Property 7: Stage 3 Exchange of Contracts

Question 1

What does it mean for transactions to be synchronised?

Answer 1

• exchange on same day; and
• completion on same day

Question 2

What is the result of failure to synchronise transactions?

Answer 2

Solicitor could be liable for negligence claim

Question 3

What is the significance of exchange?

Answer 3

Parties are now bound

Risk for property has moved to buyer

Question 4

What exactly is binding on exchange?

Answer 4

ONLY terms included in contract
- not orally

Question 5

How is exchange completed for leasehold transactions?

Answer 5

Contract will provide that:
- buyer takes lease in form of agreed draft
- landlord agrees to grant lease in form of agreed draft

Contracts are exchanged

Question 6

Can terms of lease be changed after contracts are exchanged?

Answer 6

No - unless by mutual agreement
-ie. Executing a new lease agreement

Question 7

What are the methods of exchange (generally)? And when is each binding?

Answer 7

1. In person
   - binding when they agree face to face that exchange has happened
2. By post
   - each solicitor posts signed contract to each other
   - binding when seller posts to buyer
3. By phone
   - solicitors agree on terms and insert completion date and date of conversation
   - that’s when it is binding

Question 8

What are the law societies formulas for exchange (what do they apply to)?

Answer 8

Apply to exchange by phone

Formula A
- one solicitor holds both contracts
- if seller then also holds deposit cheque

Formulat B
- each solicitor holds own client’s signed contract
- buyers solicitor has cleared deposit funds (sent to seller)

Formular C
- Chain transactions

Question 9

How does Formula A for exchange of contracts work?

Answer 9

• one solicitor holds both signed contracts
• on the phone they confirm both are the same
• agrees to insert date of exchange and completion into both contracts
• sends contract signed by their client to other solicitor

Question 10

How does Formula B for exchange of contracts work?

Answer 10

• each solicitor has their clients signed contract
• buyers solicitor has cleared funds for deposit
• on the phone they confirm both contracts are the same
• each send their clients contract to other solicitor
• buyer sends agreed deposit to sellers solicitor

Question 11

How does Formula C for exchange of contracts work?

Answer 11

For chain of transactions and involves undertaking by all solicitors

Stage 1
- first call confirms that solicitors are ready to exchange

Stage 2
- confirms actual exchange of contracts

Question 12

What is the memorandum of exchange

Answer 12

After exchange by solicitor files memorandum recording:
- their name
- date and time of exchange
- formula used (and any variations made to it)
- completion date
- amount of any deposit paid

Question 13

After exchange how can buyers interest be protected

Answer 13

solicitor can register it as an estate contract
- registered land: notice on charges register
- unregistered land: C(iv) land charge against sellers full name

(rarely used but might be used in buying new build off plan so there will be long time between exchange and completion)

Question 14

Can the contract be varied after exchange?

Answer 14

Only if they exchange contracts again with variation