Delays in property transactions following an exchange of contracts are not uncommon and, arguably, can be more problematic than delays encountered pre-exchange (when neither the seller nor the buyer is yet contractually bound to the deal). Delays can arise for a variety of reasons. Some delays, such as, documents not having been signed on time can be overcome with relative ease. But, unfortunately, some can not.
This article examines what a seller can do if its buyer isn’t ready to complete on time and the merits and consequences of serving a notice to complete.
It goes without saying that a buyer’s failure to complete the contract on the contractual completion date will have commercial implications for the seller, such as having to pay interest on an mortgage, or holding up other transactions which may be contingent on the sale proceeds.
From a legal perspective, a buyer’s failure to complete will amount to a breach of contract and will entitle the seller to bring a claim for damages. However, unless stated otherwise in the sale contract, time will not be of the essence and the seller cannot simply terminate the sale contract. This effectively leaves the seller in a position where it cannot “get out” of the contract, leaving it with no choice but to wait until the buyer is ready to complete. A notice to complete helps rectify this position.
A notice to complete is a formal notice (which can be given by either party) which is served when completion has not occurred on the contractual completion date. If a notice to complete is served by a seller it makes time of the essence under the sale contract and requires the buyer to complete.
Assuming that the sale contract is made incorporating the Standard Commercial Property Conditions (SCPC), a notice to complete can be served by a seller at any time on or after the completion date if it is ready, able and willing to complete. What does this mean, you might ask? A seller will be treated as ready, willing and able to complete if:
In practical terms, this means:
The main consequences of serving a notice to complete are:
Service of a notice to complete may be an attractive option to a seller as, no doubt, it will be eager to get the sale proceeds but before serving notice the seller should pause and consider things such as:
If a buyer does not comply with the notice to complete (i.e. it does not complete within ten working days), a seller has a choice. It can affirm the contract and sue for specific performance (an unlikely choice) or it can rescind the contract. Rescission doesn’t take place automatically so steps need to be taken to do this.
If the seller does rescind it is entitled to:
Siobhan Doherty, Associate, Fladgate LLP (email@example.com)