There are two key legal stages in a property transaction: exchange and completion. The first of those is when the legal representatives for the seller and buyer exchange contracts, while the second is when the transfer of money takes place and the buyer is given the keys.
The usual time period between exchange and completion is anything from 7 to 14 days, and it generally passes uneventfully. There are rare occasions when a property is seriously damaged during that period though.
Most buyers assume that they can either call off the deal or get the property for a reduced price, if that happens. For the majority of purchases, that will not be the case though. The contract signed during the exchange process is called the Standard Conditions of Sale and it typically passes all responsibility for the property to the buyer from that moment on. This means you would still have to complete the purchase at the agreed price even if damage has occurred.
It is a difficult subject, and the resolution is dependent on the exchange contracts and insurance.
1. The Important of Insurance
The Standard Conditions of Sale will transfer all property risk to the buyer, unless the risk position in the contracts is negotiated before signing. Therefore, it is essential for anyone buying a property to have an active buildings insurance policy in place before the exchange. If the buyer has such a policy, it will be their responsibility to make a claim for the cost of any repairs.
There is a possibility the insurance policy of the seller can cover the damage, but this is not something a buyer should depend on. It would be necessary for the standard exchange contract to be amended, and securing a payout for repairs could be tricky.
2. The Seller’s Duty
The transfer of property risk to the buyer does not absolve the seller of all responsibility. They will be legally required to treat the property with reasonable care. What is meant by this is they cannot damage the property on purpose or through negligence.
One example would be if they fail to maintain drainpipes in freezing cold weather and this leads to burst pipes and water damage. Another would be if parts of the property are damaged during the moving out process. If the buyer believes the seller has not met the standards for reasonable care, they can hold them liable for repair costs or seek a price reduction. Bear in mind though, this fault would need to be proven – and this is not easy.
3. Contract Variations
It is possible to have an amendment made to the standard contract prior to the exchange. The buyer will need the help of conveyancing solicitors in North Wales for that though, because it is not a matter for a layman. The specific part of the contract that would have to be renegotiated is condition 5.1.1 of the Standard Conditions of Sale. This can ensure the risk for the property stays with the seller until after completion. The seller and their legal representatives need to agree to that though and it would be a delicate negotiation.
If the buyer and their solicitors are able to secure the amendment, it would mean the following:
• The seller takes on the responsibility for repairing any damage and restoring the property to the condition it was in at the exchange point.
• If the damage is so severe that the property essentially becomes uninhabitable, the buyer may have the choice to cancel the purchase without the loss of their deposit.
How willing a seller is to agree to such an amendment is likely to depend on the quality and comprehensiveness of their insurance policy. If they have a strong buildings insurance policy in place, this will reduce the financial risk for them.
If you want specialist help with conveyancing in North Wales, call Bennett Smith Solicitors now.
