You may have found your next property to buy but it needs building work doing. If so you may be wondering if you can do building work between exchange and completion. Doing work on a house before completion is possible, but only if the vendor agrees to it.
But you must get the correct legal paperwork in place before you can do work on a house before completion? Doing work on a house before completion requires a “key undertaking”. This key undertaking needs to be in place with the vendor of the property before contracts are exchanged. Also, you can only realistically do building work on a property between exchange and completion if the property is empty.
Doing work on a house before completion
Doing work on a house before completion is ideal for empty properties that require refurbishment or modernising. This might include a probate property. Probate properties are often where the vendor has passed away but who lived in the house for many years without updating anything. This may include the decoration, the carpets and flooring, the kitchens and bathrooms.
Property buyers who normally ask for a key undertaking include:
- Property investors keen to carry out refurbishment works so the property is ready to sell or let immediately after completion.
- Homebuyers keen get the house up to a standard so they can move in on the day of completion to a newly refurbished home.
- Homebuyers with a retention on their mortgage for required works.
Key undertaking used with a mortgage retention
A buyer’s mortgage company may have placed a retention on the mortgage. This means they will hold a percentage of the mortgage funds back until these works are completed.
A key undertaking can be used in this case to complete the required works before the mortgage drawdown. If the remedial works are completed between exchange and completion this should mean the full mortgage funds can be released on the day of completion.
Agreeing to a key undertaking to grant your buyer access to undertake the required works might be the only way for you to sell your house. The type of works that may involve a mortgage retention could include damp issues with the property.
Popular works done between exchange and completion
The type of works buyers ask to do before completion include the following:
- Replacement of carpets and flooring.
- Fitting built in furniture.
- Installing a new kitchen.
- New boiler and heating system.
- Repairing damp problems.
- Updating the electrics and rewiring.
- Replastering works.
- Roof repairs.
- Moving a downstairs bathroom upstairs.
- Sorting out an overgrown garden.
- Building an extension.
What are the pros and cons of doing work on a house before completion?
There are pros and cons for doing building work between exchange and completion. These include:
Pros for doing work on a house before completion
- The building work is often completed before the buyers are committed to the full running cost of the property.
- Buyers are able to get the property up to a standard where they can move in on completion day.
- Property investors can carry out works necessary for the property to be let to tenants soon after completion.
Cons for doing work on a house before completion
- Buyers is often responsible for the utilities and Council Tax from the date of exchange with key undertakings.
- The buyer may not carry out the works to a good standard. The buyer may then pull out from the sale when the works are partly completed. In this case the vendor may be be left with a property in a worse state than it was before contracts were exchanged. However, the buyer will lose their deposit if they pull out after contracts have been exchanged.
- The buyer may carry out works that have not been agreed in the key undertaking (see article link below).
- The seller will still be paying their mortgage between exchange and completion. Which means if the buyer has asked for an extended period between exchange and completion, this will be an additional cost to the seller.
Is it wise for the vendor to allow building work before completion?
It’s okay for vendors to accept a key undertaking for building works to take place between exchange and completion. But it’s important to use solicitors to draft the key undertaking contract and agree it with the buyers.
The key undertaking should include what works can and can’t be undertaken before completion.
What can go wrong if a buyer does building work on a house before completion?
The worst case scenario of what could go wrong with building works between exchange and completion:
- The buyer or the buyer’s builders could damage the property. But the buyer is committed to the purchase at this point. Any problems caused will end up being the buyer’s responsibility after completion.
- The buyer may carryout works that were not agreed beforehand. You should read the article in the Daily Mail before you agree to a key undertaking (see below).
Does the vendor need to inform their mortgage company before doing work on a house before completion?
The vendor may need to inform their mortgage lender of the key undertaking. But this depends on what building works are to be done before completion.
For example, if the buyer only intends to decorate the property or to install new bathrooms and kitchens, it’s unlikely the lender needs to know. However, any major construction, like an extension or major roofing works, may need to be notified to the lender. But you will need to inform your insurance company of any major building works beforehand.
To be on the safe side always check your mortgage terms and conditions before entering into any agreement involving your property.
What legal paperwork is required before doing work on a house before completion?
The legal paperwork necessary for doing work on a house between exchange and completion is a key undertaking. This needs to be in place if you are thinking about agreeing to your buyer entering your property. But it must be in place ahead of completion. It’s extremely important to have this key undertaking properly drafted by a solicitor
A key undertaking sets out the basis on which the buyer is entitled to access to the property. The contract will include exactly what can and cannot be done to the property.
Legally there’s no reason why you shouldn’t allow your buyer to request access to your property between exchange and completion. But if they do breach the agreement (as in the example in the article in the Daily Mail below), you may end up in court to claim against them for compensation to put things right.
It is not uncommon for buyers to request access to a property to carry out building works between exchange of contracts and completion. This is especially asked by property investors.
But in the case of homeowners this is more likely requested because the buyer’s mortgage lender has insisted on works being carried out to the property before they will release the full mortgage funds.
If the buyers don’t have the refurbished funds spare, and in order to complete the sale, you may need to agree to these works being done before completion can take place so they can receive their full mortgage on completion.
“The house buyer from HELL’: Builder who ripped out kitchen and built an unauthorised extension on £800,000 house before the sale had been completed loses his deposit after sale fell through.”Mail Online
Closing tips for can you doing building work between exchange and completion
The biggest risk to agreeing to building work between exchange and completion is if the buyer doesn’t go ahead with the purchase or if they do works outside of what’s agreed in the key undertaking agreement.
But in reality this is unlikely to happen as the buyer risks losing their deposit if they don’t proceed with the sale. But if you do agree to building work between exchange and completion, make sure you have some way of monitoring what works are done.
If things go wrong between exchange and completion, the buyer will be required to put the house back to how it was before any works began.
But on the other hand if the seller decides not to complete after contracts are exchanged, they could benefit from a modernised and refurbished property. But the seller would be in breach of contract if they don’t complete.
I hope you’ve enjoyed this article about can you do building work between exchange and completion
If you’ve enjoyed this article about “can you do building work between exchange and completion” please share it on your favourite social media site.
Also, if you have any questions, please feel free to comment below too. Please also share any of your experiences with properties you’ve bought. Alternatively, if you need more help, please feel free to contact us on our contact us page here. Or join the discussion and ask your question in the property forum.