The Key elements of a freehold/leasehold residential or commercial property transaction

Question 1

What is conveyancing?

Answer 1

The process of transfer of ownership of title to property between the buyer and the seller.

Question 2

What happens at exchange of contracts?

Answer 2

Deposit is paid (typically 10%)

Through the exchange the parties become bound to completion the transaction on the agreed date.

Buyer gains an equitable interest in the property under a constructive trust.

Question 3

What happens at completion?

Answer 3

The balance purchase price is paid.

Keys are handed over.

Transfer deed is completed.

Buyer entitled to apply to become the registered proprietor at the LR.

Registered Land: Legal transfer takes place upon registration.

Unregistered Land: Must be registered within two months of completion else title reverts back to the seller.

Question 4

What does the seller’s solicitor do prior to exchange of contracts?

Answer 4

Carries out investigation of title and deduction of title.

Provide a draft contract and supporting documents.

Replies to any standard pre-contract enquiries via requistions of title raised by the buyer’s solicitor.

Deal with proposals to amend draft contract, request clean copies for signature and request a redemptions statement from any mortgagee(s).

Question 5

What does the buyer’s solicitor do prior to exchange of contracts?

Answer 5

Carries out an investigation of title under caveat emptor.

Check, approve and may amend the draft contract.

Carry out and review the results of standard pre-contract searches and enquiries of both seller and 3P.

Raise any additional enquiries and requistions on title.

Buyer is usually advised to insure the property from exchange of contracts.

Question 6

What is investigation of title?

Answer 6

Process where the property is examined and checked to ensure the seller is entitled to seller and that the title is good.

Checking for materially adverse incumbrances and necessary rights.

Question 7

What is deduction of title?

Answer 7

Process whereby the seller’s solicitor provdies to the buyer’s proof/evidence of the seller’s title/ownership.

Registered Land: The official copies or registers or title.

Unregistered Land: The copy of title deeds.

Question 8

What are pre-contract searches and enquiries?

Answer 8

Enquries: Made of the seller’s solicitor to ascertain further information about the property.

Searches: Made of 3P such as local authority and local water authority, to ascertain information they have about the property.

Question 9

What are requisitions on title?

Answer 9

Additional enquiries of the seller’s solicitor as part of IOT and the results of the pre-contract searches and enquiries.

They are specific questions about an issue rather than a solution.

Buyer is generally not entitled to raise any further questions after the contracts have been exchanged.

Question 10

What is Caveat Emptor?

Answer 10

Means ‘buyer beware’ - the onus is on the buyer to investigate title fully so they are aware of any problems and issues.

The seller only a has a limited duty of disclosure as part of the conveyancing process.

Question 11

What does the buyer’s solicitor do at pre-completion?

Answer 11

Buyer’s solicitor prepares the drat transfer deed to be approved by seller’s solicitor, also prepares the mortgage deed for execution by the buyer.

Carry out pre-completion searches and enquiries of the seller’s solicitor and 3P.

Submits their certificate/report on title to the lender and requests the mortgage advance.

Request balance of the buyer in order to complete.

Question 12

What does the seller’s solicitor do at pre-completion?

Answer 12

Approves draft transfer deed and requestis a clean copy incorporating any amendements.

Responds to completion information and underktaings form from the buyer’s solcitor.

Arranges for a clean copy transfer deed nto be exectured by the seller.

Question 13

What does the buyer’s solicitor do at post-completion?

Answer 13

Submits SDLT/LTT with payment of any relevant tax.

Deals with the registration at HM LR.

Deals with registration at CH (if applicable)

Question 14

What does the seller’s solicitor do at post-completion?

Answer 14

Discharefs exisiting mortgage(s) and provides buyer’s solicitor with proof of the discharge.

Pays estate agents costs.

Accounts to client.

Question 15

What instructions should be taken in all cases?

Answer 15

• Full details of the buyer and seller.
• Estate agent’s details.
• Details of solicitors acting for the other side.
• Property address and tenure (free/lease(hold))
• Agreed purchased price and deposit.
• Details of fixtures and fittings.
• Anticipated/proposed completion date.
• Details of related sale where synchronisation will be required.
• EPC.
• Details of occupation.
• Existing use and past alternations.
• Verify client’s identity.
• Advise on costs, funds, anticipated disbursements.
• Formal engagement letter.
• Ascertain VAT (non-resi).

Question 16

What is synchronisation?

Answer 16

Crucial where a client has a related sale and purchase.

Making sure that the contrats on the sale are exchanged at the same time as contracts of the purchase, with the same completion date.

Ensures that the client does not end up without somewhere to live, or committed to a property without someone committed to theirs.

Can be difficult for new build properties.

Question 17

What instructions should be taken for the seller?

Answer 17

• Details of the agreed estate agent’s comission and costs.
• Details of existing mortage(s), and specifically for URL the location of any title deeds.
• Ask client to complete standard property information forms.
• For co-owened, ascertain whether held at JT or TIC.
• Advise on liability for CGT or Corporation if company.

Question 18

What instructions should be taken for the buyer?

Answer 18

• Details of any proposed mortgage and generic advice on the options.
• Position concerning the age of the property, property survey, and advice on the types of survey.
• Details on the proposed used and proposed alterations and additions.
• Situation of the property (water/industrial etc..)
• Advise on co-ownership and the holding of equitable interest.
• Advice on any future tax liabilites (CGT or Corp (companies))

Question 19

When must an EPC be made available?

Answer 19

Must be made available by the seller, free of charge, before or within 7 days of marketing, and with any event within 28 days.

Listed properties are excempt from the requirement.

New builds will have a Predicted Energy Assessment that will be produced, and followed up with an EPC following construction.

Question 20

What is a repayment mortgage?

Answer 20

• There are usually monthly payments of both interest and capital.
• Interest rate may be variable, fixed or tracked.
• As both are paid, the full amount will be repaid at the end of the mortgage term.
• Key advantage that although monthly repayments are higher, the buyer will be mortgage free at the end of the term.

Question 21

What is an interest only mortgage?

Answer 21

• Monthly payments of the interest only.
• Interest rate may be variable, fixed or tracked.
• As only the interest is paid, the full amount will not be repaid and the end of the mortgage term.
• The monthly payments will be a lot lower, however if they want to keep the property and the end of the term, they must find another way to repay the capital.

Question 22

What factors determine what type of survey to use?

Answer 22

• Property age.
• Property value.
• Whether the property has been extended/altered in the past.
• Whether the buyer has any plans to extend or carry out structural alterations.
• Whether it is of non-standard construction.
• Whether it is in a former mining area or one that is affected by subsidence.

Question 23

What is a basic valuation?

Answer 23

Most basic form of survey.

Does not assess the physical state and condition of the property in any detail.

Commissioned by the lender as a minimum requirement to ascertin the market value and the value for secured lending purposes.

To ensure the lender that the property will be more more than its security so the lender gets its money back in the exercise of power of sale.

It is simple and cheap but limited value to a buyer.

Question 24

What is a full structual survey?

Answer 24

Most comprehensice form of survey and contains a detailed assesment of the physical state and condition of the property.

Most expensive type of survey.

Cost may be worth it if the property is old, particularly valuable, or there have been past or proposed alterations.

Can be used to renegotiate the purchase price and adverse matters are discovered.

Any reduction in purchase price must be reported to the lender.

Question 25

What is a homebuyers valuation and report/survey?

Answer 25

Sits inbetween a basic and full structural.

Will refer to any needed repairs/maintenance.

In a more limited scope, physical inspection may be limited to only exposed and accessible areas.

Question 26

What survey is carried out for newbuilds / newly converted properties?

Answer 26

Lender will undetake a basic valuation and a further survey will not be appropriate, especially since the property has yet to be constructed.

The developer should provide a structural defects insurance policy.

Question 27

What is a structural defects insurance policy?

Answer 27

Covers defects in design and construction for a period of ten years.

Provided by the National House Building Council (NHBC) - the ‘Buildmark Scheme’.

For the first 2 years from construction the builder is responsible for remedying any defects.

For the remaining 8 years, the NHBC is responsible for the structural defects.

Question 28

What is the Law Society Coveyancing Protocol?

Answer 28

Sets out to standardise the residential conveyancing process, to make it more transparent and efficient.

Provides standard steps/instructions to following when acting in the sale/purchase of a free/leasehold.

Provides standard forms: Property Information Form and the Completion and Undertakings form.

Usually adopted as a matter of course, and the forms are used een if the Protocol is not expressly adopted.

Does not usually apply on the sale of newbuilds.

Although it is recommened, it is not compulsory unless the firms are part of the Law Society’s Conveyancing Quality Scheme.

Question 29

What is the Law Society’s Conveyancing Quality Scheme?

Answer 29

Showcases a recognised quality standard for residential conveyancing practices.

Aims to improve consumer confidence.

Membership is often a prerequisite to act for major lenders.