Freehold conveyancing process – (3) Exchange of Contracts

Question 1

What happens during the exchange of contracts?

Answer 1

The transaction becomes legally binding; neither party can back out without penalty, and the buyer risks losing their deposit if they fail to exchange.

Question 2

When does the risk pass to the buyer?

Answer 2

The risk passes to the buyer upon exchange of contracts.

Question 3

Can exchange and completion occur on the same day?

Answer 3

Yes, exchange and completion can take place on the same day, but this is often not the case.

Question 4

What are the pre-exchange tasks for the seller’s solicitor?

Answer 4

Obtain the redemption figure for any existing mortgage, agree on the form of the contract with the buyer’s solicitor, arrange for the seller to sign the contract, and send it to the buyer’s solicitor for signing.

Question 5

What are the pre-exchange tasks for the buyer’s solicitor?

Answer 5

Report to the buyer, confirm the buyer wishes to proceed, confirm financing, arrange for the buyer to sign the contract, and obtain express authority to exchange.

Question 6

What are the methods of exchanging contracts?

Answer 6

(1) Person, (2) Post, (3) Phone.

Question 7

Describe the “Person” method of exchange.

Answer 7

Solicitors exchange contracts in person; this method is impractical and rare.

Question 8

Describe the “Post” method of exchange.

Answer 8

Involves each solicitor posting their signed parts of the contract to one another; this method is no longer used due to lack of certainty.

Question 9

What is “Formula A” for exchange by phone?

Answer 9

One solicitor holds both signed parts of the contract, usually the seller’s solicitor. Suitable if one solicitor will be out of the office.

Question 10

What is “Formula B” for exchange by phone?

Answer 10

Each solicitor holds their client’s signed part of the contract, with the buyer’s solicitor holding the deposit as cleared funds. Each solicitor confirms the contents and dates their part before sending it to the other side.

Question 11

What is “Formula C” for exchange by phone?

Answer 11

Used for chains of transactions, involving a two-part telephone process to ensure certainty.

Question 12

What should be done if completion is scheduled weeks after exchange?

Answer 12

The buyer’s solicitor should register the estate contract on the Charges Register (for registered land) or register a C(iv) land charge against the seller’s name (for unregistered land) to protect the buyer’s position.

Question 13

How should parties vary a contract post-exchange?

Answer 13

They should re-execute new contracts that include the new terms.