Buyer beware, especially when it comes to house purchases

Buyer beware is always a sensible warning but especially so when the most expensive purchase for most people, their home, is at stake. The point is underlined by two separate stories this week.

One concerns a High Court action by a couple who were pursued by the vendors of a Foxrock property after they withdrew from a signed 2006 contract for sale.

Terry and Janet Byrne of Ballinteer Road, Dundrum, Dublin, forfeited their reduced deposit of €75,000 and, after the vendors sought the difference between their €2.1 million offer and the lower amount the house sold for, that case settled on terms including their paying €237,685 to the vendors.

The couple, in proceedings initiated in 2012, have alleged professional negligence and breach of contract against Eamonn V Carney and Jeremiah C McCarthy, practising at Carney McCarthy Solicitors at Clonskeagh Square in Dublin. The solicitors deny all the allegations and the case has yet to be heard.

Four-bed period house and mews a short walk from Greystones for €975,000

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The second story concerned 16 families who entered contracts and paid deposits in 2021 to buy homes to be built by Meathamatic Ltd at the Ringfort estate at Rathmolyon, Co Meath. They are now in a state of uncertainty after receivers were appointed to the unfinished development.

[ Property sales being lost amid conveyancing delays, agents claim ]

[ Ten things to check before buying your new home ]

Conveyancing of property forms an important part of the practice of Elaine Byrne, a solicitor based in Athboy, Co Meath, who describes it as “the bread and butter of country solicitors”.

“It is a vendors’ market at the moment as there is such a shortage of houses,” she says.

All solicitors dealing with house sales refer to the standard “conditions of sale” and standard “general conditions”, issued in 2019 by the Law Society, the solicitors regulatory body. Those conditions are attached to every contract for sale here.

The vendor’s solicitor draws up the contract which includes the names of the vendor and purchaser, the purchase price, a deposit (usually 10 per cent of the sale price), a closing date and title documents. The contract, “very importantly”, recites any special conditions, says Byrne.

“Special conditions take priority over general conditions and should only be inserted where absolutely necessary. If a special condition does not cover a particular scenario, then the general conditions kick in. It is vital that both vendor and purchaser understand this.”

Stressing she is not commenting on any specific case, Byrne says: “I believe we as solicitors need to really explain the general conditions of sale to our clients. These are the small print that can trip our clients, and ourselves, up.”

“For example, general condition 37 looks at forfeiture of deposit and resale and mentions not only the deposit but also ‘the deficiency of any arising on such resale and all costs and expenses attending on the same or on any attempted resale’.”

The insertion of special conditions such as a loan clause into a contract must be consented to by both parties, she says. “We as solicitors need to highlight the risk to our clients and in particular if a special condition is not agreed to by the other party.”

[ Move to electronic transactions part of radical overhaul of conveyancing ]

Without a special condition, a purchaser would be tied into a contract even though they might find themselves without the funds to complete it and they should consider if they are happy to continue, she says.

Prospective purchasers generally pay a booking deposit between €5,000-€10,000 with estate agents, rendering the property “sale agreed”, which is refundable until contracts are signed.

The standard contract for sale provides a contract deposit, usually 10 per cent, paid by the purchaser on signing contracts. A contract deposit can be waived so all monies are paid on the sale closing but Byrne says this is “very unusual” as it would leave the vendor in a vulnerable position.

Failure to pay the deposit constitutes a breach of condition entitling the vendor to terminate the sale or sue the purchaser for damages or both.

When the contract is signed by purchaser and vendor, it is legally enforceable against either or both and the general conditions will apply unless altered by any special condition, stresses Byrne.

[ Compensation of €32,000 paid in six months over complaints against lawyers ]

During this time, the purchaser must get the balance monies to their solicitor, complete any mortgage documentation and the vendor needs to sign all closing documents and ensure “vacant possession”.

The day the contract is signed is known as “the date of sale”. The “completion date” is when the purchaser hands over the monies and the vendor hands over the closing documents and keys.

If a vendor backs out of the sale, the purchaser can seek specific performance, requiring the vendor to sell, hand over keys or pay damages.

With a view to protecting themselves, both purchaser and vendor should be familiar with the general conditions of sale, Byrne stresses. Any specific concern should be brought to the attention of their solicitor and perhaps the contract should be altered by special condition to afford greater protection.

Additional issues arise in executor sales of property, notes Byrne, an expert on probate law. Timelines for issuing of grants of probate vary across the country and should be taken into account when deciding when to put a house on the market, she says. A purchaser may seek a special condition to pull out if the grant has not issued by a certain date.