Completing The Conveyancing Transaction

Completion Day Order of Events

The buyer's conveyancer should ensure that he has both the mortgage funds (if a mortgage is required) and funds from his client no later than the working day before completion. This is because the funds will most likely be transferred by CHAPS, so that the sender can only guarantee that they will arrive before close of business but not that they will arrive in time for completion to take place on time. Even when the funds are being sent by BACS, which is guaranteed by 9am, if there is a problem and the funds are not going to arrive on time it is surely better that this comes to light the day before completion rather than on the day of completion itself. Nonetheless some conveyancers still insist on ordering funds to arrive on the day of completion.

As soon as he has all the funds in his possession the buyer's conveyancer should immediately forward the funds necessary to complete the purchase to the seller's conveyancer. Technically the seller does not have to vacate until the latest time for completion stated in the contract (which unless the contract has a special condition varying that time, will be 2pm), in practice however the seller will usually vacate as soon as his conveyancer receives the funds, provided that he is not still packing of course. If the seller himself has an onward purchase then the funds should be immediately sent on to his seller's conveyancers.

Releasing the Keys to the Purchaser

Unless some alternative arrangement is made then the keys for each property will usually be handed to the estate agent once the seller has moved out. The estate agent must hold them until he receives a call from the seller's conveyancer to confirm that the funds have been received and the matter completed. That call should be made as soon as possible after the funds are received. The estate agent should under no circumstances release the keys to the purchaser until he is authorised to do so by the seller's conveyancer (or the seller himself).

Late Completion

When Completion Still takes Place on the Day

If the funds are not received by the seller's conveyancer by the latest time for completion as stated in the contract then the buyer is in breach of the contract and this then entitles the seller to serve a Notice to Complete (see below). Similarly, if the funds are delivered on time but the seller has not vacated by the latest time then the Buyer may serve notice. Late completions are however often beyond anyone's control, particularly if there is a long chain, and it is considered bad form to serve notice unless completion is so late that it prevents either the late transaction or the seller's onward transaction completing on the day.

Leapfrogging

Leapfrogging is the term used to describe the practice of bypassing one or more of the parties in the chain with the funds on completion and is worth considering where it appears that completion may be late. Ordinarily the funds are passed along the chain from one firm of conveyancers to the next in the chain in order. When leapfrogging however, the conveyancer who holds the funds will ask the next link in the chain if they wish him to bypass them with the funds. If he agrees he will give the conveyancer who holds the funds the details of the link beyond him so that he can then pass the funds straight on. In the meantime any funds (such as mortgage funds) being held by the link being bypassed will be sent straight away, rather than having to wait for sale proceeds to arrive with him. For example, if the chain is A to B to C, and A is holding the funds to complete with B but it is approaching the cut off time for all parties to send funds by CHAPS that day (usually around 15.30) he may say to B "do you wish me to send the funds required to complete directly to C?".  If B agrees to this he will give A C's bank details and reference etc and A will then transfer the funds directly to C, thus cutting out one link in the chain and saving time. In the meantime B will usually need to send some additional funds to C (for example he is receiving £100,000 from A for his sale but buying from C for £150,000 with the additional £50,000 coming from a mortgage) but that transfer can now be made to C without having to wait for the funds to arrive from A. It is possible to bypass more than one link in this way but for each additional link that is bypassed the calculations of who should send how much where become more complicated. It is still perfectly possible however.

There may be occasions when the whole of the money held by A should not be transferred to C, for example where B is downsizing. Let's say A is buying from B for £150,000 and B is buying from C for £100,000. A will then need to send £100,000 to C and £50,000 to B. Each CHAPS transfer however costs money, and this therefore raises the issue of who pays the extra fee (because A is now sending two transfers instead of one). If the delay in completion is the fault of A then it is simple - A either pays or risks being penalised for late completion. If however A himself only received the funds from the party before him in the chain after the contract time then he could argue then he is not at fault and he does not care if he is penalised for late completion since he will simply pass the penalty on to the defaulting party. There is no rule or precedent to say who should pay in this situation and conveyancers need to practical - a bank transfer fee will cost at most £20 and could save a great amount of upset and inconvenience for their clients, and indeed a great amount of work since it could avoid them being served with notice to complete.

It should be noted that conveyancers can only send funds to other conveyancers in this way. They cannot send monies directly to the clients of other firms and cannot redeem mortgages on behalf of people who are not their clients.

Completion on Undertaking

There will be times when one of the parties in the chain is holding the funds but it is too late in the day (i.e. after their bank's cut off time for sending funds by CHAPS) to send the funds on to the next party. In this situation it may be possible to for that party to give an undertaking to the next party in the chain (or even a party further along the chain - see leapfrogging above) that he will forward the funds the next day and the party to whom the undertaking is given may agree that completion can take place on that basis. This means that the client of the conveyancer who is holding the funds can move into the property on the day. An undertaking can only be given however if the conveyancer is actually holding the funds, for example if he is waiting for funds from his client or the mortgage lender or a party further along the chain he cannot give an undertaking even if he has been promised they will arrive.

In the situation the seller may still demand interest under the contract. In particular, if he has a mortgage to repay then he will most likely demand the additional days' interest.

Occupation by Buyer Under Licence

If completion cannot be achieved on the day, for example if the funds are not released by the mortgage lender or sent by the buyer, then the seller may allow the buyer to occupy the property under licence. The standard conditions of sale set out the conditions of the licence (see Standard Conditions). The seller is under no obligation to allow the buyer to occupy. Depending on the circumstances which have led to the delay in completion the seller (or his conveyancer) should seriously consider serving Notice to Complete (see below) in order to avoid a situation where the buyer does not use his best endeavours to achieve completion because he is already in the property and from his point of view the matter is less urgent.

Interest on Late Completion

In the event that completion is delayed beyond the completion time the non-defaulting party may charge the defaulting party interest on late completion. Interest can be charged whether or not Notice to Complete has been served. The face of the contract will state the contract rate - this is usually 4% or 5% above the base lending rate of the seller's conveyancers' bank (most banks' base rates match the Bank of England bas rate). To work out the daily interest rate you need to divide the purchase by 100 then multiply it by the contract rate. You then divide this figure by 365 (being the number of days in a year) to get the daily rate of interest.

Although either party is entitled to charge interest in any instance where there is late completion it is generally accepted that it will only be charged where the seller has suffered loss, for example if he is charged additional mortgage interest or if he has himself been charged interest on an onward transaction.

Notice to Complete

A notice to complete is served where either party fails to complete by the completion time. It is explained in more detail in "Standard Conditions" but basically it is a notice saying that the defaulting party must complete within 10 working days otherwise the non-defaulting party may rescind the contract.

In most contracts there will be a clause stating that the defaulting party is obliged to pay the non-defaulting party's conveyancer's fees for serving the notice. The fee is usually around £100 - £150. For this reason some firms will serve notice at the earliest opportunity but thankfully most accept that it should only be done where to not do so would cause their client loss or put him at risk. For example if notice has been served on a buyer then he is liable to the seller for the interest and notice to complete fee, even if the delay is caused by his own seller. His conveyancer should serve notice in this case, so that the buyer can claim the notice fee back from his seller. Alternatively if it is not certain that completion will be imminent, for example if the seller is having difficulty in evicting a tenant or if the buyer has a problem with his mortgage, or has moved in under licence, then notice should be served so that the non-defaulting party cannot be tied into the contract indefinitely.

If notice is served even though completion can still take place on the day then this does not benefit the client and ultimately, the fee the conveyancer receives is often not worth involved in recovering the funds. Furthermore it is often the conveyancers who end up bearing the cost of the notice and since it is quite usual to come across the same conveyancers time and again, it is likely then next time the conveyancer who serves the notice is himself late in completing it will be remembered.

Refusal by the Seller to Complete When Funds are Received on the Day of Completion

It should be noted that unless there is a special condition in the contract to the effect then the seller is not entitled to refuse to complete provided that he does receive the funds on the day of completion, even if they are late. If they are so late as to prevent him completing on an onward transaction however than he may choose to remain in the property regardless, so as to avoid being homeless.

Damage to the Property or to Fixtures, Fittings and Contents

If the buyer discovers on moving in that the property is damaged or that items that should have been left are missing, there is really little that can be done. The seller is in breach of contract, but enforcing it easier said than done. Generally all that the buyer's conveyancer can do is to ask the seller's conveyancer to contact him and ask him to remedy the breach. In the event that he does not the buyer should be advised to seek litigation advice.