Who Pays Solicitor Fees When a Buyer Pulls Out?
When a buyer withdraws from a property transaction in England & Wales, the potential financial loss is the biggest concern. Whether you are the seller or the buyer, the rules on who pays the legal costs, including solicitor fees, searches, and surveys, depend entirely on a single, crucial factor: the formal exchange of contracts.
Before Exchange of Contracts: No legal obligation
Before contracts are exchanged, the sale is not legally binding. This is the 'subject to contract' stage, where either party can withdraw without contractual penalty, meaning there is no legal avenue for compensation.
The buyer's non-recoverable costs
If the buyer pulls out before the exchange, they walk away without a contractual breach, but they lose all money spent on preparation. The seller has no legal obligation to reimburse them.
- The buyer pays for searches (Local Authority, Water, Environmental, etc.). These costs are non-recoverable from the seller and typically amount to £250–£400.
- The cost of any mortgage valuation or building survey is borne entirely by the buyer and is non-refundable.
- The buyer must pay their own solicitor for the work completed, such as reviewing the draft contract and title deeds, unless their solicitor operates a 'No Sale, No Fee' policy.
The seller's risk
The seller cannot recover their legal costs from a withdrawing buyer before the exchange of contracts. The seller's primary financial risk in this period is their own solicitor's bill for work already completed.
To avoid being thousands of pounds out of pocket, the seller should use a conveyancer with a 'No Sale, No Fee' agreement. This guarantee ensures that if the buyer pulls out, you do not pay the solicitor's legal fees. This shifts the financial risk from you to your legal provider.
Fees vs disbursements
It is vital to understand the difference between fees and disbursements, as this affects the 'No Sale, No Fee' guarantee:
- Solicitor Legal Fees: This is the money paid for the solicitor’s time and professional service. This is the part covered by a 'No Sale, No Fee' guarantee.
- Disbursements: These are mandatory costs paid to third parties on your behalf (e.g., identity checks, obtaining copies of the title register). These costs are generally always payable by the client, regardless of a 'No Sale, No Fee' agreement, as they are external costs already paid out.
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After Exchange of Contracts: Breach and penalty
The moment contracts are exchanged, the transaction is legally binding. A withdrawal by the buyer at this stage is a fundamental breach of contract, resulting in severe financial penalties.
The buyer's financial disaster
If the buyer withdraws after exchange, the financial penalties are substantial and operate to protect the seller completely:
- The buyer will automatically forfeit their 10% deposit (placed upon exchange), which is retained by the seller as compensation.
- The buyer is legally liable for the seller’s full conveyancing fees, estate agent fees for the second sale, and any other consequential costs (such as penalties on an onward purchase).
- In rare cases, the seller may apply to the court for an order of specific performance, compelling the buyer to complete the purchase, though this is only pursued if the seller's losses are exceptional.
Seller's recourse
The seller is entitled to pursue a claim for all losses exceeding the forfeited deposit. However, the 10% deposit typically covers the seller's fees and any loss in the property's subsequent sale value, providing immediate and robust financial security defined by the contract.
Some estate agents or developers use a 'Holding Deposit' or 'Reservation Agreement'. This is often misinterpreted as a binding contract, but it has a very different legal effect than the 10% contract deposit.
A holding deposit (usually £500 to £2,000) is paid by the buyer to demonstrate commitment before the contract exchange. It is an agreement to take the property off the market for a set period (e.g., 28 days) while searches and surveys are conducted.
If the buyer pulls out during this reservation period, the holding deposit is usually forfeited to the seller or the agent, depending on the agreement. This covers the seller for the time lost while the property was off the market.
The reverse situation: When the seller pulls out
To fully understand the financial risk in property transactions, it is useful to know the penalties when the seller is the party that breaches the agreement.
Before Exchange
If the seller withdraws before contracts are exchanged, they face no legal penalty. They are generally only responsible for their own legal costs and any outstanding fees incurred by their estate agent.
After Exchange
If the seller pulls out after the contracts are exchanged, the legal consequences mirror the buyer's liability:
- The seller must return the buyer's deposit plus interest.
- The seller is liable for the buyer's full conveyancing fees, mortgage arrangement fees, and any costs the buyer incurred due to the breach.
- The buyer may seek specific performance to force the sale.
As a seller, while you can't force an uncommitted buyer to complete before exchange, you can take steps to protect your finances and your timeline. Risk mitigation focuses on reducing the likelihood of a buyer pulling out or reducing your exposure if they do.
A protracted sale is a fragile sale. The faster you move, the less chance the buyer has to change their mind or be gazumped.
- Instruct your conveyancer as soon as you list the property, and ask them to compile the draft contract and obtain title deeds immediately. This saves two weeks.
- Fill out the Property Information Form (TA6) and Fittings and Contents Form (TA10) the day you instruct. Delays on these forms are a common cause of buyer frustration.
- Ask your solicitor to propose an Exchange Deadline (e.g., 6–8 weeks) to the buyer's solicitor. While not legally binding pre-exchange, it communicates seriousness and commitment.
The cost of a failed sale
The 'No Sale, No Fee' guarantee is the single best protection against a collapsed sale. However, it only covers the solicitor's time (legal fees). The seller is still liable for several non-recoverable costs when a buyer withdraws before the exchange:
- Mortgage Exit Fees: If you are selling to port or move to a new lender, you may have incurred costs for a new mortgage offer, which may be non-refundable.
- Energy Performance Certificate (EPC): The seller is legally required to provide a valid EPC before marketing, costing around £60-£120. This is always payable by the seller regardless of whether the sale completes.
- Leasehold Management Packs: For leasehold properties, the seller must pay the freeholder or management company to provide documentation (LPE1 form, accounts, etc.). These can cost anywhere from £300 to over £600 and are almost always payable upfront and non-refundable.
- Estate Agent Withdrawal Fees: While less common today, some aggressive agency contracts include a fee if you withdraw or the sale collapses, so always check your terms carefully.
- Re-Marketing Costs: The emotional and practical cost of having to remarket the property, leading to more viewings and a further delay in your onward chain.
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