Solicitor exchanged contracts before we have a mortgage offer

ekeenan

Hi there,

Last Friday our solicitor exchanged contracts with the seller's solicitor to purchase our first home. She had alerted us that the completion date would be 13th March and mentioned that she would exchange at some point before that. She called my girlfriend and asked if we were happy to exchange, she said yes if she was happy. She did not call me - the co-homeowner. She then called back an hour later after exchanging asking to see the Mortgage Offer - but we only have the Mortgage agreed In Principle, as we explained to her. She then told us to get in touch with our mortgage advisors and chase for the documents. 

On Monday she explained to us that we were in danger of losing the flat and the deposit and we have been chasing and worrying since. We complained that she had exchanged without confirming the mortgage offer or calling me. She said something about presuming that we would pay for it privately - though there is no conversation that would suggest this nor would we have evidence of the funding.

Naturally we are very worried about losing the house and the deposit.

Who is at fault here? If we lose it all, can we sue the solicitor for negligence? Having spoken to mortgage advisors and other solicitors it seems incredible negligent that she would do this.

Any help is massively appreciated!

lisyloo

Yep your solicitor would be liable for negligence if you didn't have the finance in place to exchange.

Presuming is not what solicitors should do and that's a massive presumption.

Any reason to think you won't get the mortgage?

RelievedSheff

Well that has landed you both in a big bag of trouble if you don't get your mortgage offer through.

The 13th March is three days away, you have no mortgage in place and you are now contractually bound to complete on that day.

Your girlfriend really should not have said yes to exchange taking place. She has agreed too it!

Sachs

I don't think you can underestimate the severity of this situation. Do you know how far along the mortgage offer is? It seems odd that you got this far along the conveyancing process without a mortgage offer, is there a problem? Is there a chain?
Depending on the answer to the above it might depend on what you do next. For example, if you have a reasonable expectation that your mortgage offer might be arriving in the next week and you have no chain I would 100% be on the phone to the vendor to talk about changing the completion date, its in no ones interest for you to arrive in completion date without the means of completion. If the chain is longer and more complicated I would ask your solicitor what she proposes to do about it. 

Thrugelmir

Did you instruct the solicitor to commence searches and legal work at the outset? 
Did you pay across the deposit when requested by the solicitor? 
You agreed to the completion date a few days go I assume. 

foxy-stoat

Cant believe the solicitor exchanged contracts without even asking for proof of funds, as they thought you were buying outright.  Doing the checks on the funds and where they have come from usually takes a few days, if its cash in the bank....also why call back an hour after exchange of contracts asking to see the mortgage offer....if they thought you were buying with a mortgage they would of wanted to see that first.

princeofpounds

I feel sorry for you. This is a right mess, and largely from a misunderstanding. It sounds like the solicitor has been negligent but your girlfriend saying yes to exchange does complicate things.

Something however doesn't sound right here. If you were buying with a mortgage, the solicitor is meant to act for the mortgage company as well as you. They would be in direct communication with the mortgage company about the progress. Your mortgage company would have contacted the solicitor to confirm they are on their panel and their own instruction. If you were buying with private funds, she should have established the existence of those funds already - they usually ask for copies of bank statements. All of this happens fairly early on. I cannot think how she has got to this point without knowing the situation either way - to the point of this almost being unbelievable, or whether there has been some key detail held back. Do you have any written communication or paperwork about how the funds would be provided? Any idea how this presumption may have started?

What will happen next? Probably something like the following:
- If you are lucky, the mortgage offer will be completed before the deadline. You should contact your broker/lender and ask them to expedite processing. If your lawyer has been instructed by the lender, they should also request this.
- If not, you will have to get your lawyer to explain to the seller why you are not ready to complete. They may give you more time;  the decision depends on whether they want to make 'time of the essence' or not. That will depend on their circumstance and those up the chain, if there is one.
- If the notice is served,  you have a further ten working days to complete. So there will be a little more time. 
You will become liable for the extra costs involved, so that may involve removals, hotel stays etc. But it may get you over the line.

Now, don't go raging at the solicitor right away. You need her on hand to finish up the transaction, which may well be possible. If you threaten her with legal action she may stop representing you. In the meantime, you should gather copies of all communication you have had, and copies of all documents on file. That will provide you with the evidence to pursue the complaints process and potentially a legal case beyond that. You should ask (in writing - do everything in writing) the solicitor for their advice on how to minimise your risks - as Sachs suggests one thing may be to ask the vendor to agree to a delay. If she is not the senior partner in the firm, you might also want to talk to them directly to make them aware of the situation.

If the worst comes to the worst and the transaction falls through and you lose your deposit, you will probably need to look for a solicitor who specialises in negligence claims against other solicitors.


Good luck. The chances are that you will be ok in the end, but it's understandably going to be difficult.

Fosterdog

foxy-stoat said:

Cant believe the solicitor exchanged contracts without even asking for proof of funds, as they thought you were buying outright.  Doing the checks on the funds and where they have come from usually takes a few days, if its cash in the bank....also why call back an hour after exchange of contracts asking to see the mortgage offer....if they thought you were buying with a mortgage they would of wanted to see that first.

I wonder if it was maybe the vendors solicitor who questioned funding (particularly the deposit) during the exchange process that lead to OPs solicitor realising their mistake.

foxy-stoat

Fosterdog said:

I wonder if it was maybe the vendors solicitor who questioned funding (particularly the deposit) during the exchange process that lead to OPs solicitor realising their mistake.

If the penny dropped at that point then the OP's solicitor shouldn't of exchanged contracts, if they did they better give everyone their P45's and shut the doors.

Thrugelmir

Hopefully the OP will return and furnish some further information. 

ekeenan

Hey quite a few questions but thanks for the advice and interest!
1. I'm aware of the severity - I've been on the phone to everyone all day
2. We applied for a mortgage back in November, we were granted one in principle but changed lender as we had a better rate. It's waiting on a valuation which I've just managed to book in for tomorrow. I've provided everything else and haven't had any requests for further documentation on income. The property is good value per square foot so should be easy according to the estate agents
3. There is no communication regarding private funding. The desposit and 100k comes from private funding and the rest is made up of mortgage. My only thought is that she got mixed up here. 
4. Yes she did ask my girlfriend if we were happy to proceed to exchange and she said "yes". We are first time buyers and she did not fully understand the process and was following our solicitor's lead.
5. Yes our lawyer was instructed to complete searches from the outset.
6. It looks like we will get the mortgage offer but at some point but I think it could be next week. I've been in touch with just about everyone on the supply chain, including the MD of the surveyors company.

Hope that adds some more info!

Let me know if you have other thoughts/advice. I'm gathering info but the lawyers aren't claiming any negligence (naturally), however, my solicitor has been replaced with her supervisor.