Naska Balisani
Legal
Exchange of Contracts – What Does This Mean?
When buying or selling a property, the exchange of contracts is one of the most important stages in the conveyancing process. It marks the moment when the transaction becomes legally binding for both the buyer and the seller.
Up until exchange, either party can pull out of the deal without penalty. However, once the contracts have been exchanged by the solicitors – each holding their respective client’s signed copy -neither side can back out without facing legal and financial consequences.
At the point of exchange, a completion date is formally agreed, which is typically two weeks later although can take place on the same day as exchange. The timeline can vary depending on the circumstances of the sale and the property chain.
The completion date is when the buyer will pay the remaining balance and the keys will be handed over.
On exchange, the buyer is usually required to pay a deposit, typically 10% of the purchase price. If the buyer withdraws after this point, they risk losing the deposit and may be sued for breach of contract. Similarly, if the seller pulls out, they can be forced to pay damages.
It is crucial that all surveys, mortgage offers, and legal checks are completed before exchange. Your solicitor will also ensure that any issues with the title, boundaries, or local searches are resolved. Once everything is in place, they’ll confirm that you’re ready to proceed and seek authority from you to exchange.
Vernon Sellahewa, a Solicitor in our Residential Property department said:
“Exchange is the legal commitment in a property transaction. Once it takes place, both parties are locked into the deal, and a completion date is set. We at Mullis & Peake LLP, will not commit you to exchange unless and until everything is ready and you are happy to proceed.”