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Reviewed by: Ruth Stevenson, Director/Solicitor at Ives & Co Solicitors
Exchange and completion are two of the most important stages of the conveyancing process, but they mean very different things.
Exchange of contracts is when the purchaser and vendor become legally committed to the transaction. Completion is when the purchase money is transferred, the transaction completes and the purchaser can normally collect the keys.
In England and Wales, accepting an offer does not normally make a property transaction legally binding (unless it is at an auction or another form of agreement). That generally happens when contracts are exchanged. Completion then takes place on the date agreed between the parties.
Understanding the difference is particularly important when arranging removals, giving notice on rented accommodation, transferring money or making other commitments connected with your move.
Table of Contents
- Exchange vs completion at a glance
- What is exchange of contracts?
- What needs to happen before exchange?
- What happens on exchange?
- What does exchange mean for the purchaser and vendor?
- What happens to the deposit on exchange?
- What happens between exchange and completion?
- What is completion?
- What happens on completion day?
- What can delay completion on the day?
- What happens after completion?
- Can exchange and completion happen on the same day?
- Frequently asked questions
- Speak to a conveyancer
Exchange vs Completion: At a Glance
The simplest way to understand the difference is:
Exchange = the transaction becomes legally binding.
Completion = the purchase completes and the purchaser normally receives the keys.
At exchange, the parties commit themselves to the transaction and agree the completion date. The purchaser will also usually pay a deposit.
At completion, the balance of the purchase price is transferred to the vendor’s solicitor. Once completion has been confirmed, the keys can normally be released and the purchaser can move into the property.
What Is Exchange of Contracts?
Exchange of contracts takes place once the purchaser and vendor are ready to commit to the transaction.
Both parties will have signed their respective contracts. Their solicitors then formally exchange contracts and confirm the terms of the transaction, including the agreed completion date.
From this point, the agreement to purchase and sell the property becomes legally binding.
Before exchange, either party can generally withdraw from the transaction without being required to complete. After exchange, failing to complete can amount to a breach of contract and may have serious financial and legal consequences.
This is why your solicitor must be satisfied with the legal position before advising you to exchange, and you, as the client, must be happy to proceed to exchange contracts. If in doubt, we always advise our clients not to exchange.
What Needs to Happen Before Exchange?
Before exchange can take place, the purchaser’s solicitor will usually need to complete the necessary legal investigations and ensure that the purchaser is in a position to proceed.
This commonly includes:
- Reviewing the property’s legal title
- Receiving and reviewing the relevant searches
- Raising and resolving legal enquiries
- Reviewing the contract and supporting documentation
- Investigating rights, restrictions and covenants affecting the property
- Reviewing leasehold information where applicable
- Ensuring satisfactory mortgage arrangements are in place, where required
- Reporting to the purchaser on the legal aspects of the transaction
- Ensuring the purchaser has signed the necessary documents
- Agreeing a completion date with the vendor and any related property chain
- Ensuring the purchaser’s deposit funds are available
If you are purchasing, read your solicitor’s report carefully and raise any questions before exchange. Once contracts have been exchanged, it may be too late to reconsider matters that you were already aware of. Also, it is important to always advice your solicitor (ideally in writing) of any discussions or agreements had with the vendor or purchaser on your transaction, as only factors agreed with your mutual solicitors will be legally binding.
You should also avoid treating a proposed completion date as guaranteed until your solicitor confirms that contracts have actually been exchanged. Any date agreed provisionally before exchange is simply that, a provisional date.
What Happens on Exchange?
On exchange, the purchaser’s and vendor’s solicitors formally commit their clients to the transaction.
The agreed contract will specify important terms, including the property being purchased, the price and the completion date.
The purchaser will usually pay a deposit as part of the exchange process.
Once exchange has taken place, both parties are contractually committed to completing the transaction on the agreed date.
This is also an important point for buildings insurance. Depending on the terms of the contract and the circumstances of the purchase, the purchaser may need to insure the property from exchange. Your solicitor will advise you on the requirements applicable to your transaction.
What Does Exchange Mean for the Purchaser and Vendor?
Exchange provides both sides with considerably greater certainty.
For the purchaser, it means the vendor is contractually committed to selling the property to them on the agreed terms, and you, as the purchaser, must (unless your solicitor advises otherwise) insure the property from the date of exchange.
For the vendor, it means the purchaser is contractually committed to proceeding with the purchase.
This is why many practical arrangements are made following exchange rather than simply after an offer has been accepted.
For example, once exchange has been confirmed, you may be in a better position to finalise removals and other moving arrangements.
However, you should still follow your solicitor’s advice about any financial or practical commitments connected with the move.
What Happens to the Deposit on Exchange?
A purchaser will usually be required to provide a deposit on exchange of contracts.
A 10% contractual deposit is commonly provided for under standard residential contracts, although the amount actually paid on exchange may sometimes be less, depending on the circumstances of the transaction.
Your solicitor will explain how much is required before exchange and when the money needs to be transferred.
Always follow your solicitor’s instructions when sending significant sums of money and verify bank details using the firm’s recommended procedure.
What Happens Between Exchange and Completion?
Once contracts have been exchanged, the focus moves towards preparing for completion.
For the purchaser, this may include:
- Arranging removals
- Transferring any remaining funds required to their solicitor
- Making final moving arrangements
- Preparing utilities and services for the new property
- Ensuring buildings insurance is in place where required
- Carrying out an agreed pre-completion inspection where appropriate
The purchaser’s solicitor will also undertake the necessary pre-completion legal work. This can include carrying out final searches, preparing completion statements and arranging to receive mortgage funds from the lender where applicable.
The vendor will need to prepare to vacate the property by the time required under the contract, remove their belongings and leave the property in accordance with the contractual arrangements.
If you are a vendor, make sure you understand what fixtures, fittings and other items have been agreed as remaining at the property.
What Is Completion?
Completion is the point at which the purchase is finalised and the purchaser becomes entitled to take possession of the property.
On completion day, the purchaser’s solicitor sends the balance of the purchase money to the vendor’s solicitor.
Once the vendor’s solicitor has received the funds and completion has been confirmed, the estate agent or other key holder can normally release the keys.
For the purchaser, completion is therefore the stage at which they can usually collect the keys and move into their new home.
For the vendor, it is the point at which they must normally have vacated the property in accordance with the contract.
What Happens on Completion Day?
A typical completion day involves several stages:
- The purchaser’s solicitor sends the completion funds to the vendor’s solicitor.
- The funds are received and checked.
- The vendor’s solicitor confirms that completion has taken place.
- The estate agent or other key holder is authorised to release the keys.
- The purchaser can take possession of the property.
- The vendor’s solicitor deals with repayment of any existing mortgage that must be discharged from the sale proceeds.
If you are in a property chain, the transactions are interconnected. Money may need to move through several solicitors’ client accounts during the course of the day.
This means that one transaction can sometimes be waiting for another to complete before the chain can progress.
What Can Delay Completion on the Day?
There is no guaranteed time for completion during the day.
A common misconception is that purchasers will automatically receive their keys first thing in the morning. In reality, completion depends on the necessary funds reaching the vendor’s solicitor.
Possible reasons for completion taking longer during the day include:
- Bank transfer processing times
- Mortgage funds arriving later than expected
- Delays elsewhere in a property chain
- Solicitors waiting to receive funds from a related sale
- Final administrative matters requiring attention
A delay of a few hours does not necessarily mean there is a problem with the transaction.
Your solicitor will confirm when completion has taken place. Purchasers should normally wait for that confirmation before travelling to collect the keys. On average, most completions take place after 1 or 2 pm on the day of completion.
What Happens After Completion?
Receiving the keys does not mean that your solicitor’s work has finished.
Following completion, the purchaser’s solicitor will deal with the necessary post-completion formalities.
For a purchase in England, this will normally include dealing with any Stamp Duty Land Tax requirements and applying to HM Land Registry to register the purchaser’s ownership.
For a purchase in Wales, Land Transaction Tax applies instead of Stamp Duty Land Tax, and the purchaser’s ownership will similarly need to be registered with HM Land Registry.
Where the property has been purchased with a mortgage, the lender’s charge will also normally need to be registered.
Registration may take place sometime after you have moved into the property. Your solicitor will handle the application and should confirm the position with you once the registration process has been completed. Do not be alarmed if the process takes several months. HM Land Registry is currently taking approximately 6 to 18 months to process some applications. If you need your property to be registered urgently—for example, because you are remortgaging—please inform your solicitor and explain the reason. If appropriate, they can request that the application be expedited.
Can Exchange and Completion Happen on the Same Day?
Yes. Exchange and completion can take place on the same day.
There is often a period between the two stages, allowing the parties time to make practical arrangements for the move. However, there is no fixed legal period that must separate exchange and completion.
Same-day exchange and completion can be appropriate in some transactions, but it provides less certainty in advance because neither party is contractually committed until exchange actually takes place.
This can make matters such as removals and other arrangements more difficult to plan.
Your solicitor can explain whether simultaneous exchange and completion is suitable for your transaction.
Frequently Asked Questions
What is the main difference between exchange and completion?
Exchange makes the property transaction legally binding. Completion is when the purchase is finalised, the balance of the purchase price is transferred and the purchaser can normally collect the keys.
When do I become legally committed to purchasing a property?
In a standard residential transaction in England and Wales, the purchaser and vendor generally become legally committed when contracts are exchanged.
An accepted offer by itself does not normally create that legally binding commitment.
When do I get the keys?
Keys are normally released on completion once the vendor’s solicitor has received the completion funds and confirmed that completion has taken place.
Can I pull out after exchange?
Withdrawing after exchange can amount to a breach of contract and may result in serious financial and legal consequences.
If circumstances arise that could prevent you from completing after exchange, contact your solicitor immediately.
Can a vendor pull out after exchange?
The vendor is also contractually committed following exchange. A vendor who fails to complete may therefore be in breach of contract, with potentially serious consequences.
You should seek legal advice immediately if the other party indicates that they may not complete.
How long is there between exchange and completion?
There is no fixed legal period between exchange and completion. The date is agreed between the parties and will depend on their circumstances and, where applicable, the requirements of the property chain.
Do I need buildings insurance from exchange?
Depending on the contract and circumstances, the purchaser may need to insure the property from exchange.
Do not wait until completion to consider this. Your solicitor will advise you when cover needs to begin.
How much deposit do I need at exchange?
Residential contracts commonly provide for a 10% contractual deposit, but the amount actually transferred on exchange can vary depending on the transaction.
Your solicitor will confirm the amount required in your case.
Can I move in before completion?
Normally, no. A purchaser should not assume they can occupy the property before completion unless a specific arrangement has been agreed and properly documented.
Should I book removals before exchange?
You can obtain quotations and make provisional plans beforehand, but committing to non-refundable arrangements before exchange carries a risk because the transaction is not normally legally binding until contracts have been exchanged.
Speak to a Conveyancer
Understanding the difference between exchange and completion can make the final stages of your property transaction much easier to navigate. Your solicitor will guide you through both stages, explain when you become legally committed and ensure the necessary legal and financial arrangements are in place for completion.
If you are purchasing or selling a property in England or Wales, please contact one of our offices or email quotes@ivesandco.com so that we can provide you with a quotation, or call us to discuss how we can assist.
Our conveyancing team will be happy to discuss your transaction and guide you through the next steps.