Smooth Sailing Or Stormy Waters? Challenges Between Exchange And Completion In The UK

In England and Wales, residential property transactions involve two pivotal milestones – the exchange of contracts followed by legal completion. While the period between exchange and completion often flows smoothly, problems can arise even at this final transaction stage that jeopardises sales. This guide examines typical challenges between exchange and completion, from buyer funding issues to property damage. With insight into risks and resolutions, buyers and sellers can navigate tricky scenarios to ultimately achieve successful sales completions.

Understanding the Exchange and Completion Process

Before examining issues, it helps to recap the exchange and completion process:

Property Sale Agreed – The buyer and seller agree on an offer price and terms for the property.
Exchange of Contracts – The parties legally commit by signing and exchanging contracts. The buyer pays their deposit and a completion date is agreed upon.
Funds Finalised – The buyer secures any remaining funds required to pay the full purchase amount at completion.
Outstanding Steps – Final conveyancing searches and enquiries are completed.
Completion Day – The buyer sends the full funds and receives the property keys in return. The seller receives the net sale proceeds.
Possession Transfers – The property ownership officially changes hands on completion. The buyer can access and occupy their new home.

Between exchange and completion, buyers must ready all funds while sellers enable access to undertake final surveys.

Why Delays Happen Between Exchange and Completion

Though rarely intentional, delays typically stem from:

Buyer Funding Issues – Mortgage glitches or personal funding shortfalls prevent transferring completion monies in time.
Property Access Issues – Sellers impede final inspections by buyers’ surveyors or conveyancers.
Conveyancing Delays – Slow solicitors fail to fulfil searches or paperwork obligations to enable completion.
Third-Party Delays – Factors like lease extensions for flats held up by freeholders or management firms.
Intervening Events – Issues like damage from fire or flooding and probate disputes on deceased sales.
Seller Withdrawal – In extreme cases, some unscrupulous sellers unlawfully halt sales if more attractive offers arise.

While frustrations arise, identifying underlying causes allows focused resolution. Most delays stem from administrative hold-ups as opposed to serious failings.

How Buyer Funding Problems Derail Completion

Insufficient buyer finance is the most common delay trigger:

Mortgage Delays – Common if paperwork issues arise or lenders don’t meet underwriting deadlines.
Insufficient Equity – Full appraisals late in the process may reveal buyers require larger deposits.
Credit Downgrades – Lenders can re-evaluate creditworthiness if buyers’ profiles weaken post-exchange.
Mortgage Declines – A full refusal remains rare but requires starting alternative finance applications.
Firm Mortgage Offers – While usual now, lenders occasionally still only provide agreements in principle at the exchange, risking eventual declines.
Personal Delays – Buyers may fail to liquidate stocks or transfer sale proceeds in time from existing homes.

For buyers, it is always prudent to ensure finance is firmly secured as early as possible. Warning signs should be flagged quickly to extend timeframes.

Overcoming Access Issues to Complete Sales

After the exchange, buyers legitimately require final access for surveys and checks. But sellers may resist if inconvenient:

Tenant Refusals – Existing tenants may obstruct visits despite contractual requirements for seller compliance.
Goods Removals – Sellers may have begun removing possessions ahead of completion, limiting inspection access.
Key Losses – Sellers misplacing keys can cause access issues unless replacements are cut promptly.
Early Holiday Departures – Sellers may depart on holidays earlier than advised, impeding access.
Deliberate Avoidance – A minority of sellers deliberately avoid booking appointments to delay due diligence.
Change of Heart – In rare cases, some sellers regret the sale and try to deter buyers from completing it through avoidance.

As legally binding contracts have been exchanged already, sellers must enable access so any deliberate obstacles can be escalated.

How Conveyancing Issues Between Exchange and Completion Arise

Solicitors acting for both buyers and sellers can cause delays:

Slow Searches – Century-long legal indemnity insurance policies may be quicker than awaiting replies to official searches from authorities.
Missing Documentation – Follow-ups chasing council tax or leasehold documents may be needed.
Defective Transfer Documents – Errors in Land Registry transfer deeds require amendments which take time.
Delayed Mortgage Instructions – Buyer conveyancers failing to request funds transfer from lenders early enough.
Change Requests – Buyer conveyancers historically could be change requests regarding fixtures late in the process but nowadays generally not.
Apportionments – Calculating who owes what share of bills up to the completion date can get delayed.
Staff Absences – Conveyancers going on leave without handing over caseloads can cause friction.

By keeping conveyancers accountable to timeframes, parties reduce the chances of frustrating last-minute delays emerging.

How Third-Party Factors Outside Control Cause Delays

Sometimes external organisations contribute to delays:

Local Authority Searches – Councils and water authorities take weeks to reply to official searches with crucial lien information.
Lease Extensions – Freeholders or management firms delaying approvals for buyers extending leases before sale completion.
Probate Complications – Disputes or claims emerging from wider family members complicate transactions involving executor sales.
New Planning Issues – District councils may surprisingly identify the need for planning consents for works during final checks.
Defective Titles – Extremely rare, but Land Registry errors on titles require correction before completion.
Restrictive Covenants – Third parties may unexpectedly exercise rights to object or demand further details on covenant release.

While frustrating, buyers and sellers can unite to apply pressure on third parties to resolve external issues quickly.

How Intervening Events Between Exchange and Completion Delay Sales

Once rare but sadly increasing are sales being de-railed close to completion due to:

Major Property Damage – Fire, flooding or storm weather events seriously damaging the property require sales suspensions while insurance claims are handled.
Owner Incapacitation or Death – Illnesses or deaths of buyers and sellers delay sales while estates are addressed.
Marriage Breakdowns – Divorce proceedings debilitating sales can necessitate unwelcome delays plus legal interventions.
Title Disputes – Validity challenges by third parties if claims on property ownership emerge.
Criminal Investigations – Proceeds of crime queries if authorities believe money involved to be illicit pending investigation outcomes.
New Enforcement Orders – Planning enforcements issued for unapproved works requiring resolution before buyers exchange and complete.

While unavoidable, conveyancers can advise on options like contract severance to rescue sales if the will exists on both sides.

How Buyers Can Be Protected After Contract Exchange

To avoid losing property and deposit if sales collapse, buyers can:

Arrange Deposit Protection – Government schemes guarantee the return of deposits if issues arise that are not the buyers’ fault. Provides reassurance.
Take Out Home Insurance – Early insurance allows claims even before completion for expensive costs like temporary accommodation if serious damage occurs.
Have Contingency Funds – Ensuring extra funds availability provides flexibility to quickly source alternative properties or temporary rentals if sales fall through. Avoid spending exchanged deposits.
Check Escape Clauses – Review contracts before signing for any out-clauses that apply if unpredictable events occur. However, these are very rare nowadays.
Keep Communication Open – Stay pragmatic and solutions-focused with sellers. Aim for compromise not conflict to increase chances of eventually achieving sales.

While not guaranteed, prudent protection reduces risks and provides options if sales collapse close to completion.

How Sellers Can Avoid Losing Buyers Before Completion

To prevent sales from falling through, sellers should:

Maintain Property Access – accommodate all reasonable requests for final surveys and checks to avoid deterring buyers.
Act Responsibly With Deposits – Resist spending deposits already transferred at the exchange in case sales do fail.
Highlight Delays Proactively – Be upfront with buyers on any issues that arise affecting access or completion timing.
Remain Flexible on Dates – Be open to delaying completion dates temporarily if buyers face unexpected final hurdles.
Get Issues Resolved – Cooperate fully in tackling any problems like planning queries to enable eventual completion.
Keep Communicating – Silence allows uncertainty to escalate disputes. Sustained transparent dialogue gives sales the best chance of survival.

While not guaranteed, demonstrating a willingness to address issues constructively encourages buyers to pursue solutions collaboratively.

How Breaches Between Exchange and Completion Are Resolved

If either party fails to meet legal obligations, options exist to resolve matters:

Buyer Breach:

Sellers can serve formal notices demanding buyers complete purchases within strict timeframes or deposit forfeiture will be pursued.
Conveyancers can request evidence of delays like funding shortfalls. If unsatisfied, they may advise freeing a seller to find another buyer.
If breaches are serious, sellers can ultimately cancel contracts and pursue a claim on the exchanged deposit as compensation for losses. But courts view this as a last resort remedy.

Seller Breach:

Buyers can sue for specific performance to force completion. But court delays make this undesirable. Conveyancers will aim to negotiate improved terms for buyers to complete instead.
If sellers unlawfully withdraw from sales, buyers can sue for financial damages incurred. But litigation is undesirable if amicable settlements are possible.
In extreme cases of deliberate seller negligence or fraud, buyers may recover double deposit damages through legal action. But this is very rare.

In most scenarios, conveyancers aim to negotiate improved terms or compensatory gestures if breaches occur to protect clients’ interests and prevent terminations. The focus is achieving eventual completion where possible. But contract law also protects parties against severe breaches via deposit claims, damages and completion enforcement orders as remedies of last resort.

Conclusion

Between exchange and completion, residential transactions risk derailment even when the finish line is in sight. But forewarned is forearmed. Understanding what can go wrong between exchange and completion allows proactive issue spotting and rapid response by conveyancers. While upsetting if problems do arise, by being pragmatic and exploring options collaboratively, buyers and sellers often navigate issues successfully to achieve eventual completion. Managing expectations realistically from the outset also helps mitigate frustrations. Hiccups close to completion are undesirable but not disastrous. With patience and open communications, plus legal protections as a last resort, the originally agreed deal can usually be preserved for mutual benefit, overcoming any interim stormy waters.