Advice? Auction Property - Seller Failed to Complete

myuserid

ss2020jd said:

Your solicitor’s reluctance to serve a notice to complete seems very strange.
Perhaps they have never done that before or they don’t want any extra work.

Does the sales contract specify the compensation? Usually they say something like x% interest for every day completion has not taken place.

I found a version of the RICS Common Auction conditions. It clearly mentions notice to complete and the fact that it has to be done within 10 working days.

Your solicitor is acting for you and you can instruct him to do so.


Although an old article, this explains it quite well (you should be able to view first article for free):

https://www.ft.com/content/631417e0-518f-11e5-8642-453585f2cfcd

Thank you for another helpful post 

I'm not able to view the FT article as a non-subscriber but I'm sure it will be useful for others.

I also suspect that my solicitor's behaviour stems from this being new ground for them. They said they have never experienced this before, whilst somehow maintaining a rather blasé attitude (telling me that they're sure there's nothing to worry about). I presume it's a lot easier to demand further payment from an existing client, whose details you already have, then to chase them up from an additional party, which is why they keep stating the extra costs will be mine to bear.

The interest rate is given in the contract and the Common Auction Conditions (CAC) you posted are in fact the conditions my solicitor was trying to work from before I corrected them (sorry for not giving the document names before). Despite the name, out of the five auctioneers I've looked at properties with, none use this document.

The document relevant to this purchase is the Standard Conditions of Sale Fifth Edition (SCS), which includes an almost identical section to the part you've highlighted in the CAC in addition to a separate section specifically stating that compensation has to be paid by the party causing the (greater) delay.

As things stand my solicitor is still insisting that I would not be able to claim the costs from the seller for further work and issuing a Notice to Complete. They also keep pointing me to the clause detailing my option to rescind the contract, which I certainly do not want. Thus I'm hesitant to instruct them to issue the notice due to the unknown extra expenditure and in case they tell the seller I want to rescind.*

*At this point, I don't have much trust in my solicitor's ability to fully comprehend my communication with him. Previously I asked my solicitor whether the completion date in the contract was an exact date (i.e. can complete only on that date) or a latest date (can complete any time up until and including that date), as I'm an FTB and am new to property auctions so was curious about my options. They then took it upon themselves to tell the seller's solicitor that I wanted to complete early. Luckily I told them to stick to the original completion date, otherwise this situation would seem even more complicated.

myuserid

saajan_12 said:

To double check, which of the below is your solicitor saying?
1. As between you (buyer) and seller, buyer is responsible for the costs to enforce the contract due to the seller's delay; or
2. As between you (buyer) and your solicitor, you are responsible for their additional costs to serve the notice and they won't start the work until that's paid. You may then be able to claim that from the seller, but that's separate. 

Unfortunately it's 1.

Their stance has slightly changed from the one they initially took.

1. It started as: I will be charged for extra work and cannot claim this back from the seller.

2. It became: I will be charged for extra work that I cannot claim back from the seller but I'm entitled to interest.

3. It is now: I will be charged for extra work that I cannot claim back from the seller and I am not entitled to damages* from the seller. I can try to get damages from the seller but they don't have to oblige (and that would necessitate extra work and thus cost for me). I'm entitled to interest only.

*I don't know what is implied by the use of "damages" in place of "compensation" in this context, but it is only my solicitor that has chosen to use the word "damages", as the section in the SCS conditions document that I pointed them to uses the word "compensation".

GDB2222

myuserid said:

saajan_12 said:

To double check, which of the below is your solicitor saying?
1. As between you (buyer) and seller, buyer is responsible for the costs to enforce the contract due to the seller's delay; or
2. As between you (buyer) and your solicitor, you are responsible for their additional costs to serve the notice and they won't start the work until that's paid. You may then be able to claim that from the seller, but that's separate. 

Unfortunately it's 1.

Their stance has slightly changed from the one they initially took.

1. It started as: I will be charged for extra work and cannot claim this back from the seller.

2. It became: I will be charged for extra work that I cannot claim back from the seller but I'm entitled to interest.

3. It is now: I will be charged for extra work that I cannot claim back from the seller and I am not entitled to damages* from the seller. I can try to get damages from the seller but they don't have to oblige (and that would necessitate extra work and thus cost for me). I'm entitled to interest only.

*I don't know what is implied by the use of "damages" in place of "compensation" in this context, but it is only my solicitor that has chosen to use the word "damages", as the section in the SCS conditions document that I pointed them to uses the word "compensation".

Issuing a completion notice is pretty easy, and we paid our solicitor £200 recently for that.  You should ask your solicitor how much they will charge, as you may well end up paying it.

The big question is how you will follow through if the sellers don't complete after the notice? Are you really prepared to fund a big law suit over this?  I'm guessing easily 5 figure costs. And, will you ever recoup that, or will the sellers go bust on you? 

One issue is that you can't really gain from a law suit. The courts won't usually enforce specific performance of the contract, so you'll just be entitled to damages. But, damages for what? You have contracted to buy a property at market value, so you haven't lost financially. The courts would take the view that you can simply buy another property at market value. So, you'd be embarking on major litigation just to recoup your costs, which would be crazy. 


The alternative is that you sit tight, without spending anything,  and hopefully the sellers eventually get their ducks in a row, and complete - just a bit late.

You haven't said what the delay is costing you. If it's very costly, it might be worth issuing the completion notice, to try to gee things up, but otherwise your solicitor is right to say it's not worthwhile.    

ss2020jd

I’m sorry to hear all that @myuserid. 

Your solicitor’s advice does sound questionable. Is there anyone more senior you could get advice from in their practice? They weren’t recommended by anything to do with the auction or are linked with the seller in anyway are they?

Our notice to complete cost about the same as GDB2222 mentioned. The solicitors work it out between themselves and it’s all deducted/paid from the funds the seller receives via the completion statement, he wouldn’t have to try to retrieve it from the individual person and should definitely know that. It’s even in writing so I can’t see why it’s an issue. 

I understand you don’t want to rescind the contract and you need to be very clear in writing to your solicitor about this.

If you’ve incurred any costs from the delayed completion the contract is there to protect and compensate you. 

Hopefully completion will happen soon and you can just concentrate on getting into your new home.

doodling

Hi,

GDB2222 said:

[...]

One issue is that you can't really gain from a law suit. The courts won't usually enforce specific performance of the contract, so you'll just be entitled to damages. But, damages for what? You have contracted to buy a property at market value, so you haven't lost financially. The courts would take the view that you can simply buy another property at market value. So, you'd be embarking on major litigation just to recoup your costs, which would be crazy.   

I agree with the overall sentiment but would note that in the case of property purchases courts are more likely to enforce specific performance due to the non-uniform nature of property, the fact that non-performance is often entirely at the discretion of the seller and it is no extra work for them to sell the property to the person they have a contract with compared to someone else.  In this case it appears that there is an issue with a mortgage redemption which might indicate against specific performance - a judge isn't going to order a sale if it would disadvantage someone who has a mortgage over the property.

The alternative is that you sit tight, without spending anything,  and hopefully the sellers eventually get their ducks in a row, and complete - just a bit late.

You haven't said what the delay is costing you. If it's very costly, it might be worth issuing the completion notice, to try to gee things up, but otherwise your solicitor is right to say it's not worthwhile.  

If I was the OP, I would be trying to find out whether the delay is a real problem which might mean that completion never happens or is simply a delay in someone doing some paperwork - the two different scenarios might prompt different responses - the first case is a "wait and see, sue later if the waiting costs lots of money" the second is "sue for any losses and move on to another property".

user1977

doodling said:

In this case it appears that there is an issue with a mortgage redemption which might indicate against specific performance - a judge isn't going to order a sale if it would disadvantage someone who has a mortgage over the property.

It's not going to disadvantage the mortgagee, because the vendor's performance of the contract includes them redeeming the mortgage.

doodling

Hi,

user1977 said:

doodling said:

In this case it appears that there is an issue with a mortgage redemption which might indicate against specific performance - a judge isn't going to order a sale if it would disadvantage someone who has a mortgage over the property.

It's not going to disadvantage the mortgagee, because the vendor's performance of the contract includes them redeeming the mortgage.

It will if the delay is because the price agreed at auction is less than the value of the charge held by the mortgage company and the vendor doesn't have the difference...

user1977

doodling said:

Hi,

user1977 said:

doodling said:

In this case it appears that there is an issue with a mortgage redemption which might indicate against specific performance - a judge isn't going to order a sale if it would disadvantage someone who has a mortgage over the property.

It's not going to disadvantage the mortgagee, because the vendor's performance of the contract includes them redeeming the mortgage.

It will if the delay is because the price agreed at auction is less than the value of the charge held by the mortgage company and the vendor doesn't have the difference...

That would be a case where performance of the contract is impossible. And the OP isn't going to want to take on the property with the vendor's charge still in place anyway.

myuserid

@GDB2222 Thanks, it's good to know that the cost of issuing the Notice to Complete isn't likely to be eye-watering.

@ss2020jd No, I didn't go for a firm associated with / recommended by the auctioneer (maybe I should have ). I was initially provided with contact name for someone if I have a complaint, but I'm still trying to maintain good relations with my solicitor so haven't approached them as I don't want to be seen as going over my solicitor's head unless necessary.

As you say, the fact that the costs are deducted prior to payment is stated in writing in the SCS document, but I just can't otherwise grasp why my solicitor appears to ignore the relevant section of the document (even when I have drawn their attention to it) and keeps referring to a clause to do with rescinding the contract. I have now stated in writing that I do not want to rescind, so hopefully there won't be any confusion regarding my intention.

@doodling There has been slight progress today in that, after a lot of chasing, the seller's solicitor has told my solicitor that they hope to complete soon if "all goes well" - so I'm still in the "wait and see" camp.

GDB2222

Unless it’s costing you a fortune to wait, I would try to be as patient as possible. There must be more to this than the sellers simply needing a redemption figure for the mortgage.