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Legal Action Over Chain Collapse.

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http://news.bbc.co.uk/1/hi/england/kent/8181899.stm This could change the game significantly, is there already any sort of precedent in place or is there is simply no case to answer? Chains have been falling apart all over the place it's the first time I've heard of it going to legal action.

If it's exchanged, there is certainly a case to answer.

The chap with the beard will end up losing his deposit on the bungalow, but keeping the deposit on the shop / flat unless the sales go through.

This does not apply to sales that are SSTC where the contracts have not been exchanged. Failure to complete (post exchange) is very rare. Failure to exchange is not.

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http://news.bbc.co.uk/1/hi/england/kent/8181899.stm

This could change the game significantly, is there already any sort of precedent in place or is there is simply no case to answer? Chains have been falling apart all over the place it's the first time I've heard of it going to legal action.

No change at all. Chains normally fall apart before contracts are exchanged. Once you have exchanged contracts you are legally obliged to complete. Most seller's solicitors make sure the funds will be available to the buyer to complete prior to exchange. Having said all of that, in every property purchase I have done I have exchanged and completed on the same day; saves mucking about with nominated client accounts at the lawyers bank

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http://news.bbc.co.uk/1/hi/england/kent/8181899.stm

This could change the game significantly, is there already any sort of precedent in place or is there is simply no case to answer? Chains have been falling apart all over the place it's the first time I've heard of it going to legal action.

In other news, a man misses out on pocketing £100K on forcing his dad out of his house and into a bungalow and pocketing the difference for himself.

It's sort of bleeding obvious - if you exchange on merely a promise of more money to come, then it might not - surely anyone with a brain knows it might not. It's a risk you are knowingly taking - or if you don't work it out - you're a bit fick like.

Would you go and buy a new car till you'd sold the old one, if you needed the proceeds from the old one to buy the new... - of course not.

The reality is, this guy's got stung for the obvious - it's a risk if you don't complete on your sale to have exchanged first. But is he seriously claiming he'd not worked out it was a risk....

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I can't believe I am going to admit this, but I have twice exchanged on a property without having exchanged on the property I was selling. It was INCREDIBLY stupid and simply would not have been practicable if the market was the way it is now. Fortunately it was Summer '06 and Summer '07 when finance was easy as you like. I even took a bridging loan the first time from my bank, to allow me to complete on my purchase before I completed on my sale.

Anyway, what does this say about this case, not a lot except yes, please please please make sure that everyone in your chain has finance agreed on both sides of their transaction before you exchange. People are always desperate to exchange but surely it's better to be dropped just shy of exchanging than have a scenario like this emerge?

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Guest DissipatedYouthIsValuable
http://news.bbc.co.uk/1/hi/england/kent/8181899.stm

This could change the game significantly, is there already any sort of precedent in place or is there is simply no case to answer? Chains have been falling apart all over the place it's the first time I've heard of it going to legal action.

No shop and flat in Margate could ever be worth £425k.

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I can't believe I am going to admit this, but I have twice exchanged on a property without having exchanged on the property I was selling. It was INCREDIBLY stupid and simply would not have been practicable if the market was the way it is now. Fortunately it was Summer '06 and Summer '07 when finance was easy as you like. I even took a bridging loan the first time from my bank, to allow me to complete on my purchase before I completed on my sale.

Anyway, what does this say about this case, not a lot except yes, please please please make sure that everyone in your chain has finance agreed on both sides of their transaction before you exchange. People are always desperate to exchange but surely it's better to be dropped just shy of exchanging than have a scenario like this emerge?

you've just identified a prime option - bridging finance - the buyer of the bungalow could have bridged it - they didn't. BTW, even if your buyer has a mortgage offer, that's just a promise of money, it's not an irrevocable letter of credit or a guarantee, it's an offer that's not addressed to you and you can't rely on it. There are still a myriad of reasons why your buyer may elect not to complete.... so it's the same thing, unless you accept the risk, then don't do it.

most solicitors will not allow a client to exchange without a mortgage offer in place - but that's resi stuff, for commercial developers (like the pwoperdee developer in this story), it's his own risk - and the seller's......

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I can't believe I am going to admit this, but I have twice exchanged on a property without having exchanged on the property I was selling. It was INCREDIBLY stupid and simply would not have been practicable if the market was the way it is now. Fortunately it was Summer '06 and Summer '07 when finance was easy as you like. I even took a bridging loan the first time from my bank, to allow me to complete on my purchase before I completed on my sale.

Risky for us mortals, but for a Master Of The Universe...no problem.

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I'm no expert in these contracts matters, but surely this is a ****** up that lays at the feet of the conveyancing solicitors as opposed to the sellers/vendors??

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I'm no expert in these contracts matters, but surely this is a ****** up that lays at the feet of the conveyancing solicitors as opposed to the sellers/vendors??

there has been a rash of chains collapsing after exchange on MSE. Main cause was mortgage companies pulling the finance on FTBs at the last minute for spurious reasons...a new phenomenon apparently.

http://forums.moneysavingexpert.com/showth...highlight=chain

http://forums.moneysavingexpert.com/showth...highlight=chain

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I'm no expert in these contracts matters, but surely this is a ****** up that lays at the feet of the conveyancing solicitors as opposed to the sellers/vendors??

This is pretty much as i see it.

The main culprit would seem to be the conveyancing solicitor who allowed his property developer client to exchange on a purchase before funding was 100% in place.

It is a partcularly rare event, I have only seen it happen once in the last 10 years where a purchaser of mine was declared bankrupt between exchange and completion.

It seems like the developer will be liable for the losses incurred by the other two parties in the transaction, but whether anyone sees any money out of him if he had his empire purely built on bank loans is another matter.

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If it's exchanged, there is certainly a case to answer.

The chap with the beard will end up losing his deposit on the bungalow, but keeping the deposit on the shop / flat unless the sales go through.

This does not apply to sales that are SSTC where the contracts have not been exchanged. Failure to complete (post exchange) is very rare. Failure to exchange is not.

Failure to complete post exchange WAS rare but it's become increasingly common with many buyers of new builds backing out once they have already exchanged.... we have yet to hear about ( I think) a huge swathe of prosecutions in the new build but surely its only a matter of time, unless the buyers have some sort of edge as regards the steepness of the fall and therefore the overvaluation at time of purchase (or exchange).

In this case Mr Smith who is being sued may well have a case against his solicitor who perhaps should have made sure his buyer was in a financial position to be able to complete.. prior to the exchange... Mr Smith should also be bale to sue his buyer for potetnial losses with the same chance of success as the person who is suing him.... so he shouldn't lose out.

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This is pretty much as i see it.

The main culprit would seem to be the conveyancing solicitor who allowed his property developer client to exchange on a purchase before funding was 100% in place.

It is a partcularly rare event, I have only seen it happen once in the last 10 years where a purchaser of mine was declared bankrupt between exchange and completion.

It seems like the developer will be liable for the losses incurred by the other two parties in the transaction, but whether anyone sees any money out of him if he had his empire purely built on bank loans is another matter.

I am not sure about the conveyancer who let the developer exchange without funding is negligent. I've seen people do it all the time - it must make their backside pucker, but they do it and this is a commercial deal. So long as the lawyer pointed out the risks in writing, then it's the developer's problem as he's not a mug punter, he's a developer.....

I'd actually blame the solicitor for the primary vendor (the old bloke's solicitor) IF he's not pointed out the increased risk for his client as his client is a professional not a residential man in the street - we also don't know whether this developer has ringfenced his investment into a limited co etc and so no-one gets anything....

It is rare, but this is not a conventional residential conveyancing chain - there's no way it's that uncommon in commercial transactions - most sellers are aware of it and many insist on seeing equity commitment and debt funding letters addressed to them these days.

I do agree that Mr Developer is on the hook - and also question whether he's a man of straw.....

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No shop and flat in Margate could ever be worth £425k.

Margate isn't worth £425k, it's not even worth 452p ;-)

gB

Edited by goonboy

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What a messy world we live in,but surly the finance should be in place before contacts are exchanged?

Nope.

An offer of funds might be in place but it is not unknown for them to be withdrawn before completion

tim

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