Exchange of Contracts: What's Next for the Draft Protocol

But progress with the draft Law Society code continues to be slow: a second consultation round on the draft protocol for exchange of contracts and holding to order will be held later this year, Law Society has confirmed. Conveyancing lawyers awaiting the Society’s next move on its draft can expect to have an even greater burden placed upon them.

The code and associated protocols, replacing the current protocols, will also enable the use of new technologies for conducting land transactions. The code may also be used for commercial property transactions.

What’s proposed?

Once introduced, the changes will represent the most significant changes to the conveyancing process for decades and will effectively abolish the existing formulae for exchange of contracts.

By way of reminder, the proposals under the first edition of the draft code include:

• Formal clarification of the meaning of ‘holding to order’ of deposits and documents
• Specific matters that are to be agreed ahead of signing and ‘immediately before exchange or release of contracts’. For example, the media to be used for contracts (e.g. wet-ink paper originals signed in separate parts or using a particular electronic format and/or platform such as PDF or DocuSign; and the procedure and arrangements to be used for exchange)
• Introduction of three separate protocols - Hold to Order, Immediate Exchange and Release of Contracts
• The introduction of several undertakings for conveyancers within the three protocols
• A Hold to Order Protocol 2024 setting out the process for holding deposits on exchange

If, in any given transaction, the parties’ solicitors agree with each other to comply with the code, they will need to confirm this to each other in writing by letter or electronic communication. Crucially, that confirmation will constitute an undertaking by each of the solicitors to comply with the code and to observe and perform their respective obligations under it.

Next steps

The Law Society started consulting, back in November 2023, with Conveyancing Quality Scheme (CQS) firms, local law societies and other conveyancing stakeholder organisations – but not conveyancers at grassroots level.

A Law Society of England and Wales spokesperson told TSG: “Following the consultation with conveyancers and key industry stakeholders, the Law Society’s Working Group on the Code for Signing and Exchanging Property Contracts is in the process of amending the draft code based on the valuable feedback received.

“Once the revised draft is finalised, it will be published for a second round of consultation in 2025.”

Over the past year, critics have raised several concerns, such as why the draft Code is 12 pages long and why the need to impose so many new undertakings on already overburdened conveyancers. It will be interesting to find out whether the 2^nd edition will take those concerns into account in any meaningful way.

The draft protocol and the challenges presented are discussed in detail our Residential Property Event with speaker David Keighley. Available to Book Now.