Exchange without a completion date?

[tenapenny2018]

Hi, it is supposed to be a very short chain of 3 with me at the bottom, my seller and the developer the seller is buying his new house from. My offer was accepted mid July. Mortgage approved end of July and I got everything ready on my side. Having being told that completion should be mid Sep and after 10 weeks of very slow progress, the seller now came back and wants me to exchange with "completion on notice", because the developer wants that. I know that it is not unusual that a developer would ask for "completion on notice", i.e. while we are contractually tied, the developer can take as much as time it wants to complete. What annoys me is that, normally my seller should be the one to break the chain, but he is trying to pass all the risk to me by getting me signed up for "completion on notice" as well, because he cannot afford the rent to break the chain. What should I do? Refuse to exchange? The EA says in that case, the developer will treat my seller as "unproceedable" and remarket the property and the chain will collapse. I already spend over a thousand pounds on survey and solicitor. I also feel a bit angry, because I think the seller and the developer have been lying to me, because they knew if they told me the truth, I would not have made the offer nor started conveyance.

It's good that you understand what they're asking of you. Personally I wouldn't agree those terms - as you say, you'd be accepting all the risk, and since you're not the developer's customer, you may find communication on timescales is poor. So you'd be in the dark, forever waiting on news and unable to plan.

I've seen a similar situation where the new build house was around a year late. Unless there's an end date in the contract, presumably you'd have to wait? I'd suggest that you propose a date for completion that you're happy with, and don't accept this open - ended contract. Trust your instinct.

Hi OP, if your seller is buying from a developer then unless he (the seller) will agree to go into rented then unfortunately you have to accept the developer's terms or walk away. Developers usually insist on a short period of notice (10-15 working days is not unusual) so unless your seller is buying one at the end of the development and the developer is keen then it is unlikely to agree to give more notice than that.

It's hard if you had understood that your seller would move out but unfortunately there really is nothing you can do other than say that the seller agrees to a fixed date and takes the risk on having to rent or you pull out.

As long as you can stay where you are indefinitely, you could agree subject to your vendor accepting minimal or zero deposit.

I‘d push your vendor for a completion date - he can go into rented. You have nothing to do with the developer or his terms! If your vendor needs to exchange with you, he will need to break the chain by going into rented. How much do you spent on rent for an unknown term that the developer could push out as often as he pleases? What if he goes bankrupt and never finishes the house?

Yes, I'd also push the vendor, if he's prepared to lose his sale, that's his loss.
You need hard facts.

You need a long stop date before your mortgage offer expires. I would accept "On notice" if there were a reasonable long stop date plus break clauses for insolvency. Insurance after exchange also interesting with no planned completion date!

What does your solicitor suggest?

I would accept ‘on notice’ as long as there was a drop dead completion date that was in a reasonable time (3 months?) and still in your mortgage offer. And also only if it suited you as well.

If not then I would push for a trypical ‘exchange now and complete in 2/3/4/8 weeks’ and your vendor needs to sort their own shit out and find somewhere else to live.

Thanks for the advice, everyone! My mortgage offer expires end of Dec and financially it does not make much difference whether I rent or pay mortgage. It's just that the house is good, but not spectacular, and the local market is actually falling, so I don't want to tie myself down for 6 months or so.

I am thinking about asking the seller to reduce the price further in turn for me to sign completion on notice. This is less about money, but more about I want to see how serious the seller really is and whether he is willing to share some of the burden/risk. If he refuses, for me that would set the alarm bell ringing that the seller wants to take advantage of me without giving anything in return.

I am also annoyed that my sol does not really explain the risks to me. I was simply asked "The seller wants completion on notice, are you OK with that?"

You'd normally have exchange on notice (usually 10 working days) with a long stop date that is on or before the date that your mortgage offer expires. The developer should be able to give an estimated timescale for completion (although obviously there can be delays) to give you a rough idea what kind of wait you're in for.

Bear in mind that you will have to apply to amend your mortgage offer if you reduce the purchase price, which will cause at least a slight delay.

Also, you are completely free to tell your solicitor that you don't know much about completion on notice and would like the process as well as the pros and cons to be explained to you. They really should've done this anyway, but you're paying for their advice so don't be scared to ask for it (property solicitor here)!

Oh also @randomsabreuse raises a good point about insurance, your solicitor can arrange with the seller's solicitor to vary the contract to provide that the seller is responsible for insurance up until completion to resolve that issue.

foxycleopauper Thanks for pointing out that I may have to revise my mortgage offer. The developer estimated completion between mid Nov to mid Dec, but that's the same developer who also said mid Sep and then mid Oct!!! I am also told the developer is a small local one, so the risk of it runs into cash flow problem and going bust is another concern. On a slightly different note, I am shocked how seemly well of people (and not just my seller) are practically so broken, they cannot even afford 1 month overlap of rent and mortgage. How can they afford to buy the house in the first place is beyond my comprehension.

Aaaaaaaand, the seller pulled out! Because he is "not 100% confident that I would exchange". well, what did he expect!