When you have a sale or purchase that falls through in the UK, there are several options for handling the situation. The last thing you want is for it to get messy, so make sure you’re not wasting money on something you don’t need to waste.
Sale
There are times when you want to cancel due to a better offer. If you reject the initial offer, you could still be liable for some costs that the other party is required to cover.
For example, if you reject the offer before the exchange of contracts, you could still be responsible for some of the fees.
The other party would still have to pay fees for the survey, but if you don’t exchange contracts, you could be required to pay for them. If you accept the offer and then change your mind, getting some of your money back may still be possible. However, you would need to pay some fees to make the change. If you want to refund the sale price, but the seller isn’t willing to take it, you could pay the seller to cancel the sale.
As a seller, you will also need to check with your estate agent regarding the terms of your agreement. Suppose they already have a buyer, but you take the property off the market, it’s likely you will still need to pay the estate agent’s fee.
Additionally, you should check the terms of your retainer with the conveyancer. If they have started work already, you may need to pay for the work that has been done, even if you didn’t push through with the sale. Disbursements by the conveyancers will still be payable.
Purchase
Note, if you are a buyer, there are several reasons you could pull out of the purchase, such as a bad survey, inability to get a mortgage, issues with the title advised by the conveyancer and a negative search report.
There are no penalties due under the contract terms, but other fees may still apply. For one, you can get charged for the work the conveyancer has done.
Moreover, you won’t be able to recover the mortgage adviser fees or lender valuation fees.
Keep in mind that most conveyancers work on a “no sale, no fee” basis, which means that even if you need to pay for any disbursements by the conveyancer, you are not subject to pay any legal fees. Therefore, it’s crucial you look into this when you’re looking for a conveyancer.
Sale Falling Through After the Exchange of Contracts
Both parties pulling out of a sale following the exchange of contracts rarely happens. If it does, there will be a breach of contract, in which the party that is not at fault will need to issue a Notice to Complete on the other party.
The Notice to Complete gives the other party a 10-day grace period to complete. Additionally, the defaulting party should pay interest at a daily rate to the other party. Usually, the solicitors who serve the notice will usually charge the defaulting party a fee for serving the notice because this will be included with the contract for sale.
In this case, both parties must be willing to complete within 10 days. If one party isn’t able to complete, they will still be in breach of contract despite issuing the notice and the original reason for non-completion wasn’t their fault.
When the buyer fails to complete, the seller can end the contract and keep the deposit. The seller can re-sell the property and claim losses incurred due to market depreciation. That is, if the property’s value has decreased when the contract has been breached. Therefore, the buyer will need to pay the difference.
This is also why there’s a 10% deposit because the seller can use it for legal feels to enforce the contract. With that, anything less than a 10% deposit must be agreed with the seller before the exchange of contracts to ensure that they understand what happens when they accept a lower deposit.
Now, if both parties fail to complete within ten days, the other can sue for breach of contract in court and claim for additional losses. At this stage, the conveyancer will advise the client to seek the help of a specialist litigation Solicitor.
Why Do Buyers Pull Out of the Sale
One of the reasons for buyers to pull out is due to financing. Often, the mortgage provider will have a minimum or maximum limit for the loan. Additionally, there could be restrictions on the number of mortgages the mortgage provider can offer. Therefore, the buyer will have to look for a mortgage lender who can cover the amount, often referred to as a bigger lender.
For example, the buyer has a £100,000 deposit, which means they can only borrow £50,000. The seller will accept the offer with the terms of the mortgage, subject to contract. The buyer, who is eligible for a mortgage, goes ahead and finds a bigger lender, which could be £100,000, but they might not be willing to lend that amount.
Suppose they agree to lend £80,000, then they will want to get the difference. This is where the buyer needs to consider how much they can borrow. If the difference is too much, they will have to change the offer and make it lower.
This is why it’s crucial to get the advice of a mortgage adviser before you exchange contracts because the lender might want to know that you have the funds to cover the full mortgage when they agree to lend you the funds in the first place. Moreover, this is why you need to make sure that your conveyancer is up to date with lenders.
What Happens to Solicitor Fees When the Buyer Pulls Out
Unfortunately, you are still liable to pay. Once you are under contract, any legal fees you incur related to buying or selling the home are partially your responsibility, though not entirely. This applies to every seller and buyer.
The Bottom Line
Buying a home in the UK is a big milestone that can be a very exciting and challenging process at the same time. Now that you know what happens to the legal fees when you pull out of a sale, you should be aware of the potential pitfalls and the use of a smaller deposit. Both buyers and sellers should do their homework before entering into a contract because this is the only way to avoid any legal issues.
Are you looking for the best conveyancing solicitors? Conveyancing Calculator provides instant online residential conveyancing quotations through our Conveyancing Fees Calculator. Get started now!
Trackback URL
The Trackback Address for What Happens When a Property Sale Doesn't Push Through is:
