GUIDANCE: The Purchase Contract
The Contract is an industry standard format and incorporates the ‘Standard Conditions of Sale’, which are widely used for this type of transaction. The main points for you to be aware of are:
Your details
Please read through the contract to ensure that your name(s) are correct and that the address of the property as is you would expect.
The purchase price
Please check the contract to ensure the price is as you would expect. The fittings and contents list sent to you with our Title Report will form part of the contract. Please ensure that you are happy with its content and let us know if you intend to purchase any fittings.
Exchange of Contracts
This is the date the contract becomes binding on both buyer and selling. Neither can withdraw after this date without incurring financial penalties.
There are 3 options for exchange of contracts:
- A simultaneous exchange and completion (ie. they take place on the same day). This allows full flexibility for both seller and buyer with no commitment until the day of completion itself.
- Exchange of contracts in advance of completion. This allows for little to no flexibility.
- Exchange of contracts in advance of completion with a coronavirus clause. This allows for flexibility in the event that a ‘coronavirus’ related issue occurs for either the seller or buyer.
A ‘coronavirus clause’ can work in your favour or to your detriment. If you are affected by covid-19 (perhaps by a local lockdown or due to illness) the clause would allow you to delay completion. However, if the seller were to be affected, they could also use the clause to delay completion or even withdraw from the transaction which may be to your detriment. It is difficult to prove whether a party has genuinely been affected and so the clause may operate even where no proof is given. As a result we will not include this clause as standard unless you ask us to. Please let us know if you would like us to explain more about the detail of the clause.
The Deposit
On exchange of contracts, a deposit of 10% is payable by the buyer to the seller.
In the unlikely event that the seller defaults on completion, you will be entitled to the return of the deposit (and may be able to claim damages for your loss). But please note: all or part of your deposit money can be used by the sellers to pay the deposit on their onward purchase, and only the remaining balance, if any, will still be held by their lawyer and can be returned. For newbuild purchases, the developer’s lawyer will immediately release the deposit to the developer. Whilst these arrangements are common practice, we must warn you that if your purchase does not complete, it may be more difficult to obtain repayment of deposit money which have been used in that way, rather than if the whole deposit was retained by the sellers’ solicitors until completion. On the other hand, very few house purchases totally fail to complete (though completion is occasionally delayed), and you may be prepared to take this risk rather than insisting that the sellers incur the expense of obtaining separate bridging finance for the deposit on the new property. Please discuss this with us if you are concerned about it.
In the unlikely event that you default on completion, you will lose your deposit and the seller may also be able to claim additional damages from you.
Please note that if you have paid a deposit of less than 10% please note that the seller may still pursue you for any balance up to 10% of the purchase price plus any costs they have incurred.
If you do not have a deposit available to secure an exchange of contracts (for example if your purchase is being funded by 100% loan(s)) please contact us to discuss this as an alternative to the standard exchange procedure may be required.
The Completion Date
This is your moving date. We will insert the date by hand just before contracts are exchanged. The sellers must vacate the Property on that date, if they have not already done so, and we must send the completion money to their solicitors to reach their bank account by 1 p.m. that afternoon. You will be liable to pay the daily interest (at the % rate is set out in the contract) if cleared funds are not made available to us in time to send the money early enough, so you will need to make sure we have received cleared funds (other than the mortgage loan, mentioned below) from you at least 24 hours before the completion date.
Cybercrime warning
It is our policy not to send our bank details by email. Emails are at risk of interception and alteration by fraudsters. If you receive any bank details by email please call and speak directly to your lawyer to confirm they are accurate before you send any money. We cannot accept responsibility if you fall victim to cybercrime.
Physical condition of the property
You accept the property in the state and condition it is in as at exchange of contracts. You must be satisfied about this from your own inspection of the Property and from your own surveyor’s report (you may not be entitled to rely on any survey obtained by the mortgage lender). If you expect the sellers to remedy (or to pay to remedy) any defects, this will have to be agreed with them before contracts are exchanged and special provisions added to the contract so please let us know. You should visit the property just before exchange of contracts and again just before completion, to assess its state and condition.
It is quite common for properties to be left in an untidy condition on completion or for the sellers not to clear the property of all items. If you identify any issues before completion has taken place we can raise your concerns with the seller’s lawyers. If you do not do so, once completion has taken place we will be unable to assist with any issues which may arise.
You are also responsible for checking that the property is in an agreeable condition, and we specifically recommend that you check that the boiler an electrics are in a safe working order.
Please note that a post completion dispute resolution service is not included within the remit of the work we are instructed to undertake on your behalf.
Buildings Insurance
You are responsible for insuring the property from exchange of contracts. The risk for damage to the property between these two dates will be yours, so it is very important that you have buildings insurance in place from the date of exchange of contracts- and not completion.
Newbuild or converted properties
please note that the contract for these types of properties is likely to be more detailed than is usually the case. The contract may be weighted in favour of the developer and it is absolutely vital that you read through the terms of the contract very carefully and contact us if you have any questions at all. You must ensure that you have a valid mortgage.
Delays in completion
Rarely, circumstances arise which cause a delay in completion after exchange of contracts has taken place. This may be due to illness, death, extreme weather etc. In these circumstances it is not possible to force the seller or buyer to complete. However the contract provides for a daily penalty to be payable by the defaulting party (at the % rate shown on the contract) and also sets out that they should be responsible for any reasonable out of pocket expenses (such as hotels/ removals etc). A full breakdown is not set out in this letter but the terms of the contract are standard and law society recommended. Please do let us know if you would like us to explain this further.
Failure to complete
If either the seller or the buyer does not complete on the completion date set out in the contract, the completion date will roll into the next day. The defaulting party will be liable for the non defaulting parties costs caused by the delay (albeit payment may not always be easily obtained). Should the non defaulting party so require their lawyer can ‘serve notice’ setting a 14 day deadline within which completion must take place. At the end of that 14 day period however either party can decide to withdraw from the contract and of course this may not always be the desired outcome. In the unlikely event that a failure to complete occurs we will provide you with guidance and support as to the contractual options available to you.
