Can I pull out after exchange of contracts
14/09/2018
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 - Click here to see the costs of pulling out after exchange of contracts.
The reason for this is that under the standard conditions of sale (click to view a specimen of these), 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 loses their deposit, however the seller can equally be liable for remedies that have cost the buyer money directly because of the breach of contract.
Read on for reasons why buyers or sellers pull out after exchange, however read this article if you have failed to complete and need to know what to do - What happens when you fail to complete or pull out after Exchange of Contracts? and How to protect yourself from a failed completion.
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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 describes your case then this article is for you.
We cover the key issues in this article including:
- Reasons why you may have to pull out after exchange
- What are the costs of pulling out after exchange of contracts?
- What are the buyer's and seller's other rights and remedies?
Reduce the chance of mistakes and see what is included within a standard exchange contract.
* BEWARE - your exchange contract may differ from this!
Need help pulling out of a purchase contract?
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:
- Your full name and contact number;
- Copy of your exchange contract;
- Confirmation of your reason for pulling out; and
- Any further evidence to support your case.
Upon receipt we will get in contact and provide a quote for the work required.
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:
- Change of circumstances – such as lost or new job, bereavement in family
- 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.
- 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.
- 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.
Reduce the chance of mistakes and see what is included within a standard exchange contract.
* BEWARE - your exchange contract may differ to this!
The pitfall of new builds with 'far off' completion dates
It is very common for a new build property to exchange contracts, for a future completion date that is not agreed. This can be 3, 6 or 12 months in the future and in this time a number of things can occur that could mean that you are no longer able to complete the purchase.
For example, if you are made redundant in between exchange and completion and can no longer afford to buy the property and/or keep up repayments of the mortgage as you have no income until you find another job. In this example, when you reapply to get a mortgage offer, you will be refused as you are no longer in employment. With no mortgage you'll be unable to complete the purchase and you'll most likely lose your exchange deposit and face potential further costs.
You should think carefully before exchanging contracts on a new build property; especially if the completion date is 6 to 12 months in the future.
If this has happened to you then you should call us on 0333 344 3234 (local call charges apply) to see how we can help.
What are the costs of pulling 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:
7.4 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).
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).
Read our article about - What happens when you pull out after Exchange of Contracts?
What 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:
- Conveyancing fees including solicitor's legal fees, property searches, ID costs, OS1 and bankruptcy searches
- Mortgage costs including product fee, mortgage broker fees and mortgage valuation
- Survey costs including Building Survey/HomeBuyer Report, damp & timber survey, asbestos survey
- Drafting a new rental lease if the buyer/seller has to extend their lease
- Rental charges from Landlord for over staying their lease
- Drafting a new rental lease if the buyer/seller has to extend their lease
- Deposit paid for removals
"You'll need legal help to help you get exercise your rights under a breach of contract"
Need help pulling out of a purchase?
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:
- Your full name and contact number;
- Copy of your exchange contract;
- Confirmation of your reason for pulling out; and
- Any further evidence to support your case.
Upon receipt we will get in contact and provide a quote for the work required.
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