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Guide for Buyers and Sellers of Residential Property

Introduction

  • Buying and selling a property is a highly complex and time-consuming task at the best of times. When the property happens to be the home you are hoping to buy or sell it can also be very stressful.
  • The sale or purchase of your home will involve the disposal or acquisition of probably your greatest single asset. It will also require specialist knowledge and skill.
  • Even a single transaction (one person selling to another) involves more than the two people involved. Each person will be represented by a solicitor. The seller will usually have arranged the sale through an estate agent. The buyer may require a mortgage, in which case the lender will not only investigate the buyer’s ability to repay the loan and general credit worthiness, but will also require the property to be valued. The buyer should also have the property independently surveyed. All that for just one “simple” transaction.
  • No two transactions (even two “simple” transactions) can ever be the same. No two properties are truly identical and no two people will ever be the same.

Definitions

During the course of your sale or purchase you may come across some or all of the following expressions

  • Conveyancing – this is a blanket term for the many and complex legal processes involved in the buying and selling of property in England.
  • Subject to contract – until the buyer and seller have entered into a binding contract (exchanged contracts), then your sale or purchase will be subject to contract. This means that both parties are free to withdraw from or vary the terms of the transaction.
  • Exchange of contracts – the contract for the sale or purchase will be in two identical parts. One part will be signed by the seller and the other part will be signed by the buyer. When both the buyer and the seller are ready, willing and able, then each side’s solicitor exchanges his client’s signed part of the contract with the other and both sides will have entered into a binding contract.
  • Completion – this takes place on an agreed date some time after exchange of contracts when the buyer hands over the balance of purchase price and the seller hands over the keys and the property (gives vacant possession) and his title deeds to his property.
  • Execution – this refers to the signature of certain documents (for example, the property transfer or the mortgage deed) in a particular manner.
  • Gazumping & Gazundering – this involves either the buyer raising the price previously agreed with the seller or the seller reducing that price, often close to exchange. These practices usually reflect the strength or weakness of the property market at a particular time.
  • Conflict of interest – this arises where somebody involved in a transaction on behalf of the buyer or seller has another interest that may not necessarily be in the buyer or seller’s best interest. For example, if the estate agent is arranging the buyer’s mortgage (for which he may receive a substantial commission), then it will be difficult for him to give independent advice to his client (the seller). It is for this reason that solicitors are not allowed to act for both the buyer and the seller. This is for your protection, so you are assured that, at all times, we are protecting only your interests.
  • The Chain – if you are selling your home and simultaneously purchasing another, then you are involved in a chain. This means that you are not only dealing with your estate agent, your buyer and his solicitor, surveyor, mortgage lender, etc but also your seller and his estate agent and solicitor, your surveyor, your mortgage lender,etc. If the chain does not stop there (for example, if your seller and buyer are themselves simultaneously buying and selling other properties) then the number of people directly and indirectly involved increases at an alarming rate.
  • Mortgage – a mortgage (or legal charge) is a loan usually made for the purchase of a property and secured (or charged) against that property.
  • Freehold & Leasehold – houses almost always have a freehold title, which means that the owner of the house is the absolute owner. There are leasehold houses, but these are now quite rare and are not popular with mortgage lenders. Flats and maisonettes should always have a leasehold title. This means that the owner of the flat or maisonette owns it by virtue of a lease (effectively, a very long term tenancy agreement) granted for a specified number of years by the freeholder. Sometimes, some or all of the lessees in a building own the freehold of that building.
  • Deposit – this is the money the buyer will pay to the seller’s solicitor on exchange of contracts and which the buyer will forfeit if he fails to complete. Ten per cent of the purchase price is the customary deposit.
  • Vacant possession – means just what it says. The contract will provide that the property is being sold with vacant possession on completion. On completion, the buyer is entitled to a home empty of people, pets, rubbish and all other items save for those items (fixtures and fittings, etc) that form part of the sale contract.

General conveyancing procedure

Broadly speaking, there are three stages

1  Pre-contract work

This includes

  • The seller’s solicitor obtaining the title documentation and preparing a draft contract to send to the buyer’s solicitor. The seller’s solicitor will need to examine his client’s title to ensure that it is in order and he may have to obtain documents from HM Land Registry or carry out searches at the Land Charges Registry to “complete” the title.
  • The seller’s solicitor obtaining information from the seller to complete property information or enquiry forms. These forms cover matters relating to the title, the ownership of boundaries, guarantees, planning matters, disputes affecting the property, rights of way, etc. The seller’s solicitor will also have to deal with any additional enquiries raised by the buyer’s solicitor.

Leasehold properties only – additional information will have to be obtained regarding specific matters arising out of the terms of the lease such as the buildings insurance arrangements (usually, the freeholder insures the entire building under one “block” policy) and service charges.

  • The completion of a questionnaire concerning those fixtures, fittings and other contents of the property to be included in or excluded from the sale.

Note – you may have agreed that certain items (carpets, curtains, furniture, etc.) are to be sold or purchased at an additional price. If so, can you please let us know immediately and we can then add these items to the contract.

  • The buyer’s solicitor “examining” the seller’s title to confirm it is in order and asking the seller’s solicitor any questions arising out of the title or any other documentation he has received.
  • The buyer’s solicitor checking the draft contract, making any amendments he considers necessary for the buyer’s protection and agreeing the final form of the contract with the seller’s solicitor.
  • The buyer’s solicitor raising searches and enquiries with the local authority, drainage searches and enquiries, environment searches and enquiries, chancel repair searches and planning searches and enquiries about the property and, where appropriate, other searches such as a public index map search (where the title to the property has not yet been registered) or a commons registration search (where the property is in a rural area).
  • The buyer’s solicitor checking the buyer’s mortgage offer and ensuring that any conditions of that offer are satisfied.
  • When the buyer’s solicitor is satisfied as regards all the above matters (and any other points which may arise during this stage of the transaction), he will report to the buyer, arrange for the signature of the buyer’s part of the contract and obtain the deposit from the buyer. The seller’s solicitor will arrange for the seller to sign his part of the contract. When both the buyer and seller are ready and a completion date has been agreed their solicitors will exchange contracts.

Buyer’s note – exchange of contracts gives you no right of access to the property. If you need to have access to carry out works, to obtain specialist reports or even to measure up for curtains, then you should let us know before exchange, so that the necessary arrangements can be agreed.

2  Pre-completion work

This covers the period between exchange of contracts and includes

  • The buyer’s solicitor reporting to the buyer’s mortgage lender and obtaining the mortgage advance.
  • Where the seller has a mortgage his solicitor reporting to the lender and obtaining a statement showing the balance required to repay (redeem) the mortgage.
  • The seller’s solicitor replying to “requisitions on title” raised by the buyer’s solicitor. These relate to matters such as ensuring that there have been no unreported changes in any of the information regarding the property provided by the seller before exchange of contracts, that any mortgages charged against the property will be paid off on completion, the preparation of a statement showing the final balance to be paid over by the buyer on completion and the completion arrangements generally.
  • The buyer’s solicitor and the seller’s solicitor agreeing the form of the deed transferring the property. The seller’s solicitor will then arrange for the seller to sign the transfer deed.
  • The buyer’s solicitor preparing the mortgage deed for signature by the buyer.
  • The seller’s solicitor obtaining the seller’s approval of the estate agent’s commission account.
  • The buyer’s solicitor carrying out final “priority searches” at HM Land Registry and/or the Land Charges Registry.

3  Post-completion work

This includes

  • The buyer’s solicitor preparing a detailed report regarding the transaction for the Stamp Office and, where appropriate, paying the Stamp Duty Land Tax due.
  • The buyer’s solicitor applying to the Land Registry for the registration of the buyer’s title to the property and of any mortgage.
  • The buyer’s solicitor reporting completion to the buyer’s lender.
  • The buyer’s solicitor giving notice to guarantors where the property is sold with the benefit of certain guarantees.
  • Leasehold properties only – the buyer’s solicitor giving notice to the freeholder or his solicitor of the buyer’s purchase and of any mortgage.
  • The seller’s solicitor preparing the deed discharging the seller’s mortgage for execution by the mortgage lender and repaying the seller’s mortgage.
  • The seller’s solicitor paying the estate agent’s commission account.

All our work is carried out by qualified and highly experienced solicitors (Tom Mead and Glyn Crews).

Mortgages

  • Sellers only – we will need your title documentation to prepare the sale contract (and to hand over on completion). If your property is subject to a mortgage, then we will apply to your lender for any documents it may be holding.

 

It will be a condition of your sale contract that all mortgages are discharged on completion. If there are any further mortgages (for example, a top-up loan or a secured bank overdraft), please let us know immediately, so that we can obtain the relevant documentation and information from the appropriate parties.

  • Buyers only – if you are buying with the aid of a mortgage then you should make your application as quickly as possible (although check with us first – there may be a good reason why you should delay submitting your application). Mortgage lenders are one of the most common causes of delay in buying and selling properties.

You will not be able to exchange contracts until at least such time as you have received an unconditional, written mortgage offer – that is, an offer either that is not subject to any conditions or is subject to conditions that can easily be satisfied.

Your mortgage will usually be for a fixed term and it will be repayable over a certain term of years (a “repayment mortgage”) or at the end of that term (an “interest only mortgage”). Sometimes, the mortgage is linked to a pension policy or some other form of investment. Irrespective of the way you intend to repay your mortgage, it will always be secured against your home. This means that, if you do not keep up with your payments, your lender could sell your home to repay the mortgage.

Surveys

  • Buyers only – your seller will give no personal guarantee as regards the condition of the property. It is essential that you have the property surveyed. Failure to have the property surveyed could subsequently cost you a considerable amount of money.
  • There are three types of survey:

mortgage valuation – your lender will arrange a valuation of the property. This is not a proper survey and it will be for the benefit of your lender only. Even if you see a copy of the valuation you cannot and should not rely on it.

building survey – formerly known as a “full structural survey”, this is the most thorough, and most expensive, form of survey.

homebuyer’s report and valuation – this is a shorter and cheaper report which covers most of the major points. It is not recommended for older properties.

Your surveyor (someone with the letters FRICS, MRICS, or ARICS after his name) will be able to advise you as to whether a building survey or a homebuyer’s report and valuation is required for the property you are buying.

  • Some lenders have an arrangement where you can use their valuer to carry out both the mortgage valuation and private survey. This can save a little money, but you should first confirm that the valuer is independent (and not an employee of the lender). It can also be very difficult to refer back to the lender’s valuer for further advice or even for an explanation of something that is not clear in his report.
  • Your survey report will not usually raise any legal points. If your surveyor does raise any points that he considers should be referred to us, please let us know immediately.
  • Even if a property has an NHBC or similar guarantee, you should still have it surveyed. The guarantee will not cover any defects that existed before you complete your purchase. Any such defects must be fixed by the guarantor before you complete your purchase.

The deposit

  • Buyers only – you will be expected to pay a deposit of ten per cent of the purchase price on exchange of contracts.
  • The deposit must be paid out of your own Your mortgage advance will not be released until completion. Even if you are selling and buying simultaneously, you may not be able to use your buyer’s deposit. If you cannot raise the full deposit, can you please let us know immediately.

The completion date

  • Until exchange of contracts, no completion date can be guaranteed. Until then, the transaction remains subject to contract and all matters remain negotiable.
  • The buyer’s solicitor and the seller’s solicitor must both carry out a considerable amount of work between exchange and completion. You will also have your own arrangements to make.
  • Under the terms of your contract, you could face stiff penalties for late completion. An adequate period is necessary between exchange and completion for your protection. The usual period is between two and four weeks.
  • Completion can only take place between Monday and Friday excluding bank and public holidays.
  • Before you agree any completion date, you should confirm with your removal firm that it can actually move you on that date.
  • Whether you are involved in a single transaction or are part of a chain, everyone must agree the same date. There is little point in trying to fix a date until everyone is ready to exchange contracts.
  • What is really important is exchange of contracts. Once contracts have been exchanged, everyone is bound to complete on whatever date is stipulated in the contract.

Jointly owned property

  • Buyers only – there are two ways that a property can be owned by two or more people:

As tenants-in-common where each owner has a specified share (e.g., 50%) in the property. If a tenant-in-common dies, their share does not automatically pass to the other owners; it passes under the terms of their will or, if there is no will, under the intestacy rules.

If a property is held under a tenancy-in-common, then we strongly recommend that the owners also execute a trust deed that will provide, amongst other things, who will contribute to the upkeep of the property (and in what proportions), when and how the property is to be sold and how the sale proceeds are to be divided between the owners.

As joint tenants where each owner’s share in the property is not specified. If a joint tenant dies, then their share will automatically pass to the other owners, regardless of the terms of their will and of the intestacy rules. Most married couples and many cohabiting couples own their homes under a joint tenancy.

  • Can you please let us know whether you wish to own the property as tenants-in-common or joint tenants as soon as possible as we must notify the Land Registry when we apply to register your title. Otherwise, the Registry will automatically register you as tenants-in-common, in which case it will also be assumed that you own equal shares in the property, regardless of your actual intentions.
  • We also advise all property owners to make wills. Following completion, we recommend that you speak to our probate partner, Dee Hassan, or our consultant solicitor, Douglas Troup, who specialise in wills, estate planning, probate and trusts to make your wills or to review your present wills.

Delays

It is our job to ensure that your transaction proceeds as smoothly as is reasonably possible. Unfortunately, delays often occur due to circumstances beyond our control. The following are some of the causes of delay

  • The chain – any delay on the part of any person in your chain will hold up everyone else. You can only proceed as fast as the slowest person in your chain.
  • Local authority searches – how long these take, depends on the local authority in question and can vary between 5 days and many weeks. These searches are very expensive and most solicitors now wait until they have received funds from their client (and/or until they are satisfied that there is a complete chain, that their client’s mortgage has at least been agreed in principle, etc.) before applying for them.

Buyers only – you may be advised that the local search process can be speeded up by a personal search. This is not a good idea. Many local authorities do not allow a full personal search to be carried out. Personal searches are not guaranteed, so if the authority gives wrong or misleading information you would have no right to claim for any loss you might suffer. Mortgage lenders may not accept them, so a proper search will still have to be carried out, causing you further delay and unnecessary additional expense.

  • Mortgages – some lenders can take weeks to issue their offers and, even then, these may have conditions that can take time to satisfy.
  • Surveys – these sometimes reveal matters requiring further investigation (structural defects, rising damp, timber rot, etc.).

Our fees

Our fees are based on the amount of time we spend on each transaction. Our current charging rate for properties up to £1,500,000 is £200 per hour plus VAT and all other payments we make to third parties on your behalf. As no two conveyancing transactions are ever the same, our fees will vary accordingly.

The following are, therefore, typical fees for the sale or purchase of properties up to £1,500,000:

Sale of a freehold house with no registered mortgage – £1,600 to £2,200

Sale of a freehold house with a registered mortgage – £1,800 to £2,400

Purchase of a freehold house with no mortgage – £2,000 to £2,800

Purchase of a freehold house with a mortgage – £2,200 to £3,000

Sale of a leasehold flat with no registered mortgage – £2,200 to £2,800

Sale of a leasehold flat with a registered mortgage – £2,400 to £3,000

Purchase of a leasehold flat with no mortgage – £2,400 to £3,000

Purchase of a leasehold flat with a mortgage – £2,600 to £3,200

VAT is payable on the above fees. We will also make payments on your behalf to third parties. For the sellers of freehold houses, these are usually the fees payable to the Land Registry for certified copies of the title documents. For the sellers of leasehold flats, however, there is also usually a fee payable to the freeholder or its agents for providing information and documents (typically, £300 to £400). Sometimes, the lease may also provide that the freeholder must formally consent to the sale, for which another fee is payable (typically, £400 to £500).

For the buyers of freehold or leasehold properties there will be payable:

  • Stamp duty land tax. This will vary according to the purchase price (for example, £10,000, £43,750 and £93,750 for purchase prices of £500,000, £1,000,000 and £1,500,000 respectively). There may also be a surcharge (3% of the purchase price) if the property you are buying is not your sole or main residence or if you already own or part-own another property. Note: different rates apply where the buyer is a company or a trust.
  • A fee to the Land Registry for registering your purchase and any mortgage. This too varies according to the purchase price (£270, £540 and £910 for £500,000, £1,000,000 and £1,500,000 respectively)
  • Various miscellaneous expenses (principally, a whole host of search fees) that together ought not exceed £500.

For the buyers of leasehold flats, there will also be payable to the freeholder a fee for registering a notice of your purchase and of any mortgage (typically, £100 to £200).

These notes are intended only as a guide to assist you with your sale or purchase. No guide to something so complex and individual can ever hope to be comprehensive. So, if you are in any doubt whatsoever at any time regarding any aspect of your particular transaction, then please contact us as soon as possible. Your sale or purchase is too important to be left to chance.