Exchange of contracts and completion are the two final milestones in any property purchase in England and Wales. They mark the moments when your purchase becomes legally binding and when you finally receive the keys to your new home. Understanding what happens at each stage will help you prepare and avoid any last-minute surprises.
What Happens at Exchange of Contracts?
Exchange of contracts is the point at which the sale becomes legally binding on both buyer and seller. Up until this moment, either party can withdraw from the transaction without penalty. After exchange, pulling out would result in significant financial consequences.
The exchange itself is handled by the solicitors. Your solicitor and the seller's solicitor will agree on a completion date, then exchange identical signed copies of the contract over the telephone. The Law Society's Formula B or Formula C is typically used, which sets out the procedure for the exchange. Once both solicitors confirm that contracts have been exchanged, the deal is locked in.
At exchange, you are required to pay a deposit. This is usually ten per cent of the purchase price, although it is sometimes possible to negotiate a reduced deposit of five per cent, particularly for first-time buyers using a Help to Buy equity loan where funds may be structured differently. The deposit is transferred from your solicitor's client account to the seller's solicitor and is held until completion.
If you withdraw after exchange without a valid legal reason, you will forfeit your deposit. If the seller pulls out, they must return your deposit and may also be liable for your costs. In practice, withdrawals after exchange are extremely rare because of the financial penalties involved.
What Happens on Completion Day?
Completion day is the day you officially become the owner of the property and receive the keys. It typically takes place one to two weeks after exchange, although simultaneous exchange and completion on the same day is possible in some circumstances, particularly for chain-free transactions.
On the morning of completion, your mortgage lender releases the loan funds to your solicitor. Your solicitor then sends the full purchase amount, including the mortgage funds and the balance of your deposit, to the seller's solicitor by bank transfer. This usually happens via the CHAPS payment system, which processes same-day transfers between banks.
Once the seller's solicitor confirms that the funds have been received, completion is confirmed. The seller's estate agent is then authorised to release the keys to you. In most cases, you can collect the keys from the estate agent's office, although arrangements vary. If you are part of a property chain, there may be a delay while funds travel up the chain from one solicitor to the next.
It is worth noting that completion usually happens during business hours, and there is no set time. Some buyers receive their keys by late morning, while others in longer chains may not get them until late afternoon. Plan your removal accordingly and avoid booking removals too tightly around expected key release times.
What Can Go Wrong?
While most completions proceed smoothly, there are a few things that can cause problems. The most common issue is delays in the transfer of funds. Bank transfers can occasionally be held up, particularly if large sums trigger additional security checks. If you are in a chain, a delay at any point can ripple through to all other transactions.
Another potential issue is the seller failing to vacate the property on time. Your contract should specify a time by which the seller must leave, and if they do not, your solicitor can take action. In practice, this is rare but can be stressful if it happens on the day you have a removal van waiting.
To minimise the risk of problems, ensure your solicitor has all the funds ready well in advance of completion day. Confirm that your mortgage lender will release funds on the agreed date and keep your mobile phone available throughout the day so your solicitor can reach you if needed.
After completion, your solicitor handles the remaining administrative work. They will submit your stamp duty land tax return to HMRC within fourteen days, pay any stamp duty owed, and register your ownership with the Land Registry. This process can take several weeks, but it does not affect your ability to move in and enjoy your new home from completion day onwards.