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Sometimes, a first time buyer will ask us when to serve notice on their rental accommodation. It is very difficult at the beginning of the transaction to know when a purchase will complete. The length of the transaction depends upon a number of factors, including the speed of all parties in the chain, i.e. buyers, sellers, solicitors, lenders and managing agents (if the property is leasehold).
When to serve notice will also depend upon how complicated a transaction is and whether there are any difficult issues to resolve and if there is a chain and how long it is. If there is a chain, then the transaction can only move as quickly as the slowest link in the chain. Instructing a conveyancer who is responsive, pragmatic and efficient will certainly speed up matters in the transaction, but there may be issues outside of your conveyancer’s control, particularly if they relate to a third party or another part of the chain.
If you were to serve notice on your rental at the beginning if the transaction, there is no guarantee that you will be able to complete before the end of the rental period.
It is a risk to serve notice before exchange of contracts.
Serving notice on a rental before exchange of contracts will mean a risk of you having to find alternative accommodation and storage if there is a delay in the transaction, such as waiting a long time for documents, resolving a title issue or waiting on one part of the chain to catch up with the rest of the chain. It is possible that the seller or another party in the chain may have to put the process on hold for a while due to personal circumstances, or certain circumstances may require them to ask for a long time between exchange and completion.
If there is a chain, then one transaction in the chain could fall through which could mean that the chain could collapse or the chain could be delayed while that part of the chain is reinstated and that transaction has to catch up with the rest of the chain.
In conveyancing transactions, there is no legally binding contract until contracts are formally exchanged. At any point before exchange of contracts, either the buyer or the seller can pull out of the transaction without penalty. If a buyer were to serve notice on their rental only for the seller to pull out of the transaction, then the buyer would have to find another property to buy and start the process from the beginning. This would likely mean an extended time in alternative accommodation or having to find another rental for a period of time.
Serving notice on your rental before exchange of contracts also puts a buyer in a weaker bargaining position. If the papers to the property reveal any issues or adverse matters or if a survey reveals there are a number of problems with the property which require expensive repairs, then the buyer, being aware that their rental will end in the near future, may feel under pressure to proceed with the purchase notwithstanding the issues, whereas they may have pulled out if they did not have the pressure of their rental ending. If the buyer wished to negotiate a price reduction due to issues on their survey, then they may be in a weaker bargaining position if they felt under pressure due to their rental ending soon.
Our usual advice is to wait until contracts are exchanged before serving notice on a rental. Once contracts are exchanged, the contract is legally binding and a fixed completion date is set. This may mean a period of paying both mortgage instalments and rent at the same time, but many buyers will feel safer doing this than risking having to find alternative accommodation or storage if the transaction does not run to the timescales they had hoped for.
If you are buying or selling a property, please do not hesitate to contact us for a free, no-obligation quote on 0207 703 5034 or email us at email@example.com.
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