As potential home buyers, it`s important to understand the legalities of purchasing a property. One crucial stage of the buying process is the exchange of contracts. But is this stage legally binding? Let`s explore the answer.
Firstly, what is the exchange of contracts? This is the point in the buying process where both the buyer and seller sign identical contracts, and the buyer provides a deposit (usually 10% of the purchase price) to the seller`s solicitor. This signifies a commitment by both parties to proceed with the sale/purchase.
Now, back to the question at hand – is the exchange of contracts legally binding? The simple answer is yes. Once the contracts have been exchanged, both parties are legally bound to complete the transaction. This means that if either party backs out of the sale/purchase, they can be sued for breach of contract.
It`s important to note that the exchange of contracts is not the same as completion. Completion is the point at which the buyer pays the remaining balance of the purchase price and takes ownership of the property. However, once contracts have been exchanged, it`s difficult (though not impossible) to back out of the sale/purchase without legal consequences.
There are a few exceptions to this. One is if a condition of the contract has not been met. For example, if the buyer is unable to secure financing for the purchase, they may be able to back out of the sale without penalty. Another exception is if there is a «cooling-off period» in effect. This is a period of time (usually around 14 days) during which the buyer can back out of the sale/purchase for any reason.
In summary, the exchange of contracts is a legally binding stage in the buying process. Both the buyer and seller are committed to completing the transaction once contracts have been exchanged. However, there are a few exceptions that allow for backing out of the sale without penalty. As always, it`s important to seek legal advice if you have any questions or concerns about the buying process.