Pulling out of a sale of a property after exchange of contracts

[larkfield]

Hi,

I am selling a shop that I rent out. I have agreed a sale and exchanged contracts. The shop was sold for £900k.. the buyer has exchanges contracts and completion is due in three weeks.

If I change my mind can I prevent completion, and if so what will the consequences be.

Obviously the buyers deposit will need to be returned and I will br liable for the estate agents fees and probably the buyers legal costs...

I just can't find anything to reinvest the money in.

 

[Frank the Insurance guy]

Get some legal advice, but I suspect you will also be liable for all the buyers costs and expenses in the sale, including all surveys, inspections, and other costs. As this is a commercial venture, you may also be liable for the buyers loss of income or potential income or loss of profit that they would have had completion occurred.

 

[Elliot Green]

What does the contract say about the consequences of default?

 

[The Byre]

I just can't find anything to reinvest the money in.

Wait a few months, maybe up to a year - there will be loads of opportunities when the economy crashes.

And crash it must!

 

[DontAsk]

I just can't find anything to reinvest the money in.

Can you not find anything in the contract?

Losing a few £k for pulling out is surely worse than gaining a couple of % in a one-year account.

 

[Lisa Thomas]

The answer will be in the contract.

 

[Gyumri]

If I change my mind can I prevent completion, and if so what will the consequences be.

Presumably you have a solicitor acting in the sale. Whether freehold or leasehold you've exchanged and will be held to the bargain. You will be served with a notice to complete and the buyer will be able to sue for specific performance.

The best thing might be to check whether the buyer still wants to go ahead - maybe he or she also has cold feet!

 

[2020Lawyer2020]

The contract may contain the answers. In many types of contract you can be forced to perform - an order of "specific performance", by the way but I think not for property contracts nor employment contracts , but possibly for commercial property contracts so do check that out with your solicitor before trying to pull out.

 

[DontAsk]

In at least one case a buyer pulled out and the seller could not sell at the agreed price, as the market was falling. The seller sued for their loss some time later later and won on the grounds that the buyer did not end up in a worse position than if they had gone ahead and suffered the loss themselves. The buyer, in the end, paid over £100k, including the original deposit forfeiture, etc.

Turn that around in a booming property market and your buyer could sue you for their loss in not being able to purchase an appreciating asset.

 

[WaveJumper]

Well the details will all be in the contract and I assume you have a commercial solicitor working for you and this is the person you should be speaking too. I would also suggest turning down the opportunity to off load a retail premises at this time might be one you come to regret

 

[Financial-Modeller]

Such a bizarre system in England & Wales.

The system used in various other places is so much better:

• Agree price and terms.
• Buyer pays deposit (10% usually) and both sides are bound to the contract.
• If buyer pulls out, deposit is forfeighted.
• If seller pulls out, buyer is entitled to return of their deposit plus the same (10% usually) again.

Simple!

 

[The Byre]

I just can't find anything to reinvest the money in.

Be eternally grateful that you've found some poor sap that is buying this property at the very top of the market! Keep telling him what a wonderful business opportunity they are acquiring! Tell them how clever they are and how rich they will get selling buttons and bows to the starving masses - and no suppressed laughing when you do tell them that!

£900,000 is a nice sum to play with and if you can't find anything to do with it, buy gold, silver or uranium or US value stocks in companies that are not in debt - or buy into a broad value fund. Failing all that - spend it!

You only get to live once! There's no going around a second time! There's no sequel! There's no @larkfield - Part Two! You'll be dead soon enough! And you will only regret one thing - all the things you DID NOT DO! Do them now, before it's too late!

 

[DontAsk]

Such a bizarre system in England & Wales.

The system used in various other places is so much better:

• Agree price and terms.
• Buyer pays deposit (10% usually) and both sides are bound to the contract.
• If buyer pulls out, deposit is forfeighted.
• If seller pulls out, buyer is entitled to return of their deposit plus the same (10% usually) again.

Simple!

I see very few differences.

 

[Gyumri]

In at least one case a buyer pulled out and the seller could not sell at the agreed price, as the market was falling.

Could you quote the case?

 

[Paul Kelly ICHYB]

Where is the property? I believe in Scotland the rules are VERY different to E&W.

 

[DontAsk]

Could you quote the case?

Went all the way to the Court of Appeal https://www.pla.org.uk/2013/02/hooper-v-oates/

 

[The Byre]

Went all the way to the Court of Appeal https://www.pla.org.uk/2013/02/hooper-v-oates/

Quite a well-known case and a perfect example of the courts being asked to undo someone's stupidity. Usually, it is the sale of businesses that trigger daft cases like that - e.g. the dog's breakfast of the Terra Firma take-over of EMI and subsequent legal battles.

 

[Gyumri]

Went all the way to the Court of Appeal https://www.pla.org.uk/2013/02/hooper-v-oates/

Thanks

 

[eteb3]

It will all be in the contract as others have said. But in principle the buyers have an equitable interest in the property - that's a real ownership interest, even though it's not a 'legal' (ie, registrable) interest.

The courts will protect that property right as they do every other property right: in principle (subject to your particular contract), your title is clogged by the agreed sale. In other words, the property is no longer fully yours to do what you like with.

As equitable interests have to be litigated, the contract will almost certainly make extensive provision for these scenarios, to reduce uncertainty and litigation for all concerned.

 

[Michael Loveridge]

In many types of contract you can be forced to perform - an order of "specific performance", by the way but I think not for property contracts ...

Your username indicates that you're a lawyer of some sort, but clearly not a property lawyer! The buyer can seek an order for specific performance. i.e. ask the court to order Larkfield to transfer the property. If he refuses to comply with the order he can be sent to prison.

Needless to say, Larkfield would also be ordered to pay the buyer's legal costs, which would be well into the tens of thousands.

So the bottom line is - don't even think about it.

 

[The Byre]

So the bottom line is - don't even think about it.

. . . unless you are in Scotlandshire, in which case the party that pulls out has to pick up all the costs and damages incurred by the non-puller-outer. Google - the conclusion of missives (for those of you playing The Home Game).

As the OP speaks of 'exchange of contracts' it looks mightily as if the boat has sailed.

 

[2020Lawyer2020]

Your username indicates that you're a lawyer of some sort, but clearly not a property lawyer! The buyer can seek an order for specific performance. i.e. ask the court to order Larkfield to transfer the property. If he refuses to comply with the order he can be sent to prison.

Needless to say, Larkfield would also be ordered to pay the buyer's legal costs, which would be well into the tens of thousands.

So the bottom line is - don't even think about it.

Although my point above was specific performance can generally be available so in a sense I support your point - do not assume there is no specific performance because sometimes it can be ordered (and yes, I am not a property lawyer).

 

[RandomQ's]

“ Notice to Complete” and/or “specific performance of the contract” - look them up.

They could chase a breach of contract, or some sort of economic loss, but like others have said, better to ask a fully q’d lawyer

 

[Gettingthereslowly]

How well do you know the buyers?
Do you have a good relationship with them?
Can you appeal to their better nature?

Unfortunately I had to pull out of a commercial property purchase after Exchange (in England), a few years back. I spoke to the vendors face to face, explained the reasons why I couldn't continue/Complete, apologized profusely. They were incredibly gracious, understood my predicament.

They 'let me off the hook', re-marketed the property, and once the new buyer had Exchanged, they were most generous and repaid my £50k/10% deposit back (even though legally they did not have to).

I have always been a believer in open/honest business transactions.

But Larkfield, you have to appreciate that the buyers may well have very advanced plans for the property/incurred significant other costs, but it might be worth asking.....maybe they are having second thoughts too.