When it comes to buying and selling property, two important terms that often come up are “exchange of contracts” and “completion”. While they may sound similar, they refer to two distinct stages in the transaction process, each with its own legal implications. In this article, we’ll take a closer look at what these terms mean and what you need to know.
Exchange of Contracts
The exchange of contracts is the point at which the legal transfer of ownership of the property takes place. Once contracts are exchanged, both parties are bound to the terms and conditions of the sale, and the buyer is required to pay a deposit, usually 10% of the purchase price, to the seller. This deposit acts as security for the seller should the buyer fail to complete the sale.
After the exchange of contracts, both parties are legally committed to completing the transaction. If the buyer fails to complete the sale, they risk losing their deposit, and the seller may be entitled to sue for damages. Similarly, if the seller fails to complete, the buyer is entitled to their deposit back, along with any additional costs incurred as a result of the seller’s failure to complete.
Completion
Completion is the point at which the purchase of the property is completed in full. This is when the buyer pays the remaining balance of the purchase price to the seller, and the keys to the property are handed over. At this stage, the buyer becomes the legal owner of the property.
Completion usually takes place a few days after the exchange of contracts, but the exact timing can vary depending on the circumstances. In some cases, completion may be delayed due to issues such as problems with mortgage funding or complications with the property itself.
Important Considerations
When it comes to the exchange of contracts and completion, there are several important considerations to keep in mind. First and foremost, it’s essential to ensure that you have a clear understanding of the terms and conditions of the sale before you exchange contracts. This includes any fees that may be due, as well as any deadlines for completion.
It’s also important to ensure that you have adequate funds in place to complete the sale, including any necessary mortgage financing. If you’re using a mortgage to fund your purchase, it’s important to ensure that the financing is in place and ready to go before you exchange contracts.
Finally, it’s worth noting that the legal process surrounding the purchase of a property can be complex and time-consuming. As such, it’s often a good idea to seek the advice of a solicitor or conveyancer who can guide you through the process and ensure that everything is completed properly.
In conclusion, the exchange of contracts and completion are two distinct stages in the process of buying or selling a property, each with their own legal implications. By understanding what these terms mean and what you need to consider, you can ensure that the transaction runs as smoothly as possible.