When it all goes wrong on the completion day

Advice  |   25 July 2022

A detached house in a remote rural location
Written by
John Grindley, Conveyancing Executive

SO … You have agreed to buy (and/ or) sell a property.

You have spoken to Estate Agents and agreed a fee.

You made the house tidy and clean for viewings or you have viewed your dream property.

An offer has been made and accepted and this matter has passed into the hands of conveyancing solicitors.

The transaction has progressed well, all of the paperwork is in order and all of the parties have arranged their mortgage offers and finances to enable them to proceed.

Your solicitor, the other party’s solicitor and the other solicitors in the property chain have exchanged contracts. All parties are now legally bound and committed to sell and buy the properties on the contractually agreed completion date.

Completion Day rolls around.

Your removal company is ready, the Estate Agents are ready with keys to hand to the new homeowners however, 4pm on completion day ticks despite your solicitor . Around 4.30pm you receive an email from them confirming that whilst they have been chasing to confirm completion, monies either haven’t been made available by your mortgage company or have not been sent to the solicitor’s client account by your buyer.

Now, what happens next?

What happens next should be set out clearly in the terms of the contract agreed between your and the other party’s conveyancing solicitors. These will likely have been negotiated based on the Standard Conditions of Sale (and this article is written with reference to the 2018 Revision Fifth Edition of Standard Conditions of Sale). The Standard Conditions of Sale have been formulated by the Law Society for the purpose primarily of residential conveyancing transactions. However, the parties may or will have also varied these conditions slightly by the addition of what is known as Special Conditions, depending on the requirements of the parties to the Contract.

When completion of a property transaction fails (as sometimes happens), the non-defaulting party (i.e. the party innocent of any breach) is not immediately able to bring the contract to an end, or make a claim for breach of contract. What happens when completion fails is set out in the contracts in the Standard Conditions of Sale however, we have summarised them here.

The party who has not defaulted has the option to serve what is known as a “Notice to Complete” on the defaulting party. This will require the defaulting party to be in a position to complete the contract, either by paying the monies or releasing the keys to the property, within no less than 10 working days of the date of service of the Notice. Service of the Notice to Complete will also make time “of the essence”.

In contract law where time is of the essence and the time specified in the contract or Notice is not adhered to, this will allow the non-defaulting party various remedies (both set out in the contract or otherwise) against the defaulting party in the event that they continue in their default of completing the contract on time. We will briefly cover those remedies below.

Immediately on failure of completion on the specified date, the defaulting party (i.e., the party who is unable to complete the contract) is required to pay compensation at a penalty interest of 4% above the current bank base rate(calculated based on the monies due pursuant to the contract) to the non-defaulting party for every day that they are unable to complete within the 10 working day notice period.

So, your solicitors serve the Notice to Complete, the other party and the rest of the chain now have at least 10 working days to fulfill their obligations under the Contract and complete the transaction..

All fine, right? Unfortunately, no (or, not always).

We will now have a little look as to what remedies might be available to a non-defaulting party in the event that the contract is still not completed following expiry of the Notice to Complete.

The rights and remedies available for the non-injured party are set out in the Standard Conditions of Sale, as varied by your individual sales contract but largely will be unchanged between the conveyancing parties.

If you have any queries as to your rights and remedies prior to entering the contract, please make sure you raise this with your representative from the Thackray Williams Conveyancing and Residential Property Team to ensure that you fully understand your rights and responsibilities under the contract.

On expiry of the Notice to Complete, and on the assumption completion hasn’t occurred, the non-defaulting party acquires a right to rescind the contract.

Rescinding a contract is an equitable remedy which allows the non-defaulting right to bring the Contract to and end and claim such damages that are set out either in the contract or by law of equity.

Generally (and pursuant to the Standard Conditions of Sale) recission of the contract should allow the non-defaulting party to:-

  1. Reclaim (as the purchaser) or forfeit (as the seller) any deposit exchanged in respect of the sale contract.
  2. The Standard Conditions of Sale require this to be 10% of the purchase price
    (a) Deposits are often not paid in full in chain transactions, where the buyers funds are held in the equity of their current property, and in the event, you are forced to exercise your right to rescind, you should be able to reclaim the remainder of the deposit up to 10% of the purchase price as a liquidated debt from the other party (although this will be harder and take longer to recover) .
  3. You should also be able to claim damages and interest from the date of default of completion to the date of recission of the contract on the purchase price as set out above.
  4. You will also be able to claim any accrued interest on the deposit held on your behalf by your conveyancer.
  5. You should also be able to claim back as damages any costs that you have incurred (such as the cost of moving, storage costs, cancellation fees any wasted costs in delay and any costs of raising alternate finance to ensure that your property completion moves forward as planned from the defaulting party). It is important to keep a written record and receipts for these costs as evidence for your claim.

Of course, in the event that you are the selling party, you will be able to forfeit your buyer’s deposit and still place your property back on the open market.

Such damages can be claimed by way of a claim for repayment of the liquidated debt under the contract, and by way of a claim for breach of contract.

If you have any queries or wish to discuss the failure of your property transaction as a result of default on completion, please do not hesitate to contact the Dispute Resolution Team at Thackray Williams LLP on 020 8290 0440 or info@thackraywilliams.com

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