The conveyancing process: Stage 4 - Exchange of contracts

Our six-part step-by-step guide explains the different stages of the conveyancing process for a typical property sale and purchase transaction.

1. Instructing a conveyancer
2. Pre-contract stage
3. Conveyancing enquiry stage
4. Exchange of contracts
5. Completion
6. Post-completion

Exchange of contracts

Previously, an exchange of contracts would involve two solicitors sitting in a room with their client's signed contract. They would run through the terms and details of the agreement, date the document, swap copies, and the deal was done.

The same principle applies today, except thanks to advances in modern technology, it now only takes two solicitors on the phone and posting our own corresponding signed contracts to one another. 

Once exchange of contracts has taken place, you will be legally bound to complete the transaction on the completion date as shown on the contract. Your conveyancer will have taken your instructions before legally committing you to the transaction, and you will need to authorise them to effect exchange on your behalf.

The terms of the exchange (Standard Conditions of Sale)

When your conveyancer sent you your contract to sign for the property, you will have seen a mention of the Standard Conditions of Sale. These are all the little terms of the contract that you will be bound by once you have exchanged contracts.

There are a lot of them, but some of the most important ones are:

2.2 Deposit:

In all the discussions leading up to exchange of contracts, you will have heard mentioned the topic of an exchange deposit. If you are purchasing, then you'll have had to send this deposit over to your conveyancer in advance of exchange for it to be used as consideration for the contract (i.e. to make it binding). 

Under the first section of Standard Condition 2.2, the figure required is 10% of the purchase price for the property. This is what is required under the Standard Conditions. However, often in practice, it is at the seller's discretion whether they require the full 10% or whether they'll accept a lower deposit depending on their buyer's circumstances.

3.2 Physical State:

One of the most annoying things when moving house is if problems start to appear that you hadn't noticed at your first viewing three months prior. 

Under 3.2.1 of the Standard Conditions, the buyer of the property accepts the property as it is on the date of the contract. Whatever condition it is in, by exchanging contracts, you've agreed to accept it in that condition. Therefore, best practice is often to arrange a final viewing with the estate agents prior to the exchange of contracts. Always better to be prepared!

6.1.2 Completion time:

The big question on the day of completion is when can you pick up my keys? The answer can vary depending on many factors, including whether or not you're in a chain. The key element looked at by the Standard Conditions under the contract, however, is 6.1.2, which states legal completion has to have taken place by 2 pm in the afternoon. 

If you're at the top of a long chain and completion hasn't yet taken place, and you've gone past 2 pm, it is at your discretion as the seller on whether or not to serve notice to complete. 

A notice to complete is served on your buyer's solicitors and gives the buyer ten working days to complete the transaction legally. If, however, your conveyancer has been told the monies have been sent by the buyers and should be with them shortly, it is often worth waiting. But the 2pm deadline is there if needed.

7.4 Failure to complete:

This is the Condition that covers what happens if everything really goes wrong.

 If you are purchasing a property and you fail to complete on the fixed completion date, but then you further fail to complete once the completion notice has been served for whatever reason. Under Standard Condition 7.4.2 the seller will have the right to retain your deposit and rescind the contract, then proceeding to go on to sell elsewhere.

And then in reverse, if you are selling and you fail to complete for whatever reason, under Standard Condition 7.5 your buyer is entitled to serve notice to complete on you, and if you fail to comply, you are obliged to return their deposit back to them with any accrued interest.

What happens after exchange?

Once the exchange of contracts has taken place, your conveyancer will then work towards getting you ready to complete. The average time between the exchange of contracts and the completion date is around 5-7 working days, but this can vary depending on your circumstances and the chain.

If you're selling:

• Redemption statement will need to be obtained from your lender

• The commission account for your estate agents will need to be obtained from them

• The necessary undertakings to the buyer's conveyancer that all mortgages will be paid off on completion

• A completion statement will need to be drafted to send to you to show the proceeds of the sale that will be sent back to you on completion

• If you're selling a leasehold property, an up-to-date statement of the service charges and ground rent you pay will be requested from your management company.

If you're buying:-

• Your mortgage advance will be requested for the day of completion

• Land Registry searches will be carried out against the title to the property to ensure no additional charges/mortgages have been added

• A completion statement showing the amount to be transferred over to complete (including any apportionment figures if you are buying a leasehold property).

Expert advice on conveyancing matters

SO Legal has experienced solicitors and licensed conveyancers in Brighton, Eastbourne, Hastings, London and Uckfield, and we work with clients across the UK.