Guide to purchasing a residential property

Whether you are a first-time buyer or have bought a property in the past, the conveyancing process can be overwhelming and confusing. We aim to try to provide some clarity and guidance for our clients.

The transaction will be slightly different depending on whether the property is freehold or leasehold.

Freehold – an owner owns the property outright and is responsible for all maintenance. An owner will have more freedom to do what they want with the property which will of course subject to obtaining planning permission or building consent.

Leasehold – an owner only owns the right to live in the property for a fixed period of time by way of a lease. The property will usually be a flat but could be a shared ownership house. The lease will outline terms and conditions to be complied with. The landlord ultimately owns the freehold of the building and may appoint a management company or managing agent to oversee management of the property. A leasehold property can also be subject to certain restrictions for internal alterations and you will be liable for additional costs, such as service charges and ground rent. Any alteration to the property will require the consent of the landlord.

When considering who you want to appoint as your legal adviser, you should call around and speak to various firms to not only obtain a quote but to see if you have a positive experience from reception through to the person who deals with the quotes.

Please be aware that you are not obligated to use the solicitor suggested by the agent (or your mortgage broker) no matter what they say. You have the freedom to choose who you want.

Once you have accepted the solicitor’s quote, you will need to comply with their compliance checks, such as provide ID and source of funds which will be requested as part of their client care documents.

If you view a property through an estate agent you will need to make a formal offer to purchase. This will involve you producing evidence of funds or a mortgage in principle as well as your ID. Once the offer has been accepted, you will be asked to provide details of your chosen solicitor. The agent will then contact all parties including the buyer and sellers solicitors with a memorandum of sale which confirms details of the property and all parties involved in the transaction.

The seller’s solicitor will issue a draft contract and all title documents to the buyer’s solicitor. These documents will be reviewed and reported to you. The title documents will contain information relating to the property and may affect how you own the property. It is common for there to be reference to older conveyances and transfers which may contain rights that the property benefits from (i.e. use services that cross over neighbouring property, roadways), rights that the property is subject to (i.e. use services that cross over the property) and covenants that are legal promises that you will not (or if they are positive covenants that you will) do certain things to the property (i.e. park a caravan on the front of the property, use the property for anything other than as a residence).

These documents may disclose matters that need to be raised with the seller’s solicitor which are commonly called enquiries before contract.

Once the title plan has been received from the seller’s solicitor, all relevant property searches will be ordered such as local authority, environmental and water and drainage. Depending on where the property is located, your solicitor may also recommend a mining search or a planning search.

The cost of the searches is referred to as a disbursement and is separate from the legal fees quoted by your solicitor but should have been explained to you as part of the quote.

Following a review of the search results, your solicitor will provide you with a search report to highlight information revealed to include matters concerning contamination, road adoption, drainage and planning issues.

Sellers are required to complete a Property Information Form and Fittings & Contents Form which provide information about the property and matters that may affect it and also the items that are to be included as part of the purchase. These are commonly known as Protocol Forms. The Protocol Forms and search results will be reviewed and enquiries raised with the seller’s solicitor. The seller’s solicitor will liaise with the seller and provide replies to enquiries. This is a key stage, going back and forth to reach an understanding and agreement to the matters concerning the property and as a means of highlighting any risk factors.

Document signing

You will be asked to sign documents in advance of the exchange date in readiness. This will either be in person at the office or the documents will be sent to you at home to arrange for their execution.

The documents are as follows:

Contract – This is the formal agreement detailing key terms of your purchase.

Transfer – This is the formal deed to transfer and register your legal ownership of the property with the Land Registry.

SDLT 1 – This is a document to confirm the amount of Stamp Duty Land Tax (SDLT) payable and your consent for your solicitor to submit the SDLT payment on your behalf.

Mortgage Deed – This is applicable if your purchase is with the assistance of a mortgage. This is a deed to confirm you agree to the terms of that mortgage.

Preparing the financial position

A completion statement will be sent to you setting out the financial aspect of the transaction. If you require a mortgage, funds from your lender will be requested usually at a minimum of 5 working days in advance of the agreed completion date.  Your lender will transfer the purchase monies to your solicitor’s client account. You will be required to transfer balance purchase monies (including your deposit) to your solicitor’s client account.

Exchange of contracts

On a date to be agreed by all parties, your solicitor and the seller’s solicitor will formally exchange contracts. This means both you and the seller agree to terms of the contract and to complete the transaction on the date stated in the contract.

If the property is freehold you will be responsible to pay buildings insurance from the date of exchange.

If the property is leasehold the landlord will usually arrange this and recover the cost through the service charge.

Contracts can be exchanged on a separate day to the completion date or both exchange of contracts and completion can be agreed simultaneously on the same day. Usually, a 10% deposit will be payable by you on exchange. There are consequences for failing to complete once contracts have been exchanged, which your solicitor should explain to you.

If you exchange contracts and complete simultaneously, insurance for a freehold property will be payable on the date of completion.

Completion

The date of completion is the date you get the keys to your new home!

Your solicitor will send the purchase monies to the seller’s solicitor. On receipt of the monies the Transfer Deed will be dated to confirm completion.

Leasehold

Most Leasehold properties will have additional requirements. These will vary depending on your landlord or management company’s requirements and can include Notices of Transfer and Charge (the latter if you have a mortgage). These will incur additional costs payable to the landlord and you will also have to pay an apportioned sum of rent and service charge to the sellers on the day of completion. It is usual for the sellers to have paid the full rent and service charge for the financial year in which you complete.

Stamp duty Land Tax (SDLT)

As a first-time buyer in England you will have the benefit of stamp duty relief. Currently stamp duty is not payable for a property priced at £425,000 and below. Any difference between £425,000 to £625,000 is subject to 5%. If the purchase price is more than £625,000 the relief is not available and standard rates will apply.

Please note SDLT reliefs and rates may be subject to change.

Stamp duty is payable within 14 days of completion and the return will be submitted and any stamp duty paid on your behalf by your solicitor.

Land Registry registration

Your solicitor will be responsible for applying to the Land Registry to register you as the new owner. The Land Registry can take several months to update the title register and considerably longer if there are any complexities in the transaction. Your solicitor will forward the completed register to you upon receipt.

To discuss any Conveyancing matters please contact either Donna Sandison, Laura Day or Lucy Mills of our Conveyancing Team or telephone the office 01775 722261.