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What are the potential consequences of failure to complete on an off-plan property purchase?
What are the potential consequences of failure to complete on an off-plan property purchase? What penalties might be imposed beyond losing the deposit if the buyer walks away from the purchase?
To some extent this will depend upon whether there are any specific conditions that were incorporated into the Contract over and above the standard conditions of sale.
Subject to this the position would be that on completion if the buyer fails to complete then the Seller will serve a notice to complete making time of the essence and stipulating that completion must take place within (usually) ten working days from the date of service of the notice. Interest will be charged at the contract rate for every day that the buyer fails to complete.
It is common practice for the contract to contain a provision for the buyer to pay a further sum towards the costs incurred in the preparation and service of the notice to complete.
If at the expiry of the notice the buyer has still not completed then the Seller has various alternatives. The Seller could sue the buyer for specific performance but this would only be taken up if the Seller perceives that the buyer has the resources to complete coupled with the possible difficulties with re-selling the property. The second option is that the Seller could effectively call off the Contract in which case the buyer would lose the deposit paid. If the deposit paid was less than 10% then the Seller may well sue for the balance of the deposit which would have become payable as soon as the notice to complete had been served. In addition to the forfeiture of deposit the Seller would of course be entitled to recover the interest, the Solicitors fees for the service of the notice to complete together with any other items or expenses that may have been catered for in any special conditions that might have been included in the Contract.
It should also be remembered that in the event of the Seller taking the route of claiming forfeiture of the deposit the buyer may then be subjected to a possible further claim in the event that the Seller subsequently sells the property at less than what the buyer had originally agreed.
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