Introduction to property transactions - Stages of a property...

Learning Outcomes

This article outlines the stages and legal significance of property transactions in England and Wales, including:

• Pre-contract, exchange, completion, and post-completion phases
• Legal significance and practical steps at each stage for residential and commercial property
• Protocol forms and enquiries used in residential (PIF/TA forms) and commercial (CPSE) transactions
• Co-ownership indicators on the title, including the effect of a Form A restriction
• Deposit arrangements, risk and insurance at exchange
• Key pre-completion tasks and documents, including pre-completion searches and transfer forms TR1/TP1
• Remedies where completion is delayed, such as notice to complete
• Application to SQE1-style questions and client advice on process and risks

SQE1 Syllabus

For SQE1, you are required to understand the structure and sequence of property transactions, including the legal and practical steps at each stage, with a focus on the following syllabus points:

• The main stages of a property transaction: pre-contract, exchange, completion, and post-completion
• The purpose and significance of each stage
• The key legal documents and searches required at each stage
• The effect of exchange of contracts and completion
• The solicitor’s duties and client care at each stage
• How residential protocol forms (PIF/TA10/TA13) compare with CPSE in commercial work
• Deposit arrangements (stakeholder vs agent), passing of risk and insurance after exchange
• Pre-completion searches (OS1/OS2 and K16), completion undertakings, and transfer forms (TR1/TP1)
• Managing co-ownership and overreaching on a sale (including the role of a Form A restriction)
• Remedies and timelines if completion is delayed (notice to complete and consequences)

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the legal effect of exchange of contracts in a property transaction?
2. At what stage does the risk of damage to the property usually pass to the buyer?
3. Name two key searches a buyer’s solicitor must carry out before exchange of contracts.
4. What are the main post-completion steps a buyer’s solicitor must take after completion?

Introduction

A property transaction in England and Wales follows a defined sequence of legal and practical steps. Each stage has its own requirements, risks, and legal consequences. Understanding the stages—from initial instructions to post-completion formalities—is essential for SQE1 and for advising clients in practice. In particular, you should be alert to the caveat emptor principle (the buyer must investigate), differences between residential and commercial practice, and how the transaction is synchronised where there is a chain. Early clarity on the client’s objectives, funding and timescale informs the strategy through all stages.

The Main Stages of a Property Transaction

A typical property transaction is divided into four main stages:

1. Pre-contract stage
2. Exchange of contracts
3. Completion
4. Post-completion

Each stage is outlined below.

Pre-Contract Stage

The pre-contract stage lays the groundwork for the transaction. The parties are not yet legally bound, and either can withdraw without penalty.

Taking Instructions and Client Due Diligence

The solicitor must obtain full instructions from the client at the outset. This includes:

• Verifying the client’s identity (to comply with anti-money laundering rules)
• Understanding the client’s objectives and the property involved
• Checking the source of funds and any mortgage requirements
• Identifying whether the client is buying jointly and, if so, how they wish to hold the beneficial interest
• Clarifying any time constraints (for example, chain dependencies, lender deadlines, or tenancies to be managed)

A seller’s solicitor should ask about current occupation, any tenancies, alterations, guarantees, insurances and disputes. A buyer’s solicitor should advise on surveys (for older or altered property, a full survey is usually prudent), and signpost the differences between lender valuation, homebuyer’s report and full structural survey.

Key Term: pre-contract stage
The period before exchange of contracts, when the parties negotiate terms, investigate title, and carry out searches and enquiries.

Key Term: investigation of title
The process by which the buyer’s solicitor checks the seller’s legal right to sell and identifies any burdens or defects affecting the property.

Drafting and Reviewing the Contract

The seller’s solicitor prepares a draft contract, normally incorporating the Standard Conditions of Sale (residential and simple commercial) or the Standard Commercial Property Conditions. The contract will set out the parties, property, price and deposit, the completion date, and any special conditions (e.g., unusual title issues, specific indemnity insurance, or a seller’s obligation to supply further documents). It is common to include “specified incumbrances” so the buyer is expressly aware of rights and restrictions to which the sale is subject.

The buyer’s solicitor reviews the contract, checks the title and negotiates amendments where appropriate. Two points often negotiated at this stage are:

• Deposit arrangements: by default the deposit is usually 10% and held by the seller’s solicitor as stakeholder; variations (reduced deposits or agent holdings) require a special condition
• Insurance and risk: under the standard conditions, risk normally passes to the buyer on exchange; buyers should have cover in place from that moment

Investigation of Title

For registered land, the seller usually deduces title by supplying official copies of the register (Property, Proprietorship and Charges registers) and the title plan, along with documents referred to on the register. The buyer’s solicitor:

• Confirms the seller matches the registered proprietor and checks for restrictions or notices
• Reads the Charges register to identify easements, restrictive covenants, mortgages and other third-party rights
• Ensures the property description matches the plan and the agreed extent
• Checks class of title and any restrictions on disposition
• Assesses any entries indicative of co-ownership or trust arrangements (e.g., a Form A restriction)

For unregistered land, title is provided by an epitome of title starting with a “good root” (generally a conveyance for value at least 15 years old) and showing a clean chain of ownership. Land Charges searches are then required against prior estate owners.

Where property is co-owned or previously co-owned, a Form A restriction is commonplace and signals that any sale by a sole legal owner must be structured to overreach beneficial interests (usually by appointing a second trustee and paying capital monies to two trustees or a trust corporation).

Key Term: Form A restriction
A standard restriction on the proprietorship register stating that no disposition by a sole proprietor under which capital money arises is to be registered unless authorised by the court. It indicates a trust of land and prompts overreaching on a sale.

Searches and Enquiries

The buyer’s solicitor carries out searches and raises enquiries to uncover issues not apparent from the title documents.

Common searches include:

• Local authority search (LLC1 and CON29) disclosing charges, consents, enforcement and proposals
• Water and drainage search (confirming connections and sewer/drain location)
• Environmental search (contamination risk, landfills, flood risk indicators)
• Chancel repair liability screening (risk-based; if indicated, indemnity insurance is typical)
• Mining or other location-specific searches (coal, brine, tin, clay), and, where appropriate, a highways search
• For unregistered land, an Index Map search to ensure the land is not already registered or subject to a caution

Enquiries are raised with the seller to clarify matters such as boundaries, disputes, rights benefiting and burdening the land, services, alterations and compliance with planning and building regulations, and fixtures.

In residential transactions, standard protocol forms are used:

• TA6 Property Information Form for general matters
• TA10 Fittings and Contents Form
• TA13 Completion Information and Undertakings shortly before completion (see below)

In commercial transactions, CPSE (Commercial Property Standard Enquiries) are used and are more granular, covering planning, environmental, fire safety, services, insurance, employees/occupiers, VAT and more.

A buyer should also undertake a physical inspection (or commission a surveyor) to spot physical problems, evidence of adverse rights (e.g., pathways suggesting an easement), and occupiers. This complements legal searches and helps identify overriding interests (for example, rights of persons in actual occupation).

Planning and building regulation compliance is important. Many changes are “development” and need planning permission unless permitted development applies; work may also need building control approval even if planning is not required. Enforcement exposure varies with the breach (planning operations: normally four years; change of use and breach of condition: normally ten years; building regulations offences can be enforced within statutory limits but injunctions may be sought). Replies to enquiries and local search results should be cross-checked.

Reporting to the Client and Lender

The buyer’s solicitor reports to the client on the results of the title investigation, searches, and enquiries, and on any residual risks (often with proposed solutions such as indemnity insurance). Where there is a mortgage, the solicitor must also satisfy the lender’s instructions (for example, the UK Finance Mortgage Lenders’ Handbook), provide a certificate of title when requested, and confirm funds request timings. Any material title or search change may require further lender approval before exchange.

Exchange of Contracts

Exchange of contracts is the point at which the transaction becomes legally binding. Until exchange, either party can withdraw without liability (except for certain costs).

• Both parties sign identical contracts
• The solicitors formally exchange contracts (often by telephone using a Law Society formula)
• The buyer pays a deposit (usually 10% of the purchase price)
• The completion date is fixed

Key Term: exchange of contracts
The moment when the buyer and seller become legally bound to complete the transaction on the agreed terms and date.

Key legal consequences include:

• The buyer normally acquires an equitable interest in the property
• Risk of damage to the property usually passes to the buyer (under the standard conditions), so buyers should have buildings insurance in place from exchange
• Deposits are commonly held as stakeholder (safer for buyers because the seller cannot release funds prematurely); if held as agent, they may be released to the seller on exchange in a related purchase chain

If a reduced deposit is agreed, this should be recorded by a special condition; on any later service of a notice to complete, the buyer may have to “top up” to 10% immediately.

Where there is a chain, solicitors typically synchronise exchanges to ensure all contracts exchange on the same day with compatible completion dates. This avoids the buyer becoming bound to buy while being unable to sell.

Key Term: notice to complete
A formal notice (under the standard conditions) that makes time of the essence and requires completion within 10 working days of service. The buyer must usually top up any deposit to 10% on service. Failure to comply entitles the aggrieved party to terminate and pursue contractual remedies.

After exchange, both solicitors turn to pre-completion steps to ensure a smooth completion.

Completion

Completion is when the legal title passes to the buyer. On the agreed completion date:

• The buyer’s solicitor sends the balance of the purchase price to the seller’s solicitor
• The seller’s solicitor releases the signed transfer deed and (if applicable) the keys
• The buyer takes possession of the property

Key Term: completion
The stage when the purchase price is paid in full, the transfer deed is completed, and the buyer becomes entitled to be registered as the legal owner.

In practice, much of the work for completion is prepared immediately after exchange:

• Drafting and agreeing the transfer deed. For a transfer of the whole registered title, use form TR1. For a transfer of part, use form TP1 (with an accurate plan)
• Obtaining signatures on the transfer (seller must sign; buyer signs if giving covenants or if there is more than one buyer declaring trust shares)
• Receiving and checking the seller’s Completion Information and Undertakings (TA13 in residential), including the seller’s solicitor’s undertaking to redeem any charges and to supply evidence (e.g., discharge of charge data from HM Land Registry)
• Pre-completion searches:
  • An OS1 (or OS2 for part) priority search to “freeze” the title for 30 working days and protect the buyer’s application to register
  • A bankruptcy-only K16 search against individual buyers for lender protection
  • Company searches where a corporate party is involved
• Arranging funds: requesting mortgage monies in time (lenders may require several working days’ notice), verifying client monies, and preparing the completion statement
• Apportionments: in relevant cases (for example, rent or service charge on income-producing or leasehold property), agreeing apportionments to the completion date
• Practicalities: confirming time and method for key release (completion is typically deemed by 2pm under the standard conditions), dealing with removals, and ensuring vacant possession if agreed

Key Term: TR1
The Land Registry form used to transfer the whole of a registered title from seller to buyer.

Key Term: TP1
The Land Registry form used to transfer part only of a registered title, accompanied by a plan identifying the part transferred.

Where a seller is a sole proprietor holding on trust, the buyer must ensure overreaching by payment to two trustees or a trust corporation before completion. A Form A restriction on the register will prompt this requirement.

Post-Completion

After completion, both solicitors have further duties.

Seller’s Solicitor

• Discharges any existing mortgage and provides evidence of discharge to the buyer’s solicitor (electronic discharge is standard)
• Accounts to the client for the sale proceeds
• Pays the estate agent (if authorised)

Buyer’s Solicitor

• Pays Stamp Duty Land Tax (SDLT) in England (generally within 14 days) or Land Transaction Tax (LTT) in Wales (generally within 30 days), filing the appropriate return
• Registers the buyer as the new owner at HM Land Registry within the priority period created by the OS1/OS2
• Registers any new mortgage
• Ensures any necessary restrictions are entered and consents satisfied
• Notifies the lender and client when registration is complete and supplies updated official copies

Key Term: post-completion stage
The period after completion when the solicitors deal with tax, registration, and final administrative matters.

Worked Example 1.1

Scenario:
A buyer is purchasing a freehold house. The buyer’s solicitor has received the draft contract and official copies of the register. What steps must the buyer’s solicitor take before advising the client to exchange contracts?

Answer:
The buyer’s solicitor must investigate title, carry out all relevant searches (e.g., local authority, water and drainage, environmental), raise any necessary enquiries with the seller’s solicitor, review the results, and report to the client and lender. Only when satisfied that the title is good and all issues are resolved should the solicitor advise the client to proceed to exchange.

Worked Example 1.2

Scenario:
After exchange of contracts, a fire damages the property before completion. Who bears the risk?

Answer:
Unless the contract provides otherwise, the risk passes to the buyer on exchange of contracts. The buyer is responsible for insuring the property from exchange.

Worked Example 1.3

Scenario:
Contracts have exchanged with a 5% deposit paid. Completion does not take place on the completion date due to the buyer’s late funds. What steps can the seller take and what are the immediate consequences for the buyer?

Answer:
The seller may serve a notice to complete, making time of the essence and requiring completion within 10 working days of service. On service, the buyer must immediately top up the deposit to 10%. If the buyer still fails to complete within the notice period, the seller may rescind, forfeit the 10% deposit, and seek contractual compensation/damages (and may resell).

Exam Warning

In SQE1, questions may test your understanding of the legal effect of exchange and completion. Remember: after exchange, the parties are legally bound, risk usually passes to the buyer, and the buyer should insure. If completion is delayed, a valid notice to complete makes time of the essence and requires any reduced deposit to be topped up to 10% immediately.

Revision Tip

Always know the order and legal significance of each stage. Practice applying the sequence to different scenarios. In particular, practise mapping pre-completion tasks (OS1/OS2 and K16 searches, TA13 undertakings, transfer execution, lender funds) to the timeline, and be ready to explain how a Form A restriction affects completion mechanics (overreaching) and how a notice to complete alters the parties’ rights.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• The four main stages of a property transaction: pre-contract, exchange, completion, and post-completion
• The legal significance and practical steps at each stage
• The effect of exchange of contracts: legal commitment and risk passing to the buyer; insurance from exchange
• The effect of completion: transfer of legal title and possession
• The solicitor’s duties to the client and lender at each stage, including reporting and compliance with lender instructions
• The importance of searches, enquiries, physical inspection, and reporting before exchange
• Pre-completion essentials: OS1/OS2 and K16 searches, TA13 undertakings, and preparation/execution of TR1/TP1
• Managing co-ownership and overreaching where a Form A restriction appears
• Handling delay: service and consequences of a notice to complete (including deposit top-up and remedies)
• The need for prompt post-completion tax payment and registration within the priority period

Key Terms and Concepts

• pre-contract stage
• investigation of title
• exchange of contracts
• completion
• post-completion stage
• Form A restriction
• notice to complete
• TR1
• TP1