What happens following Exchange of Contracts – 6 FAQs about pre–completion steps

From the point that an offer is accepted for a property, the focus of Buyer and Seller is on achieving an Exchange of Contracts (“Exchange”) at which point the parties become contractually bound to proceed with the sale and purchase on the Completion Date (“Completion”). Up until Exchange either party can withdraw from the transaction or seek to renegotiate terms, with impunity.

At Exchange the parties are contractually bound to proceed and neither party can withdraw without severe financial repercussions.

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 on solicitors acting for buyer and seller and records the practical steps that need to be taken for each party following Exchange.

A solicitor acting for 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 “assume the risk” in the property at the point of Exchange, meaning that if it 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.

This arrangement is necessary however 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 between Exchange and Completion?

Completion should normally be no less than 5 working days after Exchange, although commonly 2 to 4 weeks is agreed. Completion can however 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, and 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 property team take to seek 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 so 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” no longer exist, and 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 we 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 to protect your interests and to seek the best manner in which to achieve your objectives.

In addition to our specialist conveyancing services the Firm has substantial expertise in a wide range of complimentary property law areas which will assist if issues arise that fall outside a standard conveyance and which many other smaller firms may not have the resources to provide.