As you move through your property purchase, you'll often hear people talking about "Exchange of Contracts."
It's one of the most important milestones in the conveyancing process because it's the point at which your purchase becomes legally binding.
Until contracts are exchanged, either party can usually withdraw from the transaction. Once exchange has taken place, both the buyer and seller are committed to completing the sale on the agreed date.
Understanding what Exchange of Contracts means will help you know why your conveyancer carries out so many checks before reaching this stage.
The Short Answer
Exchange of Contracts is the point at which the buyer and seller become legally committed to the transaction.
Before Exchange, either party can usually withdraw.
After Exchange, both parties are legally bound to complete the transaction on the agreed completion date, unless the contract provides otherwise.
The Explanation
Before contracts are exchanged, your conveyancer will make sure that all legal investigations have been completed and that you're in a position to proceed.
This usually includes:
- Reviewing the legal title.
- Receiving satisfactory property searches.
- Considering replies to enquiries.
- Receiving your mortgage offer (where applicable).
- Receiving your signed contract.
- Holding your deposit (where required).
- Agreeing a completion date with all parties involved.
Once everyone is ready, the buyer's conveyancer and the seller's conveyancer will formally exchange contracts.
This doesn't usually involve everyone meeting together. Instead, it's normally carried out by telephone using an agreed legal procedure.
Once Exchange has taken place, both parties are legally committed to completing the transaction on the agreed completion date.
Common Questions
Can I pull out before Exchange of Contracts?
In most circumstances, yes.
Until contracts have been exchanged, either the buyer or seller can usually decide not to proceed. Whilst this can be disappointing, there is generally no legal obligation to continue before Exchange.
Can the seller accept another offer before Exchange?
Potentially, yes.
Until contracts have been exchanged, neither party is legally committed to the transaction. Although uncommon once matters are progressing well, it is possible for circumstances to change before Exchange.
Do I need buildings insurance before Exchange?
This depends on the terms of the contract and the type of property you're buying.
Your conveyancer will advise you when you should arrange buildings insurance so that you're properly protected.
Can I book my removals before Exchange?
It's usually sensible to wait until Exchange of Contracts has taken place.
Whilst everyone may be working towards a proposed completion date, dates can change before Exchange. Booking removals too early could result in cancellation or rearrangement costs if the transaction is delayed.
Top Tip
Try not to make irreversible arrangements, such as booking removals, giving notice on a rental property or arranging time off work, until your conveyancer confirms that contracts have been exchanged.
Did You Know?
Although it's called Exchange of Contracts, the buyer and seller rarely meet each other. In most cases, the exchange is carried out by the conveyancers over the telephone using an established legal procedure.
Common Misconception
"Once my offer has been accepted, the property is mine."
Unfortunately, that's not the case.
An accepted offer is an important step, but neither party is legally committed until Exchange of Contracts has taken place.
The MA Lawyers Approach
Exchange of Contracts is one of the most significant stages of your purchase, so we believe it should never be rushed.
At MA Lawyers, we'll only recommend proceeding to Exchange once we've completed our legal investigations, answered your questions and ensured you understand the commitments you're making.
We'll explain exactly what Exchange means, confirm the agreed completion date and make sure you're fully prepared before your transaction becomes legally binding.
Related Articles
- Why Is My Purchase Taking So Long?
- What Happens on Completion Day?
- I've Completed – What Happens Next?
- What Enquiries Will My Conveyancer Raise?