Delayed Completion on Residential Property Purchases

Purchasing a property can be a stressful process at the best of times. However, the situation can be made even worse if there is any delay in completion which can cause significant problems for both vendors and purchases alike.

In this article, Senior Associate Robert Clark (rjhc@silvermansherliker.co.uk) and Associate Dee Aylward (dla@silvermansherliker.co.uk), a partner at Finura’s preferred law firm Silverman Sherliker LLP, examines the subject of Residential Property Purchases and offer their expert insight into the consequences and remedies in the event of any delay.

If we are acting on your behalf in respect of a property purchase, we will always endeavour to ensure we hold your mortgage advance in readiness and request you place us in cleared funds with the balance the day before completion at the very latest, thereby avoiding any delays on your part.

However situations can unfortunately arise where funds can be delayed either on your purchase, or from the buyer of a property you are selling.

Under the National Conveyancing Protocol, both parties are required to consider whether there is likely to be any delay in completion on the day of completion or as early as reasonably possible.

If there is likely to be any delay, the defaulting party should notify the other side and agree how communication will be handled during the course of the day, until completion takes place.

Further to this, under the Standard Conditions of Sale (Fifth Edition), Standard Condition 7.2.1 provides that if either or both parties are in breach of contract, the party that has delayed the longest is required to pay compensation.

This is calculated at the “Contractual Rate”, which is the Law Society’s interest rate and is currently 4% above Barclays Bank base rate. Alternatively, the seller’s conveyancer may choose to specify that the contract rate is 4% above the base rate of the conveyancer’s own bank.

The amount is based on the sale price (less any deposit paid) and is calculated as the lesser of (a) the period by which the paying party’s default exceeds that of the receiving party or (b) the period between the completion date and actual completion.

These provisions usually deal with minor delays or situations where both parties still wish to proceed to completion. However, if there is a more serious delay or if one or other party wants to take steps to terminate the contract, it may be necessary to serve a Notice to Complete.

This is because, under the Standard Conditions of sale, failure to complete on the completion date does not mean that the innocent party can rescind the contract.

In order to do so, it is necessary to serve a Notice to Complete, which makes “time of the essence”.

A Notice to Complete is served under Standard Condition 6.8. If the buyer still does not complete once the notice period had ended, the seller may rescind the contract and keep any deposit plus interest.

Alternatively, if the seller does not complete, the buyer can rescind the contract and require the return of the deposit.

Either party may also be able to claim additional damages depending on the circumstances, however, any damages must take account of any compensation already paid by the defaulting party.

It is vital that any party that serves a notice to complete is “ready willing and able” to do so. If they are not, then the notice to complete will be invalid and the party serving the notice will not be entitled to rescind the contract.

Alternatively, it may be the case that the innocent party wishes to continue with the contract and proceed with completion. In which case, they may be entitled to a remedy of “specific performance”, whereby the court can be asked to make an order requiring that the defaulting party completes.

There are circumstances where the court may even order that a party sells assets in order to enable itself to complete if finances are not otherwise available. If they refuse, or continue to delay, they may be in contempt of court which has a number of further implications.

However, specific performance is an equitable remedy and therefore something that the courts have power to exercise some discretion over. If the defaulting party is genuinely unable to complete and, for example, does not have the finances to allow them to do so, it is unlikely that the court would make an order for specific performance. In addition, the court would need to assess whether damages are an adequate remedy instead of specific performance.

Silverman Sherliker’s property experts take pride in keeping our clients fully informed and being available at all times to offer support and guidance during the completion itself, as well as in the days leading up to completion.