What is a ‘Simultaneous Exchange and Completion?’
A simultaneous exchange and completion means exactly what it says on the tin.
Put simply, it means you
exchange contracts - date the legally binding agreement to sell or buy,
complete the transaction - hand over or receive funds and keys
on the same day.
Typically most transactions require a contractual commitment before the parties make arrangements to move, for example, booking professional removers, arranging time off work, packing, cleaning, arranging childcare and of course arranging finances. Traditionally the period of time in between the exchange of contracts and legal completion is between one and two weeks but sometimes it can run to even two or three months.
A 'simultaneous' (as it's known for short) pre COVID-19 was widely used where properties were already empty (vacant) and for chain free properties where parties do not physically need to move on the completion day. Because of the restrictions and the risks associated with parties or their remover or professional advisers contracting the virus between exchange and completion, a 'simultaneous' has been muted as one solution for residential property deals going ahead in England and Wales.
|The deal is secured and completed, and for a vendor the money is banked. The parties are not exposed for a prolonged period of time, which would be inevitable with a delayed exchange or a delayed completion date. If you simply put the transaction ‘on hold’ there are also risks of the deal going sour, parties changing minds, mortgage offers expiring and so on.
|Reliance on good faith, of all parties. You are effectively making arrangements and even paying deposits to secure for example removals or cleaners without a cast iron guarantee that the transaction will definitely happen on the agree date. The longer the chain the greater the risk that someone drops out or can’t accommodate the agreed date Just one piece of the puzzle not being in place could mean the transaction doesn’t go through as intended.
|No risk of being in breach of contract, which might otherwise happen due to events beyond your control, for example, parties their advisors having to self-isolate or delays associated with the banks, lenders or a removal companies.
|Costs could be incurred if a transaction is set up for a simultaneous exchange and completion date, which then does not take place as envisaged because one of the parties is unable to go ahead at the last minute.
|Up to the moment decision making, the decision can be made and fulfilled there and then, which in turn can help you make other decisions which are or might be dependent upon this transaction for example job offers, schooling caring for relatives and so on.
|Stress / uncertainty, simultaneous transactions can leave parties disappointed if you get to a target date and the deal for whatever reason doesn’t then exchange and complete as planned. If a party needed to vacate it would mean pre planning and packing which could in turn be a wasted effort.
What other options are there?
There are other alternatives to look at such as:
- Exchange of contracts in the normal manner which would fix a legal completion date, but with an additional contractual provision addressing the risk of completion be delayed as a result of COVID -19. For example, if completion cannot go ahead on the fixed date, because of the need to self-isolate the parties are contractually obliged to work together to agree a new completion date.
- Exchange of contracts, with a completion date 'on notice', contractual provisions built into the contract to allow a party to serve notice to legally complete at a later stage normally based on an event trigger. Termination rights should be built into the contract so both parties can terminate after a certain date to avoid getting 'stuck' in a contract.
- Delaying exchange of contracts and completion until there is more certainty.