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An Overview of Conveyancing

 

Property Purchase

The basic process of buying and selling residential property is very simple in terms of the basic steps. You could compare it to buying, say, a car. If you were buying a car you might go along with the cash and buy the car on first seeing it. Alternatively, especially if it is an expensive car, after examining the car, making any necessary enquiries and arranging finance, you might make a binding agreement (or contract) to buy it and pay a deposit at that point and agree to go back at a later date with the rest of the money to finalise (or complete) the deal. Buying a house works on the same principle with a contract being entered into (this is called exchange of contracts) after enquiries are made and finance is arranged. A deposit is paid and completion of the deal follows on an agreed date when the property becomes yours.

In more detail, the basic steps involved in buying a residential property are as follows.

The Early Stages

You find the property of your choice, make an offer and it is accepted. However, this doesn’t make the transaction binding; it is still “subject to contract”.

Many people will have to borrow at least some of the purchase price and therefore will apply for a mortgage. The mortgage lender will make enquiries and carry out a survey to make sure that your income and the value of the property are enough to support the amount you want to borrow. The mortgage lender will also check your credit rating. Some mortgage applications are made through a financial adviser who may cover some of these areas.

Preliminary legal work

After you have instructed me to act for you, I will make contact with the seller’s Solicitor who will send me a draft contract. It is called a draft contract at this stage because I may want to try to negotiate some amendments to the contract. The contract contains a description of the property and the rights and obligations which go with the property and sets out the terms on which the seller is prepared to sell the property to you including the price.

The words “contract” and “agreement” mean the same thing within the conveyancing process and are used interchangeably.

Details of the property’s title will also usually be supplied with the draft contract. Many properties will have a title registered at H.M. Land Registry which is a government department. A registered title means that instead of the ownership of the property being proved by a bundle of deeds, the details of ownership of the property and all the legal rights and responsibilities relating to the property are contained in a file maintained by H.M. Land Registry. If the title isn't yet register, then evidence of the seller’s title will be supplied in the form of copies of the Deeds.

Property Information Form and Fixtures & Contents Form. These two forms will hopefully be completed at an early stage by the seller and their Solicitors and sent to me with the draft contract. If the property is leasehold, a Leasehold Property Information Form will also be supplied. Copies of guarantees such as woodworm/damp treatment or for things like a conservatory and planning permissions and building regulations consents would ideally also be sent with the Property Information Form.

The Fixtures & Contents Form indicates those items which are included in the sale price and those which are not.

Usually the information supplied with the draft contract won't be complete and I will wish to raise enquiries on your behalf which are sent to the seller’s Solicitors. I will send you copies of the Property Information Form and Fixtures & Contents Form and all other relevant information and documents as they are received.

Searches. These will be made after receipt of the draft contract. The local search is a standard form of questions sent to the local authority and is aimed at finding out things which the local authority have control over e.g. roads, planning and building control. A drainage search finds out whether the property is drained into a main sewer and has a mains water supply amongst other things. Other possible searches are a planning search, a flood search, a chancel check and an Enviro Search.

Contract Report. I will send you a Contract Report as soon as it is possible to do so and will ask you to sign the contract. Merely signing the contract does not make it binding; see below under exchange of contracts as to when the contract becomes binding.

Your mortgage offer

Obviously we can’t go ahead with the purchase until you have received your mortgage offer if a mortgage is required. I will ask you to sign the mortgage Deed and send you a financial statement at this stage and deal with any requirements of the mortgage lenders.

Exchange of contracts

After the local search is made, you have received your mortgage offer and satisfied the conditions and after all matters have been agreed with the seller’s Solicitors, we will be ready to exchange contracts. Obviously we can’t exchange until your seller and any others in the chain are ready as well. It is necessary to fix a completion date, that is a moving date, which everyone can agree on. The completion date has to be a weekday when Solicitors’ offices and banks are open and working. Usually completion is 2 to 4 weeks after exchange of contracts. If you are relying on a removal firm to move you, you should check that they can do it on the date you want to move and that you can get time off work etc. .

Both the seller’s Solicitor and the buyer’s Solicitor have identical copies of the contract. The seller signs his copy and the buyer signs his copy. Exchange happens when the Solicitors physically exchange the 2 documents, so the buyer’s Solicitor ends up with the contract signed by the Seller and the seller’s Solicitor ends up with the contract signed by the buyer. The Solicitors normally don’t actually meet to do this; it is done over the telephone with the Solicitors giving each other undertakings (binding promises) to facilitate the process.

At the point of exchange, you become legally bound to buy the property and the seller becomes legally obliged to sell it to you (i.e. pass ownership to you) at the price stated on the date agreed (the completion date). There is therefore a legally binding contract enforceable if necessary by court proceedings.

Traditionally on exchange of contracts the buyer pays over a deposit of 10% of the purchase price. The amount of the deposit may vary however and sometimes buyers ask to pay less than 10% e.g. if their mortgage is more than 90% or they are selling as well as buying and want to use the smaller sale deposit without paying any extra.

After exchange of contracts

I will let you know as soon as contracts have been exchanged. The Transfer Deed will usually have been prepared and signed earlier on. The seller of course has to sign it too. If you are obtaining a mortgage, I will ask the mortgage lenders to send me the mortgage money and you will have to remit to me the money required from you to complete. Before I complete on your behalf I will have to make final searches on behalf of you and your mortgage lender. A search is made against the property to check that nothing has found its way onto the title since the title details were originally supplied. The other search is made for the benefit of the mortgage lenders against your name or names to check you are not bankrupt or have bankruptcy proceedings pending against you.

Completion

This is the agreed date on which I pay over the balance of the purchase price to the seller’s Solicitors on your behalf and in return we get the deeds to the property and you are able to move in or get the keys. The property becomes yours even if you have a mortgage (many people think that they don’t actually own a property if there is a mortgage, however they do - they simply own the property subject to the rights of the mortgage lender).

The money is sent to the seller’s Solicitor by bank transfer. You will get the keys either from the estate agents or from the seller direct when the purchase money has reached the seller’s Solicitors bank account.

After completion

Everything is almost finished. I will have to pay stamp duty to the Inland Revenue if stamp duty is payable. I will have to register you as the owner of the property and register the mortgage if any at H.M. Land Registry. This applies even if the property does not have a registered title (after registering you as the owner the property will then in future have a registered title). The land registry fee will have been included in your financial statement.

After all this I will send the Land Registry title information to the mortgage lender if you have a mortgage and if the lenders require this (some don’t). I will also send you either the original title information if not required by the mortgage lenders or a copy, as well as other documents relating to the property.

Property Sale

When selling a property, the conveyancing process is largely a mirror image of the purchase process described above. If you read the above information about a purchase, you will see what steps your buyer and their Solicitors will be going through which may help to explain any delays. You will be asked at the outset to complete a Property Information Form and Fixtures & Contents Form, and a Leasehold Property Information Form if the property is leasehold. I will obtain details of your title from the Land Registry or ask you for the Deeds if the property is unregistered. I will prepare a draft contract and send it and the completed forms to the buyer’s Solicitors. They will probably raise some enquiries which you and I will have to deal with.

I will ask you to sign the Contract and when you and the buyers are ready to exchange contracts and a completion date has been agreed, then exchange of contracts will take place as described above.

I will send you a financial statement as soon as practical either before or after exchange of contracts. If you have a mortgage I will apply to the mortgage lenders for a final redemption statement once we have a firm completion date and will send you a final financial statement.

On the completion date, the buyer’s Solicitors will send me the purchase money and the property will become the buyer’s and I will send the Transfer Deed and any other necessary Deeds and documents to the buyer’s Solicitors.

I will pay the estate agents commission if you want me to do so and if there is a mortgage I will repay the mortgage on your behalf on the day of completion. I will send the net proceeds of sale to you either by cheque or bank transfer according to your instructions.

Summing up

The above are very abbreviated versions of the standard steps in a property sale or purchase. Much more detailed information will be provided if you decide to instruct me to act on your behalf. A leasehold sale or purchase is more complicated than a freehold transaction and will involve a few extra steps and expenses, such as with a sale obtaining a package of information from the landlord or management company or their agents to provide to the buyer’s solicitors about such things as the buildings insurance and service charge, and with a purchase reporting to you in detail on the Lease and the information package and after completion giving notice to the landlords or managing agents that you are the new owner and relating to your new mortgage.

I am always available during office hours as the reviews make clear to explain anything to you and discuss your sale and/or purchase with you. Talking to you is usually the most effective way to cut through any complications and iron out uncertainties.