Exchange of contracts is the critical moment in a property purchase, as was highlighted to me last week.
I was acting in a short, rollercoaster ride of a transaction for a client buying a commercial property for investment, due to be sold at auction. I provided a title report and then the client got caught up in a pre-auction contract race. As he sat in the sellers’ solicitors’ waiting room, ready to go in to exchange contracts, I was told that a competing buyer had beaten him to it at the auctioneers’ office.
I thought the game was up – once there has been an exchange of contracts (which doesn’t have to be through solicitors), then that is that for other buyers. The client was having none of it! As it transpired, the auctioneers had not actually exchanged contracts. They had taken a 10% deposit, shaken hands with the other buyer and agreed to withdraw the property from the market. However, the essential part of an exchange of contracts is that the main terms are in writing and both parties have signed (see Law of Property (Miscellaneous Provisions) Act 1989, section 2). Without this, a contract to sell land or buildings is non-binding and, in fact, cannot even exist in law, regardless of money passing or of the intention of the parties.
So, game back on! An increased offer and direct pressure on the seller resulted in my client winning the race and exchanging contracts at the solicitors’ office after all.