What happens if a buyer doesn't complete after having exchanged contracts?

[Deleted User]

What would happen in a situation where a buyer's planned financial borrowings weren't able to proceed because of a problem with perhaps the buyers credit history or they didn't have quite enough income and the buyer had exchanged contracts but not completed under auction conditions?

Are the penalties for not completing after exchange identical for a traditional house sale by estate agents and a residential auction sale and what would be the worst case scenario for the buyer in these circumstances according to standard contract conditions? Does the property revert automatically back to the seller if this happens for instance?

nyermen

Complex area, normally answered by conveyancer.  As I understand it, they first issue a notice to complete or similar.  If that doesn't happen in a certain timeframe, then I believe compensation or similar is due.  The realistic question comes as to what money the buyer has - are they a FTB?  They may have nothing but the deposit (in which case, thats likely all that can be claimed by the seller without excessive cost).

Regards to ownership of the property, I dont think it changes until completion, however seller may want to ensure the building is still insured (especially in this stormy weather).

Others will be along with better response

[Deleted User]

nyermen said:

Complex area, normally answered by conveyancer.  As I understand it, they first issue a notice to complete or similar.  If that doesn't happen in a certain timeframe, then I believe compensation or similar is due.  The realistic question comes as to what money the buyer has - are they a FTB?  They may have nothing but the deposit (in which case, thats likely all that can be claimed by the seller without excessive cost).

Yes they normally pay 10% so that's where any money would come from any type of penalty.

nyermen said:

Regards to ownership of the property, I dont think it changes until completion, however seller may want to ensure the building is still insured (especially in this stormy weather).

Others will be along with better response

Thanks for your reply nyermen So the actual ownership is conveyed by the "completion" of the contract I understand but does the buyer retain any right to buy the property now after he's failed to complete? Say for instance the buyer received funds 4 x weeks after he failed to complete then from a legal point of view does he have any legal basis to force the sale of the house to him when the seller has since found an alternative cash buyer which would be the case especially if the house was being sold via a residential home auction?

babyblade41

The auction pack should contain the answer to your question.
Estate agent failure would be your solicitor files a notice to complete within 2 weeks to your buyer .

If this still doesn't happen then they will lose a deposit and any other costs incurred but the seller has to be reasonable and limit costs as much as possible.

This procedure will happen along the chain if one is involved

Thrugelmir

Deleted_User said:

nyermen said:

Complex area, normally answered by conveyancer.  As I understand it, they first issue a notice to complete or similar.  If that doesn't happen in a certain timeframe, then I believe compensation or similar is due.  The realistic question comes as to what money the buyer has - are they a FTB?  They may have nothing but the deposit (in which case, thats likely all that can be claimed by the seller without excessive cost).

Yes they normally pay 10% so that's where any money would come from any type of penalty.

nyermen said:

Regards to ownership of the property, I dont think it changes until completion, however seller may want to ensure the building is still insured (especially in this stormy weather).

Others will be along with better response

Thanks for your reply nyermen So the actual ownership is conveyed by the "completion" of the contract I understand but does the buyer retain any right to buy the property now after he's failed to complete? Say for instance the buyer received funds 4 x weeks after he failed to complete then from a legal point of view does he have any legal basis to force the sale of the house to him when the seller has since found an alternative cash buyer which would be the case especially if the house was being sold via a residential home auction?

Legal rights will be determined by the contract entered into by both parties. Be pointless having contracts otherwise. 

[Deleted User]

babyblade41 said:

The auction pack should contain the answer to your question.
If this still doesn't happen then they will lose a deposit and any other costs incurred but the seller has to be reasonable and limit costs as much as possible.

Ok thanks babyblade41 - I've not had a chance to see the standard contract of exchange yet.

SDLT_Geek

Deleted_User said:

What would happen in a situation where a buyer's planned financial borrowings weren't able to proceed because of a problem with perhaps the buyers credit history or they didn't have quite enough income and the buyer had exchanged contracts but not completed under auction conditions?

Are the penalties for not completing after exchange identical for a traditional house sale by estate agents and a residential auction sale and what would be the worst case scenario for the buyer in these circumstances according to standard contract conditions? Does the property revert automatically back to the seller if this happens for instance?

Everyone is (fairly) assuming that contracts have been exchanged pursuant to a traditional auction.  I expect this is right, but just to be sure, this was not a "modern method of auction" case?

canaldumidi

Are you askig about a 'standard' EA sale? Or a modern method auction? Or a traditional auction?

In each case the relevant contract terms will apply, but they will be different.

But typically the seller will serve a 'Notice to Complete' giving the buyer a deadline, and if the deadline is not met then

* seller retains ownership

* seller retains whatever deposit was paid (10%?)

* seller can sue for consequential losses (eg if they had failed to Complete on their own purchase due to not receiving the funds), and all other losses in the chain, if any)

* buyer cannot later make a claim on the property