Protection from failing to complete your house purchase on time

6 min read
After reading our articles on Can I pull out after exchange of contracts? and What happens when you pull out after Exchange of Contracts? you'll be pleased to know that there are things you can do to protect your house purchase from failing to complete.

When do you become contractually liable to buy a house?

Exchange of contracts is the point where both buyer and seller become contractually bound to complete. If you don't complete after exchange of contracts then you are financially liable for costs and remedies under the contract. Read more on What happens when you pull out after Exchange of Contracts?.

Whether it is a solicitor mistake, a change in circumstances or simply a change of heart, it can be very tough to protect yourself from your house purchase falling through, however here are our top 4 tips on what you can do.

    Reduce the time between exchange and completion
In our article, How Long Between Exchange and Completion, we run through all of the pros and cons of a same day completion, 1-2 week completion, 1-2 month completion and a completion on notice. The challenge is that the longer the time between exchange and completion, the greater the chance of either the buyer or seller pulling out.

For absolute security try and limit the time between exchange and completion to the bare minimum. The shorter the time between exchange and completion limits the time for something to go wrong. To remove any chance of a failed completion you can exchange and complete on the same day, however with this is fraught with stress and most long property chains simply won't agree to a same simultaneous exchange and completion do to logistical demands. You can find out more about what to do with long chains by reading our article - How a property chain works?
    Evict tenants before exchange of contracts
The seller must give vacant possession prior to completion taking place. If a seller has a tenant that doesn't vacate before the contractual completion date then the seller is breaching the exchange contract. The best advice is to only ever exchange once the tenant has moved out. This will also help you to make sure the property is empty of any of yours or the tenant's possessions and that the property is in a reasonable state of repair.

What does the Standard Conditions of Sale (Fifth Edition) say about vacant possession?

6.1.3 Condition 6.1.2 does not apply and the seller is treated as in default if:
(a) the sale is with vacant possession of the property or any part of it, and
(b) the buyer is ready, able and willing to complete but does not pay the money due on completion until after 2.00pm because the seller has not vacated the property or that part by that time.

In cases where the seller can't give vacant possession they are in breach of contract and are liable for late completion charges set out in section 7 of the exchange contract. Read more about what are the costs of breaching contract.
For absolute security try and limit the time between exchange and completion to the bare minimal.

    Exchange with an 'in date' mortgage offer
(Specifically for new build properties without a pre-agreed completion date)

The majority of new build purchases require you to exchange off plan when the property has yet to be completed. Once the property is completed you are served a notice to complete where you have 10 working days to complete. The challenge with this is do you:

  • get a mortgage offer for exchange of contracts that lasts for 6 months and may expire before the property is built and you are served notice to complete; or
  • exchange without a mortgage offer on the assumption you'll get a mortgage offer when you are served notice to complete?

Some solicitors won't allow you to exchange without a mortgage offer, which in our opinion is the best advice because you shouldn't exchange contracts without knowing you are financially able to buy the property. With that said, whether you do or don't get a mortgage offer, you run the risk of needing to get a new mortgage offer when you get served notice to complete...and quickly! With only 10 days notice to complete and a further 10 days contract notice to complete, you could be faced with losing your 10% deposit to the developer because you can't get a new mortgage offer in time.

    Limit your potential losses
The risk of a transaction failing to complete after exchange of contracts is very small and is normally related to an exceptional circumstance. There are however good practice things you can do to limit the potential losses when a transaction falls through such as:

  • No Sale No Fee - Legal fees can be very costly if a transaction falls through which is why you want to have some kind of legal cover to protect yourself from these costs. Conveyancing fees are often covered under a No Sale No Fee, however these can come with caveats that still leave you exposed.
  • Conveyancing Cost Protection Insurance - There are a number of insurance providers offering insurance to protect against the costs of failed transaction. Although the cost of losing your 10% deposit isn't covered in any of the insurance policies, you can insurance the your legal, mortgage valuation and conveyancing search costs. The insurance policies should be checked to see if you can reclaim on any of the insured costs, if you have already incurred the cost at the point of taking out the insurance.
  • Estate agent fees - Check to see if you are liable for estate agent fees on your sale if you fail to complete the sale. If the terms are that you are liable for the estate agent's fees for selling the property from the date of completion then you should see if this can have a caveat to allow for if the transaction fails to complete.

Failing to complete after exchange is very rare

Failing to complete your house purchase is very rare and you should try not to worry about this because if it happens, the circumstances are often exceptional and out of your control. You can rely on the fact the legal process in England and Wales is structured that the worrying part is up to exchange, but from exchange onward you can relax knowing completion is going to fly through in 99.99% of completions.

If you are working with our solicitors then please call us if you are worried, for any reason, if you your purchase is going to fail to complete - 0333 344 3234 (local call charges apply).

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Contract on a desk. Can I pull out after exchange of contracts? SAM Conveyancing answer your questions

Can I pull out after exchange of contracts?

Someone tears up a paper contract. SAM Conveyancing explains What happens when you pull out after Exchange of Contracts

What happens when you pull out after Exchange of Contracts?


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