Can my brother and I cancel a property swap after exchange?

[Asvan]

Hi all,

Need some advice please.

I own the home that I live in and I inherited another home 12 years ago which has been on rent.

My brother owns his own property which he purchased 5 years ago and he has always been interested in acquiring my second home from me.

Last year I agreed to do a property swap with him where he would have my second home and I would have his home. My brother wanted this property because its closer to where he works etc. Both properties are similar value so no money was exchanged. It was a straight swap

We went to see the solicitor last year and filled in a tr1 form and signed contracts agreeing on the swap.

Since then a few things have happened and we can no longer go ahead with the swap. Neither of us want to go ahead. I called land registry and they said the registration hadn't gone through yet so ive told them to cancel it.

We both used the same solicitor and they have been so unhelpful. When I called them today they said as the contracts had been exchanged and because they are legally binding we cant back out. Even though we both agree and land registry haven't processed the swap yet. I asked them what we can do now and they have literally said nothing can be done and it all has to go ahead.

Does anyone know what we can do to put an end to all this. We've paid the solicitors for their work so far so that's not an issue.

We could potentially let the swap go through and do another swap afterwards but we also have Capital Gains Tax to consider as it is my second property and in the 12 years ive owned it the value has increased.

Any advice would be much appreciated.

Thanks.

I would put this on legal OP rather than Property.
A quick google suggests that the biggest cost of failing to complete after exchanging is from lost deposits, and presumably in your case there were no deposits, so perhaps it won't be too bad.
My guess is that if you both write to your solicitor telling him not to complete, he should not go ahead. But what do I know. Hope you get it sorted.

Have you heard of a deed of rescission? This returns both parties to the state they were in before exchange of contracts.

Worst case scenario could you just immediately apply to swap back?

Are both properties mortgage free?

Yes we would. Im also concerned about the capital gains tax situation.

Yes both are mortgage free.

It should be possible to do a deed of rescission to cancel the contract. Your solicitor should be able to do this for both properties at the same time and cancel any land registry and SDLT submissions. It really shouldn't be that complicated, you just need to pay for the additional work.

Can you do a transfer of equity instead to move the properties back to your respective names.

they said as the contracts had been exchanged and because they are legally binding we cant back out

You have only exchanged. Ask the solicitor what happens when neither of you sign the completion.

Perhaps see another solicitor, yours seems to be pants!

I think OP hasn't explicitly confirmed whether completion has happened or not I.e. whether the TR1s have been executed. Normally, you sign them in advance, then on completion the solicitors date them to make them effective and, then HMLR registers them.

If completion has happened, then you're cooked (even if not yet registered). Otherwise, both of you can just instruct your solicitors not to complete, although I'm not sure about all the repercussions of doing this.

Thinking back to my conversation with the solicitor she said completion had taken place and so we could not cancel. Even though land registry confirmed that registration hasn't taken place. Will this mean cgt will have to be paid twice?

You only pay CGT if there’s a gain. If you swap back
immediately there would be no CGT on that transaction.

Will you have to pay stamp duty if you swap back?

Did you use the same Solicitor or the same firm so have different Solicitors from the same firm?

I'm no legal expert but I am sure a buyer and a seller or swappers in your case, have to have different solicitor's due to conflict of interest.

You can't cancel once you have completed OP. Registering with the Land Registry is a separate step which needs to happen after completion. It's bad luck but you'll have to keep going.

Did the solicitor not advise you should both instruct your own solicitor to represent your own interests in the transaction?

2 different solicitors can be used by the same firm for each individual, however a signing of conflict of any interest should be signed by both parties before any work is carried out...Ideally 2 separate firms are always recommended. If completion has occurred then you need to start the process to swap again and possibly change your solicitor.