buyer if they pull out losses their deposit, however the seller can equally be liable for remedies that have cost the buyer money in them breaching the contract.

Exchange of contracts is the key stage in the conveyancing process whereby the buyer and seller contractually agree to complete the transfer of the title between each other on a future date called completion (read about What happens on the day of completion). On exchange the buyer pays 10% of the purchase price to the seller (sometimes this can be 5%) and the balance of the 90% (normally made up of the mortgage and your money) is paid across on completion which is on a day pre-agreed before exchange.

To get to exchange there will have been weeks of waiting, lots of money spent and plenty of time to find out if either the buyer or the seller has any reason they don't want to proceed. Most completions flow through easily after exchange of contracts. The challenge however is when you have to pull out for reasons either inside or outside of your control - if this is the case for you then this article is for you.

We have specially trained solicitors on hand to help you if you need to pull out after exchange of contracts. If you need help with your exchange contract please email us at help@samconveyancing.co.uk providing the following information:

TickYour full name and contact number

TickCopy of your exchange contract

Tick
Confirmation of your reason for pulling out
 
Upon receipt we will get in contact and provide a quote for the work required.
Get-a-Litigation-Quote.png
 

Why would you pull out after exchange?

There are reasons why a buyer and a seller may need to pull out after exchange and these are:

Bullet Change of circumstances – such as lost or new job, bereavement in family 

Bullet
 Issue with mortgage – there are occasions where your mortgage offer could be rescinded by your mortgage lender or expired. For example, if irregularities come to light about the information provided during the mortgage application or if you bought a new build property and cannot get a mortgage in time for completion. Without a mortgage offer a buyer won’t be able to fund the full purchase price of the property and thus will not be able to complete. 

Bullet
Unable to give vacant possession – on completion the seller must provide vacant possession of the property (unless it is agreed that the buyer will take on the tenancy with ‘tenant in situ’). If the seller is unable to provide vacant possession then the buyer’s solicitor won’t complete the purchase. 

Bullet
 Issues found out after exchange – information that can come to light after exchange includes property defects found in survey or legal issues found by the solicitor. This is why it is important that all the legal and survey work is completed in full before you exchange contracts.

We have recently worked on new build cases where the Gross Internal Area (GIA) of the finished built property wasn't the same size as that on the plans that the buyer exchanged on. If this has happened to you then you should call us on 0333 344 3234.
  
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What you have to pay if you pull out after exchange of contracts

These are the terms set out in the standard conditions of sale if either the buyer or the seller pulls out after exchange: 

Buyer7.4 Buyer's failure to comply with notice to complete 
7.4.1 If the buyer fails to complete in accordance with a notice to complete, the following terms apply. 
7.4.2 The seller may rescind the contract, and if he does so: 
(a) he may: 
 (i) forfeit and keep any deposit and accrued interest 
 (ii) resell the property and any contents included in the contract 
 (iii) claim damages 
 (b) the buyer is to return any documents he received from the seller and is to cancel any registration of the contract. 
7.4.3 The seller retains his other rights and remedies (see below for examples of remedies).

Seller 7.5 Seller's failure to comply with notice to complete 
 7.5.1 If the seller fails to complete in accordance with a notice to complete, the following terms apply. 
 7.5.2 The buyer may rescind the contract, and if he does so: 
(a) the deposit is to be repaid to the buyer with accrued interest 
(b) the buyer is to return any documents he received from the seller and is, at the seller's expense, to cancel any registration of the contract. 
 7.5.3 The buyer retains his other rights and remedies (see below for examples of remedies).
   
QuestionWhat are the buyer's and seller's other rights and remedies?
The buyer's and seller's remedies are not restricted to the losses under standard terms of contract. There is nothing preventing the person who didn't pull out from suing for breach of contract if they sustain other losses such as:

£.pngConveyancing fees including solicitor's legal fees, property searches, ID costs, OS1 and bankruptcy searches

£.pngMortgage costs including product fee, mortgage broker fees and mortgage valuation

£.png
Survey costs including Building Survey/HomeBuyer Report, damp & timber survey, asbestos survey

£.png
Drafting a new rental lease if the buyer/seller has to extend their lease

£.pngRental charges from Landlord for over staying their lease

£.png
Drafting a new rental lease if the buyer/seller has to extend their lease

£.png
Deposit paid for removals

"You will need to instruct a solicitor to help you get reimbursed for any breach of contract"

Need help with a breach of contract claim?
We have specially trained solicitors on hand to help you if you need to pull out after exchange of contracts. If you need help with your exchange contract please email us at help@samconveyancing.co.uk providing the following information:

TickYour full name and contact number

TickCopy of your exchange contract

Tick
Confirmation of your reason for pulling out
 
Upon receipt we will get in contact and provide a quote for the work required.


Should you really pull out and incur the costs?

You can see that the potential losses for the buyer or seller when failing to complete after exchange. Buyers risk their 10% deposit plus damages and sellers risk all of the costs the buyer has incurred. For some, pulling out is no longer a choice and you could be faced with the costs incurred. If you are currently thinking about pulling out or feel there may be a reason why you can’t complete then you must speak to your solicitor straight away. 

For more help please get in contact by emailing help@samconveyancing.co.uk.

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