The legal system used to convey a property from one person to another has not changed since 1925 and as it currently stands as a Seller or Buyer each time you enter a transaction you are running the risk of sustaining a financial loss.
In a world where the focus is on consumer protection there are no safeguards offering protection when a transaction breaks down before contracts of sale are exchanged.
If you are selling a property or buying a property either party in that transaction can, as the law currently stands, pull out of the sale/purchase at any time up to the exchange of the contract of sale.
This means that the seller who had accepted an offer by a buyer, who has instructed a Solicitor, and invested time and emotion into the progression of a transaction could after months of marketing the property, find that the buyer has, at the last moment, decided to pull out.
During that period it is probable that the property has come off the market meaning the seller has lost numerous opportunities to find a serious purchaser. This could, in a market where in certain parts of the Country, falling prices are still, result in a loss to the seller.
The loss to a buyer is often a lot worse when a buyer puts an offer in, it is accepted, Solicitors are instructed, a survey is arranged, only to then find later in the process that that the seller has decided to pull out of the transaction. The buyer has no recourse against the seller, the fees incurred up until that point, often ranging between £1,000.00 and £1,500.00, are lost. There may be exposure to additional loss, if as in certain parts of the country, house prices are increasing.
I often come across incidences such as this and I share a couple of my experiences:-
“I paid for a survey costing £500.00. It came back disclosing faults. I tried to re-negotiate the offer price but the seller did not want to know. I had to walk away without my £500.00 and without a house”.
“I paid £850.00 for a survey on a different house. It came back with clear findings. After several weeks of phoning the Agent and the Vendor asking for a Contract and other related documents I was informed that he seller simply changed his mind and did not want to sell. I was left having to meet the cost of the survey and Solicitors charges of £400.00”.
So what can you do to try and avoid having to meet the cost of an abortive transaction?
If you are a seller it is advisable to ask the selling agent to find out whether the buyer has a mortgage, whether the buyer needs to sell another property before the purchase can complete, and whether the buyer is willing to pay to lodge with the agent a deposit to enable the property to be taken off the market and the transaction to proceed to exchange within a set period of time. This latter arrangement is quite prevalent in areas where house prices are continuing to rise.
I have come across other transactions where the seller has said to the buyer that if the transaction does not complete within a certain period of time the price of the property will increase.
If you are a buyer it might be worth speaking with the selling agent to find out how long the property has been on the market, whether there has been any prior transactions and if there have to try and ascertain the reason for their collapse. The Agent may be reluctant to give this information but you should push for it. It is also advisable to find out whether the seller has a property to purchase since this might also delay the transaction and give greater scope for failure.
There is need for the current and archaic system to be re-formed.
Then use of deposits by both the seller and the purchaser would be a way of securing some degree of commitment to the transaction before major expense is incurred. Alternatively, perhaps the time has come to look at how the selling and buying process works in Scotland and adopting this as a model.
Finally on this subject I share with you an experience that I recently came across where a seller decided that he was not prepared to sell his property to my client because he lived at the property for many years and was not happy that my client was intending to let the property out rather than use it as a ‘home’. It is regrettable that the seller did not disclose this to my client before a survey was undertaken, legal costs incurred and we were on the verge of exchanging contracts of sale!
Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at firstname.lastname@example.org