Conveyancing jargon is confusing. That’s why we’ve put together a great collection of videos on frequently asked questions.
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So, what are Additional Enquiries? They are questions asked by the buyer solicitors where the seller is selling a property where the buyer solicitors has noticed missing documentation (building regulation completion certificate or planning permission, FENSA, electrical certificates etc; or defective title deeds, such as missing access. If the title is perfect then there should be no need for the buyer solicitors to raise additional enquiries. E.g.: Missing planning/BR consents, missing access, defective deed. Aaagh!!!!
These can go on … and on … and on … and on (for weeks, if not months if these are not tackled). Quick fixes can include, the seller responding faster, or the buyer solicitors asking less questions or taking a view.
The UK, especially London and surrounding areas, has become the capital of the money laundering world. All buyers and sellers who buy and sell in the UK must pass the UK Anti Money Laundering Regulations. Risk of breach can include imprisonment as it is a criminal office not only for the buyer, but also for the estate agent and solicitor. For both buyer and seller they must pass ID. The buyer in addition has to pass money laundering requirements of showing the source of funds is not subject to criminal activity. This has to be proved to the solicitor in order for the solicitor to progress the purchase. Ensure both buyer and seller collate all documentation in advance of instructing their solicitor.
The buyer must put building insurance in place in respect of the property, on exchange of contracts. It is essential because if property is damaged (i.e. fire, flood) they are responsible and could lose tens of thousands of pounds if not insured, of personal expense. br/> If you have a lender they will not allow you to exchange contracts without you: Firstly, purchasing building insurance prior to exchange of contracts; and Secondly, sending to us a copy of both your insurance schedule before you exchange. If their interest is not noted, or you purchase the wrong cover which does not meet your lender mortgage conditions (or those of the Council of Mortgage Lenders) then you risk losing your 10% deposit and being sued for other losses such as hotel bills if the seller does not move in time and cost of their removals because your mortgage is delayed or pulled.
This is the date the seller moves out of the property and the buyer moves in. It is when ownership legally passes from the seller to buyer. This usually happens around 1.00-2.00 pm on the day of completion, but can take place later at any time before 5.00 pm. What can go wrong? If something goes wrong on the day then this is known as late completion. This can cause complications including the buyer not being able to move in and buyer and seller fighting regarding losses (and can subject to litigation). How long to leave between exchange and completion? This is why the parties should instruct their solicitors to leave sufficient time between exchange and completion for their solicitor to reduce the risk of last minute problems before completion. This is also why the Law Society Contract 5th Edition, recommends 20 working days between exchange and completion. The parties can leave less time and whilst this is becoming more common, it is at their risk of potential loss. The added risk is where the parties leave less than 5 working days between exchange and completion because most lenders require 5 working days between requesting the funds and releasing the mortgage money on completion date.
How much is the Deposit? Usually 10%. It can be less but only by prior agreement with all the parties in the chain. The buyer needs to notify their solicitor in advance if they have less than 10% deposit in case the chain does not accept this. What does a Deposit do? It secures the property for the buyer. When is the deposit paid? This is paid on exchange. In fact, the seller solicitors will not exchange contracts until they have been notified that the buyer has sent all their deposit to their solicitors (as cleared funds). To reduce risks of delayed exchange the buyer should send their deposit to their solicitor by Bank Transfer (CHAPS payment) at least or more days prior to exchanging. Paying cheque is possible but this can delay matters by a week or more (due to postal delays and then waiting 5 working days for funds to clear.
This is when a legally binding contract is made. This is also the date where a fixed completion time is set. Until exchange NOTHING is binding; either party can walk away from the transaction with no penalty. The faster the parties exchange the less risk of a transaction falling through. The average abortive rate in England & Wales is up to 37% of cases never reaching exchange of contracts. It is rare for a case to abort after exchange. At exchange the buyer must have their 10% deposit to send to the seller solicitors. The minute the exchange takes place the transaction becomes binding – The seller must sell and the buyer must buy at the agreed price and at the agreed time and date.
This is a list of the items at the property which the seller must complete stating if they are either included or excluded from the agreed price. This form is completed at an early stage by the seller and sent to the buyer (via solicitors) so that both parties understand what is included in the selling price. One alert from Customs and Excise (tax authorities) is that these separate items cannot be used to reduce stamp duty. They have issued warnings that if by separating these items it reduces the purchase price below the next band of stamp duty than that will be a fraud on the revenue and subject to criminal proceedings. In those instances, the seller needs to have a professional valuation of items so they can provide evidence to the revenue that the purchase price is at reasonable market rate.
This is completely different from building insurance. This is a specialist insurance policy, which if available will offer cover a legal defect. it is not a fix of the defect, but it essentially it allows buyers and sellers to proceed to be covered, and continue with their legal transaction without trying to rectify the defect or even risk being turned down if they do try to rectify (after which the insurers will not insure the defect as you are on notice of it). The need is normally found when the buyer lawyers check title and find defective title. Examples of defects include: breach of covenants, lack of easements or missing planning or building regulations. In such cases, in order for the buyer to proceed to purchase, they will either need for the defect to be fixed, or in some cases, they can have access to what is called an indemnity insurance policy to cover the loss for that risk. It is not a cure but an insurance policy to cover financial loss. This has now become acceptable in most conveyancing transactions as a way to move. The cost can vary from less than a hundred pounds to up to £1000 for more problematic defects. The higher the risk the more the insurance company will charge for covering that risk. Your lawyer will be able to help you obtain this quote for you. They cannot provide it as it comes from a specialist insurance provider.
Gifts are applicable where some buyers use a gift from a relative for example to purchase the property. They are allowed, but where you also have a mortgage, your lender will want your solicitors to take additional precautions, which will can delay your purchase. These include the Donor passing UK Money Laundering Regulations etc. If the gift procedure is done right, you won’t have issues. If wrong, you could risk losing your mortgage loan or significant delay.
Leasehold transactions are more complicated than freehold as there are a number of additional issues which can go wrong. Whether the lease is short and needs to be extended. Whether there are arrears of service charges Etc; whether there are major works which the buyer will become liable for, various notices, if any covenants (obligations have been breached); whether the buyer purchases with a full set of rights, such as access. What does leasehold mean? Leasehold means the buyer will purchase a term of years left on the lease. The original lease gives the original terms of years when created. This can be 99 years, 125 years or 999 years. To know what years the buyer is purchasing they simply need to deduct the current date, from the original lease date. Work out the years, and then deduct this from the term of years fixed in the original lease.
Just under 50% of buyers in England need a Mortgage. Getting the mortgage offer is half the battle, the other half is ensuring the buyer complies with their Lender’s mortgage obligations. Failure will risk the Lender not releasing the loan money and in turn leave the buyer at risk of losing their 10% deposit. These conditions are set out in the offer itself and in the Council of Mortgage Lender’s Conditions (called CML). The buyer needs to instruct an expert lender solicitor who is used to dealing with these strict obligations. They can appoint the same solicitor who deals with their conveyancing. Alternatively they can instruct someone else or a solicitor one appointed by their Lender. Whoever they choose, note that the lender solicitor cannot start work until they receive their version of the mortgage offer (which is often towards the end of the purchase). It will be different from the buyer’s version (as it has a legal section) and will not arrive normally until between 1-2 days after the buyer receives theirs.
These are official entries held at the Land Registry for registered land. Each property has a unique HMLR title number. The buyer solicitors cannot start investigating title (or even order searches) until they have these. They are equivalent to a full set of title deeds. The official copy is divided into three parts. Section 1 ‘Property register’. This records for example how the property is held; whether it is a freehold or leasehold; whether it has full title; easements (benefits and burden that run with the property) and its property address. Section 2 ‘Proprietorship’ register. This records matters such as, whether the owner has ‘title absolute’; the name of the owner; previous price paid for the property; it also includes any ‘restrictions’ or ‘notices’ on the property such as a matrimonial Court order. Section 3 ‘Charges’ register. This records covenants (obligations) imposed on the land owner (not to do something called ‘negative’ or to do something, called ‘positive’). The other key feature found here is any loans and mortgages registered on the property. If the property is a leasehold then it will refer to the leasehold title number. The Office Copy should also include a ‘File Plan’. This is required in order to order searches. It defines the land edged in red.
This is a questionnaire about the seller’s property which the sellers are duty bound to complete which we will then send to the buyer’s solicitor. It covers such items as guarantees, neighbour disputes and boundaries, planning permissions, occupation and other matters. Failure to disclose information may give rise to the risk for the buyer to take action against you. To help speed up the transaction we send you these out at an early stage in the transaction. This will speed up our ability to send out an early contract.
This is a document which the buyer solicitor prepares and sends to the seller’s local authority and which raises questions regarding the property. It covers such items such as, whether the road serving the property should be maintained by the council (i.e. adopted by them rather than the buyer having to contribute privately), whether there have been any planning applications on the property, and a number of other things. The search is against the property only and does not cover the surrounding area. A word of warning – the search will not show any Planning Permissions or matters affecting land or buildings outside the boundaries of the property. You must therefore let us know at the start of the transaction if you require information on any particular point or if you wish us to ask any particular questions of the local authority.
Searches look for potential problems such as restrictions, benefits and conditions which may affect the property and ultimately the buyer’s use and enjoyment of it. All buyers must order searches because of the legal principles such as ‘buyer beware’ and ‘sold as seen’. The Law assumes the buyer will have seen problems the searches would have revealed, has they been ordered. Whilst there are two mandatory searches costing about £250 or less (Local Authority search and Water search), the buyers’ lender (or the prudent buyer) may require additional searches. There are some 60 optional searches but there are three common optional searches which most buyers will take out to better protect them against loss: Environmental search (looking for dangerous substances under or near the property); Flooding search (to satisfy the lender insurers, even if the property is not near a river) and ‘Chancel’ search (which risks losses into the tens of thousands of pounds). Some solicitors are able to negotiate a bundle of discounted ‘searches’ at commencement, whereas if purchased separately, not only does it risk delay on their case by several weeks, but it also costs the buyer more money as they will be buying these individually and lose the bulk discount. The buyer will need to ask their solicitor whether they offer a discounted searches pack.
Stamp Duty is a government tax charged to the buyer only. Unless an exemption applies the buyer is liable to pay for this tax at completion. The buyer’s solicitor can work out the Stamp Duty tax due. They should be able to work this out when they send the buyer their quote estimate. It is based on the purchase price. This is a tax form and the buyer’s solicitor should have the expertise to do this. Most will charge a fee for completing this form. It should be contained in their terms. The benefit of this for the buyer is firstly, it saves them time as the form is quite long; secondly, there are penalty implications if the form is completed incorrectly. So, if a buyer pays a solicitor to complete the form, then they, and not the buyer, face the government penalty for getting it wrong.
There are three types of survey. The most basic is the lender’s valuation ‘Condition Report’. This is insufficient for a buyer as they cannot rely on it and they will be at risk as the law provides for ‘sold as seen’. This is simply used by the Lender to ensure that their lending criteria has been met. The best survey for the buyer to commission is a RICS Full Building Survey. This provides an analysis of the property’s condition and includes advice on defects, repairs and maintenance options. The other is a RICS Home Buyers Report. this looks at the condition of the property, highlights any urgent defects and provides a market valuation and insurance rebuild costs. It also includes advice on defects that may affect the value of the property with repairs, and ongoing maintenance advice.
As the buyer’s solicitors this is a document which we prepare and send to the seller. If we are the seller’s solicitor we ensure that the transfer deed has been properly prepared by the buyer. This is a vital document as it passes the ownership of the property from the seller to the buyer. It is dated with the completion date and will be sent to the Land Registry after completion. The Land Registry will use this Transfer deed to change their records and show the buyer as the new owner of the property.