Is It Wise To Agree To A Simultaneous Exchange And Completion Date?
Moving house is often stressful because of fears of the sale or purchase not going through. To make the process more certain, there are two separate stages:
Exchange of contracts – this is when the parties buying and selling the property legally commit to the transaction. Binding obligations are placed on both the buyer and seller to complete the sale for the price and on the date specified in the contract; and
Completion – this is the day when the seller must move out and hand the keys over to the buyer.
A contract of sale is only binding when it has been exchanged – it is at the point of exchange that the completion date is agreed and added to the contract (unless you are purchasing a new build property).
Completion usually takes place a few weeks or months after exchange to give both parties time to organise the final arrangements such as drawing down the mortgage, transferring the purchase price, packing up their belongings, booking a removal van, etc. However, occasionally people choose to exchange contracts on the same day as completion for several reasons, this is known as simultaneous exchange and completion.
Reasons For Exchanging And Completing On The Same Day
The most common reason for exchanging and completing on the same day is lack of time. This can sometimes happen because one or both of the parties are on a deadline, such as for financial reasons, and sometimes it can be because it has taken a long time to get to the point of exchange and everyone is very ready to go.
It can also occur where the property that is being bought is already empty, such as if it’s a new build or was previously rented and the tenants have already vacated. In this situation, the seller doesn’t need time to clear the house/book removal vans etc and is probably quite keen to get the completion monies as soon as possible.
With the current global Covid-19 pandemic and the uncertainties this has brought such as potential lock downs restricting house moves, simultaneous exchange and completion is being considered more favourable. Not having exchanged already for completing on a particular day means that in the event completion does not take place due to external factors, neither party would be in breach of their contract terms.
It is however very difficult to do a simultaneous exchange and completion if you are part of a chain. The bigger the chain, the more complex the process can be, and so the less suitable it is for doing it all at the same time.
Whatever the reason, doing it all on the same day must be agreed by both parties. If one party doesn’t agree, the other party either must wait, or risk losing the deal.
The Process Of Simultaneous Exchange And Completion
The usual steps that are carried out between exchange and completion still need to be done, but instead of being done in that period, they will need to be undertaken in advance. The buyer’s solicitors will normally draw down on the mortgage funds from the lender in advance, so they arrive by the proposed completion date. The risk to the buyer is that if they draw down on the funds early, to facilitate mutual exchange and completion, and then the sale falls through, they will have incurred additional costs with the mortgage company which wouldn’t have happened if they’d waited until exchange before they committed themselves.
A simultaneous exchange and completion may therefore be useful to allow an earlier completion date, but there is some uncertainty.
The biggest downside of simultaneous Exchange and Completion is that both parties will need to do all of this preparation without the security of the other party actually being bound, as there is no obligation on either party to complete the sale until contracts have been exchanged. This could means wasting a lot of money, time, and effort for nothing if the deal falls through. The other party could simply change their mind and withdraw from the transaction, even after you have loaded the removal vans!
If, for any reason, completion does not take place on the day agreed, the costs of removals, childcare, kennels, etc, will not be reimbursed. You won’t receive any compensation for time spent off work, redirecting post, taking final meter readings, packing, and everything else that goes into moving to a new house. If you are asked to exchange contracts and complete simultaneously, you should consider carefully the financial and emotional impact if the move does not go ahead on the completion date set.
What Can I Do To Complete Faster?
If everything goes to plan and both the seller and the buyer are in agreement to go ahead with a simultaneous Exchange and Completion, you should instruct your solicitors as soon as possible to make sure they have as much time as possible to prepare. There are certain processes that solicitors would normally carry out between Exchange and Completion, which must instead be done before exchange if there is no time in between.
What You (Or Your Conveyancing Solicitor) Should Consider When Carrying Out A Simultaneous Exchange and Completion:
Which Party Wishes To Exchange And Complete Simultaneously, And Why?
Unfortunately, when one party wants a transaction to be finalised unusually quickly, this may be because they are using the transaction to launder money or commit mortgage fraud. The buyer could have submitted a fraudulent mortgage application, if this is the case completing as quickly as possible will give the lender much less opportunity to uncover the fraud and withdraw the mortgage offer before the funds have been transferred.
A Conveyancing Solicitor must particularly consider money laundering and mortgage fraud where an unusual amount of pressure is being applied for the matter to exchange and complete quickly and should always probe to find out if there is a legitimate reason for this. The conveyancer should ask the right questions and ensure potential money laundering or mortgage fraud scenarios are all considered where necessary.
If You Are Buying, What Is Your Lender’s Notice Period For Releasing Funds?
Most of the time, lenders will need at least 5 working days’ notice to release funds.
However, in exceptional cases, some lenders can release funds within 2 or 3 days. If you are planning a simultaneous exchange and completion and you have an idea of when this will occur, your conveyancer should be sure to request the mortgage funds in good time. If completion is delayed, most lenders will allow the conveyancer to hold onto the funds for a few days, however you should be sure to check the particular lender’s requirements, as interest on the mortgage is payable from the day the funds are released to your conveyancer. If completion does not take place at all, the funds must be returned to the lender.
The Seller – Clearing And Emptying The Property
As a seller, you must be able to have the property cleared out completely before the buyer moves in, including removing all necessary fixtures and fittings, clearing it of rubbish, and removing furniture and belongings.
Where you are exchanging and completing simultaneously, you will have to do this earlier, and as the buyer has not even legally committed himself to the purchase at this point, your efforts may still be wasted.
The Buyer – Preparing To Move In
As a buyer, you may have had to book a removal company to move your belongings in to your new home. This will need to be booked in advance, so you are taking a risk, as you and the seller will not have legally committed yourselves to the transaction at this point.
A chain transaction is where there is a related sale or purchase, for example, the seller of one property is buying another property, the seller of that property may be buying another and so on. If a chain is involved, a simultaneous exchange and completion is risky unless the parties on either side agree to it. If one transaction falls through, the whole chain could collapse.
Uncertainty – What If Something Goes Wrong?
When exchanging and completing on the same day, you will not be legally bound until the day you are due to move.
While effecting a same day exchange and completion can be ideal in some situations, it is important for both parties to understand their respective positions if things go wrong.
What if the other party changes their mind at the eleventh hour, the buyer lowering their agreed purchase offer, the seller increasing the agreed sale price or either party withdrawing altogether? Gazumping and gazundering may be discourteous, but they are still perfectly legal, and their impact will be far greater if you are planning to complete and exchange simultaneously. Having at least 7-10 days between exchange and completion can provide peace of mind, and extra time to resolve unforeseen problems.
You should also be sure to keep your conveyancer updated of any change in circumstances so that all parties are aware of what is going on and can adjust the date for completion if needs be.
What If The Money Does Not Arrive In Time?
If for any reason the money does not arrive in time or hasn’t cleared on the day, you won’t have any time to put things right. In addition, the buyer will have to pay interest from the date of release of the funds, so if the purchase falls through and the funds have to be returned to the lender, this is an additional expense.
The financial side of things will be a lot simpler if you are a cash buyer. You just need to make sure that the funds are available in the solicitor’s bank account on the day of Exchange and Completion, ideally you should be sure that it is there the day before.
If you are considering simultaneous exchange and completion, talk to your conveyancing solicitor first for more details and an explanation of the pros and cons.
Disclaimer – our articles are designed to give you guidance and information. There is no substitute for proper direct advice, particularly as everyone’s circumstances are different. If anything in this article may affect you, please contact us for advice that is specific to your circumstances.