Buyer threatening to pull out after exchange

milkwood

HI Guys,

I have read all the posts on this plus i'm a mortgage broker so I know i'm right in this situation but it sometimes helps to put your own post up to clarify!

My partner has a house which she has been renting out and decided to sell in June, we found a buyer and its been going swimmingly since, tenants moved out last week, exchange took place on tuesday this week and completion was set for friday this week.

The house was empty but we popped up on Wednesday (day after completion) to get some stuff from the attic, when I opened the front door I heard gushing water and looked down and the floor was 2 inches deep in water! ran to the kitchen and a pipe had burst under the sink, I turned off the mains and looked around at the damage which was the whole bottom floor of the house was 2 inches under water.

My first instinct was to phone our insurers as I was speaking to them I got my partner to call our solicitor to explain what was happening, at first he said it was our responsibility however he has changed his tone since, I explained that after exchange its the buyers responsibility to insure the property and also he is liable.

Cut a long story short the buyer first asked us to reduce the purchase price by £25,000 which we flatly declined and now he is thretening to pull out unless he is satisfied with what our insurers offer in regards to a cash settlement however I think the policy is a new for old policy so they send approved builders etc in to replace everything.

My question is, should we be using our insurance policy for this as technically he should be insuring the property?

Were losing out on excess plus higher premiums because we lose our no claims.

I know if he pulled out he would be liable to be taken to court by us however he keeps saying that he wouldnt? (he is wrong on this but when someone keeps mentioning it you start to question!!!)

He is now saying we should put him up in a hotel too, I find this hard to swallow because its not something we have done it was an accident?

Can someone give us some back up on this! my partner is 8 months pregnant and i'm seriously worried about the stress this is causing her, were not moving in to a property due to this sale although the proceeds are being used for a plot of land we have reserved.

Justg really angry at the attitude of the buyer and his solicitor who seems to be reeling off a lot of untrue facts.

Sorry for the ramble!

Thrugelmir

Hope this helps.

Insurance and Second Hand Properties

In the case of the purchase of a second-hand property, as a matter of basic law, the buyer becomes responsible for the property from exchange of contracts. The buyer will usually still have to complete on the purchase even if the property is damaged or destroyed between exchange and completion. Therefore the buyer should have buildings insurance in place from the date of exchange. Additionally, the buyer’s mortgage company may require the buyer to have buildings insurance in place.

The contract for the sale of a property may specifically state that the seller remains responsible for the property until completion. Indeed one of the standard forms of contract for the sale of land or property includes a clause to this effect. This does not automatically mean that the seller has to insure the property. If the seller fails to insure the property and it is damaged prior to completion the buyer may still sue him for damages. A clause may, however, be included in the contract which states that the seller must insure the property until completion.


There may be instances where both buyer and seller have buildings insurance in place for the period between exchange and completion.

Let the insurance Companies resolve what else he can claim for.

Your buyer is committed to the purchase so no problems on that front.

blackshirtuk

As I understood it the buyer had to insure from date of exchange.

If he fails to complete then you get the 10% or whatever deposit was lodged at exchange.

just seen above post explains better!

kmmr

The big question is - did he insure it straight after exchange... will colour his reaction!

milkwood

Cheers guys, its horrible when i start questioning myself like this!!!!

I'm glad were right in this case, I dont think our solicitor is being very helpful at the moment , will speak to him in the morning to explain this to him!!

Philkm

I don't think 'no claims' is as big a deal as it is on car insurance.............unless you're constantly claiming. Certainly not when people are talking about tens of thousands.

milkwood

Cheers, will let you know what happens today, we have decided not to pursue our insurance claim for the minute because he should be using his, I really dont think he is insured though from exchange.

Morally we had no problem with using our insurance company and we could have cancelled it at exchange but after the buyer's threats and demands we feel inclined to let him deal with it now as he should be insured for this himself rather than us incurring costs.

If we had not have gone back to the property to pick up that 1 box then this flood would not have been found until he opened the doors today after completion! He does not understand this scenario and claims he has a condition of somesort in his contract allowing him to pull out! once again another attempt to pull the wool over our eyes.

The_Unready

Hi,

Is it actually as clear cut as that?

You only seem to have noted the first para in the post from Thrugelmir. The second para states:

"The contract for the sale of a property may specifically state that the seller remains responsible for the property until completion. Indeed one of the standard forms of contract for the sale of land or property includes a clause to this effect. This does not automatically mean that the seller has to insure the property. If the seller fails to insure the property and it is damaged prior to completion the buyer may still sue him for damages. A clause may, however, be included in the contract which states that the seller must insure the property until completion."

Was such a clause contained in your contract? If so, surely it is you who'll have to claim in this instance? On reading the previous sentence, there may also be an opportunity for the buyer to attempt to claim any of his additional costs back from you as well if you weren't insured?

The Unready

gauly

We were told by our solicitor that we didn't have to insure the house until completion. This makes sense because the house has to be in the same condition it was at exchange. Also you still own the house between exchange and completion.

Your house is not in the condition it was when contracts were exchanged and I think you should have to put the damage right before you can complete the sale. Try consulting another solicitor because yours sounds rubbish. First they said you were responsible then they said you weren't - surely they should be able to answer a simple yes-or-no question.

gauly

Actually, I did just have a look on the internet to see why we didn't have to buy insurance between exchange and completion (and did the previous time we bought a house). It seems it depends on the wording of your contract. The default is that the buyer still has to pay for the house and is responsible for insurance. However, nowadays it is a fairly standard condition in the contract making the seller responsible for the house and allowing the buyer to rescind the contract if the house is unusable.

So, the answer seems to be: it depends what it says in your contract!

Richard_Webster

OP really has to check with his solicitor whether 5.1.1. and 5.1.2 of the Standard conditions of Sale were excluded or not. If they weren't then whilst the seller doesn't have to insure, the buyer doesn't have to complete.

5.1.1 says:

The Seller will transfer the property in the same physical state as it was at the date of the contract (except for fair wear and tear), which means that the seller retains the risk until completion

5.1.2 says

If at any time before completion the physical state of the property makes it unusable for its purpose at the date of the contract:

(a) the Buyer may rescind the contract;
(b) [provides that the Seller can rescind if it wasn't reasonably posisble to insure against the risk that occurred or not legally possible to make good]

(I don't like these standard conditions so routinely exclude them to return the position to the common law position that the risk passes on exchange. If a buyer' solicitor doesn't like this then I point out that his client can insure, but if my client is buying on, he will be obliged to buy the next property but won't have the money if my client's buyer has this get out.)