wrongful exchange of contracts

livrules

Hi everyone

I'm rather freaking out right now and hope one of you clever people can advise. Our solicitor exchanged contracts today with the buyer of our flat. We were very excited because negotiations have being going on since August 2011 and our buyers have been extremely challenging. Simultaneously, we are buying a house and just got the Home Buyers report back today. The house was under-valued by 18k and needs about 5k worth of repairs (hidden defects). We still wanted to by the house but felt in a good position to negotiate a lower price based on the evidence from the survey.

In mid December, we signed pre-exchange papers because we were happy with all the enquires and decided that the mortgage valuation would be sufficient. In late December we received paperwork from our solicitor that he had 'forgotten' to give us when he received it in November in which the seller disclosed that major unpinning had been done on the property due to past subsidence. This prompted us to get a survey to check that the underpinning was structurally sound. At this point we told our solicitor to go ahead with the sale of our flat but to hold exchange on the house until we had received the results from our survey. To be clear, we told him that the sale of our flat was not dependent on us buying the house (we have somewhere else to live if need be) so he should continue to push for exchange on our flat. However, when we got the call from our solicitor he informed us that he had exchanged on BOTH properties. He used the deposit from our buyer to put a deposit on the house and used the papers we had signed mid December to exchange without our authorization.
I am fully aware of the position this leaves us in. We have no written evidence of the conversations regarding the instructions NOT to exchange on the house and now he is denying having such conversations with us. We are left in a position that we are legally obliged to purchase this house.
Is there anything we can do to?

G_M

Oops!
No written instructions. Just a telephone conversation which the solicitor denies knowledge of?

And presumably back at the start (at the 'pre-exchange papers' stage before the under-pinning case to light) there was a written instruction to progess both sale and purchase.

Your only hope is if you have emails/letters/etc relating to the underpinning enquiries that would substantiate your claim that you were not rready to exchange on the purchase.

livrules

Hi G M

Thanks for your swift reply.

I know. I know. I know. *shaking and crying on the floor*.

In previous purchases (different solicitor), my solicitor has always authorized how much money I would like to put down as a deposit. I can't believe that our solicitor has taken every penny of the deposit we received from our buyer and made the decision to use it as a deposit on the house. How can he get away with that?

The truth is, we love the house and are slowly coming round to the fact that we now accidentally own it but what the solicitor did was extremely bad practice. I have no doubt that he did it because the sale/purchase was complicated and he just wanted it over and done with. We couldn't have been more explicit about our instructions.

Actually, last week when we received the preliminary results from the survey, we emailed our solicitor to put forward further enquiries and stated in the email that we needed to get some things checked before proceeding. Could this count as evidence do you think?

G_M

livrules wrote: »

Hi G M


Actually, last week when we received the preliminary results from the survey, we emailed our solicitor to put forward further enquiries and stated in the email that we needed to get some things checked before proceeding. Could this count as evidence do you think?

Without doubt.

Put a printed copy of the email in the post, addressed to the Senior Partner at the solicitors firm (or their Complaints Dept if there is one) asking for an explanation as o why Exchange took plac.

livrules

Thanks G M

I'll do that immediately.

steve1980

At this point we told our solicitor to go ahead with the sale of our flat but to hold exchange on the house until we had received the results from our survey. To be clear, we told him that the sale of our flat was not dependent on us buying the house (we have somewhere else to live if need be) so he should continue to push for exchange on our flat.

For me this is the key wording in your post. Whether they had forgotten, or not received your instructions AFTER then it's your word against theirs.

I would also speak to the Law Society.

jackomdj

I would also make sure that when you write you emphasise the fact that when you signed the papers although the solicitor was fully aware of issues you had not received all the paperwork. I assume the stuff you got in Dec had a letter with it (or even in a dated envelope)

silvercar

Your solicitor will have professional indemnity insurance, so there will be money to put right his mistake.

You have to consider where you go from here. Either you proceed and complete and claim something from the solicitor if it can be proved that the issue means that the property is worth less due to the underpinning.

The other option is to instruct the solicitor that the exchange has taken place without your consent and you do not want to complete. He will have to deal with this and it will be a hassle. The seller of the house will want to take action for your failure to complete, but if you can show that exchange was without your consent then the solicitor's insurance will end up footing the bill. What will happen in the medium term is that the sellers sell their house to someone else, quantify their losses (including any difference between the eventual price and the price you had agreed) and the bill ends up with your solicitors. This could involve the sellers suing you for failure to complete and the solicitor indemnifying you or (if the solicitor defends his action) you then suing your solicitor.

sonastin

The key now is going to be the communication between that e-mail and exchange taking place. You might have been explicit in your earlier instructions that you were willing to separate sale & purchase but have you had any communication this week about the exchange on your sale which could possibly have been misinterpreted as you accepted the answers to the survey questions and were ready to go?

You need to look at it objectively rather than from the perspective of what you know you meant. If you can anticipate an argument that they could use in defence, you have a better chance of making your case better.

I would say that the onus is really on the solicitor to justify that they were authorised to carry out the exchange though.

livrules

Thanks for all the really useful input everyone. I really appreciate you taking the time to advise me.

The email in question specifically states -

'I have listed below the points that our surveyor has suggested be raised with the vendors solicitors. I have taken them directly from the surveys initial findings. I have only included point 7 because of the relevance to point 8, and is something I will have to have tested through the agent before proceeding.'

We then listed the issues (copied and pasted from the survey) we wanted investigated before proceeding.

We have not had any written communication with our solicitor since then and we certainly did not have these enquries answered. We do want the house but believe that the solicitor should take accountability for actions. We strongly believe we had enough evidence to ask the seller to reduce the asking price and now we do not have that opportunity. Thanks again

DVardysShadow

On the face of it, your email is enough that exchange should not have taken place. Do make sure ASAP that your solicitor is fully aware that you do not consider that this exchange was authorised. He may try and pull the exchange back, but if he fails, you will probably find that that he will send you a funny letter which disses you and tells you to engage another solicitor. This means that the professional indemnity insurance is engaged.

This could mean that all work on the conveyancing will come to a stop. This will leave you exposed to the penalties of failure to complete, although this should land on your solicitor in the end. Do go and get yourself some legal advice today.

As for the purchase, decency suggests that you should advise the agent ASAP but give the solicitor an opportunity to pull the exchange back - and get your legal advice first. If the solicitor fails, contact via the agent may engage the seller in accepting that there was no contract.

Also note that now exchange has happened, there may be irreversible electrochemical changes in the minds of the vendors which make any renegotiation impossible.