In short, an ‘exchange’ is an exchange of contract whereby the buyer and seller are legally obligated to carry out the property sale.
Whereas ‘completion’ takes place after contracts have been exchanged. At this point, the buyer receives the keys to their new house and the seller transfers any outstanding funds to them.
In this blog we outline in more detail the difference between these two processes to help guide and prepare you for what can be a daunting yet equally exciting time of life.
1. Contract details
When preparing the contract, it is essential that the details are all correct. Most importantly, these include your name and information, as well as that of the property, and the price that has been agreed upon. Part of the contract should be a fittings and contents list, so ensure that you’re happy with its content and let your legal representative know about any plans to purchase from it. The most essential date to confirm for the entire process, however, is the exchange of contracts. This is the day that the contract will become legally binding for both parties, and neither can withdraw after this point without a financial penalty. This is done in order to confirm a completion date, which will be the day that the buying party will legally own the property.
2. Exchange of contract
The exchange of contracts can be approached in several ways.
- A simultaneous exchange and completion where both the contract exchange and the transfer of ownership can happen on the same day. This gives both buyer and seller full flexibility with no commitment until the day of completion itself.
- Exchange of contracts in advance of completion, which allows for little to no flexibility.
- Exchange of contracts in advance of completion with a coronavirus clause which grants some flexibility in the event that a ‘coronavirus’ related issue occurs for either the seller or buyer. This can be beneficial as it allows you to delay completion however, the seller could also stall or withdraw completely if they are affected.
3. The deposit
Upon exchanging contracts the buyer will pay a 10% deposit, and should the seller default on completion, the buyer will be entitled to its return (and potentially claim damages for any losses). However, the seller can use all or part of your deposit towards their onward purchase with any remaining balance held by the solicitor. For newbuild purchases, the developer’s solicitor will immediately release the deposit to the developer. If a deposit is not available to secure the exchange of contracts, then contact your legal representative to discuss alternatives. To find out more details on this part of the process, read our ‘guide’ here.
4. The completion date
This is the day you move. Just before contracts are exchanged, legal representatives will manually insert the date, and the sellers, if they have not already done so, must evacuate the property on that date. The representatives must send the completion money to their solicitors to reach their bank account by 1pm that afternoon. If cleared monies are not made available to the legal representatives in a timely manner, you will be responsible for paying daily interest (at the % rate specified in the contract). You must ensure that representatives have cleared funds from you (other than the mortgage loan, which is covered below) at least 24 hours prior to the completion date.
5. Property condition
The buyer accepts the property in the state and condition it is in at the exchange of contracts. It’s advised to conduct your own property investigation and surveyor’s report before reaching this stage. If there’s an expectation that there will be work done on the property before the completion date, then this must be agreed upon and confirmed before contracts are exchanged. Additionally, it’s important to have building insurance in place from the date of exchange of contracts and not completion as any risk to property damage between the two processes, will be the buyer’s responsibility.
6. Delays and completion failure
Although rare, unforeseen circumstances can delay the completion date such as death, illness or extreme weather etc, and the contract accommodates for this with a daily penalty that can be paid by the defaulting party. This would also make them responsible for any reasonable out-of-pocket expenses caused like hotels or removals etc. If either party does not complete the on-completion date that was agreed in the contract, it will roll on to the next day. The defaulting party will also be liable for any costs caused by this. If either party withdraws and the purchase fails to complete, it is best to contact your legal representative for support and guidance.
At Thomas and Thomas Solicitors, we know that buying and selling property can come with challenges during a significant time in someone’s life. That’s why we offer our reliable residential and commercial conveyancing services to help you throughout the process.
We’re dedicated to making the process of buying and selling property as easy as possible, and we’re proud to offer a free no obligation online quotation for the cost of our service bespoke to your needs. This can be accessed here, anytime and anywhere, to help streamline the entire process. If you need any advice or guidance on conveyancing matters, our expert team is always ready to help.