What is the difference between exchange of contracts and completion in conveyancing?

The two most important milestones in any conveyancing transaction are the exchange of contracts and completion. We look at the difference between them.

When you have an offer on a house accepted, or you accept an offer to buy, the next step is to instruct a solicitor to act on your behalf.

They will make enquiries of the seller’s solicitor, or answer enquiries that may be raised, and in the case of a purchase, carry out the relevant searches.

At this stage, nothing is binding and a seller can pull out of the transaction with no penalty.

Exchange of contracts

Once all the search results and replies to enqiries have been received and the buyer is happy to go ahead, it is time to arrange exchange of contracts. Both sides need to sign their copy of the contract, which doesn’t become legally binding until the solicitors actually arrange the exchange.

The buyer and seller also need to come to an agreement over the date of completion, as this is written into the contract on exchange.

When the actual exchange takes place, by way of a telephone call between solicitors, both parties become legally bound to complete the transaction. The buyer will pay a deposit of ten percent to the seller and a date for completion is set.

If the buyer pulls out after exchange of contracts, they will forfeit the ten percent deposit.

Following exchange of contracts, the solicitor will arrange with any mortgage company for the mortgage advance to be sent in time for completion and the buyer will need to provide the solicitor with the balance of any money due.

Completion

In advance of completion, the seller will need to sign the transfer document, and a buyer will need to sign any mortgage deed.

Completion is the day when ownership of the property actually passes to the buyer and they can move in.

The balance of purchase money is sent to the seller’s solicitor and once they have received it, they will contact the estate agent to confirm that the keys can be released to the buyer.

In the days following completion, the solicitor will arrange for payment of Stamp Duty, ensure that the seller’s solicitor has discharged any mortgage over the property and then register the purchase and any mortgage with HM Land Registry.