What is a Memorandum of Sale?

When buying or selling a property, you’re likely to encounter various documents, each with its own role in moving the transaction forward. One of the most important of these documents is the memorandum of sale. Although it’s a term that might sound complicated, understanding what it is and how it functions in the property sale process can make the experience less daunting. The memorandum of sale is a vital step in the property sale, capturing the agreed details between the buyer and seller and providing a roadmap for the conveyancing process.



In this blog, we’ll take an in-depth look at what a memorandum of sale is, its purpose, who issues it, and what happens once it’s sent. We’ll also explore the different types of memoranda of sale and common issues that might arise, ensuring you’re well-prepared for each stage of your property transaction.

What is a Memorandum of Sale?

The memorandum of sale is a document that formally records the details of a property sale agreement between the buyer and seller. It’s issued once an offer has been accepted, capturing key information and signalling the start of the conveyancing process.

Importantly, the memorandum of sale is not legally binding. Instead, it serves as a preliminary document to outline the agreement and terms set by both parties. The buyer or seller can still withdraw from the sale after this point, but the memorandum provides assurance that the sale is moving forward and serves as the starting point for legal preparations.

Typically, the memorandum of sale includes:

• Property Address: The full address of the property being sold, including postcode.
• Agreed Sale Price: The price at which both parties have agreed to sell the property.
• Contact Details for Buyer and Seller: Names, phone numbers, and addresses of both parties.
• Solicitors' Details: Contact information for both the buyer’s and seller’s solicitors.
• Property Type: Information indicating whether the property is a freehold or leasehold.
• HMRC Land Registry Number: The Land Registry reference number for tracking the property.
• Expected Exchange and Completion Dates: Target dates for exchange of contracts and completion of the sale.
• Special Conditions of Sale: Any agreed conditions, such as repairs to be completed before completion or any sale stipulations.

The memorandum of sale thus serves as the official confirmation that both parties have agreed to the main terms and provides solicitors with the information they need to begin the conveyancing process.

Why is a Memorandum of Sale Important?

Though it isn’t legally binding, the memorandum of sale is essential because it confirms that both parties have agreed to proceed with the transaction under certain terms. This document also allows both sides to arrange key steps such as arranging a survey, preparing necessary funds, and moving through initial checks that help speed up the process.

As well as setting out the basics of the sale, the memorandum helps reduce misunderstandings between the buyer and seller by confirming details in writing. Since property transactions can often take several months to complete, it’s essential to have a record that both parties can reference throughout the process.

Additionally, issuing the memorandum of sale changes the property listing status.

The property will now appear as “under offer” or “sold subject to contract” (STC), which discourages other buyers from attempting to make competing offers. This status update is an important step, particularly in competitive markets, as it signals that a sale is already progressing.

Related:

What is a Deed of Surrender?

What is a Redemption Statement?

What are Conveyancing Property Searches?

Can You Get Equity Release on a Leasehold Property?

What is Shared Ownership?

Who Issues the Memorandum of Sale?

The estate agent handling the property transaction typically issues the memorandum of sale. As soon as an offer has been accepted by the seller, the agent drafts the memorandum and sends it to the buyer, seller, and their respective solicitors. In most cases, this process takes only a few days, but certain factors can delay it, such as missing solicitor details or confirmation of the buyer’s proof of funds.

It’s helpful for both buyers and sellers to have all necessary details ready when they start the sale process to avoid delays. Having solicitor contact information, proof of funds, and essential property details at hand can ensure the estate agent drafts the document quickly and accurately.

Although the memorandum of sale contains confidential information about both parties, you may not receive a personal copy for privacy reasons. Instead, your solicitor will have access to the document and can discuss its contents with you as necessary.

When is the Memorandum of Sale Issued?

A memorandum of sale is issued as soon as an offer is accepted. Ideally, this happens within 24 hours, but sometimes the process can take a few days or even up to a week. Delays usually occur when either party’s details are incomplete, such as the lack of solicitor information from the buyer’s side.

Timely issuance of the memorandum is crucial for a smooth sale, as it officially marks the beginning of the conveyancing process. The longer the delay in issuing the memorandum, the longer it will take to complete the property sale. To expedite the process, make sure that all essential information is available as soon as an offer is accepted.

What Happens After the Memorandum of Sale is Issued?

Once the memorandum of sale is distributed, the property status is updated to reflect the pending sale, typically as “under offer” or “sold subject to contract” (STC). At this point, the conveyancing process begins, setting the sale in motion through several legal stages.

Here’s an outline of what generally follows:

Conveyancing Process Initiation

Solicitors from both sides begin reviewing and preparing the legal documents required for the property sale, including the draft contract.

Property Surveying

The buyer arranges for a property survey, which will assess the property’s condition and uncover any issues that might affect the sale or valuation, such as structural issues or signs of damp.

Buyer Checks and Proof of Funds

The buyer will also need to provide proof of funds. This often takes the form of a mortgage offer, confirmed within the last few months, and proof of deposit. Initial mortgage agreements are known as a decision in principle (DIP) or agreement in principle (AIP).

Draft Contract Review and Finalisation

The seller’s solicitor prepares the draft contract, which will be reviewed by both parties’ solicitors to confirm that all terms and conditions align with the initial agreement.

Exchange of Contracts

When both parties are satisfied with the contract, they proceed to exchange. This is a significant point in the process, as both buyer and seller are now legally committed to the sale.

Completion

Completion is the final stage, where the remaining balance is transferred, and ownership of the property officially changes hands.

Throughout this process, the memorandum of sale serves as a reference for the agreed terms, allowing all parties to verify that the sale is progressing in line with expectations.

Types of Memorandum of Sale

The memorandum of sale process can vary depending on the method of sale and specific requirements of the transaction. Below are a few types of memoranda of sale and the variations within each:

Traditional Estate Agent Sale

In a typical sale through an estate agent, the memorandum of sale is prepared within a few days after an offer is accepted. This type of sale is generally slower than a quick-sale model but follows the same basic memorandum structure.

Quick Sale Services

Some sellers prefer to work with quick-sale companies, which can prepare a memorandum of sale within a few hours. This approach is popular with sellers seeking a fast, chain-free sale.

Auction Sale

When a property is sold at auction, the memorandum of sale is issued immediately after the auction concludes. Here, contracts are effectively exchanged on the spot, with the buyer usually required to pay a deposit. This type of sale involves a highly accelerated process, with both parties committed as soon as the auction ends.

Potential Issues with a Memorandum of Sale

Although a memorandum of sale is designed to set the sale in motion, certain issues can arise along the way. Here are some common complications that may occur after the document is issued:

Property Chain Delays

One of the most common issues in property transactions is a chain delay. If one sale within the chain falls through, it can disrupt all other linked transactions. This problem is less common in chain-free sales but can still cause delays and, in some cases, lead to the breakdown of the entire process.

Renegotiation of Terms

If a property sale process takes longer than expected, either the buyer or the seller may attempt to renegotiate terms. This is more common in markets with high levels of supply, where buyers may feel they have leverage to reduce the price.

Financial Issues for the Buyer

Buyers occasionally encounter financing issues after the memorandum of sale is issued. This can happen if there are problems with their mortgage approval or if their financial circumstances change during the process.

Survey-Related Issues

After the buyer’s survey is completed, issues like structural problems, damp, or outdated plumbing may arise. These issues can impact the valuation and cause the buyer to reconsider the purchase or request repairs before moving forward.

Timing Complications

Prolonged sales can lead to one party becoming impatient or frustrated, potentially resulting in the withdrawal from the sale. Regular communication with solicitors and estate agents can help to keep things on track.

These potential issues underscore the importance of choosing a reliable conveyancing service and maintaining clear communication throughout the process. A well-handled memorandum of sale can set the stage for a smooth transaction, while misunderstandings or delays can lead to setbacks.

Related:

What is Residential Conveyancing?

What is a Transfer of Equity?

What does a Residential Conveyancer do?

How much does Residential Conveyancing cost?

Leaseholder Deed of Certificate: What You Need to Know

Frequently Asked Questions

Is the Memorandum of Sale Legally Binding?

No, the memorandum of sale is not legally binding. It confirms an agreement in principle, but only becomes binding once contracts are exchanged.

How Long Does It Take to Move from Memorandum of Sale to Completion?

This process typically takes between 8 and 12 weeks. However, it can vary based on factors like property chain complexities and the speed of conveyancing.

Can Changes Be Made After Issuing the Memorandum?

Yes, since the memorandum isn’t legally binding, either party can request changes or renegotiate terms until the exchange of contracts.

What’s the Difference Between Exchange of Contracts and Memorandum of Sale?

The memorandum is an initial document setting out the sale terms, while the exchange of contracts is a legally binding commitment.

What Should I Do If the Memorandum of Sale Is Delayed?

Contact your estate agent or solicitor. Delays often occur due to missing information, so ensuring all details are promptly shared can help.

Final Thoughts

The memorandum of sale may not be a binding contract, but it’s an essential document in the property sale process. Acting as a preliminary agreement between buyer and seller, the memorandum captures all necessary details and confirms the agreement in principle. By understanding its purpose and knowing what to expect, you can make your property journey as seamless as possible. Whether you’re buying or selling, having this knowledge can help reduce stress and ensure a faster, smoother transaction.

For the best results, stay in close contact with your estate agent and solicitor to avoid delays and keep your sale on track.