What Exactly Happens at Exchange?
Exchange of contracts is a legal process handled by solicitors. It works like this:
- You sign the contract your solicitor has been reviewing and negotiating since reservation
- You transfer the exchange deposit to your solicitor's client account (if you haven't already)
- Your solicitor contacts the developer's solicitor and both parties exchange signed contracts — usually by phone, followed by posted originals
- The developer's solicitor confirms exchange and holds your deposit
- Both sides are now legally bound: you must buy the property, and the developer must sell it to you at the agreed price and specification
On new builds, exchange typically happens 14–28 days after reservation, though this varies by developer and how quickly the legal work progresses. For off-plan purchases (where the property hasn't been built yet), exchange may happen months before completion — see our guide to off-plan exchange risks for the extra considerations involved.
The Exchange Deposit: How Much and Where Does It Go?
How Much Deposit Do You Need?
The standard exchange deposit on a new build is 10% of the purchase price. On a £300,000 property, that's £30,000. However, this isn't always fixed:
- Some developers accept 5%. Particularly on scheme-assisted purchases (Shared Ownership, First Homes) or where the buyer is using a 95% LTV mortgage with limited savings.
- Your reservation fee is usually deducted. If you paid a £1,000 reservation fee, your exchange deposit would be £29,000 (on a 10% basis).
- Gifted deposits are accepted by most developers, but your lender will need a gifted deposit letter from the donor confirming it's a gift, not a loan.
- LISA funds can form part of the deposit. If you're using a Lifetime ISA, your solicitor will request the withdrawal from your LISA provider — but this can take 30+ days, so start the process early.
Where Does the Deposit Go?
You transfer the deposit to your solicitor's client account. At exchange, it's passed to the developer's solicitor, who holds it in a client account until completion. In most new build contracts, the developer has the right to use the deposit as "stakeholder" money — meaning they can access it before completion. This is standard practice for housebuilders but worth understanding:
- Stakeholder basis (standard): The developer's solicitor holds the deposit but the developer can draw on it. If the developer goes bust before completion, recovering your deposit depends on NHBC deposit protection (see below).
- Agent basis (rare on new builds): The money is held by the solicitor and cannot be touched by either party until completion. More protective for buyers, but most developers won't agree to this.
NHBC Deposit Protection
If your developer is registered with the NHBC (most major builders are), your exchange deposit is protected up to a maximum of £100,000 (or 10% of the purchase price, whichever is lower) under the Buildmark warranty scheme. This means if the developer goes into administration before completing your home, NHBC will refund your deposit.
Check that your developer is NHBC-registered before you exchange. If they use a different warranty provider (LABC, Premier Guarantee, ICW), check whether that provider offers equivalent deposit protection — not all do.
The Long-Stop Date: Your Safety Net
The long-stop date is arguably the most important clause in a new build contract for buyers. It's the absolute deadline by which the developer must complete the property and be ready for legal completion. If the developer hasn't completed by the long-stop date, you have the right to:
- Withdraw from the purchase
- Receive a full refund of your deposit
The long-stop date is negotiable, but developers typically set it at 12–18 months after the estimated completion date. On a property estimated to complete in September 2026, the long-stop might be September 2027 or March 2028.
Why the Long-Stop Date Matters
Without a long-stop date, you could be locked into a purchase indefinitely while the developer experiences construction delays. Your mortgage offer could expire (typically valid for 3–6 months), you could miss out on stamp duty relief deadlines, and your life plans could be on hold with no exit route.
With a long-stop date, you have a guaranteed backstop. If the developer can't deliver by that date, you walk away whole.
What to Watch For
- Unreasonably long long-stop periods. Some developers set long-stops at 24 months or more after the estimated completion. Your solicitor should push back on anything over 18 months.
- Force majeure clauses. Some contracts allow the developer to extend the long-stop date due to events beyond their control (extreme weather, pandemics, material shortages). Check how broadly "force majeure" is defined — some contracts make it so wide as to be almost meaningless as protection.
- "Best endeavours" vs "reasonable endeavours". The contract should require the developer to use at least "reasonable endeavours" to complete on time. "Best endeavours" is stronger but harder to enforce.
The Completion Notice Period
The completion notice is separate from the long-stop date. It's the formal notification from the developer that the property is ready and you need to complete within a set number of days. Key points:
- Typical notice period: 10–14 working days (some contracts allow as few as 5)
- What triggers it: The developer issues the notice when the property has passed building control inspection and is ready for occupation
- What you need to do: Ensure your mortgage offer is valid, your solicitor has all final paperwork ready, and your completion funds are in your solicitor's client account
The Risk of Short Notice Periods
A 5-working-day notice period gives you just one week to arrange completion. If your mortgage offer has expired, you may not be able to get a new one in time. If your solicitor isn't prepared, they may need to rush the final checks.
Your solicitor should negotiate a minimum 10 working day notice period at the contract review stage. If the developer insists on a shorter period, make sure your mortgage and legal work are as complete as possible before exchange so you're ready to move quickly when the notice arrives.
Key Contract Clauses Your Solicitor Should Review
Beyond the deposit, long-stop date, and completion notice, here are the other contract clauses that matter on a new build purchase:
The Specification
The contract should include a detailed specification of what you're buying: kitchen brand and finish, bathroom fittings, flooring, turfing, fencing, and any upgrades you've chosen. If the specification is vague ("fitted kitchen" with no brand or model), push for detail. Disputes over specification are one of the most common complaints on new builds.
The Substitution Clause
Most new build contracts include a clause allowing the developer to substitute materials or fittings with alternatives of "equivalent or better quality." This is reasonable (supply chain issues happen), but check how broadly it's worded. A clause that lets the developer change your specified kitchen for any alternative they choose is too loose.
Ground Rent and Service Charges
If you're buying a leasehold property (most new build flats, some houses on managed estates), the contract should state:
- The initial ground rent and how it increases (fixed, RPI-linked, or doubling — the last is toxic and should be refused)
- The estimated annual service charge and what it covers
- Who the management company is and whether residents will have a right to manage
Since the Leasehold Reform (Ground Rent) Act 2022, ground rent on most new residential leases in England and Wales is capped at a peppercorn (effectively £0). If your contract includes ground rent above £0 on a new lease, your solicitor should query this.
Incentive Declarations
If the developer has offered incentives (upgrades, stamp duty paid, deposit contribution), these must be documented in the contract and declared to your mortgage lender. Undisclosed incentives can void your mortgage offer. See our guide to combining schemes with incentives for details.
Right to Inspect and Snag
The contract should confirm your right to inspect the property and report defects. Most NHBC-registered developers provide a two-year defect rectification period, but the specific terms should be in the contract. Check whether you're allowed a pre-completion snagging inspection by an independent surveyor.
What Happens If You Pull Out After Exchange?
If you withdraw from the purchase after exchanging contracts without a valid contractual reason, the consequences are serious:
- You lose your entire exchange deposit. On a £300,000 property with a 10% deposit, that's £30,000 gone.
- The developer can sue for additional losses. If they sell the property for less than your agreed price, they can claim the difference from you — plus their legal costs and any costs of remarketing the property.
- Your credit score may be affected if the developer obtains a county court judgment (CCJ) against you.
Valid reasons for withdrawal after exchange (without penalty) include:
- The developer hasn't completed by the long-stop date
- The developer is in material breach of contract (e.g., the property significantly differs from the agreed specification)
- A title defect that makes the property unsaleable or unmortgageable
This is why it's critical to have everything in order before exchange: mortgage offer confirmed, deposit available, contract reviewed, searches complete. Don't exchange if you have any doubts about your ability to complete.
Exchange of Contracts vs Completion: What's the Difference?
Buyers sometimes confuse exchange and completion. They're separate events:
- Exchange: You pay the deposit (5–10%), sign the contract, and legally commit to the purchase. On off-plan properties, this may happen months before the home is finished.
- Completion: You pay the remaining balance, ownership transfers, and you get the keys. See our completion day guide for the full process.
The gap between exchange and completion on a new build can range from:
- Same day (rare, but possible on completed stock)
- 2–4 weeks (typical for properties that are nearly finished)
- 3–12 months (common for off-plan purchases where construction is ongoing)
- 12–24 months (early off-plan purchases in the first phase of a new development)
How to Prepare for Exchange
A smooth exchange requires everything to line up at once. Here's the checklist:
- Mortgage offer received and understood. Know the offer's expiry date and any conditions attached.
- Deposit funds in your solicitor's client account. Transfer early — same-day transfers can fail or be delayed.
- Contract reviewed and understood. Read your solicitor's report. Ask questions about anything you don't understand — especially the long-stop date, completion notice period, ground rent terms, and specification.
- Searches returned. Your solicitor needs local authority, environmental, drainage, and any other required searches back before exchange.
- All enquiries resolved. Your solicitor's questions to the developer's solicitor should all have satisfactory answers.
- Buildings insurance arranged. Most lenders require you to have buildings insurance from the date of exchange (not completion). Arrange this in advance and have the policy details ready.
- Incentives documented. Any developer incentives should be recorded in the contract and disclosed to your lender.
The Bottom Line
Exchange of contracts is the most consequential moment in the buying process. Once you've exchanged, you're legally committed — and so is the developer. Make sure you understand every clause in the contract, have all your finances in order, and are confident in the long-stop date and completion notice terms.
Don't rush to exchange just because the developer's 28-day deadline is approaching. A good solicitor will tell you if you're not ready, and most developers will extend the reservation rather than lose a sale. Getting exchange right is more important than getting it fast.
For the full buying journey from start to finish, see our complete step-by-step guide. For the next stage after exchange, read our completion day guide.