Question: We are looking at buying a property and want to move quickly. The estate agent suggested a "simultaneous exchange and completion". What does that mean?
Answer: Generally, people like time between exchange and completion to do such things as clear the property, arrange removals and get mortgage funds released, etc.
A binding agreement between a buyer and seller only exists once contracts have been exchanged. When there is a simultaneous exchange and completion the necessary completion arrangements have to be made even though there is no binding agreement. This means there is no certainty — and a risk that one of the parties could pull out on the day. This has been known to happen.
Such an arrangement may be acceptable to someone who is not planning on moving into the property on the completion date, such as an investor, but it can cause issues where the buyer does want to move in and has a related sale and a property to vacate.
There can also be difficulties when a buyer has a mortgage, as once contracts are exchanged, the mortgage funds tend to be released to the buyer's solicitors by close of business on the day before completion. If the intended simultaneous exchange and completion does not occur, then the mortgage funds usually have to be returned to the lender, resulting in additional expense for the buyer.
If you are a cash buyer and do not have to move into the property on completion, and there is no ongoing chain, it may be a good option, but it is not without risk.
What's your problem? If you have a question for Fiona McNulty, please email email@example.com or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE. We regret that questions cannot be answered individually but we will try to feature them here. Fiona McNulty is a partner in the residential property, farms and estates team at Withy King LLP (www.withyking.co.uk).
These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor