What recourse do I have if I can't meet a tight deadline to complete on a house purchase?

Question

I've recently put down a reservation to buy a new-build flat in London, UK. This is one of the last flats available in the block and the builder is in a rush to complete and get the money as soon as possible. They set a deadline to complete the transaction of one month from the time we put down the reservation. This is much sooner than my partner and I would have liked, but we're accomodating their schedule, at a cost to ourselves: for example, my partner has taken time off work in order to attend an inconveniently scheduled appointment with the mortgage broker on a day's notice, and we will have to take a loss on a several weeks' rent as we were not able to find another person to take over our current lease in time.

As the scheduled completion date draws nearer, I'm beginning to worry that any minor setback will push us past the deadline. The dates that have been set by the builder are incredibly tight and don't allow any room for error. For example, the bank requested a reference letter from my employer, and the builder's schedule allowed 24 hours' notice to my employer to provide it. I work in a large corporation with a small and inefficient HR department, which has other priorities. It took a full day of emailing and calling to plead with them to get them to turn around the letter in that short period of time, and it very nearly didn't happen despite my best efforts.

According to the terms the builder set, if we fail to complete by the date they set, they have the right to cancel our reservation. The builder has been vaguely threatening about what will happen if we don't meet the deadline but has not said specifically what their plans are. I'm worried that even minor delays that are outside of my control could result in us going over the scheduled time and thus losing our reservation, the money we've put down, and the flat itself. As a first time buyer, I'd also like to make sure I have enough time to fully research and understand every step, rather than having to make important decisions under pressure.

My question is, what recourse do we have if we go over the deadline and the builder imposes a financial penalty and/or cancels our reservation? Does it matter that the deadline that they imposed in the first place was unreasonably tight and did not allow room for anything to go wrong?

Answer 1

You can usually negotiate a short extension to a deadline like this one, especially if you do so in advance of the deadline, because it would delay the sale even more to find a new buyer and go through the process with them.

But, if the contract provides that you lose your earnest money and the contract is cancelled if a deadline is not met and has no exceptions or cure period, and you don't meet the deadline or get it extended, they can probably enforce the rights set forth in the contract.

Does it matter that the deadline that they imposed in the first place was unreasonably tight and did not allow room for anything to go wrong?

Generally not.

The onus is on you to not sign the contract and provide earnest money if you aren't sure that you can meet the deadlines. Your negotiating power is much greater before the contract is signed than afterwards, although, you still do have some negotiating power because of "lock in" (i.e. the fact that it will delay the process to start over with someone else). The purpose of earnest money is to compensate them for the delay in having to start over with someone else, and they may be happy to get the earnest money in exchange for a modest delay in a hot market.

To escape the deadline that they aren't required to extend in the contract, you'd need what is called "force majeure" or an "Act of God". This would include things like an unexpectedly declared Bank Holiday designed to prevent a run on the nation's bank that prevented you from accessing funds, a mortgage broker's strike, a storm that shuts down courts and businesses like the one they had in Ireland earlier this year, a terrorist attack that put the entire city in lockdown like the one they had after the Boston marathon bombing in Boston, or something of that magnitude. These things do happen, but they are pretty rare.

My small company's HR manager was hung over and didn't show up to work for a few days probably doesn't qualify, even though it is beyond your control.

There is a whole raft of cases governing when delay in the delivery of documents by a third party carrier does and does not provide an excuse, but the safe assumption is that it rarely will provide an excuse.

Answer 2

From a legal point of view, your situation is unenviable; there is nothing enforceable until you exchange contracts, which is precisely what you want to delay. All you have is a 'reservation', the value of which (if any) expires in a few days. Even though you paid for it, the builder made clear that the reservation lasted only for a month, so you have no right to delay beyond that.

You have to make a decision whether to complete within the month, and accept the inconvenience to the two of you and the inability to check for problems (the builders' time pressure may well be that snagging or due diligence will reveal problems that they will have to pay for if you have not signed a contract in a hurry) or to abandon the reservation and ensure that everything is as you want before signing a contract. As mentioned in comments, the builder is not likely to abandon your sale (and look for another buyer) for the sake of a few days, but it is always a possibility. Only you can know which is the better option.