Are you buying or selling a property? It can be stressful, even without the unwanted possibility of unexpected legal fees.
A question which crops up during our work as solicitors North Wales-wide is “do solicitors charge if a property sale falls through?”
That’s what we’ll address in this article, but first, let’s give you the quickest answer. Yes – in most cases, solicitors do charge for work relating to a property that has already completed. That’s even if the transaction does not reach exchange of contracts.
How much you will pay hinges on the stage at which the sale fell through, and the agreement you have with your solicitor.
In this mini guide, we explain which costs you may face, who is responsible for paying them, and how you can reduce or avoid unnecessary legal fees.
Do solicitors charge if a sale falls through before exchange?
In England and Wales, property transactions are not legally binding before contracts are exchanged.
Before the exchange of contracts, either the buyer or the seller can pull out at any time. However, this does not mean that legal work carried out up until that point is free.
Two elements of work that solicitors typically charge for are; time spent working on your file, and any third party costs (that is, expenses paid by the solicitors to entities such as courts, experts and government offices, also known as disbursements).
The exception to the rule is the ‘no completion, no fee’ agreements offered by some solicitors. In general, you should expect to pay for the legal work completed, even if the deal falls through early.
Before entering into any property sale process, you should always be clear on any potential fees that may be incurred if the transaction is not completed.
What you pay if a property sale falls through
Now we’ll hone in on what you’ll likely pay if a property sale collapses:
Work completed
Usually, your solicitor will bill you for the work they have already carried out. This may include reviewing contracts, raising or answering enquiries, liaising with estate agents and mortgage lenders, or drafting legal documents.
Most solicitors require fees to be payable even if the transaction does not complete, due to the time and expertise they have committed to the sales process.
Third-party expenses (disbursements)
Disbursements are costs paid to third parties on your behalf. These payments to third party organisations can include for; local authority searches, environmental searches and Land Registry fees.
Third party expenses are usually non-refundable, even under ‘no completion, no fee’ agreements.
From here, we’ll move on to the various scenarios of a property sale pullout, looking at what happens in the case of a buyer, or a seller, withdrawing.
Who pays solicitor fees when a buyer pulls out?
If a buyer pulls out before exchange of contracts, each party pays their own solicitor’s costs.
Usually, the seller will not be able to recover their legal fees from the buyer. This is even in the case of an unexpected, last-minute withdrawal. This situation can be frustrating for the seller, especially in slow markets.
Who pays solicitor fees when a seller pulls out?
If this scenario is reversed and it’s the seller who pulls out before exchange, the buyer is still responsible for paying their own solicitor for work done and disbursements incurred.
Buyers cannot usually claim legal costs back from the seller, even if the seller withdraws without warning.
How to avoid or reduce costs
It’s impossible to remove all risk from the property sale process. However, there are some steps that you can take to protect yourself in case of a collapse. We will conclude this article with some suggestions:
‘No completion, no fee’ agreements
You’ll find that some conveyancing solicitors North Wales-located – and in other regions – offer no completion, no fee arrangements. These agreements mean that you don’t need to pay legal fees if the transaction falls through, but note that you will still need to cover disbursements such as searches.
You should always read the full details of every agreement, so that you know exactly what is, and isn’t, covered.
Legal protection insurance
Legal protection or homebuyer insurance may cover abortive costs if a transaction falls through for certain reasons. This type of insurance can be helpful for first-time buyers.
Delay instruction
Buyers may wait until their mortgage offer is formally approved before instructing solicitors. This can reduce the risk of paying for legal work if the sale falls through due to a lack of finance.
Check the terms carefully
Finally, be sure to check the terms of any solicitor agreement carefully. You should ask clear questions related to disbursements, abortive fees and ‘no completion, no fee’ conditions.
At Bennet Smith Solicitors, we always advise that you familiarise yourself with all terms up front, as this can help to avoid unexpected scenarios later in the process.
