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Usage of conditional contracts in property transactions

usage-of-conditional-contracts-in-property-transactionsConditional contracts are usually not recommended as they leave doubts about the validity of contractual obligations between the seller and the buyer. However, in some cases it is nevertheless undertaken. They’re usually done to benefit the buyer, rather than the seller; thus he should refrain from entering into a conditional contract, if possible.

There are several risks involved in the use of conditional contracts. However, they are advisable when:

a)      The buyer did not get the opportunity (before the contract was exchanged) to make searches and enquiries or even conduct a survey, or when mortgage arrangements have not been finalised.

b)      The contract depends on the planning permission that is being obtained for the property.

c)      The sale depends on permissions that are to be sought from a third party; for instance, a landlord.

Chain transactions

If one or both parties to the conveyancing transaction has an unconditional sale, or enter into a purchase contract that depends on the conditional sale, a conditional contract should never be used. When such conditional contract is rescinded, there would be great difficulty in fulfillment of linked unconditional contract and may eventually lead to breach of the contract.

Alternative solutions

It is the duty of the seller’s conveyancing solicitor to look into viable alternative options that could be used instead of conditional contracts.  For instance, the contract can be delayed if the matter that is subject to the condition is not resolved.

Photo courtesy: Svadilfari

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