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number is 00070079
Residential Conveyancing
Purchasing a property is by far the major investment in most of our lives. By in
large most properties are registered at the Land Registry. In England and Wales
properties are generally owned either as
Freeholds
Leaseholds
The definition of freehold is the entitlement to hold a property with a perpetual
right. There is no limit of time to hold the property.
The definition of leasehold is the right to hold or use the property for a fixed
period of time on the basis of a lease. Flats are normally held as leasehold.
What follows in this page is a guide to carrying out the conveyancing in the sale
of a freehold property. It is separated into sections, so that the reader may study
the whole document, or else skip to those topics which are of particular interest.
It is impossible to cover everything.
As with any matter which a solicitor would deal with on behalf of a client, the
first stage is of course to obtain written instructions. As well as obtaining the
seller's signature to the terms of business, the sellers will be asked to complete
the Sellers Property Information Form, the Fixtures, Fittings and Contents Form
(together known as the protocol forms) and a Disclosable Overriding Interests Form.
In addition full details are obtained of the full property address, sale price,
the selling agent's details and details of any financial charges secured on the
property (mortgages) with account numbers.
At this stage your solicitor will collect a sum of money to cover the costs of disbursements
(expenses) you will incur prior to exchange. In the case where you are purchasing
the property the buyer will be requested to pay £450.00 on account of searches and
enquiries. These fees are generally inclusive of value added tax. They are not always
fees and in some cases they are likely to exceed this amount. The fees relate to
the carrying out of essential searches and enquiries in relation to your purchase.
These fees do not form part of the legal fees in undertaking the sale or purchase
conveyance. These fees cover such matters as the local authority search, chancel
repairs search, water search and environmental searches plus the administrative
legal expenses in carrying out these searches by our firm such as the cost of printing
telephoning photocopying and ordering. They also include the essential security
searches. Having funds on account will ensure that these searches are undertaken
immediately.
You may ask yourself, why pay the fees described in the previous paragraph when
the seller has to prepare a Home Information Pack which contains this information.
Many solicitors will accept the information given without undertaking any further
enquiries on these issues. We do not. We insist in carrying out these searches.
There are a number of reasons, some of which are that the searches undertaken were
at the expense of the seller. You did not pay money to obtain the replies from the
various institutions. In our view there is no privity of contract and if you try
to rely on false information and sue you will have problems. The information of
the searches on the Home Information Packs are unlikely to be up to date which means
that important information may be missed. Generally we undertake our local authority
searches with the local authority in question direct. We do not rely on search providers
who obtain information from data bases for obvious reasons.
Obtaining Official Copies
The first stage in carrying out a sale convincing transaction is to obtain copies
of the registers of title to the property ("Official Copies") from H M Land Registry.
The entries of the register and plan will give details of the property you will
be selling or purchasing. It will give details of the name of the owner the address
of the property and covenants and restrictions to which the property is subject
to or have benefit, any mortgages and many more details. It will also have a plan
showing the location of the property.
When carrying out the sale or purchase of the property, your solicitor will need
perform a basic check. The purchaser's solicitor task is to pick up on any defects..
Some basic checks include that the property address matches that of the property
being sold, that the names of the proprietors match those of the seller(s), whether
there are any restrictions on sale and that the financial charges actually registered
match those which the seller(s) would have advised. Beware particularly of second
charges to protect secured loans as many clients will not realise such a charge
has been registered. It is a good idea also to check for any documents which the
purchaser's solicitor might request copies of. If you have the title deeds and the
documents are with them you should send copies with the contract papers. Otherwise
you should obtain copies from land registry.
Preparing the Sale Contract Package
The sale contract package should include the draft conract, the Official Copies,
copies of any other title documents, the originals of the Sellers Property information
form Fittings and Contents Form completed by the seller and copies of any guarantees,
planning permissions etc.
Sellers should be aware that your solicitor will request the whereabouts of your
title deeds. The title deeds are proof of ownership of the land you are selling.
If you have a mortgage then they are likely to be held by your bank or building
society. You will have to make enquiries as to the whereabouts of your title deeds.
Normally you will have a roll number which is the identification of your property
by your mortgage lender. This will be a pre-requisite in obtaining the title deeds
from them. Once the property is sold these will be handed over to the buyer.
Dealing with Pre-Contract Enquiries
Once the buyer's solicitor has received the sale contract package he/she will usually
wish to raise some pre-contract enquiries. Generally the solicitor will be raising
either legal enquiries, such as suggesting amendments to the contract for sale,
asking for copies of documents referred to in the property title, queries about
rights and covenants etc, or else points arising from comments the seller has made
in the Seller's Property Information form, for example if the seller has said the
property has an extension the buyer's solicitor might ask to see the planning permission
and building regulations consent, or if the seller has said there has been a dispute
with a neighbour the buyer's solicitor will ask for all the details relating to
any such dispute. The solicitor will also raise pre-contract enquiries based on
information received from any other source such as the results of the conveyancing
searches (local authority/chancel repair/water/environmental amongst many others)
or the estate agent's particulars.
Some of the enquiries raised will be for the solicitor to deal with, while generally
all these are passed to the seller for giving the replies. Once the buyer’s solicitor
is satisfied of all matters and if you are purchasing with the aid of a mortgage
all the terms and matters referred to by the bank/building society have been met
and complied and the bank/building society is ready to make the advance then it
will be possible to consider exchanging contracts.
Exchange of Contracts
Once the pre-contract enquiries have been dealt with, the seller has signed the
contract, and provisional redemption figures have been obtained for all mortgages
secured on the property, the seller's solicitor is ready to exchange contracts.
Exchange is the point at which the contract becomes binding on all parties. In general
there is no going back. Once you exchange contracts you will be committed in purchasing
the property on the designated Completion Date. The Completion Date can either be
the same date as that when contracts are exchanged or some future date. As a buyer
if you do not complete on the same day when you exchange contracts you will have
to pay a deposit to the seller (usually 10% of the purchase price). If you fail
to complete on the Completion Date the Deposit will be forfeited. You may also be
liable to other expenses which your solicitor will advise.
In most cases, the date of completion will be stated in the terms of the Contract
of Sale and will normally occur 2-4 weeks from the date of exchange of contracts.
Obtaining a Mortgage
This is a complex area and it is recommended that you use an independent financial
adviser who is not "tied" to any one or more funding source or insurance/assurance
company. This means you can take full advantage of the many mortgage offers that
are currently available in the market place from all lending sources in the UK.
If you are reliant on a mortgage for the purchase of your property you should never
exchange unless you have a valid mortgage offer.
Property Survey
If you are obtaining a mortgage, the Lender will require a valuation of the property,
which is the most basic of inspections. In addition you may wish to have either
a Home Buyers Survey and Valuation or a full Structural Survey carried out and either
one of these are certainly recommended, although a Structural Survey will be far
more thorough than a Home Buyers Report or Valuation.
Building and Contents Insurance
You must insure the property from the date of exchange of Contracts (depending on
contract terms) for at least the cost of re-building the property in the event that
it is destroyed (if the property being purchased is leasehold the Landlord may insure
the property). In the instance that you are purchasing with a mortgage, your mortgage
offer will stipulate the minimum building’s insurance cover that you will require.
Lenders will normally be able to arrange this and will certainly need to approve
any independent building insurance arrangements. It is also not unusual for any
buildings insurance that your lender may be able to arrange to be more expensive
than that which may be obtained from another insurance company on the open market.
You should also review your contents cover and vehicle insurance premiums, at this
stage, as both may vary depending on the location of your new property.
Life Insurance and Endowment Cover
Other arrangements you should consider are life and/or endowment, and/or pensions
insurance required in connection with your loan. This cover will be required as
security by your lender (depending on the type of Mortgage you choose) and you may
need to assign its benefits over to your Lender upon completion. In any event, such
insurance cover must be put on risk from the date of exchange of contracts, as opposed
to completion.
Planning for Removals
It is advised that you should start to prepare for this by obtaining at least three
estimates. With regard to a completion date, please bear in mind that most moves
take place on a Friday and therefore this can be a very busy day for removal companies.
Reminder Items Once Contracts Are Exchanged
Once Contracts have been exchanged it is normal for things to move relatively quickly
and it is not uncommon for items and duties to be forgotten. Baring this in mind
this Schedule has been prepared to provide a reference of those things which you
may need to do once contracts have been exchanged.
However, please note that this schedule is by no means exhaustive and it is only
to be used as a guide:
Make an interim check on your budget
Book the removals van
Arrange property insurance to cover all your possessions while they are in transit
on the day of the move
Make arrangements for the utilities such as electricity, gas, water and telephone
Pay your Council Tax up until completion date on your existing home and arrange
to pay Council Tax on your new home from completion day
Keep in touch with your vendor, perhaps visiting your new home to measure for curtains
and carpets and to be shown for example, how the central heating works
Arrange with the Post office for re-direction of your mail
Send out change of address notes
Make arrangements for children, elderly members of the family and pets on the day
of the move
Return rented equipment, such as television or video or arrange with the hire company
that they may be moved to your new address
Liase with any contractors for work you already know will have to be carried out
shortly after you have moved in
Home security – do you intend to change or add to the locks, or do you intend to
have a burglar alarm installed for example?
Arrange for final deliveries and final bills from those who call regularly, such
as the milkman or newsagents
Work out a detailed plan of your new home and decide, in principle, into which rooms
your possessions are, destined, to go. This can save both you and the removals firm
a great deal of time and energy. It also helps you to identify what you need and
what you don’t need
A couple of days before completion day label everything you possess so as to ensure
that the removal men put it in the correct room in your new home. You may wish to
pack anything that is valuable, personal or delicate yourself, rather than leaving
such items to the removal men.
Keep back a large suitcase and a large cardboard box, into which you can pack essential
supplies for the day of the move and the first few days in your new home
Mortgage Redemption Statements and Completion Statement
Immediately following exchange an up to date mortgage redemption statement will
be applied for from the bank/building society on behalf of the seller. On Completion
it is the duty of the seller’s solicitor to discharge the existing mortgages and
completion should not take place unless an undertaking is received by the buyers
solicitors that all mortgages/charges will be redeemed on completion.
Both the sellers and buyers solicitors will prepare for their clients a completion
statement, which will show all the incomings and outgoings for the transaction,
and any balance due or required.
This will allow the client to see a breakdown of how the balance has been calculated.
The completion statement will not include any fees in relation to the local authority
environmental water chancel repair and legal administration charges plus value added
tax referred to earlier.
Preparing for Completion
Once contracts are exchanged, the seller's solicitor must prepare the file for completion.
Firstly he must arrange for the seller to sign the Transfer Deed. This is prepared
by the buyer's solicitor as a draft, traditionally following exchange but these
days usually beforehand, and it must be approved by the seller's solicitor. If after
exchange the buyer's solicitors have still not supplied a draft deed then the seller's
solicitor must ensure that this is done or else draft their own. Completion should
not take place without a signed transfer deed.
If not already done, then following exchange of contracts the buyer's solicitor
will raise with the seller's solicitor Requisitions on Title. This is a standard
set of questions, the most important of which are asking for confirmation of what
deeds will be provided on completion, a request for undertakings to repay all charges
secured on the property, and a request for the bank details for the payment of the
purchase monies
The Completion Date
On the day of completion, the buyer's solicitor will transfer the purchase monies
by telegraphic transfer to the seller's solicitor's account. The latest time for
completion of the sale will be fixed in the contract and if completion does not
occur by the time set in the contract then completion is deemed to take place the
next working day. This will result in financial penalties to the defaulting party.
Effectively completion takes place when the funds are received by the seller's solicitor
and when the seller has vacated and delivered the keys to the estate agent (or to
anywhere else that is agreed between buyer and seller. On receipt of funds, the
seller's solicitor will telephone the estate agents to authorise them to release
the keys to the buyer, the
Following Completion
Barring any problems, all that the seller's solicitor need do post completion is
to ensure that the discharge document/s are obtained from the lenders in respect
of any financial charges paid off on completion, and that these are forwarded to
the buyer's solicitor.
The buyer’s solicitor still has work to do. He will have to fill in the Stamp Duty
forms and forward them to H M Revenue & Customs, pay the Stamp Duty to the Inland
Revenue, once the certificate confirming payment of the Stamp Duty to register the
property with the relevant land registry. On completion of all these matters the
solicitor will then advise its client and the bank/building society accordingly.
Residential Conveyancing Reference Dictionary
The aim of this Section is to provide you with the definitions of several words
and phrases that you may come across during the conveyancing process.
Bankers Draft :
A bank or building society cheque signed by a Bank Manager, or one of his staff,
on behalf of the bank, instead of the customer. Payment is guaranteed out of the
bank’s own account
Bridging Finance :
A loan that tides a purchaser over between the time when he has to pay the purchase
price of one house and the time when the proceeds of sale of another become available
to him/her.
Completion :
The end of the procedure in the transfer of a house from vendor to purchaser when
the necessary documents are handed over in exchange for the balance of the purchase
price and ownership is transferred to the purchaser
Contract of Sale :
This is a legally binding agreement, which is in two identical parts, one signed
by the purchaser and the other by the vendor. When the parts are exchanged both
the purchaser and the vendor are committed to complete the transaction on the completion
date specified in the agreement. It may also be referred to as the Sale Agreement
as opposed to Contract of Sale.
Conveyance :
The deed by which the owner of a freehold property with an unregistered title transfers
ownership of it to the purchaser. If the property is leasehold, this deed is called
an Assignment. Reference to this is now becoming obsolete. Most of the land is now
registered and as such the legal document signifying a transfer of ownership is
now known as the Transfer
Deposit :
Part of the purchase price, usually 10% or 5%, that the purchaser pays on exchange
of contracts. If a deposit of less than 10% of the purchase price is paid upon exchange
of contracts then, if the contract should not complete you may be liable to pay
the balance of the 10% deposit to the Seller
Easement :
A right which the owner of one property has over an adjoining property, such as
the right of way or a right of light
Enquiries before Contract :
A collection of detailed questions about many aspects of a property which the vendor,
or his/her solicitor is asked to answer before the purchaser's solicitor is prepared
to allow he purchaser to sign a contract. Also called preliminary enquiries.
Estate Agents Fees :
Estate agents fees are not payable when you are buying a home but when you sell
a property.
Exchange of Contracts :
The stage in the transfer of a house at which the purchaser signs their part of
the contract and sends it to the vendor (solicitors), and the vendor does the same
in return, so that both become legally bound to go through with the transaction.
Freehold :
The outright ownership of a property and the land on which it stands.
Land Registry :
The official government office that registers and maintains the details of land
ownership in England and Wales. Land Registry Fees are subject to scale.
Leasehold :
Flats are normally owned as Leaseholds. A Lease is an agreement setting terms of
ownership over a specific period of time. The term used to define the relationship
between a landlord and a tenant where the tenant occupies a property on conditions,
imposed by the landlord, for an agreed period.
Local Authority Search :
A number of questions asked of a local authority about a particular property by
the purchasers' solicitor. This can some times take a number of weeks depending
on the area. Local Authority Search Fee is also dependent on the area.
Mortgage :
(Sometimes called a legal charge). A deed whereby freehold or leasehold property
is pledged as security for a loan. It gives to the lender (such as a building society)
certain rights to the property, including the power to sell if the mortgage payments
are not paid. These rights are cancelled when the money advanced is repaid with
interest, in accordance with the agreed terms.
Mortgagee :
An organisation specialising in lending money, on mortgage, to help people buy houses.
The loans come from money invested in the society by people who are paid interest
on those investments.
Mortgage Guarantee Policy :
If a loan exceeds the normal maximum advance of a mortgagee (usually between 80%-
90% of the property valuation) the loan maybe increased by the issue of a Mortgage
Guarantee Policy, by an insurance company.
Mortgage Interest Rate :
This is the amount of money you pay to the lender in return for the loan they have
advanced on your property. The rate is affected by the economic conditions prevailing
at the time and the general financial state of the lender. The rate therefore will
fluctuate according to the circumstances.
Mortgage Protection Policy :
An insurance policy taken out on a mortgage, that ensures, in the event of your
death, or other stated circumstances, the full outstanding amount of the loan will
be paid off.
Mortgage Redemption Charge :
If you have an existing mortgage, your Lender may require a fee to cancel the existing
arrangements. This can sometimes be substantial.
Mortgagee :
One who lends money on mortgage, usually a building society, local authority, insurance
company, bank or private lender.
Mortgagor :
The Borrower.
Mortgage Term :
The length of time for which a mortgage arrangement will run.
Official Keys :
Keys to your new home will not be released to you, until all the completion moneys,
due, have been received by the sellers' solicitors. It is your solicitor's responsibility
to ensure the moneys are with the sellers' solicitors prior to your taking occupation.
Loan Principal :
The amount of the loan on which interest is calculated.
Reservation Deposit :
In some cases especially for new homes, you may be required to pay a reservation
fee or a deposit. In the case of new homes check whether this is returnable or not.
Removals Insurance :
It is advisable to check that furniture and possessions will be insured during the
move, either by the removals company or through your own contents insurance.
Stamp Duty :
A tax payable to the Government on some deeds and documents including deeds of transfer,
conveyance and assignment of property.
For an exact amount payable you may visit the H.M Customs and Excise official
website. Following their instructions you can obtain information as to the amount
payable on your proposed transaction by visiting the calculator site of HMRC.
Solicitors Fees :
Solicitors make a charge for both aspects of the transaction - i.e. buying and selling.
The Mortgagee will also instruct solicitors on their behalf and it is normally a
term of the mortgage offer that their solicitors' fees in this regard will be paid
by the mortgagor.
Subject to Contract :
Provisionally agreed, but not so as to constitute a binding legal contract. If the
purchaser and the vendor have agreed terms "subject to contract" either may still
back out without giving any reason.
Telegraphic Transfer :
A method often used by solicitors during the completion process for transferring
the balance of the purchase price of the property to the sellers' bank. The vendors
bank, on receipt of the transfer, will instruct the vendors solicitors bank that
payment has been received, whereupon the vendors solicitor will ask the vendor to
release the keys of the property to the purchaser.
Top-Up Loan :
If the amount of money available from the Building Society or Bank is less than
the purchaser needs in order to buy a property the difference can be made up through
a topup loan. Top-up loans are normally provided through insurance companies.
Valuation Report :
This is a Surveyors Valuation of the property that will be undertaken by your mortgage
companies surveyor.
