The buyer and seller of a property must both sign identical contracts or agreements as part of the Conveyancing process.
The contract to sell and buy becomes legally binding when those contracts are “exchanged”.
Exchanged means that the buyer’s Conveyancer ends up with the Sellers signed contract and the seller’s Conveyancer ends up with the purchaser’s. This is evidence that legally binding contracts have been concluded.
Welcome to Day 14 of our blog a day, 31 Days in May series – your Conveyancing questions answered – all in one place: Standard Contracts of Sale
Standard Contracts of Sale
The current editon is the 5th Edition.
The changes in the 5th Edition merely put into effect many of the additional special conditions regularly added by Conveyancing Solicitors.
This post outlines some of the changes which you can find now in the 5th Edition.
The Contract contains both Standard Conditions and Special Conditions.
The rather antiquarian "chattels" and "chattels price" have been replaced by the more modern sounding “contents" and "contents price".
In the fourth edition, all sums are stated to be exclusive of VAT.
The new position is now that the purchase price and the contents price include VAT and all other sums payable under the contract exclude VAT.
The Buyer’s solicitors must pay the money due on completion by a direct transfer of cleared funds from an account held in the name of the Sellers Solicitor’s Conveyancing firm.
Evidence of must also now be produced for any sums which are to be apportioned on completion.
Risk and Insurance
The 5th edition makes a significant change to the risk position on exchange of contracts.
Risk now passes to the buyer on exchange, so the Buyer must insure the property from exchange of contracts and not completion of the contract.
The seller has no obligation to insure the property except where e.g. the property, or any part of it, is let on terms that require the seller to insure i.e. a leasehold property.
A section has been provided to note the time and date and deposit paid over on exchange of contracts (although not part of the actual contract).
Transfer the property to a third party
The buyer cannot require the seller to transfer the property in parts or to a person other than the buyer. This is designed to prevent the possibility of a sub-sale, which must be specifically prohibited by the contract.
This has the added advantage for the seller in avoiding having to consider money laundering issues and concerns about identity which may arise.
Third party rights
The contract does not create any rights under the Contracts (Rights of Third Parties) Act 1999.
There is now a provision that on the sale of a leasehold property, the transfer will include a provision modifying the title guarantee implied by section 4 of the Law of Property (Miscellaneous Provisions) Act 1994 so that it does not extend to any breach of the tenant's covenants in the lease relating to the physical state of the property. This was the most common additional condition in the old 4th Edition contracts.
Fixtures and contents
Special Condition 3 provides that the sale includes those contents which are indicated on the list attached to the contract as included and excludes those fixtures which are indicated on the list attached to the contract as excluded.
It is assumed that the parties will attach a copy of the fixtures, fittings and contents form to the contract and that this will be marked up to reflect exactly what has been agreed. This was not always standard practice.
Special Condition 6 states that neither Seller nor the Buyer party can rely on representations made by the other, unless these have been made in writing by them or their Conveyancing Solicitors.
This was normally an exclusion which Sellers relied upon in verbal comments made to the buyer.
The exclusion provides that it does not exclude liability for fraud or recklessness.
Special Condition 7 provides for named occupiers of the property (that is, any adults in occupation of the property other than the seller) to sign the contract to confirm their agreement to the sale and to release any rights they might have in the property and any fixtures and contents included in the sale. This was also a common additional condition.
If you would like more information check with your Conveyancing Solicitor