What is a Memorandum of Sale? A Quick Guide
A Memorandum of Sale is best thought of as a clarification of the terms of a sales agreement before that agreement has been put in place. It is, in effect, a summary of the intent of the buyer, the terms of the seller and the agreed price, and is not, as other types of memorandums can be, a legally binding contract.
However, do not be fooled. Even while a Memorandum of Sale may not be binding, it is far from being an insignificant contract and both buyers and sellers of property would do well to be well-versed on what this document is all about.
What Exactly is a Memorandum of Sale?
A memorandum of sale is a document that sets down all the important key details of a property sale. The memorandum of sale is drawn up once a sale (and of course, a purchase) has been agreed in principle. It is then sent to all the parties involved so that everyone knows exactly what has been agreed.
A memorandum of sale sets down the information that will be used as the basis of the contract of sale, so it is particularly important that it is accurate. Once the memorandum of sale has been completed and shared with all the parties involved the actual sales process or conveyancing can start.
A memorandum of sale is sometimes known as a MOS for short. Memorandum is a word taken from Latin – it means a note or message which helps us remember something.
What Should be Included in a Memorandum of Sale?
A memorandum of sale sounds like a complex document but actually, it is quite simple. Here is what a memorandum of sale usually includes:
- The full address of the property that is being sold.
- The agreed purchase price. It may also show any relevant fees and any deposit paid.
- Contact details for the seller or vendor as they are also known. This should include their name, address and phone and email contacts. (The seller’s address may not necessarily be the same as the property being sold.)
- Contact details for the buyer or purchaser. This should include their name, address and phone and email contacts.
- Details of the seller or vendor’s solicitor or conveyancer including a contact name, address, phone and email contacts.
- Details of the buyer’s solicitor or conveyancer including a contact name, address, phone and email contacts.
- Whether the buyer is a cash buyer or is buying with a mortgage.
- If buying with a mortgage some details of the mortgage, and contact details for the mortgage company, may also be shown on the memorandum of sale.
- Expected dates for an exchange of contracts and then the completion of the sale. These dates may be set as a target only, such as 28 days ahead, and are not usually binding.
- Whether the property is freehold or leasehold. If leasehold the number of years remaining on the lease should usually be stated.
- A statement as to whether legal ownership of the property has been checked or not.
- The title number of the property as registered with HM Land Registry.
- Details of any legal issues that are known about that might affect the sale. For example, if the property is subject to probate or is occupied by a tenant.
- Anything else that has been agreed. For example, this might include fixtures and fittings that it has been agreed will be included (or excluded) as part of the sale.
- Any special conditions of sale. For example, if it an auction sale or is a fast sale to be completed quickly.
- Any other relevant or useful information. For example, the status of the buyer such as whether they need to sell another property before they can buy this one, ie. if a chain is involved.
You don’t normally need to sign the memorandum of sale.
There is actually no right or wrong format for a memorandum of sale and no special form for one. Some memorandums of sale may provide the information above in a different order or may provide additional information.
Who Draws up the Memorandum of Sale?
It is usually considered to be the responsibility of the seller to provide the memorandum of sale, although any party to the transaction can do so.
If you are selling your property through an estate agent then the estate agent will usually draw up the memorandum of sale. If selling through an auction the auction house will do it at the auction sale. If you are selling to a house buying company they may complete a memorandum of sale for you to help speed up the process.
A memorandum of sale can be drawn up immediately that a sale is agreed. It should usually be produced in less than a week, but it can take much longer if an agent is slow or if some of the necessary information isn’t available.
The memorandum of sale can either be on paper or sent in digital format.
Is a Memorandum of Sale Binding?
A memorandum of sale is not a contract of sale for a property sale and purchase as such. It does not mean that the property has been finally sold. Indeed a memorandum of sale will usually state that it is subject to contact.
However, the information in the memorandum of sale will be used to prepare the legal contract of sale. So it is very important that all the details in it are correct. If anything is wrong with the memorandum of sale or if anything changes you should inform the other parties immediately.
Even after a memorandum of sale has been issued and exchanged a property sale can still fall through. The parties to the sale can change their minds if they want to without penalty. This might happen if the buyer’s own house sale falls through, they decide to offer less money, they cannot raise the money or the parties just decide not to buy or sell.
What Happens After the Memorandum of Sale?
Once the memorandum of sale has been produced and exchanged the conveyancing process or legal sales process can begin.
The seller’s solicitor or conveyancer will prepare a draft legal contract of sale using the information on the memorandum of sale and other sources of information. The buyer’s solicitor or conveyancer will check the contract of sale and make other checks that are needed for the sale to complete.
At the same time, other tasks will be carried out depending on the nature of the sale. For example, a survey may be conducted, legal searches will be carried out and the mortgage will be processed. Again these will rely on the information provided in the memorandum of sale.
The seller will usually need to provide other information about the sale by completing a fittings and contents form (known as a TA10 form) and a property information form (known as a TA6 form) and possibly other forms.
Once both the buyer’s solicitor and seller’s solicitor agree that everything is in order, they will mutually agree on a date to exchange contracts and then to complete the sale. Exchange of contracts is usually when the sale becomes final. Completion is usually when the purchase price is paid and the buyer takes possession of the property.
Be aware of the differences when selling a property at auction. With an auction sale, the sale legally completes on the fall of the hammer. So the memorandum of sale is actually completed after the sale, not before it.
What are the Possible problems with a Memorandum of Sale?
The most common problem with a memorandum of sale is that it is not produced quickly enough. A property sale cannot proceed without a memorandum of sale having been drawn up. If the memorandum of sale is delayed the property sale will be delayed.
A memorandum of sale can be produced immediately that the sale is agreed in principle. That is when an offer is made by a buyer and is accepted by a seller.
Sometimes, however, there can be delays. Reasons can include if either buyer or seller does not provide the necessary information quickly. Or if a buyer makes an offer but then begins to change their mind.
A memorandum of sale can also be delayed where an estate agent is involved – such as if the estate agent has a large backlog of work, this sale is not a priority for them or is simply slow.
You can help to make sure the memorandum of sale process goes as quickly and smoothly as possible by collecting together information about your house sale in advance.
In simple terms the faster the memorandum of sale is produced and exchanged the faster your property will be finally sold and the faster you will receive the money!