Exchange of contracts
Contracts are exchanged. Exchange of contracts takes place and at this point the buyer must be ready to hand over a non-refundable deposit as security to the seller in case the contract is not carried out. This is normally 10% per cent of the purchase price, but it is usually negotiable. Once the buyer and its solicitor are satisfied that everything is in order, the contracts can be exchanged. The buyer signs a copy of the contract which is passed to the seller, and the seller signs a copy of the same contract which the buyer receives. Once contracts have been exchanged (normally by the two solicitors) both parties are legally bound to follow through with the transaction. The buyer can no longer change his or her mind – if he or she pulls out it is likely that he or she will lose the deposit, and could be sued for breach of contract. The buyer also now has no need to worry about gazumping.
The buyer’s solicitor draws up a transfer document and sends it to the seller’s solicitor. Once contracts have been exchanged the buyer’s solicitor prepares the draft transfer document (if the land is not registered it will require a special kind of transfer or ‘conveyance’). This documents transfers the title of the property from the seller to the buyer. Once both parties have agreed on the draft, it is signed by the buyer and the seller.
The buyer’s solicitor arranges finalisation and signing of the mortgage documents and will also arrange for the money to be available on completion of the sale.
The buyer’s solicitor carries out final searches and enquiries. For example, Land Registry checks are carried out to make sure that nothing is registered against the seller (or at the Land Charges Registry if the property is not registered). Problems such as undisclosed mortgages or disputes could be uncovered at this stage. There will be various matters for both parties to deal with in the run-up to completion. There will be some documents to be signed and payments to be made: the buyer must pay Land Registry fees and stamp duty. Before completion both parties need to make sure that all the terms of the contract have been fulfilled, such as any repairs. Both parties also need to be arranging all the practical matters related to moving house.
