Damage to a property between exchange and completion
Insight
Every month the Farrer & Co Residential Property partners give us a brief insight into their working lives. This month we give an overview of the sale of a property which was damaged between exchange and completion.
The Brief
We were contacted by our existing clients early in the new year for assistance with suggesting agents for their London townhouse which they were putting on the market. Their youngest child was due to start school in September and they were set on making the move from London to the country before then. They wanted to line up the sale for the summer as the wife’s family owns an estate in Shropshire which includes a sizeable cottage that would be ready for them to move into from mid-July.
Executing the Brief
This was a relatively vanilla transaction and once a deal was agreed it ran seamlessly to a 10 working day exchange in early May, helped by the fact that our clients had instructed us nice and early so the sales pack was ready and waiting when the buyers were found. Our clients’ buyers have children too, so both parties were relieved to agree to a three month gap between exchange and completion as this meant respective house moves could take place during the school summer holidays.
In the final week of July and just under two weeks before the scheduled completion date we received a panicked call from our clients; the family bathroom had flooded and there was significant water damage to the bathroom as well as the dining room below.
Our clients were worried that this was going to scupper the deal – the property was in turnkey condition following a significant refurbishment that had completed just under two years ago and this was crucial to the buyers. We immediately reassured our clients. In the contract negotiations the buyers’ lawyer had not sought to reverse the risk position under the standard conditions of sale. This meant that where there was damage to the property between exchange and completion the buyers could not delay or refuse to complete because of it.
The standard conditions of sale had been varied to reflect that our clients would continue to insure the property up until completion; they had wanted control of the insurance given they were still living in the property and had to maintain it in any event to comply with the terms of their mortgage.
Our clients accepted without question that, contractually, they would now need to make a claim under their policy. They promptly contacted their insurance broker to get this ball rolling, but it was soon confirmed that there was not enough time to receive a payout in advance of completion. This was expected given the proximity to completion and simply meant that our clients would need to assign the benefit of their claim to the buyers. Our clients’ insurance broker was brilliant throughout and was happy for us to introduce him to the buyers at the point of completion so he could take the claim forward for them thereafter.
The debrief
No one ever thinks something like this will happen to them, but it can, and it does!
Needless to say, the buyers were not very happy to have found themselves in a position where they had to accept moving into a damaged property and the hassle of dealing with the resulting repair works. It is essential that a client understands what the risk and insurance provisions in a contract mean for them between exchange and completion. Please refer to our residential property lawyer’s guide to risk and insurance in sale contracts for an overview of the considerations at play.
We are always happy to discuss the conveyancing process and how to manage a transaction.
