This is the crucial step. It is the point when both sides are committed and, in effect, the deal is done. All the earlier negotiations will have been conducted ‘subject to contract’ and are now unimportant since the main terms will be incorporated in this legal agreement. The buyer is then bound to buy the property while the seller is equally bound to sell.
Contracts for sales arranged by private treaty are not initially public documents. After completion, when the transaction has been recorded at the Land Registry, information about the price paid and the legal mortgage charges are technically in the public domain. Copies are then available on payment of the appropriate nominal fee.
In an auction, exchange of contracts technically occurs when the auctioneer’s hammer falls and the highest bid is then accepted, subject to the general conditions set out in the auction particulars and any special conditions relating to individual lots. In that case, of course, all the terms, and the price paid, are in the public domain.
In the case of private treaty negotiations the actual exchange is normally instigated by the purchaser’s solicitors sending a copy of the contract signed by his client to the seller’s solicitor together with the agreed deposit money. The solicitor will check that the terms match exactly with the copy he has had signed by his client. Technically the moment of exchange occurs when this second contract is put into the post. Where several sales are involved, simultaneous exchange of contracts is usually arranged by telephone, with all solicitors involved giving the appropriate undertakings to the others.
When your solicitor sends you the contract for signature, don’t waste any time – read it, sign it, and take it or send it back to him immediately. Time may well be of the essence.