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Purchase Guide for Residential Properties
Once you have had an offer accepted on a property you will need to appoint a solicitor to act for you on your purchase and also a surveyor to survey the structural integrity of the property and confirm the valuation.
The work of your solicitor is to assess, whether the legal ownership of the property is free from defects and claims, and therefore acceptable by a buyer. This is often referred to as “good and marketable title”.
There are five distinct stages in purchasing a property in England and Wales and these are;
- Exchange of contracts.
- Post completion.
The time it takes to complete each stage varies from transaction to transaction, but as a general rule the bulk of the time is taken up at the pre-exchange stage and could take anywhere between three and six weeks. This is because, the legal analysis of the title must take place before we exchange contracts, (when you are legally bound to purchase the property) and often this is dependent on, receiving the paperwork from the seller’s solicitors, the return of search results, receipt of mortgage offer and finally reporting to you.
A normal straightforward purchase could take anywhere between four and six weeks, but it is possible to considerably shorten that time frame, and indeed in the past we have competed purchases within a week in certain cases.
Once instructed we will arrange a mutually convenient appointment time with you so that you can come in to verify your identity in accordance with the Anti-Money Laundering Regulations.
The estate agent, will send both sets of solicitors, a memorandum of sale. The memorandum will set out, the purchase price agreed between you and the seller and also the details of the respective solicitors.
Once we have received the memorandum, we would immediately contact the seller’s solicitors to confirm our appointment and request draft papers. The papers would include amongst others:
a. A draft contract;
b. Official copies of the title and plan, from the land registry.
c. Sellers Property Information Form (“SPIF”)
d. Fittings and Contents Form;
e. Any documents relating to the information mentioned in the SPIF
If you are purchasing a flat, then in addition to the above documents, we would typically expect to receive:
- Sellers Leasehold Information Form (“SLIF”);
- Replies to Management Enquiries in respect of the maintenance of the property/building, landlord’s insurance details and service charge information.
a) Draft contract
i. The draft contract sets out the terms upon, which you and seller have agreed to sell/buy the property, and we will need to assess and if necessary, amend the contract, to ensure that it reflects your interests.
ii. The contract is usually in a standard form and is governed by the Law Society Standard Conditions of Sale. These will be explained to you in our Report on Title when we send you the documents for review and signing.
b) Official copies of the title and plan, from the land registry.
i. Nearly all properties in England and Wales are registered with the Land Registry. The Land Registry records not only the legal ownership but also any rights, which are granted to the property and any restrictions (referred to as restrictive covenants) which affect the property. Examples of rights could include a right to enter a neighbours land in order to carry out works to shared drains or a right of way over a shared driveway.
ii. Restrictions, limit the use of your property in some way and even though some of them may seem dated they will continue to apply unless they are removed or varied. Typical examples of restrictions could include a prohibition on carrying out any business at the property or you are prevented from renting to multiple Tenants.
iii. There may also be restrictions as to your ability to alter the Property, which would mean that consent may be required from a third party in addition to the usual statutory consent from the local authority.
c) Sellers Property Information Form (“SPIF”), Fittings and Contents Form (Sellers Leasehold Information Form (“SLIF”)
The SPIF, is a standard form produced by the Law Society and is completed and signed by the seller. The replies to the SPIF concern the practical aspects of the property and would cover matters such as:
- Boundaries and their ownership/responsibilities;
- Planning and building control information on any alterations or additions to the property carried out by the seller and or its predecessors;
- Flooding and any environmental issues;
- Any formal or informal arrangements with third parties
- Any disputes or complaints;
- Information about any occupiers other than the seller residing at the property.
If the property you are purchasing is a flat or maisonette then your interest in the property will be by virtue of a Lease. A lease is an agreement by which an estate in land is created for a finite period. Over time, leases have become increasingly longer, with scores of covenants (obligations) conditions, provisos and rights included to try and cover every possible eventuality. Most of these will relate to your conduct whilst you are a tenant within the building and also the obligations by the Landlord in respect of the freehold structure. No one lease is the same and therefore each lease must be closely scrutinised and amended if necessary. We will advise you on the terms of the Lease including the ground rent provisions, the length of the lease and your rights and obligations in respect of the lease. Expertise in this field is crucial as to the failure to spot any defects would affect the marketability of your Property.
The contract between yourself and the seller does not provide any warranties about the physical state and condition of the property, and therefore you are strongly advised to appoint a surveyor, who will assess whether the property is physically sound and also the viability of any alterations and additions made to your property. Further, the market value of the property be may reduced if it is in a poor condition and may adversely affect your ability to mortgage the property or sell it at a later date. Indeed case law in the past has shown that where a buyer has sued over damage, the buyer might be contributorily negligent because he had not arranged for a survey at the time of the purchase.
e) Searches and Enquiries
i. Once we have received the draft contract package from the seller’s solicitors we will undertake searches against records held by various statutory authorities including the local authority, the drainage company and the environment agency. Other searches may be necessary and this would depend on the location and nature of the Property and we will make a careful assessment as to which additional searches may be required.
ii. The most important of all the searches is the local authority search, as it records all matters or burdens, which are not matters of title and are not within the duty of disclosure by your seller. The search may reveal various planning entries (or the absence of them); any enforcement charges for contravention of building regulations; compulsory purchase orders; nearby traffic schemes; whether the road abutting your property is publicly maintained; whether the property is within a conservation area or is a listed building etc.
iii. As a part of our investigation of the title, we may need to raise enquiries with the seller’s solicitors based on the draft papers, our search results and matters raised by your surveyor. In most cases, this is simply to clarify on points, which may require further explanation but in some instances may be in relation to the defects in the legal title. We would need to ensure that if there are any defects or breaches of any restrictions, these are remedied prior to you exchanging contracts.
iv. Once we are satisfied with replies and the search results we will report to you on the legal title, which puts in layman’s term our findings on the legal title. In our report we will make an assessment as to whether we consider that the legal title is good and marketable. We will also need to certify to your lender that we consider the title to the property forms good security for their lending.
v. If you are obtaining a mortgage in order to fund the purchase then it is essential that we have obtained a copy of your mortgage offer and our instructions from the lender prior to exchange. We will usually be instructed by your lender to act for them and for you provided that there is no conflict of interest. Your mortgage offer, will invariably include specific conditions of the loan and you will need to make sure you are satisfied with the terms and conditions of the offer before exchange takes place and these will be explained to you in our Report on Title.
vi. If you are purchasing the property without any need to secure third party lending we would need to see evidence of your ability to fund the purchase and also all of their associated costs and we will need to verify the source of those funds in accordance with Anti-Money Laundering Regulations.
vii. If you are happy to proceed, based on our report and the result of your survey, we will ask you to return the agreed contract to us signed, with a 10% deposit, in readiness for exchange of contracts. You will also need to consider building insurance, which usually needs to be put on risk at the point of exchange of contracts because under the terms of the contract the seller is no longer obligated to continue with his or her insurance and risk for the property passes to the Buyer. The building insurance should be taken out for the full reinstatement value (usually shown in your survey report or your lender’s valuation). This would not be necessary if you are purchasing a flat or a miasonette because building insurance would in a majority of cases be put into place by your landlord as part of his or her obligations in the Lease.
2. Exchange of Contracts
i. Before we proceed to exchange of contracts we will obtain your instructions to do so. Once received, we will exchange your signed copy of the contract with the sellers Solicitors and send to them 10% of the purchase price. If you have a related sale we may be able to utilise the deposit from your sale contract as full or part of the deposit required on your purchase. If there is a shortfall between the amount of the deposit received from your sale and the deposit required on your purchase, you may need to top this up in order to make a full 10% deposit. If the seller is prepared to accept a reduced deposit please note that the legal position is that the seller will become entitled to claim the balance required to make up the 10% from you, once a notice to complete has been served in the event that completion is delayed or you fail to complete.
ii. The deposit is usually held by the seller’s solicitors until completion and this is referred to as the deposit being held as “stakeholder”. In some cases (this is more common with New Build properties) the deposit will be held as “agent”. This means that the Seller’s solicitor is entitled to release the deposit to the Seller immediately upon exchange of contracts. The essential point to note is that once contracts are exchange, you are legally bound to purchase and the failure to complete on the agreed completion date (for reasons other than the sellers default) means that the seller will be entitled to keep the deposit and sell the property to somebody else.
i. In between exchange and completion we will arrange for you to sign further various documents in readiness for completion including the Transfer Deed, Mortgage Deed (if relevant) and the SDLT Land Transaction Return (Stamp Duty Return).
ii. In addition we will send you a completion statement which sets out the funds required from you in order to complete the transaction.
iii. We will also need to request the mortgage monies from your lender and request that the funds are sent to us the day prior to the contractual completion date.
g) Completion (Moving Date!)
i. The Completion Date (be agreed prior to exchange) will be entered into the contract on Exchange of Contracts. This is usually a date, which is between two and four weeks from exchange of contracts but it is down to the various parties to agree on a date that suits all parties involved in the chain.
ii. The time for completion is also set in the contract and this is between 12pm and 2pm and is to be agreed between the respect solicitors. To ensure that this time is met we usually request that the balance of the completion monies and the mortgage monies are sent to us the working day before the completion date. This is in order to prevent triggering any of the contractual terms, which allow the seller to charge interest if you are late or any other penalties set out in the contract.
iii. Once the seller’s solicitors confirm receipt of the balance of purchase monies from us, we have formally completed and you are able to collect the keys from the estate agents.
h) Post Completion
i. Once completion has taken place, we will then submit the stamp Duty return online and arrange for stamp duty to be paid to HMRC on your behalf. We will then apply to the Land Registry to register the Title in your name and if applicable for your mortgage to be registered against the property.
ii. Once the Land Registry has completed the registration formalities we will send you and the mortgage lender a copy of your title. We will also send you any relevant documentation pertaining to your purchase which may be required in the event that your remortgage or sell the property in the future.
Other Considerations: Tax and Wills
You will need to consider the most tax efficient method of purchasing your property in which case you are advised to take relevant advice from a suitably qualified Accountant or Financial advisor prior to exchange of contracts. This may relate to the payment of Stamp Duty, Inheritance Tax and Capital Gains Tax.
For most people the purchase of a property is one of the largest investments they will make in their lifetime and for this reason you are advised to draw up a will in order to deal with what would happen to the property upon the death of yourself or the person with whom you have purchased the property. Please see our legal guides on wills and trusts.
This is a brief guide to purchasing a property and should not be used as a definitive statement of your purchase or as a substitute for formal legal advice.
You may also wish to view our guides on the Sales Process.
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