Understanding exchange of contracts

29 February 2024 • 6 min read

The exchange of contracts is the point in the conveyancing process where the property transaction becomes legally binding. The buyer and seller are legally bound to complete the property transaction, otherwise, they’ll incur financial penalties for withdrawing. This is also when they agree on the completion date.

This guide covers exchange of contracts in England and Wales.

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What is exchange of contracts?

The exchange of contracts is the latter part of the conveyancing process, in which the property transaction becomes legally binding between the buyer and the seller. At this point, both parties agree on the completion date and can no longer withdraw from the process without incurring penalties.

The conveyancing contract contains all the terms and conditions of the transaction. This includes:

Identity of the parties
Price
Amount of deposit
List of the fixtures and fittings to be included in the sale

The contract also stipulates the completion date, i.e., the day ownership of the property formally transfers to the buyer, allowing them to move in.

In the run-up to exchange, the conveyancer will provide the buyer and seller with a copy of the contract and answer any questions. Once both are satisfied with the terms, they’ll sign identical documents and prepare to exchange contracts.

These days, exchange of contracts can take place over the phone. The solicitors for each party verbally confirm the terms and then immediately send the documents to one another.

How long does it take to exchange contracts?

There is no fixed timescale. The government puts the average home purchase at around 120 days (GOV.UK, June 2026), and exchange of contracts happens before the end of that period. Chain-free, straightforward purchases can be quicker, while chains, leasehold properties and slow searches or mortgage offers add time. Any timescale is an estimate, not a guarantee.

Timing depends on the length of the chain you are in or the complexity of the property transaction.

For instance, if the existing property being sold is part of a chain and the seller is moving to a new one, they won’t want to exchange contracts on the purchase until everything is agreed on the sale.

Or if a buyer is purchasing an inherited property, additional steps may be needed to ensure applicable taxes, such as inheritance tax, are paid, or the title is clear and not jointly owned with someone else.

Or if it involves a leasehold property, the provisions of the Leasehold and Freehold Reform Act 2024 need to be considered to ensure the transaction is legally sound. Your conveyancer cannot advise on tax, so speak to a qualified tax adviser

This is why an experienced conveyancer is invaluable. They will:

Coordinate the requirements for the whole transaction
Identify and help resolve any hold-ups
Ensure legal accuracy
Communicate efficiently with the other parties
Make sure everything is in place at the right time

This ensures the process is completed swiftly.

Find out more about the stages of the conveyancing process.

Can you exchange contracts without a completion date?

No. The buyer and seller need to have a completion date agreed before exchange of contracts can take place.

In some situations, such as cash purchases and buy-to-let investments where there is no chain, it may be possible to exchange contracts and complete on the same day.

However, in most transactions, there is often a gap of one to two weeks between exchange of contracts and completion, although the buyer and seller can agree a different date. This gives sufficient time for the mortgage lender to send through the funds.

Who holds the deposit on exchange of contracts?

On exchange of contracts, the buyer pays a deposit to the seller. The deposit is usually held by the seller’s conveyancing lawyer. The exchange deposit is usually 10% of the purchase price, but the amount is agreed between the buyer and seller and set out in the contract. However, if the buyer doesn’t have 10% available, for example, if they are purchasing with a 95% mortgage and only have 5% available before completion, it is sometimes possible to agree a lower deposit, such as 5%, if the seller accepts.

If the buyer is unable to complete after the exchange of contracts, the seller keeps the deposit. And if the buyer has paid less than 10%, the seller can pursue the buyer through the court system to recover the balance needed to reach the full 10%, plus compensation.

What happens if a buyer pulls out after exchange of contracts?

Since exchange of contracts makes the property transaction legally binding, pulling out after is considered a breach of contract. If the buyer fails to complete, they lose the deposit and may be liable for additional damages. The seller may also claim compensation for losses like wasted removal costs, loss of earnings, temporary accommodation, and storage costs.

Both the buyer and seller must complete on the date and time agreed in the contract. Under the Standard Conditions of Sale (5th edition), the completion time is usually 2.00 p.m., but the parties can agree a different time.

If this doesn’t happen, the seller can serve a ‘Notice to Complete’, which confirms the buyer’s breach of the contract and gives them 10 working days to complete (condition 6.8 of the Standard Conditions of Sale, 5th edition)..

If the buyer eventually completes but is late in doing so, the seller can claim interest. For each day they are late, this is calculated at a daily rate of 4% above the Bank of England base rate under the Standard Conditions of Sale (5th edition), unless the contract says otherwise (see the Bank of England’s Bank Rate page for the current rate) on the purchase price, less any deposit already paid, divided by 365.

Where the seller has to find a new buyer and market prices have fallen in the meantime, the seller may also be able to claim compensation to reflect the difference between the agreed purchase price in the original transaction and the amount they eventually receive in the new sale.

Legal Costs – The buyer may also be required to pay the seller’s legal costs, and in some cases compensation, if the seller suffers a loss as a result.

What happens once contracts have been exchanged?

The buyer’s conveyancing lawyer contacts the mortgage lender to ensure the remaining funds are available in time for the completion. The buyer should also get building insurance for the property as soon as the exchange has taken place. This protects the buyer against any damage to the property between the exchange and completion.

With the final completion date agreed, the buyer can:

Finalise the move
Book removals
Prepare utilities and address changes

If you need practical information on exchange of contracts, Muve’s conveyancing lawyers are here to guide you and make the whole property transaction a smooth process. Our 24/7 case tracking portal lets you follow your case and see what is outstanding before completion, including mortgage status, document submission, and moving logistics.

Are you ready to make your move? Meet our team here or contact us directly for a conveyancing quote.

FAQs: Exchange of Contracts

What does exchange of contracts mean in the UK conveyancing process?

Exchange of contracts refers to the part of the conveyancing process that makes the property transaction legally binding. The buyer and seller sign identical contracts that contain all the terms and conditions of the transaction. The buyer will also give the deposit, and the seller’s conveyancing solicitor will keep it until completion. After this point, withdrawing from the transaction will result in financial penalties.

How long does it take to exchange contracts in England and Wales?

Can a buyer pull out after exchange of contracts?

Yes, the buyer can still withdraw after exchange of contracts, but it will have serious consequences. The buyer usually loses their deposit (5% to 10% of the purchase price) and may be required to pay the seller’s legal costs or compensation claims (e.g., for delays or losses).