Remedies in Conveyancing Where the Other Party Appears Reluctant to Complete the Transaction

REMEDIES

Supposing you are a lawyer acting for a party in a conveyancing transaction but the other party to the contract is showing a marked reluctance to complete the sale. This could be due to any number of reason e.g. buyer has changed his or her mind about buying the property or the seller has found a buyer willing to pay a lot more. What can you do as the lawyer advising the innocent party do to force completion to occur?

1. Forcing completion on an unwilling party

(a) Specific performance - this is an order granted by the court and is used against the seller where the seller is refusing to execute the deed of purchase. The court has the power to order a third party to execute the deed on his behalf.

A writ for specific performance can be applied for as soon as the day fixed for completion has passed whether or not time is of the essence and whether or not a notice to complete has been served.

It is not as useful against an impecunious buyer of course as the court cannot force a sale where the buyer has no money.

Specific performance is a discretionary remedy. However it is virtually available as of right where land is concerned because of the unique nature of any property. An applicant denied the decree may be awarded damages in lieu. Supreme Court Act, 1981 s. 50

(b) Completion notice - this is a notice served after the date set for completion has passed without completion occurring. Provided a party is still ready and able to complete then that party can serve a notice to complete on the other. The notice makes time of the essence meaning that if there is further non compliance then the innocent party can withdraw completely from the contract (such remedy being expressly stipulated at standard condition (S.C.) 7.4 of the 5th edition of the Law Society's standard conditions 2011). When can the notice be served? Under the standard conditions of sale completion is either 20 clear days after exchange of contracts or such other date as the contract stipulates. The open contract position if time is not of the essence and there is no stipulated completion date is that notice must not be served until there has been unreasonable delay. If time was of the essence then the innocent party can withdraw from the contract immediately. However deciding if time is of the essence or what is unreasonable delay is a question of fact and thus subject to uncertainty so the open contract position should be avoided. A further advantage of the standard conditions is that they stipulate that if the purchaser has not paid a deposit on receipt of a notice to complete he must pay 10% forthwith so this gives a wider remedy as well as certainty about when the notice can be served. A notice to complete is usually used by a seller against a buyer where specific performance is not appropriate. The threat of being sued for damages for non compliance with a notice to complete will often persuade a reluctant purchaser to proceed.

2. Remedies for delayed completion

(a) If time is of the essence then withdraw.

(b)Compensation for delay

(i) The open contract position is that any delay is a breach of contract (though not necessarily one giving a right to innocent party to retire from contract). The injured party is entitled to damages, e.g. cost of finding temporary accommodation. In calculating loss the rule is that the injured party is entitled to be put in the same position they would have been in had completion occurred on time. Thus the seller would have earned interest on the purchase price and the buyer who has been deprived occupation can charge mesne profit.

(ii) Open contract rule

- if delay is buyer's fault then no mesne rent is applicable

- if delay is seller's fault and rent exceeds any interest then the buyer does not have to pay interest

(iii) Usually however compensation for delay is covered by a term in the contract. Under S.C. recognition is given to the fact that the party has been unable to complete due to a delay by the other at some earlier stage of the transaction. Under the S.C.7.2 you look at the transaction stages as a whole to determine who caused the delay and how long it was and then the party most at fault pays interest at the contract rate on the balance of the purchase price either for the period of default or the delay between contractual completion and actual completion if shorter. Provision is made to set off the contractual damages from any common law damages if such claim is made or to take rent instead where the buyer is in occupation.

(iv) Rate of interest

- S.C. 1.1.l (e) stipulates that unless otherwise agreed it is the Law Society's rate from time to time in force

- special condition can alter this

(v) Notice to complete - see above.

Note also however that S.C.7.4 deals with remedies available to the seller due to the Buyers failure to comply with a notice. These include forfeiting the buyers deposit with interest; reselling the property; and damages.

S.C. 7.5 deals with the buyers remedies when the seller is the one who cannot comply with a notice. The buyer can rescind and recover his deposit plus interest and still retains the right to sue for damages.

3. Grounds for withdrawing from the contract

Instead of forcing completion the innocent party may want to withdraw altogether. What are the grounds available?

(a) Rescinding the contract because of a defect in its formation, e.g. undue influence. This means the parties have to be returned to their pre-contract position. So buyer gets his deposit back and the seller gets back the property. Accompanied by a claim for restitution and indemnity i.e. reimbursement of expenses such as aborted legal costs.

(b) Rescission for misrepresentation. If the misrepresentation was not fraudulent, the court can refuse to allow rescission and award damages in lieu. (Misrepresentation Act 1967 s.2 (2)). The open contract position is that rescission for misrepresentation can be accompanied by a claim for damages if the misrepresentation was fraudulent or negligent. Rescission is still available even after completion unless a third party has acquired rights or there has been reliance and it is now impossible to restore the parties to the pre contract position.

S.C. 7.1 modifies the open contract position. Only get rescission if misrepresentation. Has to be fraud, recklessness or get a property differing substantially before can rescind. Otherwise just get damages and only if there is a material difference in the value, description or contents.

s.3 Misrepresentation Act 1967 makes any exclusion clause subject to a reasonableness test.

(c) Rescinding under a contractual right e.g. S.C.7 failing to comply with a notice to complete or a special condition.

(d) Choosing to treat the contract as discharged because of the other party's breach of contract. This is only possible if the breach is a serious one,

e.g. -a major misdescription

-failure to show good title

-existence of an undisclosed incumbrance

-any delay if time is of the essence -non-compliance with completion notice.

This may be accompanied by a claim for damages for breach of contract.

4. Damages for breach of contract

Damages are calculated under the rule in Hadley v. Baxendale i.e. the plaintiff can recover loss which arises naturally from the breach or was a loss that may reasonable be supposed to have been in the contemplation of the parties at the time of the contract as the probable result of the breach.

Examples

(a) If completion never takes place, because of a serious breach of contract, damages could be

For the buyer (B)

• loss of bargain i.e the difference between the contract price and the higher market value at the date of breach

• Conveyancing costs & other expenditure in buying a new property

• Alternative accommodation in the meantime

• possibly, loss of profit e.g where P knew B could develop property

• if no loss of bargain, then wasted conveyancing costs.

For the seller (S)

• loss of bargain i.e.difference between the price that would have been paid and any lower price actually achieved on resale

• if no loss of bargain then the costs of the aborted conveyancing transaction

b) If completion does take place there might still be a breach of contract entitling a party to damages, so that e.g. buyer could claim a reduced purchase price if he discovers an undisclosed incumbrance or a misdescription before completion.

An action for damages for breach of contract cannot generally be brought after completion. However, buyer can sue on an express provision in the contract entitling him to compensation for misdescription, even after completion. For example S.C 7.3 and don't forget the right to rescind under the Misrepresentation Act.

5. Forfeiture of deposit

If non-completion is due to seller's default, buyer is entitled to return of the deposit and if it was paid to seller or seller's agent, has a lien over the land for its recovery. If it is due to buyer's default, seller can forfeit the deposit, irrespective of whether he actually suffers loss subject to the court's discretion to order the return of the deposit under L.P.A. 1925 s.49(2). But if seller claims damages, the forfeited deposit is taken into account.

6. An undisclosed incumbrance that only comes to light after completion

(a) Unregistered title only. Compensation can be obtained from the Chief Land Registrar if buyer is adversely affected by a pre-root land charge.

(b) An action may lie under the covenants for title.

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What's The Difference Between Exchange Of Contracts And Completion In Conveyancing?

When moving house one of the problems encountered is the new terminology that you will encounter. Often phrases such as 'exchange of contracts' and 'completion' are known to your solicitor and estate agent but not to you. It's important to know the difference, and which stage of your sale or purchase they relate to, as both have significant implications for you.

Exchange of contracts is the stage at which you have agreed all the various terms on which you will buy or sell your property and includes the exact price to be paid taking account of any allowances (reductions to the price) to be made and any additional payments for contents. For contracts to be exchanged your solicitor also needs to have received all of your search results, have received your mortgage offer, and resolved all the legal queries and any problems. Before exchange of contracts can take place, everyone needs to have agreed the date for moving in. Once all of these issues have been resolved and agreed it is at this point that your solicitor will proceed with exchanging contracts with the solicitor acting for your seller or buyer. If you have a sale and purchase your solicitor will ensure that contracts are exchanged on your sale and purchase at the same time.

Exchange of contracts is very important because once it has taken place the contracts become legally binding and you are committed to selling or buying or both (as the case may be). This means that no-one will be able to pull out of the deal without being in breach of contract and incurring significant legal penalties. You do not move home on exchange of contracts, but you do set the date on which you move home (known as the completion date) which is also the date by which you must have all funds available to buy your new property.

It is therefore important that exchange of contracts is not confused with completion, and you leave a sufficiently large period of time between exchange of contracts and completion to allow you to finalise all matters in respect of your move before you have to vacate your property. Because anyone can pull out of the deal before exchange of contracts takes place your solicitor will advise you not to make any firm moving arrangements, such as booking your removals, until after exchange of contracts.

Completion is the day of moving, and is often fraught with difficulties, stress and pressure. You not only have to ensure that everything has been packed and that your removals are booked and ready, there is often a delay between you moving out of your old house and being able to collect the keys to enable you to move into your new house. Any such delay tends to be caused by issues with the banking system and the transfer of monies on the day of completion between all of the solicitors in the chain.

If there is a long chain, each solicitor has to send the money on to the next solicitor and that party will have to wait for money to be received (and sometimes mortgage funds to be received) before they can then send the money further up the chain. You may therefore have to be patient in waiting for your seller to receive the monies from your solicitor, before you're able to collect your keys and start to move in. Often the delay can mean waiting for a few hours, however, typically the delay is not too long and you should be able to move into your new property fairly quickly.

So to summarise, exchange of contracts is the point at which you are legally bound to sell or buy your property, and completion is the day when money changes hands and you move out of your old home and into your new one.

Are you are looking for expert conveyancing solicitors in Hull? Talk to Solicitors in Hull Myer Wolff. Ashley Easterbrook is a partner in the firm's private client department.

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What Is The Role of Conveyancing Solicitors In House Sales?

The process of selling a property to another person is called conveyancing, this process contains all of the legal requirements to execute a sale. Conveyancing can be quite complicated and therefore legal assistance is normally sought out. Tasks completed during the conveyancing process are; contract drafting, doing searches and looking after all the post-completion paperwork.

Conveyancing Solicitors are required to give you an estimate of their fee and unless they later advise you of a change, their fee must be consistent with the initial estimate. Costs range from about £500 to £1500 [or possibly more if the property is very expensive indeed] depending on the work involved and value of the property, however all Conveyancing Solicitors are accustomed to discussing costs so feel confident about dealing with these up front before you make a decision.

The first step is to make an offer on the property you are interested in and inform your estate agent the amount you would be prepared to pay. If you require a mortgage you need to make an application to your lender at this stage. Once the vendor of the property accepts your offer, their Conveyancing Solicitor will send out a draft contract setting out the terms of the sale.

At this point your Conveyancing Solicitor will:

Check the contract, raise any queries and carry out searches to see what information is available about the property.

Report to you that all is in order and the money is available before arranging for contracts to be exchanged. After this, neither you nor the vendor can withdraw from the transaction and it is usual on exchange for the buyer to pay a deposit which the seller can keep if the buyer defaults.

Prepare a final statement showing how much money is needed.

Arrange for the buyer to pay a deposit on the day the contracts are signed, typically 5 or more per cent of the total sale price.

On completion pay the money to the vendor's solicitor; they then vacates the property and you are free to move in.

Pay any Stamp Duty Land Tax due and register the property in your name at the Land Registry.

Receive the balance of the sale price and hand over title deeds to the buyer's own Conveyancing Solicitor.

In addition, your Conveyancing Solicitors will:

Advise you if anything unexpected happens during the sale process and handle any price negotiations.

Assist you in the completion of forms detailing information about your property, its fixtures and fittings.

Obtain your title deeds and land registry copies.

Deal with the requirements of your lender in all mortgage cases and liaise with estate agents and surveyors to ensure that everyone works together to complete your house sale or purchase.

Buying a house is probably the most expensive transaction you will ever conduct - don't cut corners - make sure your appoint specialist Conveyancing Solicitors who can guide you through the whole conveyancing process with expertise.

If you need a conveyancing solicitor then contact Bonallack & Bishop. They are a firm of Andover Conveyancing Solicitors. Senior Partner Tim Bishop sees himself as a businessman who owns a law firm. He has expanded the firm by 1000% in 13 years.

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Residential Conveyancing Checks For Buying a Property

Residential conveyancing is the legal terminology for the process involved when legally transferring ownership of a property from one person to another.

The process itself involves a number of checks to ensure that you are aware of the local environment, any unpleasant things the land may have been used for before it was built on, and exactly what you are being sold.

Let's go through the process in stages.

You have seen the perfect property, you have been to see the mortgage adviser and have been told that they can provide the money that you need, so you make an offer on the house and the seller accepts. Gazumping apart, the process starts in earnest.

You should first go to a local solicitor that you either know or have heard are good. If you don't know any, call a few solicitors in your local area and ask them to give you a quote for conveyancing the property you want to buy. You can go on price but it is advisable to go with the person that you connect with most as you will be dealing with them for the entirety of the process.

What will then happen is that the sellers' solicitor will start writing up a contract detailing what you are actually getting for your money.

The contract details will include selling price, the boundaries, what fixtures and fittings are included (for example wood burning stove, cooker etc or if you are buying land you may have agreed a tractor as part of the sale!), legal restrictions or rights on the property, planning restrictions, a description of the services to the property (septic tank or electricity), and finally a completion date for the purchase.

While all of this is going on your solicitor will be making a number of checks to see if there is anything that could effect your decision on purchasing the property.

The checks can be broken down into environmental search, local authority search, chancel repair search, and if in a mining area, a mining search.

The environmental search lets you know if the ground is prone to flooding, has issues with Radon Gas, has had mining in the area, or is listed as contaminated land (landfill, fuel stations or waste treatment sites nearby).

If the environmental search, flags that there is mining in the area a further mining search can be carried out to see if the mines would have an effect on the property that you own.

The Local Authority search will let you know if there are any pending planning applications that might affect the land that you are looking to buy. You can also go into the local planning office yourself to have a look at plans in the local area.

The chancel repair search is to find out whether you have to pay the local church a set amount of money towards the repair of their chancel. This will soon be easier to check as churches have to register their chancel charge in the next few years or lose the right to claim the fee. There is chancel insurance that you can take out to cover the eventuality of this but a good solicitor should sort this out for you.

What then comes (if the buyer and seller are happy with the contract that both solicitors have prepared) is an exchange of contracts which then makes the sale legally binding. At this point both parties have legal recourse should the other person pull out of the contract.

Next, the solicitors will make sure that everything is ready for the completion of the conveyancing process. This will include them ensuring that their are enough funds, checking mortgage documents (if any), doing a final land registry check, ensuring that all things that have been agreed in the contract are carried out, and ensuring that all legal documents are completed to transfer ownership. This is then followed by the final transfer of the total funds and receipt of the legal documents that prove ownership. You then need to pay the solicitors fees and register the ownership of the land with the land registry.

The final cost that you will have to pay is the stamp duty on the property which when this article was written was 0% for properties purchased below the price of £125,000, 1% for properties between £125,001 and £250,000 unless you are a first time buyer when you don't have to pay any stamp duty. This price then increases by 1% every time you double the purchase amount.

There are a number of Government sites that clearly take you through this process and they are worth consulting too.

By Rebecca G Wishford.

If you are looking for residential conveyancing Salisbury or residential conveyancing Andover, try Parker Bullen LLP.

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