One of the most important documents in any house selling process is a memorandum of sale. Let’s take a look at what a memorandum of sale is, why it’s important, and the legal implications involved.
Definition of a memorandum of sale
A memorandum of sale is a legal document containing all the information about a property sale. It is typically drawn up by the estate agent, and once it has been drafted, it is then passed on to the conveyancers who represent the buyers and sellers. It should record as many relevant details as possible, including:
- Agreed sale price
- Address of the property
- Names and contacts of the buyer and seller
- The HMRC Land Registry number
- The expected dates for exchange and completion
- Important information about the property e.g., whether it’s leasehold or freehold
- Any terms and conditions included in the sale
Related: Steps to buying and selling a house at the same time
Why is a memorandum of sale needed?
A memorandum of sale is crucial as it confirms the agreed terms between the buyer and seller. While not legally binding, it serves as a reference point to prevent disputes, aids in tracking the sale’s progress, manages chains of transactions, and ensures transparency between both parties.
It also plays an integral part when it comes to surveying the property as it contains all the important details about the house. This could include things like subsidence, which the buyer will need to be aware of before they can decide whether or not to proceed.
Related: What are the main ways a property sale can fall through?
What happens after a memorandum of sale is sent?
The first stage of the house sale process is the memorandum of sale. Once a memorandum of sale has been issued, the property listing will be changed to ‘Sold Subject to Contract’ (SSTC). This means that the conveyancing process has begun, but the sale won’t be legally binding until the exchange of contracts.
What could go wrong with a memorandum of sale?
Most issues that arise following the memorandum of sale are related to the property chain. Usually, the deal between the buyer and seller depends on a chain of other property sales. Should one of these transactions fall through, maybe due to someone having second thoughts about the property – the rest of the chain will also collapse.
Related: Common property chain problems and how to avoid them
The time frame can also present problems once the memorandum of sale has been issued. If the sale is taking longer than expected, the buyer or seller may decide to either renegotiate the price or withdraw completely. Effective communication with your estate agents and solicitors at all stages of the sales process will help to cut the completion times.
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How long after the memorandum of sale is the sale completion?
Usually, the memorandum of sale states the date of the sale as well as the target completion date.
The length of time between the memorandum of sale and completion can vary depending on a number of factors, such as the complexity of the transaction and any conditions that must be met. But usually, if using an estate agent, the sale completion date is set for anywhere between a few weeks to a few months after the memorandum of sale is signed.
