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The sale and purchase of residential property
A guide to the legal processes
SOLICITORS
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What do solicitors mean when they talk about...?
Chains: linked sales/purchases, all of which need to exchange contracts at the same time.
Completion: the day on which the Buyer is bound by contract to pay for the property in full and the Seller is obliged to give vacant possession.
Conveyancing: the name given to the legal processes involved in the sale and purchase of property.
Exchange of Contracts: the moment when both Seller & Buyer are irrevocably committed to the transaction.
Freehold: an interest in land of indefinite duration (as compared to say leasehold – see below). The emphasis of this booklet is on freehold transactions, but much of it is also relevant to leasehold.
Gazumping: where a Seller, having agreed to sell a property for a particular price, accepts a higher offer from another party or where a Buyer makes a last minute reduction in their offer. This is only possible without penalty where no formal ‘exchange of contracts’ has taken place between the original parties.
EPC: energy Performance Certificate – see page 4.
Joint Tenants/Tenants in Common: only relevant to joint purchases – see page 18.
Leasehold: an interest in land which is limited to the period granted by the freeholder or superior leaseholder by a Lease. Commonly used for technical reasons where buildings are sub-divided laterally eg, flats – see page 21.
Mortgage: an agreement to repay borrowed money on agreed terms linked to a charge over property – see page 16.
Negative Equity: where the sale price is not enough to pay off all outstanding mortgages and loans on a property.
Registered/Unregistered Title: most properties these days are registered at the Land Registry but sometimes the title to a property (proof of ownership) has not been registered, for perfectly good reasons. in that case an application to register has to be made after completion.
Searches: official enquiries that need to be made on behalf of a Buyer especially if a mortgage is involved – see page 14.
Vacant Possession: on completion a property must be left empty and completely free of the Seller’s effects including rubbish and unwanted items.
How long will it take?
The average sale/purchase transaction takes about 8-10 weeks from start to finish (although can be much quicker circumstances allowing). Computerisation of routine elements of conveyancing has slightly helped shorten timescales but ultimately timing is affected by factors such
as:-1. the need to synchronise with a related sale or purchase and the complications that can ensue where a ‘chain’ is involved.
2. the need for a Buyer to obtain a satisfactory mortgage offer which will only be made after a valuation has been carried out.
3. the Seller’s and Buyer’s physical ability to move (e.g for example, during annual leave, to coincide with school holidays etc).
4. negotiations with a lending institution where a Seller has ‘negative equity’.
5. problems associated with the property which only become apparent in the course of the transaction.
6. complying with the specific requirements of a Lease where a transaction relates to leasehold property.
For these reasons it is not necessarily going to be possible to achieve a specific date that may have been informally agreed between the parties during negotiations. It is therefore unwise to make any removal arrangements until contracts are actually exchanged and a definite date given. Nevertheless your solicitor will be happy to find ways of meeting your requirements where at all feasible.
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u A solicitor’s primary role is to safeguard the interests of the client; to identify and, wherever possible, to resolve any problem is, after all, the reason for seeking the services of a solicitor.
Do I need to provide an Energy Performance Certificate?
an energy Performance Certificate (ePC) must be ordered before marketing commences on the sale or renting out of a property and made available to any potential buyer or tenant at the earliest opportunity and certainly before any commitment is made. Thus one of the first actions for a Seller (or landlord) is to order an ePC – your solicitor or estate agent can assist you to obtain this. Please note that a new building also requires a certificate and regulations affect commercial properties as well. Both solicitors and estate agents will be able to organise an ePC for you.
Any other advice?
if you are asked to sign a Confirmation of Marketing or other agreement, read
it carefully so that the rate of commission and circumstances/timetable for payment do not come as a surprise. Some agreements contain an irrevocable authority to your solicitor to pay the commission from the sale proceeds on completion. also, you should be aware that if you have instructed agents but then agree to sell your property privately during the period covered by the agreement, commission may still be payable. if in doubt enquire – reputable agents are happy to explain when asked. Finally, do check the Sale Particulars for accuracy.
When do I need to produce my title deeds?
Title deeds are undergoing a process of ‘dematerialisation’ which means that you may not have any! Most titles these days are registered at the Land Registry and your solicitor can procure an up to date ‘official’ copy of the title direct from the Land Registry. However it is still useful if you can provide the title number. if not registered the title deeds will certainly be required in full. if the property is not in mortgage, you will presumably have these in safekeeping. if stored in a bank, please provide the bank with a written authorisation to release the deeds to your solicitor.
if the property is in mortgage, your solicitor will need the name of the lending institution and the account number. This is usually sufficient to allow your solicitor to obtain the deeds direct but the deeds are only released on a ‘loan’ basis pending full discharge of the debt. in practice this means that your solicitor is acting for that institution as well as you in relation to the redemption.
if there is, or ever has been, a second mortgage or other borrowing secured on the property it is very important to let your solicitor know at the outset. Sometimes old mortgages that should have been discharged are erroneously shown to be current and time has to be taken to sort this out.
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What other papers will I need to provide?
now that deeds have ‘dematerialised’, other important papers may not be readily available. if you were sent any documents by your solicitors at the time of your own purchase, these should be provided to the solicitor acting on your sale.
In particular:
Planning Permissions and Building Regulation Approvals
in accordance with good conveyancing practice, the Buyer’s legal representatives will need to see all Planning Permissions and Building Regulation Consents before they can finalise their Report to the Buyer (and any Lender).
if you have any papers in your possession relating to either Planning Permission or Building Regulation approval or confirmation of compliance then these will be needed. if you do not have these and there are no copies with “the deeds”, then copies of all such papers will have to be obtained, at your expense, from the Council.
if any recent building work has been done and you are unable to produce written evidence from the Council that the work has complied with the Building Regulations then sometimes a Buyer may insist that you get the Council to do a re-inspection, at your expense, to have the work checked and a Council certificate issued. This can also happen if the Buyer’s Survey or his Lender’s Valuation Report raises any concerns. Recent changes to the Regulations have meant that ‘competent persons’ can issue Certificates – works that commonly require approval documentation are the installation of windows (after april 2002), re-wiring or a new boiler or wood-burning stove (as from 2004). if any of these works have been carried out since those dates you should have received a Certificate from the installer – if not you should revert to the installer for the documentation.
Consents
Some work will have required the consent of the original developer under the provisions of the title deeds – we shall need to know if this was obtained and if it was, a copy provided.
Guarantees
if you hold any guarantees for any work carried out – for example, installation of double-glazing or a conservatory, cavity wall insulation, wood treatment, damp proof course or anything else then the Buyer’s solicitors will almost certainly require these. not only the guarantee document will be required but any preceding estimates, reports and receipts for payment in order to comply with the terms and conditions of the guarantee in the event of a claim.
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Should I see an Energy Performance Certificate?
This must be made available to interested Buyers and could influence your offer.
Do I need a survey?
english property law states ‘let the Buyer beware’ – in other words, it is up to the Buyer to satisfy him or herself as to the physical condition of a property. The onus is on the Buyer unless there have been significant misrepresentations by a Seller (which is rare). generally a Buyer should assume that there is no redress against a Seller if structural problems come to light after the purchase. Therefore a structural survey is usually recommended. a Survey Report will frequently contain points to be checked by your legal advisor.
it should not be assumed that a modern property is free of structural problems. Where a house has been constructed within the past 10 years it should have the benefit of insurance through the national House Building Council (nHBC) or equivalent scheme. Sometimes this insurance will take the form of an architect’s Certificate. Such schemes should not be regarded as a magic solution to any problems that become apparent.
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u Note: A mortgage valuation
is not the same as a structural survey – although a valuation may well identify problems, it will not necessarily indicate structural defects and you should not rely on it to do so. It is often possible to arrange for your lender’s surveyor to carry out a ‘House Buyer’s survey’ or a ‘Full Structural Survey’ at the same time as a basic valuation. Alternatively this can be done by an independent local surveyor.
Do my plans for the property matter at this stage ?
it is always helpful to let your solicitor know if the planned use of the property is for anything other than as a private residence e.g for letting. if it is to have any business application there may be planning considerations such as change of use. also, if significant structural alterations are intended, your solicitor can check for legal restrictions (sometimes even modest additions need consent to comply with requirements in the deeds).
This background assists your solicitor to assist you. new houses forming part of estate development are often affected by restrictive covenants as to use e.g these can affect the parking of caravans or boats in the drive. These are points which are investigated as a matter of course but should be taken into consideration at an early stage if likely to be of importance to you.
Have I got the money?
You need to be confident that you can raise the whole of the purchase price and associated costs. See page 16/17 as to mortgages and page 19 as to legal fees, stamp duty, etc. You will also need a deposit – see box below.
if you are selling only part of a property, e.g your garden as a building plot, your solicitor needs to consider questions of access, services, ownership of boundaries and so on and to agree a plan with you.
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u Note: What is meant by the ‘Deposit’?
A misunderstanding sometimes arises as to the meaning of ‘deposit’. When solicitors refer to ‘the deposit’ they do not usually mean the difference between the purchase price and the amount the Buyer is raising by mortgage but the deposit that is required on exchange of contracts. The Buyer will be asked for the deposit (which is payable to the Seller’s solicitor and which is usually to be kept by them as stakeholder pending completion) on exchange of contracts. This is 10% of the purchase price unless otherwise agreed.
If you envisage a difficulty please alert your solicitor to the position in good time as a reduced deposit can possibly be arranged. Of course a deposit from a simultaneous sale may become available in which case it can generally be utilised toward a purchase deposit.
What do I do first?
You should provide certain information relating to your property to your solicitor so that the sale can progress as soon as a buyer is found and also arrange for an ePC to be obtained.
What happens when a buyer is found?
Once a price has been agreed, the estate agent will forward Sales Particulars to your solicitor and continue to liaise with them throughout. Your direct instructions to proceed in relation to that specific transaction are also needed by your solicitor who will ask you to complete various forms including:-
A Fittings & Contents Form
This records items included or excluded from the sale price (e.g carpets, curtains) room by room.
A Property Information Form
This asks for specific information with regard to the property such as maintenance of boundaries, details of disputes with neighbours, alterations or additions made to the house during your period of ownership, and so on. You are also asked to confirm who is actually resident at the property.
Once the title deeds are to hand, your solicitor will draft the sale contract and prepare proof of your title, usually by applying for official copies of the title register from the Land Registry. These, the contract and the above forms will all be sent to the Buyer’s solicitor together with any supporting documents such as Planning Consents and guarantees for work done.
if you are simply selling, it is then a matter of waiting for the Buyers to finish their
investigations and obtain finance. You must be prepared to respond to any further legitimate enquiries that the Buyer raises. if you are
selling and buying, then it is a matter of synchronising procedures.
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What happens now?
Your solicitor will review the paperwork provided by the Seller’s solicitor in more detail, submit and check the Searches and that they will remain up to date at the time of completion (especially if you are obtaining a mortgage), request further information especially copies of any Planning Consents, Building Control papers, guarantees etc.
The paperwork should include proof of the Seller’s title, an energy Performance Certificate and the questionnaires completed by the Seller. However they will not necessarily contain all the information that will be needed. (Obtaining such outstanding information and the existence of a ‘chain’ as well as waiting for a Mortgage Offer, means that the timescale is liable to be extended.)
Can I have the key before completion so that I can decorate?
Buyers should by no means expect access to a property once they have contracted to purchase it, even if it is empty. Sometimes, if a property is vacant, the Seller may be willing to permit access for the purposes of cleaning or even decorating. if you know that you would like access before completion please indicate at an early stage so that the point can be negotiated.
What does my solicitor do and what should I do?
Your solicitor is unlikely to be personally familiar with the property in question so it’s important that he or she is made aware of the existence of any shared or unusual access, or rights of way, new extensions or windows which may have required Planning Permission. it is important that you check the boundaries as seen against the plan of the property. it is also advisable to check whether any services, such as drains and water, are connected direct to the mains or whether they appear to run under any adjoining property. This is often difficult to establish in older properties. Older rural properties may be connected to a septic tank.
Some old properties may extend over part of the adjoining property or vice versa (this is known as a ‘flying freehold’) – again tell your solicitor if this is the case as it may well not be apparent from the plans with the deeds.
On receiving the draft contract, or at least a location plan of the property, your solicitor may submit additional searches on your behalf.
a copy of the Seller’s Fittings & Contents Form is sent to you and pre-contract enquiries raised with the Seller’s solicitors. These are supplementary to the Property Information Form usually provided by the Seller and are designed to elicit information regarding boundaries, disputes with neighbours, work carried out at the property, drainage arrangements, shared services, any existing guarantees relating to the property and so on. if there are any points which you would particularly wish to raise with the Sellers this is when it should be done.
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What else do I need to be aware of?
Remember that it is very unlikely that your solicitor will have personal knowledge of the property you are buying and therefore will not know, unless it is pointed out by you or your surveyor, whether any work has been carried out to the property since it was built. it is now considered good conveyancing practice for the Buyer’s solicitors to inspect all Planning Permissions and Building Regulation Consents before finalising a Report to a Buyer and the Buyer’s Lender. However, your solicitor will not necessarily be able to tell if the house conforms to these in practice so you should be conscious of any such matters and bring them to your solicitor’s attention.
Planning Permissions
You will need to tell your solicitor if you consider the property you are buying has been altered or extended in any way so that they can check any Planning Permissions. Certain issues may be revealed by a Local Search and in that case, the Seller would be asked to produce copies for checking. Unfortunately not all Councils reveal all Permissions in the Search result.
Solicitors are concerned to see that the building of the original house (if built after 1st July 1948 – the date the current planning laws started) and any later changes are authorised. it is desirable, although not always practicable, to see the original Permissions so that you, as Buyer, can check if there are any apparent breaches of the conditions in the Permission. However old the Permission, the Council can still seek to enforce a condition for up to ten years from the date of breach or failure to observe the condition (not the date of Consent).
Building Regulations
These deal with how a property is built and are a series of detailed technical specifications which exist to ensure the health and safety of people in and around buildings. normally when first built there is some written evidence that the house met the then current standards. However, not all Councils kept all such records and as time passes some get mislaid. The concern here is that if the original house or any more recent works were not recorded as having met those Regulations there could be structural problems which may arise and which would then be your responsibility as the new owner and the value of the property may be affected. a survey is highly recommended as this may pick up any such problems. even if the records show the property met with the Regulations, this can only be a ‘snapshot’ of the situation on that day and the situation could have changed later, so that the property no longer complies with the Regulations. The current Building Regulations are more stringent than those applying from time to time in the past.
if you have any concerns about the structure of the property or how any work was completed you will need to discuss these initially with your surveyor.
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The next step
an examination of the ’title’ to the property by your solicitor will establish whether the title is registered at the Land Registry or unregistered. if unregistered, an application for registration must be made on your behalf following completion. Your solicitor wishes to ensure that the Seller is entitled to sell, that there is no defect in the title and that the Land Registry should therefore register your title without difficulty. all formalised rights of way or rights to share the services and any restrictive covenants will also be revealed (where you may for example be limited in what you can do at the property) or positive covenants (for example, to erect and maintain a fence).
at the same time you should be ensuring that you have made all necessary financial arrangements.
Your solicitor will correspond with you as to any specific points arising and possibly send an interim Report. a final report will be sent to you when all points are satisfied, including receipt of a written Mortgage Offer (if applicable), and you will be asked to sign the contract and provide the agreed deposit monies.
if the purchase is reliant on a related sale your solicitor will ensure that both transactions are dealt with simultaneously unless you specifically require otherwise. exchange of contracts can take place when all is agreed.
For both Seller and Buyer this pre-contract period is often the slowest part of the transaction and can appear to ‘drag’ but be assured that many things are happening! Once all outstanding matters are satisfied you are invited to sign the sale and/or purchase contract with a view to an ‘exchange of contracts’.
What does ‘exchange’ actually mean?
‘exchange’ is the time when both sides are committed to the transaction and cannot withdraw without financial penalty.
On exchange of contracts a ‘completion date’ is agreed. This is the actual day on which the Buyer is obliged to pay the balance of the purchase monies and is in turn entitled to the keys. it is the date you can move in. This date is agreed by arrangement between the parties – anything between a week and four weeks depending on requirements. However, as there is further documentation to put in place between ‘exchange of contracts’ and ‘completion’, ideally at least two weeks notice is preferred.
This date will be discussed with you prior to an ‘exchange of contracts’ and it must be borne in mind that all parties in a chain of transactions will have to be accommodated as everyone has to move on the same day. The day of completion has to be a working day when the Banks are open. Property insurance may need to be put in place on exchange. You do not need to be present on exchange of contracts – it is sufficient for your solicitor to have your clear instructions to proceed on the agreed basis.
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After Exchange
The Transfer document will need to be signed by the Seller (occasionally the Buyer needs to sign the Transfer as well). all financial charges must be discharged on completion so the exact sum required to discharge the Seller’s mortgage will be ascertained and your solicitors will have to give an undertaking that this will be paid on completion and reply to pre-completion ‘requisitions on title’.
The Buyer will need to sign any Mortgage deed, witnessed by a solicitor. The Buyer’s mortgage advance monies will be sent direct to your solicitor who will be asking you for the balance of the purchase monies to include Stamp duty and all other fees and costs. a government document called a Stamp duty Land Transaction Return will also need to be signed by the Buyer. if you expect to be giving your solicitor a personal cheque it will need to be provided at least five working days prior to the completion date in order that there is time for it to clear. electronic transfer of funds is usually preferred.
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S e l l e ru Note: If you are giving vacant possession everything must be removed including rubbish unless the Buyer agrees otherwise. Don’t forget all bits and pieces in the attic, garage and garden sheds, etc. But it is not helpful to remove light bulbs!
Don’t forget to warn your removal company about any unusual vehicular access and whether (if a flat) you’re on the ground floor or above, etc. And it’s a good idea to pack the kettle and cups last!
What does my solicitor do and what do I need to do?
Your role on completion day is simply one of moving! ideally both parties will already have liaised as to the reading of meters, changing the records in respect of services and utilities, etc. Make sure that you know the arrangements with regard to the keys e.g are they to be collected from the agents or direct from the Sellers as they move out? as the monies are almost always sent through the banking system, the timing on the day is out of your solicitor’s hands.
Because of this difficulty in predicting the timing on the day itself (especially if a ‘chain’ is involved) it is not a good idea to have your removal van waiting to move in much before midday unless this has specifically been agreed. arrangements will need to be made for the transfer of electricity, gas, telephone, etc. it does make life smoother if such practicalities can be discussed directly between Seller and Buyer before the big day.
Your solicitor’s role on completion day is to attend to the transfer of funds through the bank and deal with all formalities. The Buyer is informed as and when the keys are available. Usually the Buyer should not expect to have access to the keys until the Seller’s solicitors
actually receive the monies.
And after?
Your solicitor arranges for the mortgage documents to be receipted, sends the necessary documents to the Buyer’s solicitor and generally ties up loose ends. it is customary for the Seller to notify the Local Council of the change of ownership for Council Tax purposes and water and sewage rates. You need to ensure that property insurance is cancelled as are standing orders/direct debits in favour of Lenders and utilities.
Registration of title on most transactions is now compulsory throughout england & Wales. if you have bought a property that has been in the same hands for many years it is likely that an application for ‘first registration of title’ will be made. The application to register titles already registered is somewhat simpler. The process can take several weeks. From October 2003 the Land Registry has issued only an “Official Copy” of their records (part of the move to electronic transfers of title).
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Searches: What are they and why do they need to be done?
Local Search
Matters which are registered as local land charges with the Local authority will bind the land and therefore the Buyer. That is why it is important to carry out Local Searches to verify whether there are such matters – e.g whether the property is a Listed Building or is within a Conservation area or even a site of Special Scientific Value! The search will indicate whether the main roadway is a public or private road and whether there are any projected road improvement schemes within 200 metres. it will not normally contain drainage or water details.
However it should be noted that the search only relates to the property in question not neighbouring land or properties. Let your solicitor know if you have any
query concerning nearby sites, for example vacant land providing a view, so that a specific enquiry can be made at the time of lodging the Local Search (although the search may take longer). There is no legal right to a “view” so it is important to consider the potential for development of any nearby open spaces. it should also be appreciated that a certificate of search reveals the registry entries at the date of issue – it cannot record applications or notices that have not at that moment in time been made. in other words, it can only be a ‘snapshot’ as on a particular day.
if you have particular concerns as to the general development of the area, you are strongly advised to attend the local Council offices with a view to inspecting the Local Plan. This enables you to check the areas zoned for residential or commercial development over the next few years. it can also be a good idea to ask around locally.
Commons Registration Search
Used mainly where land adjoins a village green or common or where land has remained unbuilt on since 1964 to check whether any registration exists.
Environmental Search
a landowner can now be held responsible for the costs of cleaning up contaminated land if those responsible for the original contamination cannot be identified. Therefore a search is now commonly undertaken but a search result may reveal information that property lawyers are not qualified to interpret.
Plan Search
This is often now made to check planning decisions in the locality.
Land Charge Search
This is a search against the name of the property owner and will disclose any bankruptcies or other matters affecting the property.
Company Search
if you are buying from a limited company this will disclose details of any charges affecting the property and the search will also ensure that the company still legally exists.
Drainage Search
This checks the availability of a public sewer and mains water supply.
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Chancel Liability Repair
determines liability for chancel repairs in the Parish of the property. if the search discloses a potential liability, indemnity insurance may be advisable.
Other
Some searches are only relevant to a particular geographical area e.g coal mining or clay working.
Pre-completion Searches
in the Land Registry or Land Charges Registry.
Insurance: What are my responsibilities?
insurance cover is often arranged by your Lender but when you need to arrange your own insurance it is helpful to alert your insurers to the situation at an early stage so that the property may be put on risk immediately it is required. Your solicitor is usually asked by Lenders to obtain a written verification of private insurance arrangements, so, if you are obtaining a loan but arranging your own cover, do give your solicitor the necessary particulars. a Lender’s interest may have to be noted on the Policy.
You will receive a reminder about this with details of requirements.
Buildings insurance (as opposed to contents cover) often needs to be put in place by the Buyer at the time of ‘exchange of contracts’. even where this occurs it is unwise for a Seller to cancel existing insurance cover until completion itself.
Remember that insurance can be more difficult/expensive to arrange if there is a history of subsidence or the property has special features such as a thatched roof.
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What is a Mortgage?
a mortgage is your agreement to repay the amount borrowed together with interest at the agreed rate, linked to a charge over the property. This enables the Lender, in the event of default, to repossess the property by evicting you and to sell the property to recover its money. if the money is insufficient to repay the borrowing and interest (and any costs properly incurred), the Lender can still sue you for the balance owing.
Nowadays there are many different deals available:
a repayment mortgage is the simplest type of mortgage.This pays off a combination of capital and interest every month so that the debt is cleared at the end of the mortgage term. in the early years monthly payments consist mostly of interest. Calculations will be made according to tables maintained by the lending institution. When you move house you pay it off and start again. Some Lenders offer ‘flexible’ mortgages which allow you to vary the amount of monthly instalments subject to certain conditions.
an alternative is an interest only mortgage. This is where interest is paid monthly but no capital is paid off. The capital is usually repaid at the end of the term with the proceeds from a savings scheme, e.g an endowment policy, a pension plan or iSa. You need to satisfy yourself that any such plan is appropriate to your circumstances and will generate sufficient funds to repay the capital in due course. endowment policies or indeed any plan that relies on capital growth through investment in the share market must be regarded
with caution.
a choice has to be made between a fixed rate mortgage or a variable rate of interest. Fixed rate schemes are useful for those on a fixed income but at the end of a period (usually between 2-5 years) the rate reverts to the current variable rate (which usually alters in the same manner as the rate set by the Bank of england) and you may be tied into this for several more years. also consider capped-rate mortgages or discounted rate mortgages.
Penalties
Quite severe financial penalties can sometimes be imposed in the event of an early redemption (e.g if the house is sold or you find yourself able to pay off capital) of the mortgage and this particularly tends to apply to fixed rate mortgages. You need to know if penalties may arise in your particular case.
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Remember that there are many products now available and you may not automatically be offered the best or most economical policy or mortgage – you should shop around and consider all alternatives.
Most institutional Lenders maintain a panel of solicitors whom they are prepared to instruct in connection with the mortgage advance. Your solicitor would therefore automatically receive a copy of your formal offer of mortgage. it is important to examine this document before committing yourself to the transaction as a formal mortgage offer can contain conditions which were not made clear to you verbally. Such conditions may arise from the Lender’s valuation report or relate to other matters. The Lender will invariably require you to pay all legal costs.
The Mortgage Deed itself, which you will be asked to sign before the monies are released, will incorporate all the conditions referred to in the Offer as well as the basic Mortgage Conditions which are usually separately supplied by the Lender and which you should ensure you have seen before completing the mortgage. if you have never seen these do ask for a copy. Your signature will probably need to be witnessed by a solicitor. You may well have to produce some identification such as passport, driving licence, etc in order to comply with anti-fraud requirements.
The Lender may insist on a mortgage protection policy or some similar arrangement, particularly if they are lending above their normal limits. These are designed to cover monthly mortgage payments in the event of redundancy, accident or inability to work because of short or longterm ill health. Whatever the nature of the policy it is important that exclusions are carefully noted.
Term life assurance should be considered so that any outstanding mortgage can be paid off in the event of death.
All solicitors are obliged to comply with Lender’s requirements and conditions under a code agreed between the Solicitors Regulation Authority and the Council of Mortgage Lenders. Please note professional codes on page 22.
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u Note: Your solicitor can advise you and has no financial interest one way or the other. The legal costs of the mortgage are paid by you as Borrower.
Buying together – are there any special considerations?
There are two ways for individuals to hold a property jointly. Your solicitor will need to know, at some point in the process, which method is to apply to you as this will affect the way that the Transfer deed is drawn up. You should not hesitate to ask for advice about this before reaching a decision – much may depend upon your family circumstances which may not necessarily be known to your solicitor.
Joint Tenants
This is where the entire property is held in such a way that upon the death of one of the owners, the property will vest in the survivor without the need for a Will to be proved or any further documentation. all that will be required upon a subsequent sale or disposal will be the death certificate of the deceased person. a joint tenancy can always be “severed” by either party at any time, meaning that from that point in time the holding is to be considered as a tenancy in common in equal shares.
Tenants in Common
The interests in the property are ‘divisible’ so that they can be held in equal or unequal shares, e.g 50:50 or in any other ratio according perhaps to the amount of capital each party has provided. in the event of the death of one of the parties his or her share would not devolve automatically to the survivor or survivors but would follow the terms of that person’s Will (or the rules of intestacy where there is no Will).
although it tends to be the usual practice for married couples or longterm co-habitees to hold as joint tenants, it can be appropriate to hold as tenants in common where the parties may wish to protect the interests of others who are not actually named in the title deeds. Where provision for a tenancy in common is made it is highly desirable to have Wills in place.
if the purchase is made with the help of a mortgage there will always be a joint and several liability as far as the Lender is concerned. This means that either party can be held fully responsible for repayment of a mortgage and this liability is not affected by the method of holding the property as outlined above.
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Fees & Associated Costs
apart from solicitor’s fees, the brunt of related costs are borne by the Buyer.
Stamp Duty Land Tax
This is a government tax on property transfers (on purchases, not sales) and is payable to HMR&C immediately upon completion of the purchase. For residential properties, it is currently payable at the rate of 1% of the whole of the purchase price between £125,000 and £250,000. Between £250,000 and £500,000, stamp duty is 3%, with 4% payable on transactions over £500,000 and 5% over £1,000,000. if the purchase price is just over these limits, then it may be that some of the purchase price could be apportioned to cover the value of carpets and curtains or similar items being purchased with the property. This would have the effect of reducing the purchase price of the property itself, which in turn could effect a saving on Stamp duty. However, the value of these items must be a genuine
value and be capable of justification to HMR&C if necessary. There are temporary schemes to reduce or remove this tax in some specific instances (e.g first-time Buyers).
Land Registry
On completion a Buyer’s title to the property will almost certainly have to be registered at H.M. Land Registry and the fees for registration are calculated on a sliding scale, e.g at present these are from £50 in respect of properties £50,000 or less, up to £130 for transactions valued between £80,000 and £100,000, £200 for transactions valued between £100,000 and £200,000 and so on.
Search fees/Miscellaneous costs
Searches are carried out on behalf of the Buyer as explained earlier. You will probably be asked to pay the Local authority search fee at an early stage – this varies between Local authorities. Fees are also incurred in obtaining official copies of Land Registry entries on a sale. Other fees may have to be incurred as a result of complying with Mortgage Lending Requirements.
Legal fees
Cross Ram & Co are happy to provide an estimate. This will depend upon the work anticipated and the value of the transaction. a written estimate will routinely be given at the start of a specific transaction anyway. don’t forget that this attracts VaT which is
charged at the rate then applicable. Figures for anticipated out-of-pocket expenses are also given.
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Title Indemnity Insurances
it is quite common to find that a matter is not capable of resolution by reason, for example, of lost deeds and documents relating to any matters. if that applies to your transaction, a Buyer’s solicitor may recommend that the Buyer accept the defect backed up by an appropriate insurance policy.
With the exception of chancel repair liability, the one-off premium would usually be met by the Seller but that is not always the case. (a Buyer’s Lender would have to be notified and approve the proposed insurance). Many matters that were once deemed acceptable now have to be covered in this way so it is quite feasible that if, as a Seller, of property on which you ‘took a view’ as to any technical defect, you would now be required to perfect the issue and be expected to cover the premium.
The cost is usually modest and is geared to the value of the property. You would be provided with a Statement of demands and needs as required by the Financial Services Rules, on the appropriate basis.
Notes
nowadays, most domestic property transactions are covered by the procedures agreed between The Council of Mortgage Lenders and the Solicitors Regulation authority. These have to all intents and purposes regulated conveyancing and a solicitor takes responsibility for observing each and every requirement.
This affects Sellers as well as Buyers. a solicitor acting for a Buyer will need to be satisfied that all requirements are met. Thus issues relating to rights of way, services, Planning Permissions, compliance with all historic and current Building Regulations etc are nowadays scrutinised in more detail than has previously been thought necessary.
There are special issues with regard to leasehold properties – these are usually flats made out of converted houses or in purpose-built blocks.
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Terms of Business
You are referred to the Cross Ram & Co General Terms of Business which are on display at our offices and are provided to all new clients.
Leases
a solicitor acting for the Seller will need to check whether the landlord’s consent is required to the proposed sale (transfer of the lease) and comply with the relevant requirements. if consent is required, the Seller will be required to meet the landlord’s legal costs in providing the necessary documentation.
a pack containing information re insurance, service charges and other matters will be necessary – often obtained from the Managing agents (if there are any) who will also charge a fee.
it will be important for a Buyer to establish what the current and future service charges are or likely to be before committing to the transaction. The condition of the building as well as the flat is therefore significant as the future cost of repairs have to be considered.
details of what can and can’t be charged to the leaseholder are set out in the lease, as are leaseholder and landlord rights and obligations. There are often restrictions as to user. Leasehold ownership means a right to occupy for the period of the lease – a residential lease is usually granted for 99 or 125 years. a mortgage Lender will specify its acceptable minimum years remaining. a long leaseholder can extend the length of the lease by statutory right if certain conditions are satisfied.
Cross Ram & Co provides detailed notes to assist a Buyer in understanding the implications of leasehold ownership.
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properties. Granting a new long lease can be complicated and needs careful discussion between Seller and solicitor; taking a lease whether new or existing also requires considerable input. Because of this and the extra processes involved, legal fees in connection with leasehold dealings tend to be higher than with freehold and there are often more related out-of-pocket expenses. We are happy to give more detailed information on leasehold processes on request.
Professional Codes
Disclosure
in the course of a transaction your solicitor may well be asked to disclose certain
information, such as whether you have a related sale, need a mortgage and so on. Unless you stipulate otherwise, your authority to disclose such general information will be implied. This can work to your advantage as it helps to counter delays brought about by a lack of information.
Conflict of Interests regarding the mortgage
Cross Ram & Co is on the panel of most Building Societies, Banks and other institutional Lenders. it is therefore common to receive instructions from such a Lender to act on its behalf in connection with the mortgage to be granted. This practice provides a significant saving as, if separate solicitors were appointed to represent the interests of the Lenders, additional costs would necessarily be incurred by you.
However, although in the vast majority of cases there is no problem, there is a potential for a conflict of interests. Your solicitor may only have this information by virtue of the fact that he or she is acting for you on the purchase itself, but the lending institution will usually require disclosure of any factors which may breach their loan conditions.
Acting for both Seller and Buyer
generally the Solicitors Regulation authority does not permit the same office of a firm of solicitors to act on both sides of a property transaction except where both parties are (or are relatives of) existing clients or the monetary value of the transaction is very low. in that event, we would seek your consent and different solicitors or conveyancing staff would act on both sides of the transaction very possibly in different branch offices.
Client Care
Cross Ram & Co operates an internal complaints procedure. You will be given the name of the person with primary responsibility for handling your matter and other information in accordance with the recommendations of the Solicitors Regulation authority.
Confidentiality
Rest assured that all dealings with clients are conducted on a strictly confidential basis in accordance with the ethical standards required by the Solicitors Regulation authority.
Financial Regulation
Cross Ram & Co is regulated by the Solicitors Regulation authority. (SRa number 45753.)
Money Laundering
Solicitors have to comply with the stringent requirements of the Money Laundering Regulations. amongst other things, this means that we shall need evidence of your identity at an early stage.
This firm is registered for Value added Tax under reference number 104906002, and is subject to the Solicitor’s Code Of Conduct Rules which can be found at: www.sra.org.uk/code-of-conduct.page
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Cross Ram & Co
Cross Ram & Co undertakes a wide range of legal work and can assist with
residential, commercial and agricultural property transactions anywhere in
england and Wales, whether freehold or leasehold.
We offer complementary services including Business Sales and acquisitions,
Wills and Trusts, administration of estates, Powers of attorney, Change of
name, Tenancy agreements and Leases and associated matters.
Please note that we do not undertake litigation, matrimonial or
criminal work.
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Cross ram & Co Solicitors
18 The ThoroughfareHalesworth Suffolk IP19 8AJ
Tel 01986 873636 Fax 01986 872224
e-mail [email protected] 3 Church Street
Framlingham Suffolk IP13 9BG
Tel 01728 724111 Fax 01728 724747
e-mail [email protected]
www.crossram.co.uk
PartnersJonathan M. Margarson TeP lorraine D. Parkes MA (Cantab)
Consultant
Josephine Jordan-Fisher BA (Hons)
associate Solicitor
Daniel Hewitt llB (Hons)
Probate assistant
louise Chadwick TeP
J.M. Margarson is also an admitted Barrister and Solicitor of the Australian Capital Territory All rights reserved to Cross ram & Co
No part of this publication may be reproduced or transmitted in any form or by any means or otherwise without the prior permission of the Publishers.
