The forgotten risk in residential transactions: should conveyancers be talking more about post-exchange failure?

For generations, exchange of contracts has represented the point of certainty in the residential conveyancing process.

Once contracts and deposits are exchanged, buyers and sellers are generally entitled to proceed on the basis that their transaction is legally binding and that completion will follow. For most clients, that assumption proves correct.

However, exchange is not the same as completion.

Although buyer failure to complete after exchange is rare — estimated at around 1 in 2,000 transactions — it remains one of the most financially and emotionally damaging events that can occur in a residential property transaction. And yet it is a risk that many clients barely consider, and one that is rarely discussed in detail.

That is understandable. Historically, there has been limited practical value in focusing on a problem for which few practical solutions existed. If a buyer failed to complete, the seller would usually retain the deposit and may have been able to pursue further losses through legal action. Beyond that, there was little that could be done to preserve the seller’s position, particularly where they were relying on completion funds for an onward purchase.

Today, however, that position is beginning to change.

ClozeSure was created to address this specific gap. It allows sellers, before exchange, to secure a commitment that if their buyer fails to complete, ClozeSure will immediately step in as a “safety buyer” and acquire the property at 90% of its agreed sale price. Combined with the forfeited 10% deposit from the defaulting buyer, the seller receives the equivalent of their full agreed sale proceeds, enabling them to continue with their onward plans.

The consequences of a failed post-exchange completion can be severe and far-reaching. Many transactions sit within chains, with sellers already committed to their onward purchases, removals, temporary accommodation and other costs. Whilst the 10% deposit provides the seller with an important safeguard, it may not fully address the disruption, financial exposure and stress that can follow if a property sale collapses after exchange.

Nor is litigation always a practical answer. Pursuing additional losses through the courts can be lengthy, costly and uncertain. For clients facing the immediate prospect of losing an onward purchase, legal entitlement and practical recovery are not always the same thing.

In that sense, post-exchange completion protection sits alongside the familiar conveyancing use of title indemnity policies: a relatively modest, one-off cost used to address a low-probability risk where the consequences, if it materialises, could be significant.

The conveyancing profession has become increasingly focused on risk communication in recent years. Client care letters now routinely address issues such as cybercrime, identity fraud, source-of-funds requirements, leasehold complexity and transaction delays. The principle is straightforward: vendors should understand the risks associated with one of the largest financial transactions they are ever likely to make.

Against this backdrop, post-exchange buyer default arguably deserves greater prominence.

This is not about alarming clients. The vast majority of transactions exchange and complete without issue. But many consumers are surprised to discover that exchange is not an absolute guarantee of completion. More importantly, they are often unaware that options now exist to mitigate the consequences if the worst should happen.

That is where solutions like ClozeSure are particularly relevant. For perhaps the first time, conveyancers have access to a practical risk-management tool for an issue that has traditionally been viewed as unavoidable.

This does not require conveyancers to become product distributors or to recommend a particular solution. It is about informed client choice. Where a risk exists, and where a means of mitigating that risk also exists, there is a strong argument that clients should at least be made aware of both.

For some firms, that may be as simple as including a brief reference in client care documentation. For others, it may form part of conversations with sellers involved in longer chains, higher-value transactions or circumstances where a failed completion could have particularly serious consequences.

Ultimately, conveyancing is about helping clients navigate one of life’s biggest financial events with confidence. Most risks cannot be eliminated entirely, but they can be identified, explained and, increasingly, managed.

As expectations around transparency, consumer protection and client care continue to evolve, perhaps the question is no longer whether conveyancers should discuss post-exchange failure, but whether clients would reasonably expect to be told that a practical safeguard is now available.

Kindly shared by Peter Thompson, Founder ClozeSure