Exchanging Contracts: A Guide to Legally Binding Your Move

Exchanging contracts is the pivotal moment in the conveyancing process where your property transaction becomes legally binding. Before this point, either party can withdraw without penalty; however, once contracts are exchanged, the buyer and seller are committed to the sale.

Our panel of solicitors ensures all pre-contract enquiries are thoroughly answered, and that your mortgage offer and deposit are fully finalised before the exchange takes place. This guide explains the exact steps required to reach this milestone and what happens if things don't go to plan.

For what happens on the day you complete, read this: Completion Day Timeline: Everything You Need to Do on Moving Day.

What does exchanging contracts mean?

In England and Wales, you are not legally bound to a property transaction until your solicitor exchanges contracts. Until this point, either party can withdraw without penalty.

The term 'exchange' refers to the formal process where solicitors confirm the contract details over the phone before posting the signed, dated documents to one another. Once this is finalised, the agreement is legally enforceable.

If you try and stop the process after you exchange, the legal implications and losses are considerable. Read more: Can I pull out after the exchange of contracts?

How do solicitors exchange contracts?

• 1

  Sign your documents

Once all of the legal enquiries are satisfied, your solicitor provides you with:

• Report on Title. This report is drafted by the buyer's solicitor and explains all the details and risks of buying the property.
• Contract. This is the exchange contract you sign; it doesn't need a witness. Don't worry about typos in names or addresses; simply hand-amend them and sign the contract. You can return it to the seller's solicitor. However, this wastes time as it isn't required.
• TR1 Form. This can be signed digitally or on paper. It must be signed and witnessed by the seller and the buyer. This document is submitted to the Land Registry to transfer title from the seller to the buyer. For any errors in this document, send it back to your solicitor to correct, as the buyer's solicitor drafted it. Read more: What is a Land Registry TR1 Form?
• Stamp Duty Land Tax (SDLT) return. Whether you are paying any stamp duty or not, an SDLT form is sent to HMRC to confirm a transaction has taken place.
• Mortgage deed (if applicable). This is provided by the mortgage lender and is signed and witnessed. The mortgage deed is sent to the Land Registry for registration of the mortgage over the property.

The signed documents must be returned to your solicitor by special delivery. Scan copies are helpful, but originals are required. Read more - What can hold up the exchange of contracts?

• 2

  Agree to a completion date

You decide with the seller how long the period between exchange and completion will be. It is more common to have 1 week, but there are pros and cons for longer or shorter, so read this: How Long Between Exchange and Completion.

• 3

  Pay exchange deposit

The standard terms of the contract state, "The buyer is to pay or send a deposit of 10 per cent of the purchase price no later than the date of the contract". Here are things that can affect the amount paid for the exchange of contracts deposit:

• 5% Deposits. With the Government's mortgage guarantee schemes, mortgage lenders are more commonly offering 95% loan-to-value mortgages, allowing buyers to pay a 5% deposit. The contract of exchange is amended to confirm that the buyer is only paying a 5% deposit; however, the buyer remains liable for the balance if they fail to complete after the exchange. Read more here - The risks of buying a house with only a 5% deposit.
• Sale and Purchase. If you're exchanging in a chain, your buyer transfers their 10% deposit to your solicitor, who will, in turn, send it to your seller. Where the exchange deposit lower down the chain isn't large enough to fund your onward purchase, you'll either have to top up the deposit to 10%, or your seller must agree to accept a lower deposit. The seller often accepts the latter.

• 4

  Building Insurance

The buyer is responsible for insuring the building from the day of exchange. You don't have to do this if you are buying a leasehold because the management company/freeholder will already have building insurance. It is advisable to save a quote earlier in the conveyancing process to place it closer to the exchange.

Click to compare up to 50 Quotes

• 5

  Give your consent

Your solicitor needs your consent before they exchange. Before you give your consent, here are some things you must check:

• Pre-Exchange Viewing. It may have been a few weeks since you last saw inside the property, so organise a viewing before the exchange.
• Fittings and Contents. Ensure you are happy that what you agreed with the seller is reflected in the seller's Fittings and Contents forms. You could find that the bed you thought was being left as furniture is not included.
• Rental Notice. You'll be handing in your notice on your rental property. But be careful not to do it too early, read: First Time Buyers Homeless after Handing Notice to Landlord

• 6

  Solicitor gives the release

The solicitors in the chain give a release up and down the chain. This means the solicitor is in a position to exchange and is awaiting release from the other solicitors in the chain.

This can be the frustrating part of the process as you wait to hear when the chain is ready to be exchanged, and it may not happen on the first try. We explain this more below.

• 7

  Contracts are exchanged

The seller and buyer's solicitors will call each other and verbally agree on the following parts of the contract:

• property being sold, including the title numbers;
• names of the buyers and sellers;
• deposit being paid;
• completion date; and
• any additional conditions/amendments

Once the checks are complete and the exchange of contracts is complete, both solicitors write the completion date into the contract, sign and date it with a time. From that point, the buyer and seller are contractually bound by the contract, and the solicitors undertake to send each other their clients' signed contracts (hence the name 'exchange of contracts').

Example Exchange Contract

Download

Pre-Exchange Checklist

Download

What Happens After You Have Exchanged?

Once the exchange is finalised, the legal uncertainty ends, and the countdown to your move begins. Your solicitor will now carry out final Land Registry searches and request the mortgage funds from your lender. For you, the focus shifts from legal enquiries to the practicalities of packing and notifying utility providers.

The period between exchange and completion usually lasts between one and two weeks, though it can happen much faster. Now that your move is legally guaranteed, it is time to prepare for the logistics of the big day itself.

Your Next Step: Preparing for Completion