The differences between exchange and completion

Exchange of Contracts:

Timing: Exchange of contracts is an intermediate step that typically occurs (usually) a week or more before the actual completion date.

Legal Commitment: Once contracts are exchanged, both the buyer and seller are legally committed to the transaction. The buyer pays a deposit (usually a percentage of the property price) to the seller or their solicitor.

Agreed Terms: All terms of the sale, including the purchase price, completion date, and any specific conditions, are agreed upon and documented in the contract.

Penalties for Non-Performance: If either party fails to complete the transaction after the exchange, they may be subject to financial and other penalties.

Completion:

Timing: Completion is the final step, and it is when ownership of the property officially transfers from the seller to the buyer.

Transfer of Funds: On the completion day, the remaining balance of the purchase price is transferred from the buyer’s solicitor to the seller’s solicitor.

Handover of Keys: Once funds are received, the seller gives possession of the property to the buyer. The keys are handed over, and the buyer can take physical occupancy.

Title Deeds and Documents: The buyer’s solicitor registers the change of ownership with the relevant Land registry.

Key Differences:

Exchange creates a legally binding contract, and failure to complete can result in penalties.

Completion is when the property sale is finalised, and ownership is officially transferred.

Exchange and completion can happen on the same day, but they are distinct steps with separate legal implications.

Same-Day Exchange and Completion:

In some cases, particularly in residential property transactions, exchange and completion can occur on the same day. This is known as ” simultaneous exchange and completion”.

This article is intended for guidance only and does not constitute legal advice – 2024