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Contract terms and exchange

This content applies to England & Wales

Contract terms, and issues around the exchange of contracts.

The purchaser and seller will be ready to exchange contracts once the purchaser is happy with the survey report, the solicitor has completed the necessary legal work, and the lender has agreed the mortgage

Contract terms

It is important for both the purchaser and the seller to read and understand the terms of the contract for sale. The sale process can be confusing for first-time purchasers or sellers and it is important for both parties to seek professional advice if necessary, particularly to examine the terms of the contract.

The terms of each contract can vary, although the terms must comply with the regulations[1] and there are model terms that can be used in the contracts for sale of property. Examples of 'model terms' can be obtained from the National Association of Estate Agents, the professional body for estate agents.

Exchange of contracts

The purchaser will usually have to pay 10 per cent of the purchase price, and a date for completion will be agreed. Once contracts have been exchanged, it is not possible for either party to back out of the purchase without the risk of being sued for damages, and if it is the purchaser who pulls out, s/he will lose her/his deposit. It is important that the purchaser arranges buildings insurance cover from the date of exchange of contracts, since s/he will be obliged to complete even if the property burns down in the meantime.

[1] Unfair Terms in Consumer Contracts Regulations 1999 SI 1999/2083.

 

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