Exchange of Contracts

The Contract

When buying or selling property in England, Wales or Northern Ireland, prospective buyers make an offer subject to survey and contract. A contract is in two parts:

1. The Particulars of Sale

This gives an accurate physical description of the property. A plan may be attached to emphasise or illustrate what is in the contract. The particulars will also outline whether the property is freehold or leasehold and what kind of lease the vendor is assigning. Rights, such as easements and restrictive covenants, should be expressly referred to in the particulars of sale. In addition, the vendor should refer to any hidden defects affecting the property, if known.

2. The Conditions of Sale

The requirements concerning completion are detailed thoroughly in the general conditions of sale, such as payment, failure to complete and dates required for completion. Additionally, there may be specific conditions to a sale - these must usually be fulfilled before completion. If a condition of purchase is that certain work must be done or repairs carried out, a 'specification of works' must be drawn up by your solicitor detailing the work to be done before completion.

Joint Ownership

A property can be owned by a number of joint-owners. They do not need to have equal shares - they can be proportionate to the deposit paid and the repayments made. The percentage owned by each co-buyer must be registered in the title deeds and all co-buyers registered as 'tenants in common' rather than 'joint tenants'. They will also need a 'declaration of trust' so that if one person wants to sell, the others have the option of buying them out.

Exchange of Contracts

Once you and your legal representative are satisfied with the house, the contract is drawn up in two identical copies - you sign one and the seller the other.

The contract becomes legally binding only when copies are exchanged, so that each party has a copy of the contract signed by the other and both can sue on the contract, should the need arise. If the transaction is one of a chain, each dependent on the next, all the contracts in the chain must be exchanged at the same time.

You, as the buyer, will be asked to pay a deposit of up to 10% of the purchase price on exchange. This is held by the seller's legal representative until completion and is non-returnable if you decide not to proceed with the purchase.

Once you've exchanged contracts, you become the beneficial owner of the property, with the vendor owning the property on trust for you. You will need to take out buildings insurance at this point- this is mandatory if you have a mortgage.

Your conveyancer will now draw up a document known as a transfer. This is the document that concludes the transfer of ownership from the vendor to you, the buyer. Once you have signed it, the transfer is sent to the vendor conveyancer to be signed by the vendor. The vendor's conveyancer will keep it until completion. Your conveyancer must ensure that you have the rest of the purchase money ready for the day fixed for completion. Your conveyancer will deal direct with your lender, if you have arranged mortgage, and will also draw up the mortgage document for you to sign. Some final searches by your conveyancer ensure that there have been no last-minute changes in the legal ownership of the property at this stage.

Completion usually takes place around four weeks after the exchange of contracts, although it can be shorter or longer, as agreed between the parties. Your solicitor will give you a bill for Stamp Duty Land Tax and Land Registry fees before completion, which must be paid by completion day.