plainlaw has considerable experience of working with buyers of residential
property whether you are purchasing to live in the property or for investment.
Our role is to ensure that the buying process is completed as smoothly and
quickly as possible. To help you achieve that goal we have put together this
checklist which covers many of the questions that clients ask. If you need
more information or would like to clarify any of the issues raised here,
then please do contact Philip Horn or Karen Peacock on 01865 240202 email: philip.horn@plainlaw.co.uk or karen.peacock@plainlaw.co.uk
1. Proving your identity for Money Laundering Regulations
In order to meet the requirements of UK Money Laundering Regulations (MLR)
we will ask you to provide the following documents:
- If you are buying the property in your name
Evidence of your identity: a copy of your passport or driving licence and
evidence of your address: a copy of a utility bill.
- If you are buying the property in a company name
Copies of the passports or driving licences and copies of utilities bills
of two directors and the memorandum/articles of association and certificate
of incorporation for that company and details of the shareholders of the
company.
All information provided will have to be certified as a true copy of the
original by a solicitor.
Ideally, in both instances referred to above, we would like to meet the
buyer (or directors in the case of a company) in person.
Please note that if you are borrowing money to fund the purchase the bank
/building society providing finance may have additional money laundering
requirements.
2. Mortgage finance and deposit
We will need to know if you intend to borrow monies in connection with the
proposed purchase. We will also need to know that your mortgage offer has
been made and any conditions subject to which the offer is made are acceptable
to you before exchange of contracts.
Typically sellers ask for a deposit of 10% of the purchase price on exchange
of contracts. We would, however, always try and negotiate a lower deposit
particularly if you are financing your purchase largely with mortgage finance.
At the outset you should confirm what sum you have available for the deposit.
3. Surveys
We can assist you in instructing a suitable firm of surveyors if you do
not already have your own surveyor.
- Building survey
We recommend that a full building survey is carried out for any
property before exchange of contracts. A buyer will not usually have any
come back against the seller if there is a problem with the condition of
the property. This survey should also confirm that the extent of the property
as shown on the legal title plan corresponds with the seller’s agents’ particulars
and the position on the ground.
- Valuation survey
Your lender, if you are borrowing to finance the purchase, will
require a valuation in respect of the property before sending any money to
your solicitor. This will have to be obtained before exchange of contracts
and the valuation fee paid when applying for your mortgage. It is often practical
to instruct the lender’s surveyor to carry out both the valuation and
the building survey as this keeps the fees down and means a surveyor only
needs to visit the property once.
4. Deadline
Sometimes a seller will impose a deadline by which contracts must be exchanged
and all searches and enquiries will need to be undertaken within that period.
It is possible to enter into an “exclusivity agreement” with
the seller which will allow the buyer a period within which to carry out
its searches and enquiries with the reassurance that the seller will not
market the property to others during this period. The benefit of such an
agreement, however, is limited because if the seller acts in breach of it
the buyer’s recourse is usually limited to recovering the abortive
costs it has incurred.
We will require instructions from you as to the deadline and timescale in
which you anticipate exchange of contracts and completion. The typical timescale
between exchange of contracts and completion is 28 days.
Once contracts have been formally exchanged you are legally bound by the
terms of the contract including the agreed completion date and there are
usually severe penalties for late completion: penalty interest at 4% above
base rate at a daily rate is payable on the outstanding completion monies.
In a worst-case scenario, should a buyer fail to complete in time (the seller
having made time of the essence under the terms of the contract) the seller
can keep the deposit and, in addition, the buyer can be pursued by the seller
for damages.
5. Availability
As the buyer you should confirm that you will be available to sign the necessary
documentation (including mortgage documentation, if applicable) before exchange
of contracts and before completion. If this is not the case, for example
if you are going to be out of the country on holiday or business, please
inform us as soon as possible so that the necessary powers of attorney or
other written authorities can be prepared and completed.
6. Buying property in joint names
If you arebuying a property jointly with another
person there are special considerations which you need to think about. You
need to consider whether to buy the property as “joint tenants” or “tenants
in common”.
Joint tenancy:
If you buy the property as joint tenants your “share” in the property
will pass automatically on your death to your co-owner by what is called “the
right of survivorship”. You cannot leave your “share” by
your will to anyone or, in the event that you do not leave a will on your death,
your share will not be governed by the laws relating to intestacy.
Tenancy in common:
If you buy the property with another as tenants in common, each
co-owner’s share of the property will pass according to the terms of
his/her will or according to the rules which apply on intestacy if no will
is left on death.
If you are buying a property in joint names please click here for further
matters that you might need to consider.
7. Fees
In planning your purchase you will need to take the following fees into
account. Typical fees include:
- Land Registry fees (which are payable following completion) which range
from £40 up to a maximum of £700 for properties of a value
in excess of £1,000,000.
- fees plus disbursements and VAT of your own solicitors (“disbursements” or
out of pocket expenses include Local Authority search fees (usually between £150
- £250 depending upon the Local Authority and the cost of other searches
that it may be necessary to carryout depending upon the location of the
property)
- fees plus VAT of your mortgagees valuation surveyor
- fees plus VAT for building survey
- SDLT – see below
8. Stamp Duty Land Tax (SDLT )
The SDLT rates are currently as follows for residential property:
- nil for prices of £120,000 or less
- 1% if the price is more than £120,000 but not more than £250,000
- 3% if the price is more than £250,000 but not more than £500,000
- 4% if the price is more than £500,000
(Note: There is exemption from this tax in certain government designated “disadvantaged
areas” but the availability of this relief is very restricted).
SDLT is payable within 28 days of completion otherwise interest and penalties
will become payable to the Inland Revenue.
9. Insurance
Property will usually be at the risk of the buyer from the date of exchange
of contracts. This means that if the property is substantially damaged after
exchange of contracts but before completion the buyer is still obliged to
proceed to complete the purchase. Therefore you should arrange to put your
own insurance cover in place for the property from the date of exchange of
contracts.
10. Leasehold property
Where leasehold property is to be purchased, the lease provisions will need
to be reviewed carefully. There may be restrictions in the lease for example
about building works being carried out or keeping pets at the property which
may affect your decision to buy.
11. Planning
As part of our investigations we will look into the planning permissions
and building regulation consents relating to the property to make sure that
the correct consents have been obtained for the construction of the original
building - these tend to be of greater relevance for recently constructed
or new properties. We will also check to make sure that the correct consents
are in place for extensions to the property.
We hope that this checklist has given you some useful guidance to buying
property in England or Wales. If you would like further details of any of
the issues raised here, do please get in touch with us. Where we are instructed
on sales and purchases we provide a full report on issues concerning the
specific property before exchange of contracts.
This
edition of “The Law made plain” is written to provide you
with general information. It is recommended that you seek specific professional
advice before taking any action.
© Copyright plainlaw 2005
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