What Is Exchange of Contracts in UK House Buying?

What exchange of contracts is

Exchange of contracts is the formal legal moment at which a UK property sale becomes legally binding. Before exchange, either party can pull out of the deal without legal consequences (although they may have spent money on surveys, searches, and legal fees). After exchange, both parties are legally committed and the buyer typically loses their 10% deposit if they fail to complete.

In the English and Welsh system, exchange and completion are usually separate events. Exchange happens first, completion follows days or weeks later. In Scotland, there is no equivalent stage because the legally binding moment is the conclusion of missives, which is structured differently.

What actually happens at exchange

The mechanism is administrative. Both conveyancers have prepared identical contracts signed by their respective clients. They:

1. Confirm both signed contracts are in their possession

2. Confirm the deposit (typically 10% of the purchase price) is in the buyer conveyancer's client account

3. Confirm the completion date

4. Telephone each other and exchange contracts using one of the Law Society standard formulas (typically Formula B)

5. Each conveyancer sends the signed contract to the other by post or DX

The phone call itself takes about 5 minutes. There is no ceremony and you do not need to be present.

What changes at exchange

After exchange:

1. The contract is binding. Either party can be sued for specific performance or damages if they fail to complete.

2. The buyer's deposit is at risk. If the buyer fails to complete on the agreed date, the seller can keep the deposit.

3. Insurance becomes the buyer's responsibility. From the moment of exchange, the buyer is at risk if the property is damaged. You must have buildings insurance from exchange.

4. The completion date is fixed. Either party can insist on completion on the date in the contract.

5. The chain is locked. All parties in the chain are now committed to their respective transactions.

What still has to happen between exchange and completion

In a typical 1 to 4 week gap between exchange and completion:

• Buyer arranges completion funds with their lender
• Both conveyancers prepare completion statements
• Buyer transfers any remaining deposit and contribution to their conveyancer
• Seller arranges to vacate (movers, change of address, key handover)
• Buyer arranges removals and utilities

What can still go wrong

Although exchange is legally binding, things can still go wrong:

• The lender withdraws the mortgage offer after exchange (rare but devastating). The buyer is then liable to the seller for compensation.
• The buyer cannot raise the completion funds for any reason. Same liability as above.
• The chain collapses upstream. The seller cannot complete on time because their onward purchase has fallen through. They will need to delay completion and pay compensation.
• The property is damaged between exchange and completion (fire, flood, vandalism). The buyer's insurance pays for repair, and the buyer typically still has to complete.
• A fundamental misrepresentation is discovered. Very rare but the buyer can sometimes rescind for fraudulent misrepresentation.

How long is the gap between exchange and completion

Typical gaps:

• Same day: cash purchase or simple chain, when both sides are ready to complete on the same day they exchange
• 1 to 2 weeks: most chain transactions
• 3 to 4 weeks: when one party needs more time to vacate or arrange removals
• Longer: occasionally agreed for specific reasons (school year, tenant in occupation, builder's schedule)

The gap is set by mutual agreement during negotiation. There is no minimum or maximum.

When does exchange happen

Typically 12 to 16 weeks after offer accepted, although this varies enormously. Cash purchases of unencumbered freeholds can exchange in 4 weeks. Leasehold flats with cladding issues can take 6 months or more before exchange is possible.

The conveyancer will only allow exchange when:

• All searches are back and clear
• The mortgage offer has been issued and reported on
• All enquiries have been answered satisfactorily
• The buyer has approved the contract
• The deposit is in the conveyancer's client account
• All other parties in the chain are also ready

What to do as the buyer

1. Make sure your conveyancer has the deposit in their client account before you sign

2. Sign the contract when sent to you by post or e-signature

3. Arrange buildings insurance to start on the exchange date

4. Confirm the completion date with your conveyancer and any chain

5. Book removals for the day after completion (or on the day if you are confident)

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Related guides

• What to check when buying a house
• How long does conveyancing take
• What happens on completion day
• What is exchange of contracts