Exchange & delayed Completion

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    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).


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