Exchange of contracts
Exchange of contracts is the point at which a property sale becomes legally binding, when the buyer's and seller's solicitors swap signed, identical contracts and the buyer pays a deposit. Before exchange either party can withdraw without penalty; after it, neither can without serious financial consequence. The requirement for a signed written contract that both versions match comes from section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which is why exchange, rather than an accepted offer, is the moment of commitment.
What happens at exchange of contracts
At exchange, the two solicitors confirm that their clients' signed contracts are identical and formally exchange them, usually by a recorded phone call rather than in person. The buyer pays a deposit, traditionally ten per cent of the price, though often less in practice and sometimes reduced to five per cent by written agreement. The completion date is fixed and written into the contract at this point, and the buyer normally needs buildings insurance in place from exchange, because responsibility for the property passes to them even though ownership has not yet transferred.
Exchange of contracts versus completion
Exchange and completion are two distinct stages. Exchange makes the sale binding, sets the completion date, and takes the deposit. Completion is when the buyer's solicitor sends the balance of the price, ownership transfers, and the keys are handed over, along with vacant possession unless the property is being sold with a tenant in place. The gap between the two is commonly about a week, although it can run to anything from the same day up to around twenty-eight days, depending on what the parties agree and the length of any chain.
Can you pull out after exchange of contracts?
No, not without breaching the contract. A buyer who withdraws after exchange forfeits the deposit and can be sued for the seller's further losses, including the cost of remarketing, any shortfall if the property later sells for less, and interest. A seller who refuses to complete is equally in breach and must return the deposit and may face a damages claim. If either side simply fails to complete on the agreed date, the other can serve a Notice to Complete, which sets a final deadline before the contract can be rescinded. From working with landlords buying and selling rental property, exchange is the point at which a purchase stops being provisional, which is when a completion date can safely be planned around, whether that means lining up a tenancy, a mortgage drawdown, or a tenant's move-in.
What needs to be in place before you can exchange
Exchange should only happen once the conveyancing is genuinely ready. In practice that means the mortgage offer is confirmed in writing, the searches are back and reviewed, any survey has been considered, the solicitor's enquiries have been satisfactorily answered, the deposit is sitting as cleared funds in the buyer's solicitor's account, and a completion date has been agreed. Landlords expanding or exiting a portfolio should treat the weeks before exchange as the window for due diligence, because once contracts exchange the price and the date are fixed. This position is correct as of June 2026.
Frequently asked questions
Is exchange of contracts legally binding?
Yes. Exchange is the moment the sale becomes binding on both parties. Until it happens the transaction is subject to contract, and either side can pull out without penalty.
How long is it between exchange and completion?
Often about a week, though it can be the same day or as long as around twenty-eight days. The completion date is agreed and fixed into the contract at exchange.
What happens if you pull out after exchanging contracts?
A buyer who withdraws loses the deposit and can be liable for the seller's losses, such as remarketing costs and any shortfall on a later sale. A seller who pulls out is also in breach and can face a damages claim, so withdrawal after exchange is rare.
