Once the contract is exchanged both parties to the contract shall not be allowed to withdraw without sufficient reason. Doing so would incur breach. Therefore, it is very important that all queries are dealt with and all financial arrangements are in place to ensure a smooth transaction.
Matters to be checked
The following issues should be checked before exchange of contract; while some concern the buyer, some concern the seller.
- Have all searches been conducted and enquiries been made
- Have all replies to searches been answered and enquiries been received
- Have all replies to enquiries been checked to the satisfaction of the buyer and are all replies to individual questions are satisfied and according to the client’s instructions.
- Has a survey of the property been conducted and are these to the satisfaction of the solicitor.
- Are all outstanding queries been resolved (This concerns both the seller and the buyer)
- Has a lender made a mortgage offer and has it been accepted by the buyer?
- Have all arrangements been made with regards to the conditions attached to the advance. For instance, obtaining estimates for repairs to the property
- Is there sufficient money to carry out the transaction smoothly, taking into consideration the deposit money, mortgage advance, and the cost of the transaction?
- Have arrangements been made for the release of the seller’s mortgage or when it is a part sale, have arrangements been made for the release of the part that is being sold from the mortgage. (This concerns the seller and the buyer).
- Has deposit been paid, and if paid, how much?
- How much money is required to be paid during exchange of contract
- Have arrangements been made for an undertaking with relation to a bridging loan?
- Who is to be paid the deposit amount
- Have the deposit funds been obtained and cleared through the client’s account.
- Have all outstanding queries been resolved
- Have all amendments that were mutually agreed upon been included in the contract
- Has the buyer’s conveyancing solicitor returned the approved draft to the seller.
- Has the clean copy of the contract been prepared for the clients to sign
- Have the clients been explained about the terms and conditions pertaining to the sale
- Have both parties agreed on the list of fixtures and fittings.
- Are all procedures on track to ensure that the property is insured immediately on exchange of contract?
- Are all procedures in place to obtain other insurance policies like life insurance policy required under the terms of the mortgage offer
Has completion date been agreed upon by both parties?
Method of exchange
- What are the modes of exchange that are best suited for this transaction
- If the client requires a simultaneous exchange of contract, are all transaction related documents (pertaining to the sale and purchase) ready to proceed
Signature of contract
Has the client signed the contract?
Has the consent of all non-owning occupiers been obtained?
Reporting to client
When the buyer’s conveyancing solicitor has made all enquiries and the contents of the draft contract have been agreed upon, the next step for him is to explain in writing to the client about his observation and also the terms and conditions of the contract and the mortgage offer. A ‘Buyer’s Report’ is sometimes prepared to explain all of this.
Signature of contract
Both parties to the agreement should sign the contract to ensure that S2 of the Law of Property (Miscellaneous Provisions) has been complied with. The signature need not be attested by a witness; an authorised agent’s signature is enough.
Signature by client
It is ideal that the buyer/seller sign the contract in presence of their solicitors. However, it is not always possible. If a conveyancing solicitor plans to send the documents via post or courier, it is important that an accompanying letter should explain where and how the client is required to sign the document. The letter should also explain in detail the terms and conditions associated with the sale in a language that the client can easily understand.
Signature by solicitor on behalf of client
A conveyancing solicitor can sign the contract on behalf of his client, provided he has the express authority to do so. This could either be done by a valid power of attorney or through a letter in writing by the client. This permission should be given by the client after being made fully aware of consequences of such an authority. Without this authority a solicitor signing the contract would be liable for damages for breach of warranty.
Before exchanging the contract, the conveyancer should ensure that proper authority is obtained from the client regarding the exchange. The client should also be made aware of the consequences of the exchange. In fact, to accentuate the importance of an exchange most soliciting firms require that the exchange takes place in writing.
Photo courtesy: Claire L. Evans