Basic Guide to Conveyancing
PURCHASING RESIDENTIAL PROPERTY IN ENGLAND
1. PRELIMINARY
Unless you have retained an Agent, to act on your behalf, the Estate Agents act for the seller, who pays the Agent’s commission.
When discussing the price with either the seller or his agents, you should ensure that any offer in writing is made "subject to contract”.
Before making an offer, you should consider some of the other points in this note, including timing for an exchange of contracts and completion; what main fixtures and fittings are included in the sale price; whether you are able to obtain the benefit of an Exclusivity Agreement.
If a written offer is a requirement of the Seller or his Agents, notify us and we will ensure that written confirmation is given on your behalf. This is important as we will make certain that you do not inadvertently create an enforceable contract and, furthermore, we may be able to incorporate important concessions such as a Lock Out Agreement.
2. CONVEYANCING
(i) Pre Exchange:
Once you have found a suitable property to purchase, the conveyancing process begins. As your appointed solicitors, we will receive a copy of the Agents' sale particulars, with details of the agreed purchase price and the seller's solicitors. We will write immediately to the seller's solicitors to request a draft contract - the first distinct stage in a conveyancing transaction. It is important to appreciate that either the seller or the purchaser is free to withdraw from the transaction at any time before exchange of contracts.
It may be possible for you to negotiate an Exclusivity or Lock out period, which usually provides that the seller will not negotiate with another party during the “LOP” and will,
at the very least, not send out draft papers, including another contract to another party during the LOP. However, a LOP does not force the seller to exchange contracts with the buyer, should the buyer wish to proceed within the LOP period. It merely tries to focus the parties on dealing with other exclusively, and hopefully gives the buyer a fair chance to complete his own legal due diligence without any other party making a counter offer.
We will consider the draft contract, which will contain a description of the property, a statement of the price, details of any restrictions etc affecting the property and various conditions relating to the transaction. We will also examine the Title to the property which, in most cases, means studying copies of the entries of the title maintained at H M Land Registry and, if the title is leasehold, a copy of the lease. Thereafter, we prepare written enquiries based on our investigations and submit these to the seller's solicitors for their replies.
It is also necessary for us to carry out various searches including a local authority search in order to ascertain crucial matters such as whether any necessary planning permissions have been obtained, whether there are any outstanding notices affecting the property or if any road widening schemes are threatened.
Once our investigations are complete, we will send you our comprehensive written report, together with copies of any relevant documents. We will also send you the contract, in its approved form, with a request for you to sign it. You will be asked to return the signed contract to us and to provide us with the deposit monies. Normally, a 10% deposit is payable on exchange of contracts, and those monies will normally be held in an escrow account by the seller’s solicitor, pending completion taking place. In certain circumstances, a lower deposit can be negotiated.
If you are obtaining a mortgage offer, you will need to ensure that you have a satisfactory mortgage offer before exchange of contracts.
When a completion date is agreed with the seller's solicitors, contracts are exchanged. At this moment, you will be legally committed to purchase the property. It should be stressed that either the seller or the purchaser is free to withdraw from the transaction at any time before exchange of contracts. However, once contracts are exchanged, neither party can renegotiate the purchase price, nor withdraw except in a few exceptional circumstances from the transaction.
(ii) After Exchange
The second stage of conveyancing from exchange of contracts to completion involves our preparing the transfer documentation and undertaking various title searches and, if you are borrowing part of the purchase monies, the preparation of the mortgage documentation and reporting on title to the lenders.
(iii) Completion
On completion, you will pay the balance of the purchase monies to the seller and you will take possession of the property. At the same time, Stamp Duty Land Tax and other costs, including Land Registry Fees and the legal costs, will become payable. It is at this stage that the legal ownership in the property passes from the seller to you.
There is no fixed time span for a conveyancing transaction. As a general rule, the pre-contract stage may take up to five or six weeks and the second stage a further four weeks. However, provided both the seller and the purchaser are in agreement, and the parties' solicitors co-operate, it is perfectly possible to considerably reduce both the pre-contract and post-contract stages. Indeed, we have on occasions completed conveyancing transactions in less than a week after receiving instructions.
3. THE DEPOSIT
When contracts are exchanged, you will be required to pay a deposit to the seller's solicitors. This normally amounts to 10% of the purchase price although the actual amount payable is sometimes negotiable. The deposit monies will be held by the seller's solicitors either as "agents for the seller" or as "stakeholders". The former means that the seller is entitled to receive the deposit monies immediately contracts have been exchanged. The latter is preferable as the seller will only receive the deposit on completion and his solicitor is obliged to retain the monies in his stakeholder bank account until then.
You should be aware that the seller might be able to keep the full deposit monies if, through your default, you fail to complete your purchase of the property, and in certain circumstances could sue a Buyer for losses in excess of the Deposit.
4. FINANCE
You may be providing the whole of the purchase price from your own resources or you may need to take out a mortgage to finance your property purchase.
The lender will wish to be satisfied that your property will be adequate security for the loan. To this end they will instruct solicitors to represent them. In most cases, we will be instructed to act for the lenders as well as you. This has distinct cost advantages in addition to avoiding delays which might occur if the lenders are represented by other solicitors.
It is essential that you obtain a firm written mortgage offer before you exchange contracts for the purchase of your property.
5. SURVEYS
We would always recommend you to instruct a chartered surveyor to undertake a building survey of your property before you are committed to purchase it. If need be, we can suggest the names of some surveyors who are known to us.
If you are obtaining a mortgage, you may be tempted to rely on the lender's surveyor's report rather than incur extra expense by instructing your own independent surveyor. A word of warning: this is risky as you may have no legal recourse against the surveyor if you later discover a major problem which was not mentioned in his report. Furthermore, the survey element of his report will be minimal - the prime interest of the lender will be to obtain a valuation of the property to ensure that it is adequate security for the loan.
6. LETTING YOUR PROPERTY
It may be that you are purchasing your property for investment purposes with the intention of letting it after completion. Landlord & Tenant law is complex and there are many pitfalls. It is essential that you consult us before you agree to create a tenancy of your property.
7. CONCLUSION
This is intended only to be a brief guide to purchasing a property in England and is by no means exhaustive in its content. It is based on English law as at May 2000. We shall be pleased to amplify any points and to give advice based on your personal circumstances.
