Compensation if buyer does not go ahead to completion after an exchange.

dawnrosenbaum

My buyer exchanged at 5% deposit but I need to know What compensation is there against a buyer who does not complete on a purchase? I understand that I can keep his 10% deposit but what then if I try to resell the house and because of a slump in the market I have to sell it at less than 95% of the value of the original sale  can I sue him for the difference of the loss?
I would like to know please as the market is very tricky at the moment due to Covid. 

dawnrosenbaum

has anyone been in the same situation in the past?  Please let me know 

hazyjo

Do you have reason to worry, or it it just a case of "what if?" If the latter, it's extremely unusual and most solicitors don't ever experience it in their careers.

eddddy

dawnrosenbaum said:

My buyer exchanged at 5% deposit but I need to know What compensation is there against a buyer who does not complete on a purchase? I understand that I can keep his 10% deposit but what then if I try to resell the house and because of a slump in the market I have to sell it at less than 95% of the value of the original sale  can I sue him for the difference of the loss?

Yes - you can claim your losses from a buyer who breaches the contract by not completing. That includes losses resulting from having to sell your property at a cheaper price.

But if the buyer doesn't have enough money to re-pay your losses (and maybe just goes bankrupt), you'd be out-of-pocket.

But it very, very rarely happens.

Is there an upward chain? i.e. Are you buying another property at the same time as selling this one?

ThePants999

Yes, if the buyer fails to complete, your legal entitlement is your direct costs plus whichever is higher out of the deposit specified in the contract, and any amount you lose by having to re-list in a falling market. E.g. If they were buying for £100K and paid a 10% deposit and you sell to someone else for £95K, you just get the £10K deposit (plus your costs); if you have to sell to someone else for £85K instead, you can sue for the extra £5K. https://www.cluttoncox.co.uk/site/blog/conveyancingblog/failure_to_complete_house_purchase.html refers to a 2008 case where this was upheld in the Court of Appeal, though it doesn't name the case. However, your buyer has to actually have the money - the court can't make them pay you money they don't have, only force them into bankruptcy.

But this basically never happens - what's got you worried?

davidmcn

hazyjo said:

Do you have reason to worry, or it it just a case of "what if?" If the latter, it's extremely unusual and most solicitors don't ever experience it in their careers.

Nevertheless, I would expect them to explain to their clients what the contract actually means before they exchange...

blue_max_3

There is a protocol in place. My buyer was late by a week and we hit them for costs. You can't just keep the deposit, it is all documented what happens. Your solicitor will explain.

hazyjo

davidmcn said:

hazyjo said:

Do you have reason to worry, or it it just a case of "what if?" If the latter, it's extremely unusual and most solicitors don't ever experience it in their careers.

Nevertheless, I would expect them to explain to their clients what the contract actually means before they exchange...

Indeed!

AdrianC

So, umm... when did you exchange contracts? And when is completion due?