Urgent: Contract exchange with certain clauses

manan.shah.82

Hello,

We are buying our first home and hoping to exchange contract today but didn't happen because our solicitors have requested some amendments to the contract which were not accepted by seller's solicitors.

While I'm sure our solicitor is trying his best to make sure we, as a buyer, are all safe once we have exchange the contract; I wanted to check with you guys couple of clauses in the contract and have your opinion:

1. Seller has mentioned that once contract is exchanged property is at buyer's risk and seller is under no obligation to the buyer to insure the property. No damage or deterioration of the property will entitle buyer to any reduction of the purchase price or to refuse to complete or to delay completion.

2. In "Delayed Completion" clause, they have asked
£250 + vat for notice fee,
additional removal, storage and delivery cost because of delay,
temporary accommodation for seller,
cost of arranging finance to enable the seller to complete the purchase of another property,
any payable interest (which is 4% above Lloyds SVR, currently 2%)


Are above clauses common/expected now a days or seller/her solicitor is being demanding in my case?

Thank you.

matthorp

I thought that you had to have buildings insurance from the point of exchange presumably because clause 1 is standard. Somebody else will know more than me about this though. I would have thought 'no accidental damage' clause would have been better incase (not saying this about your seller specifically) there had been any animosity over the sale either between the sellers (ie separation/divorce), or between seller/buyer and the seller was feeling a bit hard done by.

With the second one, if you delayed completion (after exchange) or failed to complete, I believe you would be libale for all these things anyway.

TrickyDicky101

1. seems to indemnify your sellers against any damage/deterioration (even willful) and I would be unhappy with this (no idea if it is standard though).

ash28

Contracts are covered by Standard Conditions of Sale -

Insurance: The property is at the risk of the buyer from the contract date (exchange) and unless it's in the contract the seller has no obligation to insure the property - if they have a mortgage their lender will probably insist on insurance but get your own buildings insurance sorted - has your solicitor no mentioned that you will need it?

Again failure to complete on time is covered by the Standard Conditions of Sale though I imagine some solicitors will put an additional clause in the contract dealing with it - which it looks like your sellers solitictors have done.

I think you would be liable for a lot costs anyway if you failed to complete on time - it's breach of contract and could be serious.

Chris55_2

Why do people keep posting that a property is normally at buyers risk after exchange. This is just wrong. At exchange the seller of the property is responsible for the property to be in that condition at completion - that's what you are contracted to receive. If something happens to the property between exchange and completion either because of the sellers negligence (e.g. they burn out their kitchen - as happened to me three days before completion) or there is a flood, or a satellite crashes into the roof the seller must make the property good to the state it was in at exchange.

In my case there was a clause in the sellers insurance that specifically covered the period between exchange and completion and stated that the work would be paid for by them, but that details on the "making good" would be decided by the buyers (i.e. us). This was a fairly standard home insurance.

The only reason why it can be a good idea to insure it yourself is as a "belt and braces" - in case the seller does not have the resources to pay up. I'm sure that in this case "your" insurance company would attempt to claim back all the costs from the seller.

saabay

Your solicitor is right not to agree to these special conditions. They will override the standard conditions of sale in so far as they do not agree with them. Whilst the buyer may insure from exchange, the seller should retain the responsibility for the property until completion. After all it is the seller that is living there and in control of it. Insurance can be a sticky issue between exchange and completion.

The other clause is ridiculous although, when practising, I was coming across it more frequently. The standard conditions provide adequately IMO for late completion interest, damages, etc. With this proposed clause in place, the seller has an open cheque book from you. What if you were late completing for some reason and the seller decided to use very expensive bridging finance to complete their purchase. That could cost you a fortune. Frankly, if they decide to do that then they pay for it.

chopper78

That clause sounds like open season for the seller to burn the house down or otherwise destroy after exchange and make you (or your insurer) have to pay for it.

If the house, between exchange and completion, is no longer as agreed to, then the seller would be in breach of contract anyway and the buyer certainly wouldn't be liable. After all, title of the property doesn't transfer until completion.

I suppose the clause may have some level of validity if the house is vacant between exchange and completion, but if the seller is still living there, then the clause shouldn't be there.

Richard_Webster

Why do people keep posting that a property is normally at buyers risk after exchange. This is just wrong.

Not quite.

The Standard Conditions of Sale (4th Edition) which many solicitors still use provides that the seller will pass the property to the buyer in the state and condition it was in at exchange of contracts, fair wear and tear accepted. The 5th Edition (now recommended for use) effectively goes back tot he Common Law rule that the risk passes at exchange. In nay event many solicitors amended the 4th Edition to remove the offending clauses.

The 4th Edition provisions were unfair if someone was selling and buying. If they exchanged on both transactions on the same day with completion for both a week or two later then if their property suffered serious damage the buyer could refuse to complete but the client would still be bound to complete his purchase.

For that reason I would not accpe thtese terms but insisted that the risk passed on exchange. The buyer could insure and if the place burnt down or whatever then he would have to compelte but could claim on his insurance. The seller would then havwe the money to complete his purchase.

The provision about paying legal costs etc is fairly standard - £250 is a little high as a minimum fee. The point here is that it should be even handed so that the buyer is entitled to the same heads of compensation and legal costs if the seller does not complete. I object to any such condition that seeks to impose the liability on the buyer but not on the seller.

manan.shah.82

Thank you very much guys for your replies.