Exchange of contracts and completion: when you are bound, and the SDLT and LTT effective date

When does the contract become binding?

After an offer is accepted, the solicitors draw up the contract. When both sides are happy with it, they sign final copies and send them to each other, and the agreement to sell and buy is then legally binding.

A contract for the sale of an interest in land can only be made in writing, incorporating all the agreed terms, and must be signed by or on behalf of each party (section 2 of the Law of Property (Miscellaneous Provisions) Act 1989).

Usually, neither side can pull out at that point without paying compensation.

What is completion?

Once contracts are exchanged and any remaining checks the buyer has asked for are dealt with, the buyer’s solicitor or conveyancer transfers the money.

The seller’s solicitor then pays off the mortgage and other costs, and the remaining balance is sent to the seller’s account. The seller also sends the legal documents needed to transfer ownership to the buyer, according to the same GOV.UK guidance.

When is SDLT or LTT due?

Stamp duty is charged on the effective date of the transaction. In England, the general rule is that the effective date is when the land transaction is completed, with exceptions set out in the HMRC manual.

The GOV.UK pay guidance also says the effective date can be earlier than completion in some cases, such as when the buyer is entitled to take possession of the property, the first rent payment is due, or the transaction is substantially performed because at least 90% of the payment is made. In England the effective date is therefore completion or an earlier substantial performance. Check which applies before the deadline.

How do you register the purchase, and what is the priority period?

An official search of the whole with priority prevents registration of an adverse interest during the priority period, to allow the buyer to lodge the protected application. The search is used for a transaction for value affecting the whole of the land in a registered title.

The Land Registration Rules 2003 define the priority period as ending at midnight marking the end of the thirtieth working day after the search is entered on the day list. According to the Land Registry practice guide, the priority ends at midnight at the end of the 30th working day after receipt, and the application must be delivered by noon on the date the priority expires to make sure it is entered in time. The practice guide also notes that the definitions of working day and business day differ slightly.

The application to register the transfer is the AP1. Your solicitor lodges the application, and should check the expiry date of the official search before doing so. Read the AP1 guide and the HM Land Registry guidance together.