Buyers liability between exchange and completion

3mph

I think I read somewhere that the purchaser is liable for the property as soon as they have exchanged no matter what since they have signed a contract to buy at a fixed price and a specified date. So that if the house burnt down, got flooded, broken into, trashed, squatted on, they still have to buy at that price. Which is why they need full insurance.

Is this correct? In which case I assume you want the shortest period between exchange and completion.

I ask because our sellers are now talking about wanting at least a month between exchange and completion.

Thanks

G_M

Correct (assuming you use the Standad Conditions of Sale 5th edition).

Not sure why this impacts on the gap length though. Is the property more, or less, likely to burn down during this period than after you Complete?

3mph

No but afterwards we will be in it and in control, before we wont be.
Whilst I do not expect there to be problems I see no advantage for us in a long period and lots of disadvantages.

da_rule

The advantage is that it's what the seller wants, and if you don't agree to it then they don't have to sell the property to you?

A month is relatively standard. It gives time to sort out money, carry out final searches etc.

G_M

and book removals, time off work, friends to help, buy furniture, give notice to your landlord, and 101 other things that cannot be done before Exchange....

3mph

OK but in this case I don't need time since I'm a cash buyer, no mortgage, and in a rented house we will be staying in for the next few months.

The flat is one of 3 holiday homes the seller has as well as a large house in Chelsea and they just need to have the contents moved to one of their other houses.

Since its been on the market for 12 months and in that time was with another agent and moved to this one with a price cut 6 months ago if they don't sell to us I suspect that it could be some time before they find another buyer.

Hopefully a compromise suitable to both of us will be agreed, but to date they come across as selfish and arrogant although I suspect the Estate Agent is to blame for causing a lot of this impression since I have had no direct dealings, only via the EA.

da_rule

I really don't get what you're getting yourself so worked up about, this really is standard practice and happens on thousands of transactions every week.

Think of it from the sellers point of view, they may need the deposit from you so that they can put the deposit down on the place they are moving to. If they can't exchange on the property they're buying without the deposit funds then you can't have the house you want to buy.

Also, until you sign the contract the sellers have nothing that legally binds you to them. Therefore they are not going to want to pay to move all of their stuff when you could just walk away. When there's a contract they can either try to compel you to complete, or keep the deposit and potentially pursue you for any other costs they've incurred as a result of your breach.

The contract also protects you. You can force them to sell the property to you. What happens if, the week before you were due to complete someone offers them £5k more for the house? They can just accept that offer and there's nothing you can do about it, as you've refused to exchange. You'd have legal fees to pay but no house at the end of it.

Simultanious exchange and completion is possible but if there is a chain, getting everyone to agree to this could be problematic.

Tax_Slave

G_M wrote: »

Correct (assuming you use the Standad Conditions of Sale 5th edition).

Not sure why this impacts on the gap length though. Is the property more, or less, likely to burn down during this period than after you Complete?

That's a new one on me. it's been 14 years since we last moved.
So you are saying that if I see a house , 4 bedrooms good condition and we put in offer at say £500,000 We then exchange contracts and we pay £50,000 Deposit. While waiting to complete the house burns down to the ground.
In this case surely as a buyer we would not complete until house was rebuilt using vendors insurance or be allowed to walk away and get £50,000 deposit back ?

da_rule

Tax_Slave wrote: »

That's a new one on me. it's been 14 years since we last moved.
So you are saying that if I see a house , 4 bedrooms good condition and we put in offer at say £500,000 We then exchange contracts and we pay £50,000 Deposit. While waiting to complete the house burns down to the ground.
In this case surely as a buyer we would not complete until house was rebuilt using vendors insurance or be allowed to walk away and get £50,000 deposit back ?

Nope. You are bound to complete on the property on the agreed date, even if it is a pile of rubble. As long as it wasn't caused by the negligence of the seller.

So you'd need to claim on the insurance policy you have in place from exchange in order to come up with the rebuild costs. That's why mortgage companies insist you have insurance in place at exchange rather than completion.

Tax_Slave

da_rule wrote: »

Nope. You are bound to complete on the property on the agreed date, even if it is a pile of rubble. As long as it wasn't caused by the negligence of the seller.

So you'd need to claim on the insurance policy you have in place from exchange in order to come up with the rebuild costs. That's why mortgage companies insist you have insurance in place at exchange rather than completion.

Wow that is a new one on me.
We have moved house now 4 times since 1988 and I have always insured the property we were moving into from day we moved in aka completion date.

Having just sold our house (exchanged with buyers last Friday ) I suspect they have not taken insurance out on our property. Obviously we have our own home insurance policy on property (building and contents plus extras).
We are ourselves due to exchange contracts on a new build we are purchasing this week. So your saying we should get building cover for fire and flood etc from day we exchange ?

kingstreet

The vendor used to retain the risk between exchange and completion but as GM said earlier, this changed with the 5th edition of the standard conditions of sale.

You simply ensure your building insurance starts from exchange of contracts rather than completion.

NB This does not apply to newbuilds, where the builder retains the risk until completion.