On the Completion Date, the Buyer’s conveyancer transfers the balance of any purchase monies to the Seller’s conveyancer. Upon receipt of those monies, the Seller’s conveyancer releases keys to the Buyer.
Usually, keys to a property are made available for the buyer to collect from the Estate Agent selling the property once the balance purchase monies have been received. Legal Completion has then taken place: Upon payment for the property, the Buyer becomes the new legal owner of the property.
The buyer’s conveyancer then deals with any Stamp Duty and Land Registry formalities.
Where the seller of that, ‘first’ property is then buying another property, we have what is known as a ‘chain’ of ‘linked transactions.’ Some chains can be long and complex.
If there is a chain of linked property transactions, completing on the same date, once sale monies are received by the ‘first’ Seller’s Conveyancer, that ‘first’ Seller’s conveyancer will then need to forward the balance of any monies for the property their ‘first’ seller client is then buying to the ‘second’ seller’s conveyancer in the chain.
Keys to the ‘second’ Seller’s property will be released once the balance monies have been received by the conveyancer for the ‘second’ seller in the chain, and so the process repeats all along the chain until everyone in the chain has completed their sale and purchase transactions.
It may seem obvious, but it is important to note that purchase moneys cannot be released to buy a property by any conveyancer until all of the monies they await from the sale of their client’s current property have been received: i.e., we cannot buy your new property until we have received monies from your own buyer. Where you are in a chain of linked transactions, those monies must have passed through every conveyancing Firm for every other party in the chain below. This can take time.
Whilst we aim to have completed as many transactions as possible by around lunchtime, there can be delays if your transaction is part of a long chain, or where any one of the conveyancers below us in the chain is unable to send purchase monies out on time (or sometimes, at all!). These delays, whilst both unfortunate and inconvenient, are often beyond our control. We will keep you updated by telephone with regards to progress of your matter on the day of Completion any delays we learn of and the reason for them once we are informed of this.
Delays can mean Completion happens quite late in the afternoon on the contractual Completion date, or that they must take place on another day.
Each bank has a daily ‘cut off’ time for actioning same day money transfers.
Therefore, conveyancers also have an afternoon cut off deadline, beyond which they cannot send funds to complete property transactions. If funds arrive with a conveyancer beyond their cut off banking deadline, Legal Completion on any property transaction where funds need to be released, cannot take place until at least the following working day.
To avoid problems wherever possible, conveyancing Contracts usually provide that Completion must have taken place by no later than 2pm. If funds arrive very late in the afternoon, they cannot be forwarded until the next working day. This might mean Completion is delayed by a day, over a weekend, or even for several days if it coincides with a Bank Holiday weekend. We call this a ‘Delayed Completion.’
If there is a ‘Delayed Completion’ we will speak to you to explain the options available to you and to take your instructions as to how you wish to proceed.
In situations where Completion is contractually due to occur on a specific date, but cannot happen at all, we call this a ‘Failed Completion’.
There can be serious financial consequences for the parties in a chain where there is a Delayed or a Failed Completion.
Why might my Completion be ‘Delayed’?
There are lots of reasons why a Completion might be delayed. These include situation such as:
- One party in the chain sends their balance purchase monies to their conveyancer from an account that is in a different name, or from an unknown, third parties’ account, different to the one verified by the Conveyancer at the outset of the transaction.
There are very strict rules regarding conveyancers verifying the source of funds to be used in a Conveyancing transaction. Conveyancers cannot use funds that have not been properly verified.
- One party in the chain sends monies to their conveyancer late, or via a method which means the funds are not ‘cleared funds’ (e.g., by cheque or BACS).
Conveyancers are forbidden from drawing on uncleared funds; if a client sends moneys via a method that still requires several days to clear, Completion must be delayed until those funds have cleared, unless alternate cleared funds can be provided and properly verified by the conveyancer.
- Mortgage/ Help to Buy ISA or LISA funds do not arrive with a conveyancer early enough for the purchase monies to be released before the banking cut off time.
Every Lender has a prescribed number of working days’ notice they need to process the request from a conveyancer to release mortgage or other monies. Lenders will not guarantee what time of day funds will arrive with a conveyancer. Wherever possible, to avoid delays due to mortgage funds arriving late, here at Talbots, we request mortgage monies to arrive with us the working day before Completion.
Not all conveyancers do so. Not all lenders will agree to this. Sometimes, where there is a last-minute Completion, the Lender is simply unable to process the request to release funds at very short notice.
We advise our clients when to close investment accounts so that any savings and bonuses are with us in good time for Completion.
- There is a long chain and funds do not complete their journey from the bottom to the top of the chain that day. In these cases, often some parts of the chain are able to effect legal Completion, but others, are not.
- The seller is unable or unwilling to vacate on the due date. E.g., due to illness or for another reason. This happened with some regularity during the Covid-19 outbreak. Occasionally a removal van breaks down and the seller cannot remove their items from a property.
- Someone in the chain has failed to return signed documents to their conveyancer: Completion on the sale of a property cannot take place if the Seller has not returned a signed and witnessed Transfer Deed to their conveyancer. In this instance, monies cannot be used for any onward purchase that Seller has until the signed and witnessed Transfer Deed is with their conveyancer.
There are some things conveyancers can do to try to find practical solutions of a temporary nature to overcome some of the difficulties caused by a delayed completion: e.g., In some situations, the parties in the chain may agree to let their respective buyers move into a property under a ‘Licence’ until Legal Completion can be formally effected. All parties in the chain need to agree to do this, so that everyone can move into their new home. This is not entirely without risk.
Why might you encounter a ‘Failed Completion’?
This is much rarer than a ‘Delayed Completion’ It occurs when Completion cannot take place at all.
The most obvious situations are:
- Where one party dies, and the rest of the chain are unwilling or unable to wait for a Grant of Probate to be obtained- this can take months.
- Where there is evidence of criminality or Fraud.
What are the consequences of a Delayed or Failed Completion?
Interest and compensation for costs incurred directly as a result of the delay or failure of one party to effect Completion on time, or at all, could be pursued by the parties inconvenienced by the delayed or failed completion.
In some situations, a Buyer or Seller may be served with a ‘Notice to Complete’ giving them 10 working days’ to complete the transaction. A defaulting Buyer who is in ‘Breach of Contract’ also risks losing the deposit paid on Exchange of Contracts, as well as having to make the deposit up to a full 10% of the purchase price if a smaller deposit was paid on Exchange.
The contract may be forfeit, the deposit lost and a claim could also be pursued for the consequential losses incurred as a result of the Breach of Contract.
DISCLAIMER
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The contents of this blog or any other published by Talbots law cannot be considered as legal advice and should therefore not be acted on without prior consultation with a qualified solicitor or legal professional.