Until you’ve exchanged contracts, there’s no legal recourse
Q: I own a flat in north Leeds which is in negative equity. I have agreed to buy a new property from a well-known Yorkshire-based developer. As part of the deal the developer agreed to provide me with a substantial allowance towards the negative equity under what they call their “star mover” scheme.
Under this scheme they appointed the selling agents whom, some weeks ago, secured a cash buyer for my flat.
The conveyancing process progressed to the stage where I had signed contracts and agreed a completion date when the buyer of my flat withdrew as he no longer had the cash available.
I have approached the appointed selling agents who seem disinterested. They state the buyer produced proof of available cash but they have not retained any hard copy record of this on their file.
I have informed the developers that my high percentage mortgage offer expires in a few weeks’ time. I was then informed they would consider a part exchange of my flat, removing the need to secure a new buyer. However, to add insult to injury, the developer’s conveyancers contacted my conveyancer to say their clients do not offer part exchange on flats.
As a result of all this I have incurred substantial legal and survey costs, ordered new furniture for my proposed new home, aside from the stress and time away from work coping with the process. I appreciate there is no legal commitment of the agreed deal until an exchange of contracts but I do feel blameless for my present situation.
Do I have any recourse? A: It is correct, no legal agreement is achieved until contracts are exchanged. Thus you have no recourse against either the former buyer who retracted due to a change in financial circumstances or the
I have incurred substantial legal and survey costs and ordered new furniture.
developer who would still proceed with the deal should you be able to re-sell your flat.
This, I know, leaves you with the financial outlay of legal and other professional fees for no return.
The fact the developers almost offered a part exchange is a tactless offer which, in view of their policy, should never have been suggested in the first place.
Turning to the selling agent’s position, from your question it seems to be the case they were appointed by the developers rather than yourself.
As such you will need to establish the terms of their contract and who it is with – the developer or you. If the agents are unable to provide hard copy evidence confirming they carried out the required financial checks and received the proof of finance then they may be negligent. If a buyer says he has the cash then the client of the selling agent is entitled to know this statement has been verified. However, the agents would only be accountable to their client who, in this case, appears to be the developers who appointed them.
Sadly, you should not have ordered furniture until the exchange of contracts had been achieved.
The best course of action is to positively challenge the selling agents to vigorously market your property, get the developers behind you in this and to approach your mortgage lender for an extension of time to complete your loan.
It does seem that financially the developers are willing to be flexible to achieve the deal.
Clearly they stand to benefit from the sale of the new house to you and are willing to provide financial incentives to achieve this.
John Robson is Residential Conveyancing Manager at Ford & Warren Solicitors in Leeds.