Going through all the paperwork involved in buying a new home can be a bit overwhelming. However, their neglect may lead to a financial catastrophe. For example, The Guardian described the story of a British family having to pay a bill of £ 50,000 to repair damage to a home that did not officially belong to them. How is such a situation even possible and what can you do to protect yourself from similar problems? We hope to fully answer these questions in our article.
In the aforementioned text, The Guardian, the parents of a young child decided to buy a new home. After paying the deposit, they have completed the so-called exchange of contracts. However, they were not allowed to stay on the property until the purchase was finalised (with English completion), which usually takes a few extra weeks. The family did not take out home insurance so that the property was already protected when the contracts were exchanged, and that was the biggest mistake. The building was partially destroyed by the flood before the purchase was finalised. The family then faced the following choice: to pay the bill for repairing the damage or withdraw from the purchase. Even though the second option seems reasonable, the pair would lose £ 50,000 on their deposit. In other words, the money would be lost anyway.
This unfortunate situation was perfectly legal under British law. The family obviously blamed their lawyer for not informing them of the potential ramifications of not insuring the property. The lawyer, in turn, insisted that it was the buyer's duty to read and understand the document that he signed. Even if it is 40 pages long.
The question is if you decide to take such an important step as buying an apartment, would you like to receive the described level of service from your mortgage advisor or lawyer?
All advisers at Five Star Mortgages realise that it is imperative to insure your property before replacing contracts. We would never ask you to sign any documents without making sure you fully understand them. In addition, we are always happy to provide you with additional advice so that you are aware of the potential consequences of each of your decisions. As choosing the right lawyer is also important, Five Star Mortgages can recommend those professionals who will always act in your interest.
Before we get to our conclusions, we decided to prepare a short guide on the differences between exchanging contracts and finalising a purchase. All information is provided in the table below.