Often vendors and purchasers want to settle as soon as possible so that they can either receive their money quickly or can start moving in to their new home. A standard contract allows for 35 days between exchange and settlement however the settlement period can be as short or as long as the parties agree.
What are the potential problems if you negotiate a very short settlement period?
It is important to discuss the settlement period with your solicitor prior to agreeing to a short settlement period as failing to complete settlement on time may leave you exposed to unnecessary penalty rates.
For example, the purchaser has asked the vendor to agree to an early settlement as they are selling their old property and will be out of their house earlier than expected. The vendors agree and the parties decide to settle within 14 days of exchange which is confirmed in writing in the contract. However, the purchaser's bank has not yet processed the mortgage documents and therefore there is no way they can settle within this time frame. As a result of this, the purchaser is now in breach of the contract and will have to pay penalty interest to the vendor for each day until settlement occurs.
This is why it is always important to seek legal advice from your conveyancer or solicitor so that you are informed on all potential risks.
Please note the answers provided are for your general information only and we ask that you call our office on 01800 650 656 to obtain detailed legal advice for your individual situation.
Rachael Thurn | Property Conveyancer