What Happens If My Conveyancing Transaction Falls Through?

Property transactions can unfortunately fall through. Understanding why this happens and what the consequences are can help you manage expectations and reduce risk.

1. Before Exchange of Contracts

This is the most common point where a property chain can break down.

What Happens?

Before contracts are exchanged, neither party is legally committed, so both Seller and Buyer can withdraw from the transaction at any time and for any reason with no obligation to the other party.

However, if the transaction falls through at this stage, you would still be responsible for any costs incurred to date which would usually include:

• Search fees
• Survey and mortgage valuation fees
• Legal fees incurred to date.

All of these costs are not recoverable from the other party.

2. After Exchange of Contracts

Once contracts have been exchanged, at this point the transaction is legally binding, and both parties are contractually obliged to complete.  Failing to do so will usually amount to a breach of contract. In many cases, the non-defaulting party will serve a Notice to Complete on the defaulting party.

What is a Notice to Complete?

Notice to Complete is a formal legal notice requiring the defaulting party to complete the transaction within a specified period (usually 10 working days). During this period:

• The defaulting party may be required to pay interest on the outstanding balance in accordance with the contract.
• Time becomes “of the essence”, meaning failure to complete within the notice period will have serious consequences (on either party, not just the one that serves the Notice).

If any party fails to complete after the Notice to Complete expires, the non-defaulting party can treat the contract as terminated and pursue remedies for breach of contract. If you are the defaulting party (it’s your fault), it depends if you are the Buyer or the Seller.

If the Buyer Fails to Complete

You will usually forfeit your 10% deposit (or be liable to pay the full 10% if you exchanged on a lower deposit).

You will also be liable for the Seller’s losses, being any costs incurred as a result of relying on the Contract.  This can include:

• Additional mortgage interest
• Removal and storage costs
• Any reduction in the sale price if the property is later sold for less
• Costs arising from the failure of an onward purchase (that was reliant on the sale)

In some cases, the Seller may pursue a claim for specific performance which is a Court Order requiring the Buyer to complete the purchase (and pay costs).

If the Seller Fails to Complete

The Buyer can claim their deposit back and they may be able to claim compensation for their losses incurred (e.g. survey costs, legal fees, removals).

As with Buyers, the Seller may also be at risk of a claim for specific performance, requiring them to sell the property as agreed.

How Easy Is It to Sue for Breach of Contract?

Outside of the immediate deposit (usually held by the Selling Solicitor), recovering additional losses generally requires court proceedings for breach of contract, which can be a costly and time consuming process. Even if successful, enforcement can be difficult if the defaulting party does not have sufficient assets.

Claims for specific performance are relatively rare and can be difficult to pursue, particularly where enforcement would cause significant hardship, such as making someone homeless.  

How Can I Protect Myself?

Realistically there is no way to 100% protect yourself given the way the system works in the UK. You can reduce the risks in a number of ways:

• Carrying out careful due diligence before committing too far.
• Ensure your finances are completely in place at an early stage. 
• Keep communication frequent with all parties to avoid delays. The Estate Agents play a role here and should keep an eye on the chain as a hole, looking for weaknesses to either deal with swiftly or inform you before you expend too much time and money.
• Choose experienced professionals to guide you through the process.
• Research and choose a good reputable Estate Agent, Mortgage Broker and Solicitor. The old adage of “Do you want it cheap, good, or quick? Pick two” applies. 

Why Choose Pinney Talfourd Solicitors?

At Pinney Talfourd Solicitors, we take a proactive and pragmatic approach to conveyancing. We focus on identifying issues early, progressing matters efficiently and keeping you informed at every stage, helping to reduce the risk of unnecessary delay or transaction failure.

If you are buying or selling a property and would like clear, practical legal advice, please contact a member of our team on 01277 211 755 to find out how we can help.