Why don’t conveyancers abolish written contracts?
Abolishing written contracts could stop property sales falling through – but might create more problems.
A significant number of property sales and purchases fall through for a variety of reasons. Whatever the reason, other related transactions are often affected and buyers and sellers incur wasted costs. The government has said that it wants to see if anything can be done to change Conveyancing practice to reduce the number of these abortive transactions – but are there any practicable changes which can be made?
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Changing the timeline for property contracts
One suggestion which is often made is that buyers should be ‘locked in’ to a purchase when they have made an offer to buy a property – in other words a contract should come into existence straight away rather than having to wait for exchange of written contracts as at present. Would this stop buyers backing out and reduce the number of sales which become abortive? It is important that there should be a properly functioning housing market. And so the legal framework for property sales should not unduly restrict the operation of this market.
Should buying a house be made easier?
People often say that buying a house should be as easy as buying a car or a tin of baked beans. But one thing that makes selling and buying a home different from ordinary purchases of consumer goods is that the seller is often living in the home being sold while the would-be buyer will also have to sell his own home to fund the purchase of the new one. Buyers and sellers can end up in a chain of interdependent sales and purchases, with perhaps a first-time buyer at one end and a probate sale at the other. If one link in the chain breaks – perhaps someone can’t get a mortgage, or just changes their mind – the whole chain falls apart.
Archaic processes are still followed today
The reason that this can happen is that until formal written contracts are exchanged between seller and buyer there are no binding sale agreements which can be enforced in court. For hundreds of years English land law has refused to accept verbal contracts for the sale of land. Buyers and sellers can pull out until exchange of formal contracts Under modern law such a contract for the sale of land can only be made in writing incorporating all the terms which the parties have expressly agreed in one document or, as is normally the case, in each copy where contracts are exchanged. (i.e. each person signs an identical copy of the contract which are then exchanged between solicitors when the contract is made binding).
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Changing the order of the Conveyancing process
So, solicitors do not exchange contracts until both seller and buyer are ready to go ahead and have agreed a completion date. When there is a long chain of related sales and purchases this means that all the people involved are ready. And until this exchange of contracts takes place any party is free to withdraw, or to try and negotiate a higher or lower price, or some other variation of the terms. Dispensing with written contracts might help reduce the risk of abortive sales Would it help to reduce this uncertainty by doing away with this requirement for contracts to be in writing? So if a buyer says verbally to a seller or the agent that she is willing to buy the seller’s house for the asking price that would create a binding contract (as it can do in the case of goods).
The problem with property chains
The seller would then be free to find another property to buy, knowing that his own buyer could not legally withdraw. But how would this affect a buyer who then found it difficult to sell her own property or get a mortgage? Or perhaps the seller then couldn’t find a new home to buy in the right area? Would they be forced to complete without a related sale or purchase, or end up having to pay substantial damages for breach of contract if they were unable to do so? And what happens if the buyer’s HomeBuyer or Building survey reveals severe structural defects or the solicitors discover some problem with the seller’s title which cannot easily be resolved?
Abolishing property contracts may cause more problems
The likelihood is that the courts would become clogged with aggrieved sellers and buyers trying to enforce claimed contracts – and as anyone who watches TV’s Judge Rinder should know, if you want to enforce an agreement with someone else it is always better if you have some written evidence. Without written contracts how do the courts know exactly what was agreed? Who does the court believe if there is an argument? How about making buyers pay for abortive legal costs?
Should we request a deposit from buyers?
While abolishing the requirement for written contracts might create more problems than it solves, perhaps another solution would be to make people liable for costs if they withdraw before contracts are exchanged (and perhaps pay the costs of others involved if a chain collapses). That might make them less likely to just change their minds on a whim. Perhaps buyers should be asked to put down a deposit to show that they are genuine, and the costs could be taken out of that. But again this poses a problem as often the person withdrawing does so for a good reason – perhaps an adverse survey report or the discovery through property searches that the HS2 line is going to run nearby. So there would still be arguments about whether a deposit should be returned – and also problems about who should hold such deposits.
Make sure your conveyancing solicitor offers guarantees
“No Sale, No Fee” (or “No Completion, No Fee”) and SearchPlus protection offer a better deal. A better way for buyers and sellers to protect themselves is to use firms such as Homeward Legal, as we offer these reassuring guarantees. Buyers will also benefit from our SearchPlus protection against wasted search fees on any purchase which becomes abortive for whatever reason. Our sister company, Searches UK is a property searches specialist and our conveyancing solicitors order searches through them.
There is no doubt that any delays in the conveyancing work do not help, so both buyers and sellers will benefit from employing conveyancing solicitors who are proactive and keep cases moving. Homeward Legal works with some of the top firms in the country to ensure that you get such a service, and if you do encounter problems we are always here to help.
Unlike most conveyancing websites and services, Homeward Legal will be here in the background every step of the way. Why not get a conveyancing quote today?