Exchange & delayed Completion

  • Filter
  • Time
  • Show
Clear All
new posts

    Exchange & delayed Completion


    Trying to sell a property for a very long time. Along comes a buyer who loves it; wants to buy. But their finance is not quite in order to buy outright now.

    In essence they want to Exchange now with apx 20-30% down-payment and delay the Completion and payment of the outstanding balance for 1 year.
    Legal Title and Vacant Occupation of the property will only be transferred upon Completion in 1 year. Title remains mine until Completion.

    This is not a normal sale clearly!
    But I am happy to do this kind of deal - as long as the 20-30% is non-refundable and I can use it. (To pay down my own borrowing).

    I can wait a year to exit.
    In 1 year the Buyer intends to pay a further 20% cash and the rest, 50-60%, on finance - and I exit.
    The Buyer has organised finance - offer in principle - via a broker.

    Is this something like a developer would request when selling apartments 'Off-Plan'? Where a buyer puts down a % against the new build, then pays a further % when the development reaches the 2nd stage, 3rd stage and so on...

    Can I do this? Can we have a separate legal agreement that allows me to use the Exchange 20-30% funds? And locks both us in to the Sale?
    This is most important to me. I need to be able to use the funds.
    Very grateful for advice on how this could be structured legally...

    I have said elsewhere that there is no such thing as a non-refundable deposit but that the exception is deposits paid on the purchase of land. However, there are exceptions to exceptions. The legal position is as follows:

    Section 49(2) of the Law of Property Act 1925 says:

    Where the court refuses to grant specific performance of a contract, or in any action for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit.

    That clearly gives the court discretion. The case of Omar v El-Wakil gave guidance as to how the discretion should be exercised*. Following that case the position is that the circumstances must be exceptional for the court to order the return of a deposit. In that respect it needs to be borne in mind that a "normal" deposit is ten per cent. If a significantly higher deposit is paid the court may take the view that retaining it would give the seller a disproportionate benefit. I do not think therefore that you can take on the proposed transaction in full confidence that if it does not complete you would be able to retain all the moneys received.

    Whether you can use the deposit to reduce your borrowing depends on how the deposit is held by your solicitor. It would have to be held as "agent for the vendor". If I were acting for the buyer I would advise very strongly against that for a large deposit. Further, in view of the risk that the deposit might have to be repaid, it would be unwise to use it.

    As a very general principle it is best to avoid complications or unusual arrangements where you set out expecting to proceed normally. It is especially important to stand back and consider matters carefully if you are keen to sell - and even more important if you are desperate. You need to consider whether "finance is not quite in order to buy outright now" really means "finance will never be arranged." There may be no intention to deceive - there hardly would be if a large deposit is being offered - but it is possible that the proposed buyer is being over-optimistic. You need to ask why, if finance is not available now, it is expected to be available in a year.

    *For further information see here:


      Exchange and completion would be in different tax years. As I understand it the tax liabilty on an unconditional sale arises on exchange - so you may have a CGT bill before having the money to pay it. However you should definitely check on that with an expert, if you can find one (sour tone is because I tried getting advice from HM revenue and customs not long ago on a different tax issue).


      Latest Activity


      • Complain to Solicitor about Private Road?
        We purchased our property - number 7 of an estate of 7 new build houses two years ago. A year ago, going through the title plans of the purchase agreement, we noticed that the plan did not show our back garden as it is in reality. There was a large chunk missing.

        After threatening our solicitor...
        Title plan for land to east of number 7 has our front drive missing, and private road and visitor parking also not designated.
        19-02-2019, 10:28 AM
      • Reply to Complain to Solicitor about Private Road?
        Can anybody help?
        19-02-2019, 16:05 PM
      • Legal issue re Unadopted Road.
        I live in an unadopted road, its not a private road as thier is no owner,(Land Registry shows no owner and oppinion is original developer died with no heirs).

        I understand that I am responsible for the upkeep/maitanence of half the width of the road for the length of my frontage. Approximately...
        18-02-2019, 14:33 PM
      • Reply to Legal issue re Unadopted Road.
        There are three possibilities for a road:

        · An adopted public highway
        · An unadopted public highway
        · A private road

        In each ownership is irrelevant to the status of the road.

        If a road is unadopted or private the frontagers (the owners of land adjoining...
        18-02-2019, 18:08 PM
      • Freehold Management Company
        Dear all,

        In 2002 I purchased a large building which was split into 6 flats.

        Each flat has their owns council tax, gas and electricity charge with one communal water meter to the building, and a single insurance bill.

        As we all know tenanting has its ups and downs,...
        18-02-2019, 11:22 AM
      • Reply to Freehold Management Company
        RMCs have no specific legal status, so they could have unlimited liability. However I very much doubt anyone has ever gone that way.

        As I think you need it to own the freehold, it will have to be registered, so making it limited liability, being the normal case, is likely to be easier....
        18-02-2019, 16:50 PM
      • Reply to Freehold Management Company
        I’m learning.

        Residents management company? - would that have to be a limited company, as I have read some are, or is the limited status optional.?

        I don’t doubt that it could be problematic, hence I am trying to do my homework – is there such thing as a or rics...
        18-02-2019, 15:30 PM
      • Reply to Legal issue re Unadopted Road.
        The road is a private road, but probably owned by the Crown. If the developer was a person, that would only happen if the rules on succession were exhausted.

        I think frontage also includes backage and sideage!

        It is the owner that would have the legal right to cut the road...
        18-02-2019, 14:46 PM
      • Reply to Freehold Management Company
        The only way of having six people share the freehold is to form a residents' management company and make them members. The flats are then held under leasehold.

        The lease and the company articles need to interlock to ensure that membership of the company follows ownership of the leasehold...
        18-02-2019, 12:55 PM
      • Reply to Freehold Management Company
        Sorry, leaseholder64

        I am a mere novice.

        I think what I should have said, and please correct me if I am wrong,

        Six separate titles, six separate flats and shares in the freehold.? The intention being to ensure that all do have a fair voice, unlike some of the...
        18-02-2019, 12:12 PM