What is 'exchange of contracts' in a conveyance? What effect does it have?

Exchange of contracts is the point where the beneficial interest in the property transfers to the buyer. Between exchange of contracts and completion, the property will be held on trust so that the legal ownership remains with the seller but the beneficial ownership will be held by the buyer. 

On completion, the legal title will be transferred so that the buyer has both the legal and equitable title. 

If either party dies after exchange of contracts, the sale will still be bound to follow through due to a valid contract being formed. If either party break the contract after exchange, compensation may be payable. 

The buyer should insure the property immediately after exchange. This is because they are bound to complete the purchase following exchange, even if the property is destroyed. Although the destruction of the property may seem unlikely, it is best to be insured against the risks. 

Solicitors can either exchange contracts by post or by telephone. They will confirm to you when exchange of contracts has taken place. It may be that exchange of contracts is delayed due to waiting for a chain of transactions to complete. 

If you would like any further information or advice in relation to buying or selling a property, please contact us on 01384 410 410 or send an email to residentialconveyancing@georgegreen.co.uk. You can also get a free quote by using our conveyancing quote tool on our website.