Once the contract wording is agreed, the buyer’s finances are in place, satisfactory search results have been received and satisfactory replies to enquiries have been given, the buyer and the seller cansign their copies of the contract and return them to their solicitors – in the buyer’s case with a deposit (usually 10% of the purchase price). This is the time to raise any remaining questions, doubts, etc. Although the mere act of signing the contract does not commit you to the deal, once the contracts are returned to the sollicitors, they will (unless you tell them otherwise) exchange contracts, and at that point you ARE committed to the deal – no changes of mind; no price alterations; no decsions that, after all, you will spend the money to have the building surveyed or the equipment checked. Too late! You have passed the point of no return.
The actual exchange of contracts takes place during a telephone conversation between the solicitors (following, if you are interested, one of the Law Society’s formulae for exchange of contracts by telephone). In essence, at an agreed moment, the solicitors mutually agree that, from that moment, the contracts are deemed to be exchanged – from that moment, each holds his or her client’s part of the contract on behalf of the other party’s solicitor, instead of on behalf of their own client: it has become the other solicitor’s property.
The physical documents are exchanged by post that day, but from the moment agreed, exchange of contracts has legally taken place and is irrevocable
Each solicitor will then tell his or client that contracts have been exchanged, and will confirm the completion date – the date on which the property and the business will change ownership – so that removal arrangements, etc, can be made forf that date. Paricular items to note in this connection are –
Stocktaking: The stock at the premises on completion will need to be valued and paid for. It is open to the buyer and seller to agree a value between themselves or, at the other extreme, each to appoint a valuer to try to agree the value. However, I suggest that the best method is for both Buyer and Seller to agree on one experienced stock-taker to carry out an impartial valuation for them jointgly. The one fee is split between buyer and seller, and a swift, impartial and inexpensive valuation is the result
Utilities: The parties need to read the meters at completion (sometimes the valuer will record the figures on his valuation, to avoid disputes later) and the buyer needs to arrange his or her own supplies. This should be done promptly (ideally, prepared in advance) to avoid the risk of the buyer being saddled with potentially huge unpaid bills of the seller, who is likely to disappear, perhaps to emigrate. This is so important that I encourage buyer clients to set this up as soon as contracts are exchanged, and I try to get the meter numbers from the seller’s solicitors (who will be unwilling to provide copy bills containing these numbers if there are arrears) in readiness as part of my pre-contract enquiries
Premises licence: Again, this needs to be transferred into the buyer’s name as soon as possible after completion. On exchange of contracts, I try to get the seller’s consent to the transfer, so that the transfer papers can be prepared and sent to the council (and police) in advance of completion, to be processed on the completion date. As no legal skill is required for this, I normally suggest to clients that they do it themselves, but it is important they do it, or the premises can be closed down. At the same time as transferring the premises licence, a new Designated Premises Supervisor (usually one of the buyers) needs to b appointed, so in total there are 4 forms –
1: The application to transfer the premises licence
2: The outgoing licence-holders consent to that transfer
3: The application to appoint a new DPS
4: The consent of the new DPS to being appointed as such
Why it cannot all be on one form – or at most two – is beyond me!