Many solicitors are advising that home owners Exchange and complete on same day during the Coronavirus outbreak. This is also referred to as simultaneous exchange and completion. There are a few important reasons for this and there will be implications for you. Let’s take a look…
During the Coronavirus pandemic some solicitors have advised to exchange and complete on the same day. There are risks associated with a simultaneous exchange and completion. But this risk is worth considering when compared to the risks of a delay between exchange and completion during the Coronavirus pandemic.
Whilst there are risks associated with exchanging and completing on the same day, it is worth considering how these compere to the risks of a delay between exchange and completion during the Coronavirus pandemic.
The main risk is from someone in the chain contracting Coronavirus Covid-19, which could delay or prevent the move.
This could be you or one of the other people in the chain. But equally it could be your solicitor or another solicitor in the chain.
If this were to happen it could cause a delay to the completion date and may have serious financial implications to you or to others in the chain.
Exchange contracts and complete meaning
Exchange of contacts is when both parties in the transaction are in possession of a signed contract. On this date a deposit is paid to secure the transaction. The deposit is usually 10% of the purchase price.
It is from this point that both parties are legally bound to complete the transaction on an agreed day. Completion is normally set for around two weeks from the date of exchange.
The day of completion is when the final moneys are paid over. It is on this day the ownership transfers to the buyer. Plus is when the new owners get the keys to their new home. It is on this day that the transaction is ‘completed‘.
Exchange and complete on same day or simultaneous exchange and completion meaning
If your house purchase is to exchange and complete simultaneously, there’s no gap between exchange and completion, as it all happens on the same day.
This means there is no need for an initial deposit to be paid. But instead the full amount is in one amount for the full purchase price instead.
There are a few reasons why a same day exchange and completion makes sense during the Coronavirus pandemic. Let’s take a look at what these are and why it’s a good idea to go for a simultaneous exchange and completion.
- Someone in your chain could contract Coronavirus during the period between exchange and completion. If this were to happen, and it could be yourself, and as a result it caused a delay to the completion date or if completion doesn’t take place at all, this could have serious financial implications.
- What would happen if one of the buyers in the chain lost their job or their business stopped trading between he dates of exchange and completion? Would they still be able to complete if this happened? Whilst they will still be legally bound to complete despite what has happened, this may not help.
- There could be a problem with any one of the law firms in the chain. The office of one of the firms could close due to an new outbreak of Coronavirus-Covid-19. Or the solicitor dealing with the transaction could contract the disease and hold up the completion of the transaction.
- There could be a problem with the banks whereby there’s a delay to the transaction. Whilst this is unlikely to happen, it is possible. By agreeing to a same day exchange and completion, the mortgage funds will be ready on the day for the translation to happen.
- Removal firms could develop a problem between exchange and completion. But by setting a date on which exchange and completion will happen on the same day means you can fix in this date with your removal firm. At least if a problem occurs before the day of simultaneous exchange and completion arrives, you can postpone the date without the risk of financial loss to you.
Amending the contract might solve the problem
There are some solicitor firms that are suggesting to insert additional conditions into the contract. These new conditions are there to protect the chain against problems associated with Coronavirus and property sales.
However, for this to work, every solicitor in the chain together with each home owner they represent needs to agree to these new conditions for this to have any effect in the event of a problem.
If agreement can’t be reached and in order to avoid any delays in any event, a simultaneous exchange and completion is the solution.
With a same-day exchange and completion you’ll be able to move on the day, because once the whole chain is in agreement to complete, all contracts will be exchanged and completed on the same day.
This will protect you and your house purchase from if someone becomes ill and can’t leave their property or for any other reason that might prevent the transaction from taking place.
What are the risks of exchange and completion on the same day? There are a number of risks to this strategy. You will need to weigh up the risks of a simultaneous exchange and completion against the risks of a delayed completion date.
To find out more about exchanging contracts and completing on the same day plus to read about the 7 risks associated to this, please read this article here: Can you exchange contracts and complete on the same day? (Plus 7 risks).
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