FTB Series – what is a property chain?

The property chain – introduction

You may have seen in the estate agents’ windows while looking for your first home ‘No onward chain’; you may have heard of a ‘chain’ or that ‘the chain is not ready’.  You know it is something to do with the conveyancing process, but what exactly is it?

At its simplest, a property chain is a series of linked property transactions. Looked at another way, they arise where a purchaser of a property is relying on the sale proceeds from another property to fund their purchase.

A chain can be visualised as follows:

“A” is a first-time buyer. “B” is both selling and buying a property at the same time. “C” is a seller who is not purchasing another property at the point of sale. This could be because they are selling an investment or additional property, or because the sale arises from probate, among other possibilities.

“A” is at the bottom of the chain. They start the flow of money up the chain when they pay the purchase price for the property owned by “B”.

Once “B’s” conveyancers receive the purchase funds from “A”, they will transfer the purchase price for property “C” to the conveyancers acting for “C”. They will also confirm to the estate agents that the keys to property “B” can be released to “A”.

When “C’s” conveyancers confirm receipt of the funds, they will then confirm to the estate agents that the keys to property “C” can be released to “B”.

At that point, the money that started with “A” has successfully moved all the way up the chain.

What does ‘no onward chain’ mean?

You may also see properties advertised as having ‘no onward chain’ or described as being ‘chain free’. This means that the seller is not relying on the purchase of another property to complete their sale. In other words, the transaction does not form part of a longer sequence of linked sales and purchases.

There are several situations where this may arise. A seller may be disposing of an investment or additional property, the sale may arise following probate, or the seller may have already moved into alternative accommodation. In these circumstances, once a buyer is found the transaction will not depend upon the seller completing a further purchase.

Properties advertised as having ‘no onward chain’ can progress more quickly than those forming part of a longer chain, as there are fewer transactions that need to be coordinated. However, it should be remembered that the conveyancing process still requires matters such as mortgage arrangements, searches and enquiries to be dealt with before the transaction can complete.  How long the process takes really is the question of how long a piece of string is.

What happens if a chain breaks?

Because transactions in a property chain are linked together, difficulties affecting one transaction can have consequences for the rest of the chain. This situation is often referred to as a ‘chain break’ or ‘chain collapse’.

A chain may break where a party decides to withdraw from the transaction, where a mortgage offer is refused or withdrawn, or where an issue arises following a survey or enquiries that cannot be resolved. Changes in a party’s personal circumstances can also lead to a transaction not proceeding.  Suppose in the example above, “C” decides they no longer want to sell?  “B” will likely not be able to sell to “A”, unless they can find alternative accommodation in the interim as they find a new property to buy.  So, from “C” withdrawing, both “A” and “B” have been delayed in their affairs.

Where this occurs, the remaining transactions in the chain may be delayed or may fail altogether unless alternative arrangements can be made. It is therefore common for estate agents and conveyancers to keep in regular contact with the other parties in the chain so that progress can be monitored and potential issues identified at an early stage.

Why can property chains cause delays?

Property chains can slow the buying and selling process because each transaction in the chain usually needs to reach the same stage of readiness before contracts can be exchanged and completion can take place.

This means that all parties within the chain must have their mortgage arrangements in place, searches and enquiries must be completed and satisfied, and the terms of the contracts agreed. Even where most transactions are ready to proceed, one slower transaction within the chain can require the others to wait until matters have been resolved.  Supposing an unexpected delay arises, like a conveyancer losing a signed document, something as ancillary as removals may then become an issue (for more on removals see here). 

For this reason, coordinating the progress of a property chain can form an important part of the conveyancing process, with estate agents and conveyancers working together to ensure that all parties are able to move forward at the same time.

A property chain is a series of linked property transactions, very often where at least one transaction depends wholly upon another.  That dependence is the weak link of the chain, as where a critical party of the chain is either causing delays or wholly withdraws, the chain itself can collapse.  Issues with a chain can be managed ahead of critical breaking points by estate agents and conveyancers alike querying the readiness of the chain as the process nears its end, but this can only go so far.