Selling a property - when can contract disputes arise?

This is the second of two articles related to property contract disputes. Whilst the first article concentrated on dealing with common contract issues experienced by a property buyer, this article will focus on dealing with problems experienced by property sellers.


Read on to discover some of the situations where property contract disputes can arise when selling a property, so you know what to look out for, how to manage the situation and when you should enlist the help of a contract dispute solicitor.


When a buyer pulls out of a house sale


Before contracts are exchanged, a buyer may withdraw the offer they have made. Pulling out of a house sale before exchange of contracts has taken place means that the buyer is under no legal obligation to buy the property and does not need to pay any costs the seller incurs as a result of this. The seller can ask the buyer to contribute towards these costs, however, as previously mentioned they are under no legal obligation to do so.


If, on the other hand, the buyer pulls out of the sale after the contracts have been exchanged, the buyer is legally obligated to pay the property price stated in the contract. You should instruct a dispute resolution solicitor to advise on the steps you should take in relation to the contract.   The property’s seller can sue the buyer for any losses caused and the seller may be able to keep hold of the deposit. Should this happen, the seller will need to seek legal advice on what actions are available to them.


Gazundering and the lowering of the offer made


A buyer may decide to reduce the offer they have already made on the house. Before contracts are exchanged, the seller can decide whether or not they want to accept this new, lower offer. When this takes place just before contracts are exchanged, it is known as gazundering. Whilst gazundering is legal, it is a problem which is hitting the UK property market and is one of the main reasons for the UK’s 300,000 failed property transactions each year. Gazundering is particularly rife when national property prices begin to fall, with the buyer looking to get an improved price as a result of this.


To combat gazundering and having to foot the bill of the costs incurred by not selling to the buyer at the lower price, some sellers and estate agents are requesting that buyers put down a reservation payment. Once contracts are exchanged, the buyer is legally committed to paying the price stated in the contract. If the buyer does try to lower the price after contracts are signed, the seller does not need to accept the new offer. Should the buyer try to pull out of the house sale, having exchanged on the contracts, the seller is able to sue the buyer for any costs incurred and may be able to keep the deposit.


Buyer fails to comply with the notice to complete


If the buyer fails to comply with a notice to complete, the seller can usually rescind the contract. Should the seller decide to do so, they may be able to forfeit and keep any deposit and accrued interest, resell the property, keep any contents in the contract, and claim damages.


The buyer will need to return any documents received from the seller and cancel any registration of the contract. Should the buyer fail to comply with the notice for completion, the seller’s remedies mean that they can claim damages for losses such as:


  • Obtaining a reduced sale price on a future sale
  • Conveyancing fees
  • Mortgage costs
  • Survey costs
  • Costs associated with drafting a new lease
  • Rental charges
  • Any removal deposits paid


Disagreeing with a buyer’s survey


During the sale of a property, the property will be subject to an inspection by a valuer on behalf of the buyer. A buyer can send a surveyor acting on their behalf, along with a specialist surveyor to investigate specific issues.


Even if the seller believes the survey is inaccurate, they don’t have any rights to see a copy of the report unless the buyer chooses to share it with them. Should the surveyor or valuer disclose to the seller the report’s actual or likely findings without the buyer’s consent or knowledge, it could breach their contractual agreement with the buyer and the rules of conduct. This could lead to a contractual dispute and a breakdown in the sale of the property.


If the buyer is making unreasonable demands, the seller can refuse to sell their property to that buyer and can look for a different prospective buyer instead. It is often recommended that the seller protects their interests by commissioning their own independent survey prior to listing the property for sale so that they can deal with any issues found or price it accordingly.


Property damage caused between exchange and completion


It is not uncommon for there to be damage caused or found to the property between exchange and completion of contracts, or even once the sale is completed. If, for example, a water pipe bursts or a window is broken before the sale is completed, the seller has to advise the buyer of the damage. In this situation, it is the buyer’s responsibility to insure the property from the date that contracts are exchanged and to carry out the repairs. The buyer will then have to claim for the damages on their insurance policy.


If the damage or defect is found between exchanging contracts and completion, the buyer can refuse to complete the purchase, request and secure a reduction in price, or be entitled to damages. Should the buyer discover the damage or defect after completion, they may be able to rescind the contract and claim damages for breach of contract or misrepresentation.


Understanding misrepresentations


The seller has to provide the buyer with information about the state of the property. This is done whilst the seller fills out the Seller’s Property Information Form (SPIF) as well as answering any enquiries made by the buyer. The seller has to be extremely careful with the way they answer these questions, as it could lead to them being charged with misrepresentation.


A breach of contract can take place if the seller knowingly misrepresents any of the answers. Contract dispute examples as a result of misrepresentation include structural issues, damp, residential property disputes with neighbours, proposed planning which could affect the value of the property, and the presence of Japanese Knotweed in the garden.


A seller must give full disclosure on all matters regardless of whether or not they believe it is valid or not. If the seller provides incorrect information, they will need to prove that they have an honest belief in the information provided. Should it be found that false or inaccurate information was provided prior to exchange of contracts, the seller should notify the buyer as soon as possible. There are three types of misrepresentations which the seller must be aware of:


  • Fraudulent representation – the seller knows the statement is false and does nothing to rectify this
  • Negligent representation – the seller cannot prove that they believed the statement was true and had reasonable grounds to believe this
  • Innocent misrepresentation – the seller believes the statement to be true and had reasonable grounds to believe this


Property contract dispute resolution options


A property contract dispute is a stressful and draining experience which can lead to the seller being unsure of who to turn to for help. If you’re a property seller, there are a few options available to resolve your contract dispute as quickly and efficiently as possible.


Resolving contract disputes with the help of a contract dispute solicitor


Should you find yourself in a difficult or complicated sale, we highly recommend enlisting the help of a dedicated contract dispute solicitor who will be able to walk you through the contract dispute resolution procedures. This will be your best option when it comes to resolving a dispute as quickly and smoothly as possible.

Get in contact with our team of expert contract dispute resolutions solicitors in our Warrington or Manchester offices, to discover the best route possible to resolve any property contract disputes you may be facing.