Written by Jan Bolden, Partner, Residential Property
In any property transaction, a Buyer withdrawing from a purchase can have very different consequences depending on the stage reached. This article explains the key differences between pre- and post-exchange withdrawals, the potential financial implications, and practical next steps.
Key Takeaways
- A Buyer can withdraw at any time before exchange of contracts with no legal penalty, meaning the sale is not binding and the Seller may need to relist the property and restart the process.
- After the exchange of contracts, a Buyer who pulls out is in breach of contract and may lose their deposit and face claims for losses, although withdrawal at this stage is rare.
- Howell Jones’ conveyancing team in Surrey can support Sellers and Buyers through every stage of the transaction, offering clear legal guidance if issues arise during the sale process.
What if a Buyer Pulls Out Before the Exchange of Contracts?
If a Buyer pulls out before the exchange of contracts, the sale is not legally binding, meaning they can withdraw without legal penalty or obligation to pay compensation. The Seller generally cannot sue for damages, and the property must be relisted, causing delays and potential loss of costs for both parties.
It is important, before accepting a Buyer’s offer, to ask questions and find out through your Estate Agents:
- If the Buyers have a dependent sale, and if so, how long is the chain below them? The longer the chain, the more time it usually takes to reach the stage where everyone is ready to exchange contracts.
- Do they have their mortgage agreed in principle? Cash Buyers are not always a good thing, as the need to comply with Money Laundering regulations can cause delays.
- Why do the Buyers want to move into your house? Do they have children starting at a nearby school? Will they be near family or a new job? If so, they are less likely to change their minds.
What if a Buyer Pulls Out After the Exchange of Contracts?
If a Buyer pulls out after exchanging contracts, they are in breach of contract.
In principle, the Seller is entitled to serve a Notice to Complete usually within 10 working days on the Buyer, making time of the essence. In principle, the Sellers can keep the deposit (usually ten per cent of the purchase price), sue for damages/losses, and charge interest on the sale price.
While Section 49 of the Law of Property Act 1925 allows a court to order the return of a deposit to a defaulting Buyer, this is rare and only done in “exceptional circumstances,” as courts prioritise the certainty of contract.
The Buyers will have incurred survey fees and mortgage arrangement fees.
Both the Sellers and Buyers will have incurred legal fees, and the Sellers will have to re-market their property.
Fortunately, Buyers will rarely withdraw from a purchase after the exchange of contracts for the above reasons.
Howell Jones has a dedicated team of conveyancing solicitors in Surrey who can guide and support you through every step of buying and selling your home. Get in touch with our Surrey solicitors today for clear, professional advice.
