The legal process, when moving to a new house, is arguably the most important part – it’s where the real ‘magic’ happens, to get you from a potential buyer to completed and moved in.
However, despite it being so important not many people seem to know what happens during the exchange and completion process, or what those words even mean!
Do you know what really happens at exchange and completion, and the relationship between them? Can you exchange contracts without a completion date?
If you’re sat thinking no, I have no idea, then it’s a good job you’re here! We’re going to explore the answers to these questions and more, including some top tips on how you can speed up the exchange of contracts if you’re wanting a fast sale.
To find an answer to something specific, use this menu to help:
- What is exchange of contracts?
- What is completion?
- Can you exchange contracts without a completion date?
- What happens if completion is delayed?
- Can I speed up exchange and completion?
What is exchange of contracts?
Exchange of contracts is the part of the deal where it becomes legally binding, with all the contracts signed and a completion date set. The buyer will also give over their deposit at this stage and the seller’s solicitor will hold the signed transfer of the title deed.
What happens on the day of exchange of contracts?
On the day of exchange of contracts, there’s generally no physical hand over of contracts and it all takes place over the phone. If you’re in a chain, the exchange of contracts will rely on the people below you in the chain exchanging on the same day.
The legal company of the buyer at the ‘bottom’ of the chain will exchange with the legal company above them, who will confirm they have the signed contracts and the deposit funds, whilst also confirming the terms of sale and the completion date.
The solicitor at the bottom of the chain then gives the solicitor above them a ‘release time’, which is the time that it must come back to them that the exchange of contracts is confirmed. If it hasn’t reached them by the release time, exchange of contracts can’t happen on this date, and everyone involved must repeat the process again the next day.
This then continues up the chain until the solicitor at the top is reached. This is when the exchange of contracts can be confirmed with the other solicitors back down the chain, within the release time frame.
Why does exchange of contracts matter?
Exchange of contracts is important because at this stage the deal is legally binding and so both parties can feel confident the deal is going ahead.
It also sets the completion date ‘in stone’ so both parties know what they’re working towards so they can get ready to move out and into their new home. It gives the safety that if one party was to pull out, there would be financial consequences and the other party would be able to get the costs they incurred during the process, such as surveys or legal fees, covered.
What is completion?
Completion is the final stage of the purchase transaction, and is the part of the process where you actually gain ownership to your new home and move in. Once the seller’s solicitor confirms they are in receipt of the full agreed purchase amount, the title documents are transferred, and the buyer now has ownership of the house.
Normally, the seller should be out of the property by 1pm, and then the new owner can collect the keys to the property and is free to move in.
What happens on the day of completion?
When the seller’s solicitor has received the full purchase amount, they can confirm this with their client that the sale has completed. At this stage, the seller must then move out of the property, normally by 1pm, and hand the keys over to the estate agent.
The buyer can then collect the keys from the estate agent and is free to move into the property.
Once the sale has completed, it’s the buyer’s responsibility to make sure that the Stamp Duty Tax is paid to HMRC and that their ownership of the property is registered with the Land Registry. The buyer’s solicitor will normally register it for them, but as a buyer you should always check to be sure it’s done.
Why does completion matter?
Completion is the end of the whole process, when the seller moves out and the buyer is transferred ownership of the property. Completion is arguably the most crucial part of the process, as it’s the whole point of looking to move – gaining ownership to the next home you want and selling your old house.
Can you exchange contracts without a completion date?
Wanting to exchange contracts without a completion date is common amongst those who want to move fast and make sure they’ve secured the deal, so they can push the process through quickly.
To give you the short answer to ‘can you exchange contracts without a completion date’, then no, you can’t. The completion date has to be written into the contracts before they can be exchanged.
If you’re wanting a longer and more detailed answer than a simple ‘no’ then great! Keep reading…
Is completion date set at exchange?
No, completion date will be set before exchange of contracts because it needs to be written into the contracts to allow exchange to take place. Once the completion date is set and written into the contracts, the solicitors from both parties will do their final checks and then exchange of contracts takes place.
You can actually exchange and complete on the same day, but we would say it makes the whole transaction more stressful and there are no guarantees the deal will go ahead. For example, imagine you’ve packed up your house and you have removal vans raring to go and then the deal falls through at the exchange of contracts. Now you’re left with your whole house in boxes and no new house to move into…
Exchange and completion normally happen on the same day when the buyer is a cash buyer, as there’s no chain and the buyer is likely to be wanting a fast sale. A cash buyer also doesn’t require a mortgage, so this means there’s no mortgage lender slowing the process down and wanting a bit of time between exchange and completion.
Do you need a completion date to exchange contracts?
Yes, exchange of contracts can’t take place without a completion date agreed. At the point of exchange, the deal becomes legally binding and everyone must complete on the agreed date.
The completion date is written into the contracts and so this must be in place for the solicitors to be able to do the final checks before exchange of contracts can take place.
Who decides completion date?
Both parties collectively decide and agree on the completion date. This decision generally takes place a few weeks before exchange of contracts. Once both parties have found a date that they are both happy with, this can be written into the contracts, allowing both parties’ solicitors to work towards the exchange.
Is there a maximum time between exchange and completion?
The average time between exchange and completion is 2 weeks (The Advisory), but this isn’t to say this will always be the case.
As we said earlier, some exchange and complete on same day, or some have a gap of months – it’s really a case of setting the completion date to a time that suits both parties.
There is no actual maximum time between exchange and completion, but you wouldn’t expect the time period to be more than a year.
You can set something called a ‘delayed completion date’, which means there’s a longer period between exchange and completion than you would normally expect. The period could be any amount of time, as long as both parties are in agreement with the delayed date.
What happens if completion is delayed?
When contracts are exchanged, the completion date that has been set is final and by law has to go through on this date. However, this doesn’t mean that completion always runs this smoothly…
If the buyer fails to complete:
- Notice will be served to complete within 2 weeks before the contracts are rescinded
- Will have to pay interest to seller on the amount of the purchase money which isn’t sent through
- If they don’t complete by the new deadline, the contracts are rescinded, and the deposit is forfeited
- The seller can resell property and if they can’t achieve the same price, they can pursue the old buyer for the losses
If the seller fails to complete:
- Must return the deposit
- Liable for the costs the buyer has incurred, for example, mortgage, surveys, etc
- The buyer can rescind the contract
As we said earlier, you can actually set a delayed completion date at exchange. This may be the case if, for example, you’re in rented accommodation and need to give a months’ notice before you can leave the rental property, and so set a completion date in a months’ time from exchange. If you’re buying a new build, you may need to set a delayed completion date for a long time after exchange of contracts, as your new house may not even be built when you exchange.
It’s important that, if you’re getting a mortgage, you’re aware of mortgage deal deadlines, as some may only have a few months on them. This may mean your completion is dictated by your mortgage lender, as you’re pushed to get the deal over the line before the mortgage offer expires.
Can I speed up exchange of contracts?
Yes, exchange of contracts can be sped up, but it requires work from all parties. It’s a good idea to agree on a rough exchange date from the start so everyone knows how fast the process is wanted to be and the timescales they’re working towards.
Alongside the buyer, seller and solicitors, the estate agent should also be regularly in touch, pushing all parties to move swiftly towards exchange of contracts.
We’ve put together a list of ‘top tips’ you can follow to make sure exchange of contracts happens ASAP:
- If you’re the buyer, have your solicitor in place before putting an offer on a house. If you’re the seller, make your solicitor aware you may be needing them soon. This way all parties are aware they will be needed soon and will be kickstarted into action
- Make sure you understand the process – this way you will know what to expect and can be readily available with information when asked
- Arrange for surveys and searches to be done ASAP!
- As a buyer, you need to make sure your deposit funds are available and that you transfer the amount to your solicitor as soon as exchange of contracts is about to happen
- Choose a solicitor who has both quality and speed
- Don’t go on holiday – a fairly obvious one, if you’re wanting things to move fast it’s not the best idea to disappear to another country
- As a seller, before you have secured a buyer, get together the paperwork for your house, such as warranties, any planning permission, certificates, etc to make sure it’s readily available, should a potential buyer want to see it
- Push for the agent to put the house sold subject to contract ASAP to make sure no other buyer comes along and puts in another offer, slowing the process or potentially stopping it completely
So now you know the answer to the all-important ‘can you exchange contracts without a completion date’, as well as the ins and outs of exchange and completion AND how to speed up the exchange of contracts. Do you have a story to share on exchange and completion? Or maybe another question to ask? Whatever it is, don’t hesitate to get in touch!