Stage 7: Exchange

Question 1

when may exchange take place?

Answer 1

after pre-contract searches and enquiries

it may also be simultaneous exchange and completion

Question 2

what happens on exchange?

Answer 2

usually, identical copies (rather than using one) of the contract are exchanged and the deposit is paid

Question 3

what are the pre-exchange steps for the buyer’s solicitor?

Answer 3

The buyer’s solicitor must ensure:
o The deposit is in cleared funds ready to send to the seller’s solicitor
o The mortgage offer is in place and the client has sufficient funds
o Insurance is in place immediately from exchange

Question 4

what are the pre-exchange steps for both solicitors?

Answer 4

Ensure their client has signed a copy of the contract.
 Can be signed in ink or e-signature (provided the person signing it intends to authenticate it and any execution formalities are satisfied)
 Solicitor can sign on the client’s behalf if they have express authority

Obtain their client’s authority to exchange.
 This should be in writing and placed on the file. Exchanging without express or implied authority will amount to negligence.

Question 5

how can the client’s contract be signed?

Answer 5

 Can be signed in ink or e-signature (provided the person signing it intends to authenticate it and any execution formalities are satisfied)
 Solicitor can sign on the client’s behalf if they have express authority

Question 6

what should happen once the client’s authority to exchange is obtained?

Answer 6

This should be in writing and placed on the file.

Question 7

what are the consequences for exchanging without authority?

Answer 7

 Exchanging without express or implied authority will amount to negligence.

Question 8

how can exchange take place?

Answer 8

in person, by post or over the phone

Question 9

what is in place in relation to telephone exchange?

Answer 9

Law Society Protocols

Question 10

what must the solicitor do in terms of recording the exchange?

Answer 10

o At the time of the exchange  details (i.e. time and formulae) of the exchange are recorded on front page of the contract
o File note inc.: date and time, formulae (+exact wording of any variation), completion date, deposit to be paid and identities of exchanging solicitors

Question 11

explain Law Society Formulae A

Answer 11

• Used when one solicitor holds both signed contracts
• Seller’s solicitor has both parts  they undertake to send their client’s signed contract to the other side by 1st class post, DX or by hand that same day
• Buyer’s solicitor has both parts  above + the banker’s draft or client account cheque for the agreed deposit (will need to be altered if e-transfer)

Question 12

explain Law Society Formulae B

Answer 12

• Used where each solicitor has their own client’s signed copy (most common)
• Same undertaking as A

Question 13

explain Law Society Formulae C

Answer 13

• Used in residential transactions where there is a chain transaction
• Rarely used as so complex.

Question 14

what are the consequences of exchange?

Answer 14

• Binding contract in place so parties cannot withdraw without breaching
• Seller retains legal title until completion and holds BI for the buyer
• Seller is entitled to remain in physical possession. They are also responsible for outgoings until completion i.e. community charges
• The buyer bears the risk of any loss/damage to the property

Question 15

what effect does exchange have on title?

Answer 15

• Seller retains legal title until completion and holds BI for the buyer

Question 16

what effect does exchange have on the transfer?

Answer 16

• Binding contract in place so parties cannot withdraw without breaching

Question 17

what effect does exchange have on possession and charges?

Answer 17

• Seller is entitled to remain in physical possession. They are also responsible for outgoings until completion i.e. community charges