What happens after exchange of contracts when buying a property?

Purchasing a property for the first time, whether commercial or residential, can often feel overwhelming, because so many of us are unsure how to navigate the process. With various steps to be taken, processes to be followed, and involvement from third parties, it can be difficult to know where you are in the purchasing process, and what your next steps are. 

One step that many of our clients express uncertainty about, is the process from exchange of contracts to completion. This high-stakes part of the purchase journey can leave buyers and sellers wondering if they’ve done everything on their end, and who the property actually belongs to at that particular moment in time. 

Andrew Weir, our Head of Conveyancing at Anthony Gold, has summarised everything that you need to know and compiled it into this handy article. Read on to find out exactly what happens after the exchange of contracts, and at what stage you will have completed on your purchase.

What does exchange of contracts mean?

In British law, you cannot agree to buy or sell a property verbally. For a transfer of ownership to be legally binding, it must be supported by an exchange of contracts (a process colloquially known in the property world as “exchange”) between the party selling and the party purchasing the property. Even in cases where no money is exchanging hands (for instance, if a parent gifts their child a starter home), the transfer of ownership must be documented in contracts that protect both parties.

The seller’s solicitor will prepare a contract which includes the basic terms of the sale (i.e. the names of both parties, address of the property, agreed price etc.). This will then be sent to the buyer’s solicitor, who will review the proposed contract and perform their conveyancing due diligence (e.g. performing local authority searches).

If both parties are happy with the proposed terms, the solicitors will perform an exchange of contracts wherein both parties sign their contracts, and send a copy of each contract to the other party’s solicitor.

Once this is done, the buyer can no longer pull out of the sale without incurring significant costs, as they have legally agreed to the seller’s terms and may be liable to pay damages to the seller based on the contract they have signed.

Our residential conveyancing team have also recorded this short explainer video, detailing what is meant by exchange of contracts. You can view this below.

What do I need to do between exchange and completion?

If you are the person (or persons) buying the property, once your contracts have been exchanged, you will need to pay your deposit to the seller’s account. This is typically facilitated by your solicitor, meaning that if you have already transferred your deposit to your solicitor’s account, to be released upon exchange of contracts. 

Once the contracts have been exchanged and your deposit sent, that is everything the buyer must do to complete the sale. Everything else will be managed by your solicitor, or the conveyancing professional that is managing your purchase.

What do the solicitors do between exchange and completion?

The Law Society’s Code for Completion, last updated in May 2019, sets out the obligations of solicitors acting on behalf of a buyer and or seller, and records outlines the practical steps that need to be taken for each party following exchange.

A solicitor acting on behalf of a buyer prepares a financial statement for their client, setting out what funds are required to complete. Prior to exchange, the buyer will have already paid a deposit to their solicitor (usually an amount equal to 10% of the price) which will have been passed on to the seller’s solicitors at exchange as consideration for the contract. The net mortgage advance is requested direct from the mortgage lender, and the balance of funds required from the buyer will be required no later than the working day before completion.

The seller’s solicitor will obtain a redemption statement from the seller’s mortgage lender (if they have a mortgage) as they will be under a professional obligation owed to the buyer’s solicitor to redeem all identified mortgages secured against the title to the property. The buyer’s solicitor drafts a transfer deed for approval by the seller’s solicitor, and the seller’s solicitor will have their client sign it before completion. The buyer will also need to sign a duplicate transfer deed where any covenant is given (i.e. agreeing to indemnify the seller for any future breach of any obligation attached to the property).

What happens if the property is damaged or destroyed?

If disaster strikes and a property is severely damaged or destroyed between exchange and completion, the contract needs to be clear about what happens. In most cases, a buyer will need to assume the risk in the property at the point of exchange. This means that if the property is damaged, the buyer will still have to complete the purchase for the full price and will then use insurance proceeds to rebuild (and presumably to rehouse themselves in the meantime). It is accordingly vital that the buyer insures the property from exchange (unless the property is a flat and insurance is maintained by the landlord).

Having to accept the risk in the property from exchange may seem hard on the buyer who, after all, has no control of the property until completion and will not physically be in possession of it making sure that everything is safe and secure.

However, this arrangement is necessary where there is a chain consisting of three or more properties. The buyer at the top of the chain will be unconcerned about what happens lower down the chain, provided that the relevant purchase funds flow to allow that buyer’s purchase to complete. Their purchase cannot and should not be conditional on anything happening further down the chain and, in the interests of certainty, the sale and purchase must be completed in accordance with the contract, even if material damage or complete destruction of the property has occurred since exchange.

What do I need to do on completion?

It is not necessary for either buyer or seller to be physically present at completion, either at the property or at their solicitors’ office. The Code for Completion sets out requirements for the solicitors to deal with the flow of funds, and the parties themselves simply need to focus on physically moving in or out of the property.

The contract will specify the time that completion needs to occur by on the completion date, normally 1:00 or 2:00pm.

When the seller has moved out, they should deliver all the keys for the property to the estate agent and, once completion funds have been received by the Seller’s solicitors bank, the solicitor will contact the buyer’s solicitor to confirm completion and should immediately issue authority to the estate agents to release the keys to the buyer.

How long do I need to wait between exchange and completion?

Completion should normally be no less than 5 working days after exchange, although commonly 2 to 4 weeks is agreed. However, completion can be any period that the parties agree on, even months apart, if that is what the parties want. The actual completion date is agreed and written into the contract at the time of exchange and must either be a specific date or must be easily determinable (for example, 4 weeks after the issue of an event such as the departure of a tenant, or the issue of an acceptable planning permission).

Where the completion date is settled in relation to any contingency, that contingency should always be backed up by a long-stop date by which completion must happen in case, for whatever reason, the contingent event fails to occur.

What happens on the day of completion?

As soon as possible on the morning of completion, the buyer’s solicitor sends the balance of purchase monies by bank transfer to the seller’s solicitors. Where there is a chain, the onwards transfer will be dependent on completion funds being received in respect of the property down the chain. Where there is a long chain, all parties need to be aware of how important it is to send the funds early to enable sufficient time for onwards purchases to be completed.

One of the steps that the Anthony Gold conveyancing team take to minimise the risk of any delay is to always ensure that mortgage funds and any balance of purchase money required from the client are drawn down at least the working day before completion. This ensures that completion funds can be sent as early as possible on the day itself.

Final security checks are made to ensure the funds are being sent to the correct account (compliance requirements provide for a protocol to be used to counteract the threat of fraud in order to protect client money) and the client is then contacted to advise them that completion has occurred.

What happens following completion?

On completion, the seller’s solicitor will date the transfer deed and then send it to the buyer’s solicitor. The buyer’s solicitor will complete stamp duty formalities within 14 days of completion by lodging an online stamp duty application with the buyer’s consent and will pay the Stamp Duty Land Tax due. 

The online application will generate a form of receipt known as an SDLT5 and this document will be required by the Land Registry when application is made to register by lodging the transfer deed, any mortgage deed and the SDLT5. Most straightforward transactions are usually dealt with by HM Land Registry in a few weeks, but complicated matters can take up to several months, depending largely on Land Registry’s workload.

Title deeds, in their traditional form, no longer exist. A buyer’s proof of ownership is simply an Official Copy of the Register maintained by HM Land Registry, an electronic copy of which will be sent to the buyer by the buyer’s solicitor following registration.

How Anthony Gold can help

When you instruct Anthony Gold, you will have the reassurance of knowing that a top-ranked London firm is dealing with your transaction and will work . Our team will work hard to protect your interests , and ensure your sale or purchase goes as smoothly as possible — from initial offer to completion.

In addition to our specialist conveyancing services, Anthony Gold has substantial expertise in a wide range of complimentary property law areas, which many other smaller firms may not have the resources to provide.

To speak to a member of our expert conveyancing team, you can contact us via the form on our homepage, or visit our contact page for more ways to get in touch. A member of staff will be in touch shortly to discuss your conveyancing needs, and how we can help.