CP Law: A Guide to Buying or Selling a Property
Conveyancing: what is it?
Conveyancing is the name given to the process of transferring ownership of land from one person to another. It is important during that process to identify any issues relating to that land that the buyer needs to be aware of. These may include:
- The rights of someone else to occupy it;
- The rights of someone else (e.g. a neighbour) to enter the property ( e.g. to dig up the drains in order to inspect or clean his drain);
- Claims by the public –a public footpath across the property;
- The rights of the local council in respect of, for example, compulsory acquisition or unpaid charges for making up the road;
- Planning authority, or highway authority schemes which would affect the environment of the house in question;
- Validation that the seller owns the land and that he is free to sell it. If for example he inherited the property, ensure the correct steps were taken to transfer legal ownership to him.
There are a number of steps in the conveyancing process, as follows:
Stage 1: Pre-contract
- The buyer makes an offer and the seller accepts it. Any price that you offer should be ‘subject to contract’ and ‘subject to survey’.
- The estate agent then prepares a memorandum of sale which is distributed to the seller, the buyer and both sets of solicitors.
- The sellers’ solicitors obtain an up to date copy of the title from the Land Registry and prepare a package containing the sale contract and the title documentation.
- The buyers’ solicitors now commence their investigation into the title of the property. At this stage they also request a local authority search, check the legal title, read the lease and any other relevant documents and raise any pre-contract enquiries.
- The buyer also commissions a survey of the property.
- While the above is in progress, the buyer and their solicitor should ensure that the finances are in place for the purchase. This means that the mortgage application is being processed by the lender and money is available for the deposit.
- Generally a seller will require a 10% deposit on exchange of contracts; a lower figure can often be negotiated. The deposit acts as compensation if the matter does not complete according to the sales contract.
- Each side’s solicitors then amend and agree the sales contract and get it signed by both parties in readiness for exchange of contracts.
- The buyers’ solicitors collect the agreed deposit which they hold in the firms client account.
- Each side agrees a completion date; the parties are then ready to exchange contracts.
Stage 2: Exchange of Contracts
- Exchange of contract generally takes place over the phone using one of three formulas prescribed by the Law Society. Each formula is a series of solicitors’ undertakings. In the most commonly used formula, each parties solicitor confirms that they hold a signed contract by their client and the buyers’ solicitor confirm they hold the deposit.
- Each party enters the exchange date and the agreed completion date and notes the precise time of the conversation. They agree to send the contracts and the deposit cheques in the post day the same day.
- At this point the parties are legally committed to the sale and purchase and penalties will be levied if either party breaches its obligations.
Stage 3: Pre-completion
- The buyers’ solicitors prepare the draft transfer for approval by the seller’s solicitor. They also raise requisitions about the title, which are a set of enquiries.
- The sellers’ solicitor calculates the precise amount to be paid by the buyer on completion. When calculating this for leasehold properties, the ground rent and service charge must be apportioned accordingly and no arrears due to the landlord.
- Each party then signs the transfer.
- The buyer must get his mortgage deed executed and their solicitor will check that they have sufficient funds to complete.
- Each solicitor then sends a statement to their client setting out the figures.
- Immediately before completion the buyers’ solicitor will carry out pre-completion searches that include a bankruptcy search and land registry search if applicable.
- The stamp duty land tax form is then sent to the buyer. It has to be paid by the solicitor within 28 days.
Stage 4: Completion
- On the date for completion, the buyers’ solicitor sends the sellers solicitors by bank transfer, the funds required to complete.
- The buyers’ solicitors must pay any stamp duty tax within 28 days.
- They will also arrange for the purchase to registered at the Land Registry.
- The sellers’ solicitors will account to the seller for the sales proceeds. It is generally at this stage that all agents, surveyors and solicitors fees are paid.
- Once the Land Registry has completed the registration the buyers’ solicitor forwards the title deeds to the mortgagee or to the buyer.
How long will it take?
It is very difficult to generalise but a guide of one month between acceptance of an offer and exchange of contracts and a further month between exchange and completion is a reasonable time frame. It can often be quicker if required.
There are a number of costs that are fixed. These include:
Stamp Duty: this is paid by the buyer and is fixed related to the purchase price.
** Residential Property only. A 15% rate will apply to properties over £2m purchased by certain ‘none-natural’ persons.
Land Registry fees: payable by the buyers and fixed by The Land Registry.
|Land Registration fees for Purchase of Property|
|£0 – 50,000||£40|
|£50,001 – 80,000||£70|
|£80,001 – 100,000||£120|
|£100,001 – 200,000||£190|
|£201,001 – 500,000||£270|
|£500,001 – 1,000,000||£540|
|£1,000,001 and over||£910|
Local Search Fees: These are set by the local authority and are in the region of £150-£280
Other search fees: These are about £250 – £300 depending on the searches required. They are set by the local authority and include drainage and environmental searches.
Surveyors’ fees: They are paid by the buyer. They are generally in the region of £450 – £700 depending on the type of survey undertaken and the value of the property.
Estate Agents fees: Paid by the seller and can range from 1% – 3.5% of the purchase price.
Solicitors’ fees: each party pays its own solicitors and the fees are generally fixed at the outset. Generally they are quoted exclusive of disbursements (the above charges). Charges vary from one practice to another.
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