To accept more than 3 months between exchange and completion? Vendor is buying a new build...

[augustusbloom]

Hi all

We had an offer accepted on a property at the weekend (yay!) and the estate agent advised that the vendors are purchasing a new build in Jan/Feb '22 when complete, so are looking to exchange ideally in the next 5 - 6 weeks. We saw no issue with that initially and were pleased our offer was accepted.

Fast forward a couple of days and we received an email which confirmed that the sellers will require early exchange and completion around Feb/March '22 (getting later already...) once the apartment is ready, and that we would be 'advised of the completion date by the developer'.

This has made us nervous as we do not want to be handing over a great sum of money saved over several years with no accurate estimate of completion date in sight, basically being at the developer's beck and call. We'd also be losing out on interest on our deposit as it is accruing in our various savings/investment pots. We also have no idea of much notice we would get from the developer, and as we are renting, would need to give 1 months' notice which could leave us out of pocket if their notice is less. We have an estimated date of when the new builds will be ready, but we need to get more of an idea of what stage they are actually at as new builds always tend to run over. Finally, I understand we have to insure the property from exchange of contracts (?), which could mean us insuring for months longer than anticipated. There is also the obvious risk of our mortgage offer expiring.

We are due to speak with our solicitor and get legal advice on all of this, but would also appreciate the hive mind's view on what we see as two broad options:

1. Refuse to exchange until we have a completion date and/or exchange, but set a fixed completion date
   
   We think that the vendors needs to prove to the developer that they have exchanged before they can 'secure' the property (does this sound right?) and it may lead them to try and find another buyer, but we are struggling to see what sort of buyer would wait around without their deposit and that much uncertainty, especially if they are in a chain? We would suggest that our vendors break the chain and stay with family/rent if the completion date comes and goes and their new build is not ready (likely) but equally we can't imagine them wanting to do this (they are in their 80s)
   
   
2. Agree a reasonable long-stop date with adequate financial cover by the vendor
   
   Agree to a specified date after which we are free to get out of the contract if completion hasn't happened. If we are exchanging this side of Christmas, I would be inclined to make this end of February 2022 as per the new build brochures estimation... any thoughts on this? What happens if this date passes, can you just get your deposit back from the solicitor quickly, no questions asked? I would also be inclined to request that the seller pays for/reduces the purchase price by the amount of insurance we may incur on their property whilst we cannot live in it, and also the month's rent we may end up having to pay unnecessarily if the notice of completion is less than 30 days. If we pull out because of the uncertainty and the sellers are not prepared to budge by moving in with family/a rental, I would also consider asking to be reimbursed for all the legal fees/surveys/searches we have paid for on the basis that the sale would be completed by X date.
   
   Does anyone have experience with either of the above and could offer some advice/guidance?
   
   Separately, what would happen in this scenario if one of the vendors gets sick or worse? They are elderly so this isn't beyond the realms of possibility. I think we'd need a long-stop date for sure not to get burdened with a potential probate (unless we are prepared to go through that process).
   
   Thank you.

[friendlycat]

Without any doubt you need solid legal advice on this as you have already identified numerous pitfalls.

I can't offer you any words of wisdom sadly but you are correct in realising that new builds often get very delayed and all of this is then putting you in a difficult position. The age of your vendors is not going to help the situation but if they pose this type of condition on their sale any party will have the same problems, not just you.
In fact this would not work for anybody with a property to sell as part of a chain and only really works for you being in rented.

Once you have exchanged you are committed to buying the property and would forfeit your deposit if you were to pull out. I have never heard of a situation whereby "get out" clauses can be written into the contract.

I hope you can make it work and get sound advice from your solicitor as they must have experience of how this can all be put together with somebody in the chain purchasing a new build with potential delays.

[LuluLefevre]

You need your solicitor to advise on this.

Would you even want a get out clause? Then you are back to square one. Maybe the best thing is to find something else to buy where there’s more chance of certainty in the completion dates.

[Motnight]

Don't do it. My BIL's new build was delayed by over a year.

[ZoBo123]

Are they moving into a new built retirement flat? They may be less likely to experience delays than individual houses as they will have quite a lot of buyers waiting

[Couldhavebeenme3]

Your mortgage offer may not be valid after 6 months, I'd step back. Can they go into rented?

[augustusbloom]

Thanks all so far.

To answer your qs/comments, @friendlycat long-stop dates aren't uncommon in this scenario as I understand (otherwise, far less people would get into a chain with new builds I imagine) but certainly not ideal. Agree that our solicitor should have all the answers (I hope!)

@LuluLefevre we would want a get out clause as if by February, say, it is clear that the new build won't be complete until the summer, we may seriously consider pulling out entirely and looking for a new property as with delays like that, who knows when it will end.

@Motnight urgh that is awful, I'm sorry for your brother. It would be okay if the vendors would move into rented, as then we could complete and not be involved in this mess, but that's the sticking point I guess!

@ZoBo123 No it's a general new build development, not a retirement apartment.

Thank you!

[elaeocarpus]

I wouldn't do this. Developers require buyers to exchange within about 6 weeks or so and complete whenever its done. They'll have an estimated completion date, But lots can delay a new build.
And what happens if there is damage/costs in the house you are buying during this period? Or your mortgage offer expires and then you cant get another for some reason?

Most developers offer part exchange in scenarios like this because not many buyers in a chain want the uncertainty and delays .

[TakeYourFinalPosition]

@elaeocarpus We’re buying, although not a new build, and our solicitor and mortgage lender have made it clear that we need to insure the building from exchange. I don’t think that was the case when I bought here 8 years ago… but that answers the “what if it’s damaged” question!

[Bamaluz]

Be very cautious, do not exchange until it is built.
DS is buying from someone who is buying a new build, his offer was accepted in February and he was told it would probably be ready in June. Then he was told they shouldn't have said June, but the summer. Then it was September.
The agent for the new build has tried to bully him into exchanging or the vendor was going to put the house back on the market.
It turns out that they have had to extend their mortgage offer and are waiting to hear.
They have tried to tie him in until April next year!
He's obviously missed the stamp duty deadline and has already extended his mortgage offer. The only reason he is sticking with it is that house prices are going up in the area he is buying, and he's getting it at February's price. And he'd be £2500 down if he pulled out.
It's all been a nightmare, luckily he is in a house share so is able to be flexible, but he said never again.

[StillTryingtoBuy]

I think your vendors need to accept that they might need to complete on their sale and move in with friends / family or a short term rental while they wait for their new build. Way too much uncertainty for you and it could go on for many months - you won’t be able to change jobs for example as that will affect your mortgage, it’s a long time to have your life on hold.

[Seasonschange]

I wouldn’t. To many risks. Unless house is a bargain or something

[friendlycat]

I thought the long stop date applied to the new build element to help the developer.

I'm not sure the vendor is being at all realistic here as they obviously need your exchange deposit to secure their newbuild and it feels as though they are putting the cart before the horse so to speak.

Really the onus should be on your vendor to complete the sale between them and you and go into rental if required prior to their newbuild being ready.

[Evecob]

Your vendors need to make the compromise not you. My mum and step dad were in your vendors position. They sold their house and are now waiting for their new build to complete, and as many have said, there have been big delays! They are now moving in with us for 5 weeks as their new build has been delayed by that much!

If they are serious about selling, then it's not fair to leave the risk on you. They need to sell and complete on their sale and deal with the consequences of buying a new build.

I would threaten to walk away if they do not do this.

[DFOD]

In a previous life I worked for a developer selling new builds ….. they over ran and over ran and over ran - my job was to make the call giving the monthly update - which was it was delayed another month, kicking the can down the road - when the developer knew well that it would be at least another 6 months.

With the current severe shortage in construction workers, HGV drivers to deliver material as well as shortage of materials - I would imagine it will be v difficult and you will never get a clear idea of what’s going on.

The couple need to take on this risk by moving into rented ASAP - otherwise you could have another year of paying rent, it falls through and you are back into searching in a house market that’s gone up 10%.

It looks like the EA has already started the slippery process of kicking the can down the road / moving the goal posts - there’s your big fat red flag right there waving in your face.

[MargotEmin]

We considered a long exchange to completion period but it is risky, what if you got sick or lost your job or the mortgage offer was pulled for whatever reason? Can you afford to lose your deposit? We were told that if we went ahead we'd have to sign a waiver stating our solicitor had set out all the risks and wouldn't be held liable if it all went tits up - that in itself was enough to put me off!

As it happened there were a tonne of unavoidable last min delays prior to exchange which meant exchange got nudged back a few times, bringing us back into a normal exchange/ completion period.

[augustusbloom]

Thanks all.

@elaeocarpus and @TakeYourFinalPosition

Agree that insurance is the one in this scenario and the mortgage offer expiring is a real concern.

I haven't looked into part-exchange so will add that to my list of things to learn about (!)

@Bamaluz thank you for the cautionary tale. We know for sure it is built (we can see it from the town centre!) but what stage it is at inside is another story... this scenario sounds hellish and one we defo want to avoid.

@StillTryingtoBuy

This is our position I think - either we do early exchange and complete soon after and they have the benefit of the sale going through but have to move out, however much of a pain that may be. Or, we delay exchange until they have notice of completion on their new build - less certainty for them in terms of us but they wouldn't have to rent. Seems sensible and reasonable to us..

@Seasonschange it really isn't a bargain! such little stock in our area... see comment above on our probable approach

@friendlycat you may well be right on the longstop date element and that we may struggle to get something similar to apply to us. Agree on vendor's onus to complete etc - we just can't envisage a situation where any buyer would be happy with this scenario?!

@Evecob thank you, this seems to be the consensus and is comforting! Would be sad if we lost the property but is certainly not worth us risking our very hard-saved deposit..

@MargotEmin - very good points, we certainly cannot afford to lose our deposit. Hopefully a similar thing will happen to us, that we won't be put under pressure to exchange prematurely etc!

This has been super helpful so thank you very much

[gogohm]

I personally would say to the vendors that you will agree to exchange based on a set date only, if their property isn't ready they will need to rent a temporary place eg Airbnb. If they want you as buyers they will at least consider this option

[titchy]

I'd withdraw my offer if they won't agree to a completion date which suits you tbh. Pref before Christmas...

[elaeocarpus]

Note that part exchange is something that the developer does with your vendor- ie they part exchange their house for the new build they buy. Ie not sell on open market (to you) but sell to the developer. It's something some people do if they do not have the necessary deposit in the bank ( but need it from a sale) in order to exchange on their new build, because not many people in a chain ( like you) want to deal with long exchange-completion situations.

Its of no benefit/option to you here.

Just thought I'd clarify.

Ive bought new builds
Ive also had a delayed exchange/completion where something did 'break' in between in the property

I would not exchange, handover money and have no idea of completion date( or it be a moveable date or too long between) at all in your situation
I

[namechanging564]

OP this is very common practice and it's extremely unlikely you'll be able to be negotiate anything dependent on the developer, they deliberately protect themselves so they aren't legally vulnerable if delayed so you will not be able to force them to guarantee a completion date. Your only hope is to negotiate with the seller that if it's not ready by a certain time they get out regardless and find alternative accommodation, how much you can legally bind them to that I don't know but do not take their word for it, it's spouted out as commonly and sincerely as "the marriage is dead, we don't sleep together anymore, I'm just in the house for the kids"

[augustusbloom]

@namechanging564

OP this is very common practice and it's extremely unlikely you'll be able to be negotiate anything dependent on the developer, they deliberately protect themselves so they aren't legally vulnerable if delayed so you will not be able to force them to guarantee a completion date. Your only hope is to negotiate with the seller that if it's not ready by a certain time they get out regardless and find alternative accommodation, how much you can legally bind them to that I don't know but do not take their word for it, it's spouted out as commonly and sincerely as "the marriage is dead, we don't sleep together anymore, I'm just in the house for the kids"

Thanks @namechanging564. Yes I think subject to what our solicitor says we will most likely be requesting a completion date from the seller which they can take or leave, or not exchanging until early new year and frankly we won't in the latter be motivated to spend heaps of money on searches, valuations, surveys etc if exchange won't happen until months later than suggested. It's such a shame as it is a lovely property. It might be okay - the sellers may realise what they want from a buyer is basically untenable to most if not all buyers and it will be better for them to compromise with us than go back to the market and risk this whole situation again. Fingers crossed...

[namechanging564]

Fingers crossed!

[squee123]

I wouldn't touch it with a barge pole. There's every risk your mortgage offer will expire. Even assuming that nothing has happened in the meantime that means you can't get a new offer, rates might have shot up and it will end up costing you a lot more.

Also whilst you would have insurance in place from exchange, you're basically trusting someone else not to damage your house. If they did it would be a major hassle to sort and you'd still have to complete and pay the mortgage on the property even though you might not be able to move in. A former colleague of mine had their house burn down between exchange and completion. They still had to complete and it took nearly two years for the house to be habitable. Of course that could happen with you living there too, but at least then your control the risk. I'd be worried about them forgetting they'd left the hob on or similar.

[FFSFFSFFS]

Run. Even if you draft it so you have the legal right to get the deposit back it would
Be expensive and difficult to ever actually get it back. I wouldn’t touch with a barge pole. Sorry. Only option I’d offer them is a short period between exchange and completion for them to find a rental property to move into.

[FFSFFSFFS]

And as above there are risks you would have between exchange and completion- worst case scenario it burns down and mortgage offer withdrawn - you’d still be liable for full amount….