Topic 6 - Buying a Property: An Overview Flashcards
Bound by Terms:
Once a contract has been agreed and put in place, both parties are bound by its terms.
Failure to do so could mean they are sued for breach of contract and ordered to comply or pay damages.
‘Caveat Emptor’
Most contracts are based on this principle meaning ‘Let the buyer beware’. This means that neither party is required to disclose information to the other unless asked to do so.
‘Uberrima fides’
Utmost good faith. This principle requires disclosure of all material facts by both parties.
An agent should only act within the powers given to them by who?
The principal
Two situations in which the agent may act outside their actual authority without making themselves liable for redress:
- Apparent authority: Where a statement by the principal appears to give the agent wider authority
- Ratification: Where the agent acts outside their actual authority, but the principal agrees afterwards that the action was acceptable
Different ways of estate agents operating:
- Sole selling rights (uncommon)
- Sole agency
- Joint sole agency
- Multiple agency
What is an EPC?
An energy performance certificate required for a new build or when a property is marketed for sale or rent. Failure to commission before marketing a property is an offence.
Marketing can start before certificate is received
If building has separate units each need an epc
Gazumping
When the vendor having accepted an offer, accepts a better offer. It is legal but may be seen as unethical
Offer of Advance
The formal statement of the T&Cs on which the lender is prepared to enter into a mortgage contract
The letter is an offer for the applicant to enter into an agreement and the details will be eventually reflected in the mortgage contract.
The lender’s offer is binding on the lender, and can only be withdrawn in certain circumstances:
- Where the buyer knowingly provided false, inaccurate or incomplete info
- Material changes to the buyer’s circumstances after the binding offer was made, that would affect their ability to pay the mortgage
- A material change affecting the condition or value of the property after the offer was made
Offer letters are highly standardised and typically contain:
- General details confirming the applicant, property and loan
- Standard warranties and conditions, applicable to the vast majority of mortgages and not specific to the property or borrower
- Any specific conditions that might be applicable
It is important that buyers insure the building from when?
The point of exchange of contracts
Either party may choose to exchange contracts conditional on a specified event. What are these?
- Conditional on sale or purchase of another property
- Conditional subject to satisfactory search results
- Conditional on a long-stop date
Buying at auction
Successful bid > Contracts exchanged same day > 10% deposit paid same day > Completion within 28 days
There is often also a reservation fee of up to 5% of the purchase price covering the auctioneer’s costs
For an auction, the vendor’s solicitor will typically prepare a legal pack for bidders to inspect before the auction including:
- Memorandum of sale
- Special conditions of sale
- The local search
- Land Registry search
- Proof of title
- Copy of any lease affecting the property
What are the main steps in buying a property
Establish budget
Find property
Make offer
Formal mortgage application
Exchange contracts
Completion
What are the basic principle of a contract
Agreement
Offer and acceptance
Consideration - this money for your property
Capacity- legal? Aged 18 and over and legally able to buy or sell property- either as principal or agent with authority and sound mind
Intention- clear both parties intend to enter legally binding contract
Bound by terms - If they don’t comply they breach contract
How do buyers establish a budget?
Lenders provide indication of the maximum.
What does a buyers budget determine?
Price range they can afford
Whether they can find the deposit required
Whether they can meet the other costs involved eg. Valuation / survey / legal fees
What buildings do not need an EPC
Places of worship
Temporary buildings intended for use less than 2 years
Listed buildings that meet minimum requirements
What EPC categories is it illegal to arrange new rentals or renew an rental agreement for a residential property
EPC rating is F or G unless the landlord has an exemption
An offer is made subject to contract. What does this mean?
Buyer or vendor is not legally committed until the contracts are exchanged. They can withdraw with no penalty or compensation.
According to MCOB what must offer letters also include
Illustration
Tariff of charges
7 day reflection period
What are the standard warranties in an offer letter
The offer does not imply a warranty of the reasonableness of the purchase price or condition of property
The fact the offer is subject to certain conditions for ions including satisfactory certificate of title
Statement the lender can withdraw if conditions are not met. Subject to MCOB rules on offers.
Statement lender can vary the terms of the offer for legitimate reasons
The period the offer letter remains valid
What special conditions can be found in the offer letter.
Conditions relating to additional security or guarantee
Requirements in relation to completion of roads and access
Work the applicant must carry out and when it needs to be completed . Right of the lender to inspect the property to check the work done. Retention conditions if applicable (hold part of the advance until work is done)
Requirement of consent to mortgage form for non owning occupants 17+
Requirements for the redemption existing mortgages or other borrowings on or before completion hi
Conveyancing required the solicitor to?
The property is what it is claimed to be
The vendor has the right to sell
There is nothing that will prevent the buyer from obtaining good title to it
What is the typical process of offer and contract?
Offer is made subject to contract- neither party legally committed at this stage.
Contracts prepared, signed and exchanged- both parties legally bound to complete the transaction. Both can now be subject to breach of contract
Buyer pays deposit- amount of deposit is negotiable between the parties. Buyer will lose the e deposit if they do not complete.
