The process of buying a home in the UK is both exciting and complex – and a crucial part of this process is understanding how do solicitors exchange contracts.
The contract is an important legal step towards completing the purchase, but it is also one that is legally binding.
Both parties are legally entitled to pull out of the home buying deal without racking up big costs until the contracts are signed.
Here, the Property Road team have put together this guide to help explain what happens when solicitors in England and Wales exchange contracts because it is important to know the stages that precede it – as well as those that follow. It’s also a good way to understand why the house buying and selling process can take so long to complete.
The process is different in Scotland as the process tends to involve estate agents, and a formal, written offer is made by a solicitor after the buyer has seen the Home Report.
How solicitors exchange contracts – explained
Here, we explain the step-by-step process for how solicitors exchange contracts.
Step 1: Solicitor Review of Documents
The first step in the process of exchanging contracts is for each solicitor to review the contract documents and make sure that they are accurate, legally compliant, and complete.
This includes making sure that all relevant forms have been filled out correctly and that any necessary amendments have been made. The solicitors will also check that all parties understand the terms of the contract and any potential legal implications.
Step 2: Exchange of Documents
Once the solicitor review has been completed, both solicitors will exchange signed copies of the contract documents to finalise the sale or purchase of the property.
This step is critical for both parties to be legally bound by the terms of the contract. The documents should also include any agreed-upon amendments or changes for both parties to agree on the conditions of the sale.
Step 3: Adherence to Terms of Contract
Once the contracts have been exchanged, it is important to ensure that both parties are adhering to the terms of the contract to avoid any disputes or breaches.
This includes communicating regularly, being transparent about any changes, and making sure deadlines are met wherever possible. It is also a good idea for both parties to have their respective solicitors review any changes that occur during the process to make sure that everyone is legally protected.
And that’s it! It sounds straightforward, and with an experienced solicitor, it usually is.
Before contracts are exchanged
Before contracts are exchanged, there are some crucial legal steps. A buyer will need to:
- Have an offer accepted on their chosen property by the seller;
- Have a surveyor carry out an inspection of the property to check for any potential issues or defects that could affect the sale;
- Checked the results of all searches that have been requested – and get a more detailed background check of the property, if necessary;
- Ensure they are aware of any potential issues, such as disputes over boundaries or other legal matters.
But that’s not all the buyer has to do before they sign on the dotted line. Here’s a quick checklist of important steps for the buyer:
- Check the Energy Performance Certificate (EPC) of your new home;
- Check the mortgage offer in writing is still valid;
- Ensure you have the money ready for the house deposit;
- Get a detailed list of what is included in the sale, for example, furniture and decor – this will avoid any surprises after you get the keys;
- Know when the expected completion date for the sale is before proceeding;
- Read over the contract provided by your solicitor about the property you are buying – sign it and return it (Not doing so may cause a frustrating delay);
- If there are conditions or terms in your contract you don’t understand, ask your solicitor for clarification;
- To avoid any delays in your paperwork, keep in touch with your conveyancing solicitor;
- Make sure you have enough money for a holding or contract deposit if the seller or the seller’s solicitor asks for one;
- Call your insurance provider to confirm that your home insurance policy is valid from the date of exchange.
Remember, if either party backs out before you sign the contract, you can’t sue them to get your expenses back. But you can purchase insurance in case this happens, which will compensate you for any lost funds – speak to a solicitor about this ahead of time.
Also, if the seller attempts to haggle over the price at this stage, ask your solicitor for help – you might want to pull out before exchanging contracts.
The process of solicitors exchanging contracts
Once these steps have been completed, it’s time for solicitors to gear up for the exchange of contracts which is when an exchange of legally binding documents takes place. The process is simple:
- The buyer’s solicitor will send the buyer’s signed copies of the contract – and any supporting documents – to the seller’s solicitor;
- The seller’s solicitor will check the documents for accuracy.
The seller’s solicitor will also prepare their own set of contracts which they will exchange with the buyer’s solicitor when both sides are ready.
This is the point where a completion date will be arranged between both parties. This is when:
- All final payments, such as the balance of the purchase price, are due to be paid;
- After that, the buyer will take ownership of the property.
The exact completion date can vary depending on how quickly both parties can agree on it; however, it must fall within an agreed-upon timescale that was stated in the original contract.
Once contracts have been exchanged, both parties are legally obliged to proceed with the purchase, and if either side fails to do so, they could be liable for breach of contract. It is, therefore, important that both parties are fully aware of their obligations before the exchange takes place.
On completion day, the buyer’s solicitor will transfer the remaining funds, and the seller will hand over the keys to the property. The buyer’s solicitor is also responsible for registering the new title deed to confirm that ownership has been transferred from the seller to the buyer.
It is important to remember that, when solicitors exchange contracts, does not necessarily mean that completion of a purchase is guaranteed, as there are still various steps that need to be carefully followed to complete a purchase.
However, it is an important legal step and a necessary milestone on the way to completion.
Professional advice should be sought
It’s also important to remember that professional advice should be sought at every step of the process, as solicitors are specially trained and qualified to handle such matters.
A solicitor will be able to provide advice on everything from when it’s appropriate to exchange contracts, to helping you understand the legal documents associated with a property purchase.
By understanding how solicitors exchange contracts in the UK, you can be sure that you are well informed and prepared when it comes to buying a property.
With professional advice, a thorough understanding of the process, and an experienced solicitor at your side, you’ll have everything you need to complete your purchase successfully.
How do solicitors exchange contracts in a chain?
As we have seen, when buying or selling a property, solicitors are required to exchange contracts to legally transfer ownership. This is particularly important when the purchase forms part of a chain, as there are multiple parties involved.
A chain occurs when two or more buyers and sellers have each agreed to buy and sell properties at the same time. However, not directly with each other.
This creates an obvious delay in the contract exchange process because each buyer and seller will need to carry out their own searches and checks.
The big issue with being involved in a chain is that it’s more difficult to agree on a completion date.
So, if just one party experiences delays, it throws off the whole chain.
The problem is that your solicitor can only communicate with the buyer’s or seller’s solicitor involved in your purchase – they cannot communicate with other solicitors involved in the chain.
Also, each buyer and seller will have their own mortgage requirements to meet, and the solicitors will have to work towards a completion date.
No contracts can be exchanged until all the other buyers and sellers have finalised their enquiries and can complete them on the same day.
What happens when the chain breaks?
Should the chain break, then that particular property sale will have to start again – and leave everyone else in your chain hoping to complete.
But should this process take too long to resolve, you might find that one way to speed it up is for somebody to agree to move out of their current house and into temporary accommodation.
The solicitor will recommend exchanging contracts simultaneously on your sale and purchase to help reduce any risk that comes with one party deciding to pull out.
How do solicitors exchange contracts?
Exchanging contracts between solicitors is an important step in the process of buying or selling property.
And while this appears to be a time-consuming process, it requires both parties to be diligent and thorough in their review of the contract documents so that each party can understand their rights and obligations before signing.
By doing so, you can be sure that the exchange of contracts is legally binding and that all parties involved can move forward with confidence.