On a cross border property matter, the exchange rate can change the sterling cost of completion as much as anything in the contract itself, yet currency usually sits outside the solicitor's retainer. This guide explains, for conveyancers and property lawyers, where currency risk arises in an overseas purchase, why the completion timetable makes it sharper, the practical points around moving funds to a notary or overseas lawyer, and the checks a client will face. It is part of our wider adviser's guide to FX. Medlock & Thames is a currency broker, so this is general information for advisers, not advice on what any client should do.
Where does currency risk arise in a cross border property transaction?
The risk comes from timing. A client agrees a price in euros or another currency, pays a deposit, and completes weeks or months later, but their money sits in pounds until it is converted. If the pound weakens against the purchase currency in that window, the same property costs more in sterling, even though the agreed price has not changed. On a property priced at 500,000 euros, a move of five per cent against the buyer, well within a normal year's range, adds more than 20,000 pounds to the cost. The longer the gap between exchange and completion, and the larger the sum, the more a small percentage shift matters.
Why does the completion timetable make it worse?
Because the date and the amount are both fixed, the client cannot simply wait for a better rate. The balance and fees usually have to reach the notary or the other side's account in cleared funds on a set completion day, so the client is committed to converting a large sum by a deadline, whatever the market is doing. Each country has its own timetable, from the compromis de vente in France to the escritura in Spain and Portugal, and the deposit structures differ too, which changes how much is exposed and when. Our guide to buying property abroad sets out the country by country detail your client may ask about.
How can a client fix the rate before completion?
The usual tool is a forward contract, which lets a client fix today's exchange rate for settlement on a future date, in return for a deposit, with the balance due when the contract matures. Taken at the point of exchange, it lets the client commit to the purchase knowing the exact cost in pounds, whatever the market does before completion. We explain the mechanics, with a worked example, in how a forward contract works. Whether to fix the rate is the client's decision; the role of a currency specialist is to explain the options and carry out the transaction.
What about sending funds to the notary or overseas lawyer?
Completion funds usually need to reach a notary or an overseas lawyer's client account, in the local currency, on the day. A currency specialist can convert the money and send it directly to that account, which keeps the conversion and the transfer in one place. Two practical points are worth flagging to a client. First, the beneficiary details must be confirmed carefully and verified through a trusted channel, because property completions are a known target for payment redirection fraud. Second, ask in advance about timing and any receiving bank charges, so the full amount arrives on the date required and nothing is lost to a deduction at the other end.
What checks will the client face?
The authorised institution behind the transfer must carry out anti money laundering checks, verifying the client's identity and, for a sum the size of a property purchase, asking for evidence of the source of funds. This sits alongside your own client due diligence rather than replacing it. Preparing the client to gather proof of funds early, before the deposit or balance falls due, avoids a last minute scramble that could put a completion date at risk.
How is the client's money protected?
A currency transfer involves a broker, who arranges the transaction, and an FCA authorised institution, who receives, holds, safeguards and pays out the money. Safeguarding means the institution must keep customer funds separate from its own, so they are identifiable as the client's and protected from the institution's creditors. One point is essential for an adviser to understand before making an introduction: the Financial Services Compensation Scheme does not cover payment services or electronic money, so the protection comes from safeguarding rather than the FSCS. We set out the full chain in our regulation and compliance guide, and our own detail in our regulatory information.
When should a solicitor flag currency to a client?
As early as instruction, and certainly before the deposit falls due. Once a client knows they are buying abroad, the currency is in play, and the value of fixing a rate is greatest when there is still time to arrange it. Raising it at the outset, even just to flag that the cost in pounds is not yet fixed, lets the client plan rather than convert a large sum under pressure on completion day. Doing so does not change your role: you continue to act on the conveyancing, and the currency desk handles the exchange and the transfer.
According to Medlock & Thames
In our experience, the buyers who lose most to the exchange rate are rarely the ones who chose the wrong tool. They are the ones who left the currency until completion day and converted a six figure sum at whatever the rate happened to be, under time pressure. The solicitors whose clients fare best are those who mention the currency at instruction, so the client has the option to fix the rate when they exchange rather than discovering the cost has moved when the balance falls due.
Frequently asked questions
Should I convert the money through my firm's client account?
Many firms prefer not to take on the currency conversion or the rate risk themselves. A currency specialist can convert the funds and deliver the local currency to the notary or overseas lawyer, while your client account handles matters in the usual way. How you structure this is a matter for your own firm's policies.
Does referring a client change my obligations?
Making an introduction does not make the currency firm your agent, and you continue to act under your own professional and regulatory obligations, including any rules your regulator sets on introductions and referrals. The transfer itself is executed by an FCA authorised institution, separately from your retainer.
Will you advise my client on the rate or the timing?
No. Medlock & Thames is a currency broker. We explain how the options work and execute the transaction through FCA authorised partners, but we do not provide regulated financial advice or forecast the market. The decision rests with the client.
What happens if completion is delayed?
Property timetables slip, so a client can often use a flexible or window forward, or extend the contract, to match a moved completion date. It helps to set the contract date a little beyond the realistic completion date. We cover this in how a forward contract works.
Is the client's money protected by the FSCS?
No. Payment services and electronic money are not covered by the FSCS. The client's money is protected by safeguarding, which keeps it separate from the institution's own funds. This is worth understanding before making an introduction.
Related articles
This guide is part of our Intermediary Intelligence series. For the overview, read our adviser's guide to FX. For the client facing detail, see buying property abroad and how a forward contract works. For how client money is protected, see our regulation and compliance guide, and to see how we work with firms, our partnership page.
