Conditional completion?

Rosetinted

I have a legal conundrum that I would appreciate some advice with. Obviously I have asked this question of my solicitor, but it will take a few days to get a response and I wanted to gauge opinions of board members in the meantime.

I'm almost at the end of the conveyancing process on a property I want to buy. I have no chain, but the vendor of my property is buying another one (vacant possession), so two other parties are involved. In summer 2013, my vendor removed an internal wall from the property without seeking building regs approval. There is no completion certificate. My solicitor flagged this and I made it a condition of the purchase that they obtain regularisation certification prior to exchange (to avoid hassle when I eventually sell).

My vendor eventually got round to applying and have now said the council has indicated that it'll take 'a few weeks' to book an inspection, which may take us into the new year. My vendor and their vendor both really want to exchange and complete before Christmas. This is the only thing holding up the sale.

My vendor has now asked if we could draw up an agreement that my solicitor will keep a retainer of £5000 from the purchase price, to cover any remedial work (if any is identified by the council) and any costs of preparing and issuing the certificate, but we move ahead with exchange and completion. They would then receive the retainer (or the remaining balance) once the regularisation cert had been issued.

I've heard of conditional exchange, but not a conditional completion. Is this a realistic request? What risk would I expose myself to? Obviously if the remedial work cost more than £5k, I'd be in difficulty (this seems unlikely as the original work cost £2k and my structural survey revealed no issues). There's also the issue of mortgage lenders (but they have set no conditions around obtaining regularisation certs or useless indemnity insurance) and whether or not a legally binding agreement like this can even be drawn up. Thoughts, please?

davidmcn

Rosetinted wrote: »

There's also the issue of mortgage lenders (but they have set no conditions around obtaining regularisation certs or useless indemnity insurance)

You quite sure about that, and have you discussed with your solicitor? It's part of their standard requirements in the CML Handbook, I'd be surprised if they waived it.

and whether or not a legally binding agreement like this can even be drawn up. Thoughts, please?

Yes, it all makes legal sense, if you're prepared to take the risk of owning a property which takes more than £5k of work to fix. It's the practical side of whether you can get the mortgage that's the problem.

bouicca21

Assuming your mortgage lender is happy - and as stated above they might not be, I'd be inclined to ask for an agreement that the £5k is allowed irrespective of the actual cost. you are going to be dealing with a certain amount of hassle irrespective of whether the alteration meets building regs and that deserves some compensation.

This was my solicitor's solution to a problem on my purchase last year. As post completion, it turned out that remediation wasn't necessary, I was well pleased.

Rosetinted

Hi David, thank you for your response. When we discovered that there was no completion certificate a few months back, I asked my solicitor to investigate whether or not I'd need a regularisation cert to proceed with the sale. He checked with HSBC and they have no issue with the purchase proceeding without certs or indemnity insurance, as their valuer agreed that the property was worth the sale price agreed and noted no issues.

Humphrey2012

Could you not get indemnity insurance to cover this so you can go ahead and exchange and complete? Maybe even negotiate a small reduction in the price paid?

davidmcn

Humphrey2012 wrote: »

Could you not get indemnity insurance to cover this?

Not now that the council have been tipped off.

Humphrey2012

Oh of course - sorry, I'm forgetting that once the council have been informed this isn't an option.

Might be worth checking that the vendor actually gave the council the specific details though, as if they just got an idea of time scales then maybe didn't give the actual address? - clutching at straws now I know!

Rosetinted

Good points, bouicca21; thank you. I am a bit concerned about the inconvenience, as I've just been promoted and it'll soon become a lot more difficult to work at home to allow the council inspection to take place. Thing is, they've been pretty decent to me (said no to a bidding war and accepted my asking price offer), so I'm not sure I'm comfortable seeking a price reduction when they could've sold the place for more to begin with.

Humphrey, the indemnity insurance is, in my opinion, pretty useless, even if it were still obtainable in this scenario (vendor's submitted a regularisaiton application to the council, so insurance is not an option). It only protects against enforcement action by the council, not the house collapsing around my ears from shoddy building work. Hence me seeking the regularisation certificate (+ avoiding the hassle and cost of obtaining one when I sell in the future).

Anyway, thanks to all for your responses. The opinion thus far is that this is legally doable, so I'll investigate further with my solicitor and see if he has any reasonable objections we've not yet thought of.

eddddy

Rosetinted wrote: »

Obviously if the remedial work cost more than £5k, I'd be in difficulty (this seems unlikely as the original work cost £2k and my structural survey revealed no issues).

I guess there are some very extreme possibilities....

All a structural surveyor can look for is tell tale signs - cracking, bowing, lines which aren't horizontal/vertical, etc.

If the steel joist was recently plastered over and the walls recently redecorated/re-plastered, there may be very few clues to see.

I guess the worst case scenario is that the steel joist is seriously undersized (or non-existent), and when you put heavy beds, wardrobes etc upstairs, the floor deflects causing cracking, or perhaps even collapses (costing much more than £5k to fix).

If you know who the building firm is, and they are reputable and/or your surveyor was given details of the joist and the work done, that should be reassuring.

Also, bear in mind that building certification is likely to require plaster hacked off, holes cut in ceilings etc. Will you be happy with patch redecoration, or will you want whole rooms redecorated?

(And if you want whole rooms redecorated, will the vendor agree to pay for that out of the £5k.)

Lungboy

It's entirely possible that the wall never needed certification, so it could be a lot of fuss over nothing. Having said that, it's worth getting it checked.

Richard_Webster

He checked with HSBC and they have no issue with the purchase proceeding without certs or indemnity insurance, as their valuer agreed that the property was worth the sale price agreed and noted no issues.

Make sure your solicitor gets HSBC to put that in writing.