What is exchange of contracts in my property purchase?
Posted on 10th January 2020
Exchange of Contracts is often referred to as the ‘point of no return’, this is because, by Exchanging, you are giving authority to your solicitors Lancaster to complete on the agreed date, which makes the transaction legally binding. As you can see, this is why your Lancaster law firm aim to proceed to this stage of your matter as soon as is possible.
As per Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, the Contracts are to be identical and include all relevant terms. Your solicitors Lancaster will draft the Contract for sale and send this to the buyer’s solicitor for their approval. Once approved, with any necessary amendments, the Contracts can be Exchanged.
Your Lancaster law firm can carry out the Exchange of Contracts via a number of different methods, these include the following:
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In Person: This is a very rare form of Exchange and would only be suitable where the two Lancaster law firms are local to each other to physically Exchange the documents.
By Post: Where Exchange takes place via post, the Lancaster law firm acting on behalf of the buyer posts the signed Contract and deposit to the seller’s solicitor. Upon receipt of the same, the seller’s solicitor does the same. As per the case of Adams v Lindsell when the second Contract is posted, the transaction is binding. Again, this is a rare form of Exchange due to the potential time constraints as well as relying on the postal service which could possibly delay matters, particularly if there is a chain involved.
By Telephone: Completion can also be affected, by your solicitors in Lancaster, in accordance with the Law Society’s Formulae for Exchanging Contracts by Telephone. This can be done one of three ways:
- Formula A: This involves one of the solicitors in Lancaster holding both Contracts, one signed by each the buyer and seller(s). The solicitor in possession of the same will then telephone call the other to confirm that both Contracts are identical, that all information entered is correct, and will subsequently insert the agreed Completion date.
- Formula B: This is the most frequently used form of Exchange carried out by your solicitors Lancaster. Each Lancaster law firm will hold their own Contract, signed by their clients. One of the solicitors in Lancaster will telephone the other to go through the items within the Contract, confirming the party names, the sale price, etc, Undertaking to Complete on the agreed date. Once Exchange has been confirmed, the Lancaster law firms will send each other the Exchanged Contracts in that day’s post.
- Formula C: This Formula can be used when there is a large chain involved. The Lancaster law firms call each other to confirm that they hold a signed contract and deposit, the items within are approved and the Completion date is agreed and inserted within the Contract. The buyer’s solicitor agrees to then release the Contract for a specific time frame in which further up the chain can proceed to Exchange. There is then a domino effect in that all parties up the chain can Exchange within the specified release time frame.
If you are purchasing a property, this is the stage at which your solicitors Lancaster will ask that you put in place your buildings insurance. Once Exchanged, you are legally bound to purchase that property. Therefore, in the event that there is a fire and the house burns to the ground, and you are not insured, you will be left with no house. As you can see, this is extremely important to place on risk at the point of Exchange.
Once Contracts have been Exchanged, you can sit back and relax as the date for Completion is agreed and is legally binding. At MG Legal, your solicitors in Lancaster, we aim to proceed to ‘the point of no return’ as soon as possible to secure matters for you.
For more information on Exchanging Contracts, or the conveyancing process as a whole, contact our Lancaster law firm for specialist advice today at enquiries@mglegal.co.uk. Our solicitors in Lancaster would be delighted to be of assistance to you.
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