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 davidpett@m-j-p.co.uk
