What does exchange of contracts mean?

One of the most important milestones in any property transaction is exchange of contracts.

Many buyers and sellers assume the transaction becomes legally binding when an offer is accepted. It does not.

Before Exchange

Until contracts are exchanged:

• either party can withdraw;
• the agreed price can be renegotiated;
• the completion date is not legally fixed.

Whilst frustrating, this flexibility remains part of the conveyancing process in England and Wales.

What Happens at Exchange?

Exchange takes place when the buyer’s and seller’s solicitors formally exchange identical signed contracts.

Once exchange occurs:

• the transaction becomes legally binding;
• the completion date is fixed;
• the purchase price is fixed;
• the buyer becomes contractually committed to buy;
• the seller becomes contractually committed to sell.

What Must Be in Place First?

Typically, the following must be completed:

• searches reviewed;
• enquiries satisfactorily answered;
• mortgage offer received;
• source of funds checks completed;
• deposit funds received; and
• buildings insurance arranged where required.
• contract documents signed by all parties

What Happens If Someone Pulls Out?

Following exchange, there can be serious financial consequences if either party fails to complete.

These may include:

• loss of the buyer’s deposit;
• contractual interest;
• claims for losses suffered by the other party; and
• additional legal costs.

Why Exchange Matters

For most clients, exchange provides certainty. Removal companies can be booked, completion arrangements finalised and plans made with confidence.

Speak to Judith Manser

Judith is a Partner at Wollens and can advise you. Contact Judith via email Judith.Manser@wollens.co.uk or call 01271 340496.

View Judith’s Profile

You can also complete an online enquiry form. One of the Wollens team will contact you as soon as they are available.