House buying and selling in a chain – what if someone is late on the completion day?
It can happen, and when it does, you just hope that your conveyancing solicitor is up to the task of finding a solution.
If you are tying in your purchase with your sale, you will be reliant on your buyer's money to fund your purchase. Your conveyancing solicitor will therefore not be able to purchase your new house until your own buyer's money actually arrives. If your buyers are in turn relying on funds from their own sale, the longer the chain, the greater the risk that someone will get something wrong with sending money and so cause delay on the day of completion to the chain above them.
So the first task is to make sure you always chose an expert conveyancing solicitor – as the quality of conveyancers ranges wildly in the marketplace. Many are inferior and must rely on attracting customers from certain estate agents by making huge cash payments, others just plod along offering a no-frills no-special service that just about gets you there, but there are many who trade on their reputation for being excellent. Indeed, a dynamic, expert solicitor will be experienced and prepared to offer up a solution. Many conveyancers just cave in and hope someone in the chain will solve the delay.
Why would there be delay?
Here are some situations:
- a party who delays putting their conveyancer in funds for their own part of the purchase money (e.g. because they did not realise their bank had a daily limit on amounts that can be sent electronically, they paid with a cheque too close to when the money was needed leaving no time for it to clear, just forgetting to pay, or their own conveyancer did not explain when or what to send in time).
- a party's conveyancer forgetting to ask for the required mortgage money the day before completion.
- a conveyancer having changed their firm's bank details but forgetting to update the details they had already sent out to the paying party.
- a party's conveyancer handling lots and lots of completions on the day and your transaction becomes just a number with no special priority.
- any of the banks having a technical problem.
When is 'late'?
The standard legal contract for house selling in England & Wales sets 1pm as the time after which penalty interest starts to accrue (usually 4% above a bank's base rate). Most house completions happen well before then, often between 10am-noon, certainly that is when removals tend to unload etc. After noon, people start to get stressed, and often removal men are waiting outside houses and threatening to charge more for their time and overnight storage. Sadly for you and your conveyancer, if it is a delay below you in the chain, it remains a waiting game, nothing you or your conveyancer can really do until it becomes clear when the money may or may not be received.
So – it would be unwise to simply chose your removal company on lowest price, always check what your removals will also do/charge in the event that the time of completion is late in the day, or even spills over to the next day. This is because legal house sale contracts do not allow you to claim your own personal losses, just the paltry 4% above base interest, as strange as that might sound. Instead you have to take small claims for them as separate transaction – and which is something your conveyancer would charge you separately to help with of course, and it would not be cheap. So, it is not just your own conveyancing solicitor you hope is the best, but you will also hope every conveyancer along the chain is. Indeed, when deciding on a buyer for your house, always have your estate agent look into which law firm they are using, as a buyer paying more than another, but with a mediocre conveyancer could cost you dearly.
However, even if money arrives after 1pm it can often present no difficulties. The real difficulty arises depending on what you need to do with your money after 1pm. This is because of the greatest issue. The banks of all conveyancers have a cut-of time after which they cannot electronically send on your money. Usually 3.30pm. It is this looming time on the day of completion which presents a very real risk that sellers will not receive money for the sale of their houses and so the chain does not all complete. A nightmare for those people with removal vans sitting and waiting outside houses.
So what happens when 3.30pm comes and goes, and banks cannot send the money?
Conveyancers should not quit and automatically tell their clients nothing can be done. Your conveyancer may well still have an opportunity to 'help people get into houses'. But remember, a delay in the chain below means your conveyancer is not to blame, and any solution that your conveyancer can offer can mean it comes as a separate and extra conveyancing charge to you. To create a solution to solve someone else's delay can mean several hours of extra work and the prioritising of your work over the lawyers remaining clients – and whilst unfair that you should pay due to the fault of someone else, it is a cost your conveyancer has not quoted you for, and of course is also time you yourself would incur if you were doing the work personally. Your lawyer is simply your agent and their time does come at a charge. Charges you will have to bear and add to any separate action you take against your buyer for being late.
So what is the possible solution?
Sadly the solution depends on your conveyancer having the experience and dynamism to help. Which goes back to your choice of conveyancer. Sadly, the delaying conveyancer can often also fail to correct their delay and leaves the other conveyancers in the chain to help. The worst thing for a client is their own lawyer admitting to other lawyers in the chain that they are not experienced and are struggling to offer a solution. It happens.
Undertakings. Providing each solicitor holds the money they should have sent, it is possible and should be the aim of all the conveyancers in the chain, for each of the to offer an Undertaking (i.e. a statement to someone who reasonably places reliance on it, that you or your firm will do something or cause something to be done. Promise which can be enforced against the law firm giving it, and the lawyer made to honour it) that they will hold the money which they are timed out from being able to send, and to hold it on behalf of the lawyer they need to send it to, and perhaps they undertake to send the money via the banking system the following day. On the strength of that promise, the recipient lawyer may feel this is the same as cash, and they can also give the same undertaking onwards. In other words, promised money changes hands. True, no mortgages can be repaid, but lawyers will already have traded undertakings to repay mortgages, so a chain of promised money payments has already been made.
However, each lawyer needs to carefully word their undertaking, and propose it to their opposite conveyancer, and this needs to go along the chain. It can take some time. It only takes one conveyancer to be slow, or to be too junior to know what they are doing, or even a conveyancing team who can only make decisions when the only solicitor in the building first gives a sign-off, which can slow everything down to a halt.
Indeed, you may find a conveyancer along the chain who does not properly understand the legalities and so is nervous about agreeing to something they do not understand, and therefore inadvertently unable to advise their client about it, despite it being the common solution to the chain's problem. Or you may find a conveyancer or their client who will only accept money, and nothing else, and quite often they are the people at the top of the chain, the ones who are only selling. It is hard to know what conversation they may have had together to end up with that stance – either the lawyer provided a muddled explanation to their client and the client therefore considered there to be a risk, and one not worth taking, or the conveyancer, or client (or both) just wish to be difficult, and to exert some sort of control and dominance; something the chain will have no choice but to accept. Sadly, there can be personalities like this, as home moving is a stressful and emotional time.
As we said at the start, choosing the right conveyancer at the very beginning of your house move is crucial.