7. The Legal Aspects of Property Purchase Flashcards
What is involved in the investigation of title?
Investigation of title involves the solicitor making thorough enquiries to establish whether the property is what is this claimed to be and that it is free from restrictions that would inhibit the sale process.
It also involves producing a certificate of title to confirm the findings.
What is a certificate of title and what does it confirm?
It confirms the solicitors findings in the investigation of title and it also confirms that the person who is selling the property is the legal owner, or their legal representative, and is entitled to sell the property.
The certificate of title will also confirm the borrower‘s full name as it will be recorded in the legal documents, and show the outcome of the various searches on the title that the solicitor has undertaken.
Why is investigation of title extremely important?
Any defect in the title that is not uncovered at this stage could have very serious repercussions, at worst meaning the buyer has not bought what they thought they had.
Why is investigation of title important to the lender?
Defects in the conveyance could mean it is unable to exercise some or all of its rights over the property, which would affect its security. For this reason the lender will insist on receiving a satisfactory certificate of title before it enters into a binding contract with a borrower
If the title to the property is not free from defects what must a solicitor do?
The solicitor must advise how these affect the security and/or how they may be overcome. Further legal work may be required to overcome the problem or, instead, insurance cover could be arranged to protect the lender
What searches are carried out?
Land registry search: Carried out if the land is registered and involves a search of the property, proprietorship and charges registers
Land charges registry search: carried out if the land is unregistered to check for the puisne mortgages or spousal interest
Local land charges registry search and enquiries of the local authority: The local land charges register identifies details of obligations and restrictions attaching to the property. Enquiries to the local authority identify road changes, town planning schemes and so on, which may affect the property and apply to the land rather than the individual
Bankruptcy search: carried out by the lender’s solicitor to ensure that the applicant is not bankrupt, and sometimes carried out on the vendor to confirm they have the right to receive the proceeds of sale
Commons registration search: checks that the land being sold is not common land. Usually applies where the land is in the countryside and previously undeveloped; or belonged to the Lord of the Manor; or is designated a town or village green
What is a puisne mortgage?
A puisne mortgage is one where the lender on an unregistered property does not have the title deeds as security for the mortgage. For unregistered land, the lender holding the title date is considered to be the first-chargeholder. A puisne mortgage holder is in the same position as a second or subsequent chargeholder on registered land
What is a spousal interest?
Exists where a non-owning spouse has lodged an interest in the property under the family law act 1996
What are the work is carried out prior to exchange of contracts?
The buyers solicitor confirms that with the vendor exactly what is and is not included in the sale; such as fittings and temporary outbuildings such as garden sheds.
The vendor will also be required to complete a ‘sellers property information form’
What information is provided on the sellers property information form?
Property boundaries
Dispute with neighbours
Notices affecting the property
Guarantees relating to the property
Services to the property (water, electricity, gas, et cetera)
Sharing with neighbours: any joint responsibilities to pay for maintenance of joint or common areas, or any need to go on to the neighbours property, for neighbours to go onto the vendors property for maintenance purposes
Arrangements and rights
Changes to the property
Planning and building control issues
Fittings included in the sale of fixtures that are to be removed
Other issues to do with the mechanics of the sale
What does the draft sales contract specify?
Terms and conditions of the purchase
Buyer and vendor details
The property being sold
Agreed sale price
Agreed deposit to be paid on exchange of contracts
What is involved in exchange of contracts?
Once all of the searches have been completed, and the buyers solicitor is satisfied with the results and has confirmation that a binding offer is in place, the signed contracts can be exchanged. The amount of the deposit is paid at this stage and is negotiable
A completion date is agreed. The vendor solicitor will obtain a settlement figure to repay any outstanding mortgage the vendor has on the property when the sale is completed. If the buyer is selling a property to fund the new purchaser solicitor will obtain settlement figure to repay any mortgage on that property
The buyer solicitor will normally arrange for the buyer to sign the mortgage deed a day or two before the purchase is due to be completed, ready for execution on the day.
The buyers solicitor then sends a draft transfer deed to the vendors solicitor for the vendor to sign in readiness to be returned in time for completion.
Soon after exchange The buyers solicitor will apply for release of any mortgage money needed to complete the sale
What happens at completion stage?
The property is transferred from the vendor to the buyer. The main event is the transfer of the balance of the purchase price from the buyers solicitors to the vendors solicitor.
The legal charge for the mortgage takes effect at completion
Once the money has cleared the property belongs to the new owner, and they can move in
What Is to be done after completion?
File stamp duty land tax return within 14 days of the effective date of completion and pay the applicable tax
Apply for registration of the new owner of the land registry, and for any mortgage to be noted on the register
Send a bill to the buyer to cover conveyancing fees and disbursements
