The Legal Process
Help On Hand
The stress of buying or selling your home has been likened to that experienced
in bereavement or divorce. But a problem shared is
a problem halved and we are here to help you through the process. We can advise
and assist in many ways but perhaps the most important is our ability to liaise
with all the solicitors to ensure as little hassle as possible:
• if you are selling, we will undertake the marketing
and use our best endeavours to suit your requirements by introducing a suitable
buyer at the best possible price;
• You will need to have
a package of information available about your home which we can provide for you;
and
• if you are buying, we can offer you our wide range of properties on which
we are instructed and guide you through the purchase procedures generally.
Smoothing The Way
In either case, your solicitor or licensed conveyancer will ensure that all
the legal requirements are met and you are selling or purchasing as smoothly
as possible.
The legal process may seem a minefield but the sale or purchase
of land is fundamentally different from buying or selling anything else. If you
agree upon a price to buy or sell a motor vehicle, but then change your mind,
you could be sued for breach of a verbal contract. This does not apply to land
as there are many more obligations involved which need to be checked through
and understood.
'Subject To Contract'
For over three hundred years - since the Statute of Frauds 1677 - the law
has required the sale or purchase of land to be set out in writing, signed and
containing all the important terms. It used to be commonplace for any offer made,
and any acceptance of that offer, which was in writing, to be endorsed with the
magic words 'subject to contract' - this was to avoid either party being legally
bound inadvertently. If those words were not used, then an exchange of letters
could be sufficient to bind both parties.
You may find the term 'subject to contract' still
in use but it is no longer so critical since modern legislation requires sales
of land to be recorded in a specific format, called a Deed, which cannot be created
unintentionally. That said, the expression remains in use as a convenient shorthand
note to indicate that an offer is still provisional and not a firm commitment
so the term may still appear in the correspondence. It is no longer critical.
Final Negotiations
At this stage there may still be minor negotiations to be concluded. For example,
does the sale agreement include, or exclude, furnishings and fittings? By this
is meant any of the moveable items which could be taken from the property without
damage to the structure - 'chattels' in legal terminology. Misunderstandings
can arise and should be dealt with at the outset. Carpets and curtains are the
most common chattels. They can be excluded, or included, in the price. As can
other items.
Fixtures And Fittings
It should be remembered that the legal definition of 'chattels'
is 'personal property'. Often, a description of the property will include (or
exclude) 'fixtures and fittings'. This can be a trap for the unwary buyer or
seller. As stated, in law, a 'fixture' is something secured to the property which
cannot be removed without damage to the structure. for example, a hob which is
part of a fitted kitchen. As such, it is part of the property and the seller
has no right to remove it without notice.
Unless the contract expressly makes reference to this item
being excluded from the sale, it should remain. As it is fastened to the property
it is, in law, an immovable. The same applies to plants and shrubs in the garden,
although light fittings may generally be removed if this does not significantly
damage the ceiling.
Stamp Duty Adjustments
To avoid delay, expense and uncertainty, we always recommend spelling out
exactly what is being taken and what will be left. With most properties being
liable for Stamp Duty based on the contract price there may be more attention
paid to the value of the 'fixtures and fittings' to avoid falling into a higher
duty band.
A separate contract and price is then concluded for these excluded items,
additional to the purchase price of the property. Please be certain, at the very
beginning, as to what is, and what is not, included. Incidentally, the structure
and collection of Stamp Duty (now called Stamp Duty Land tax) has recently been
tightened up. The Inland Revenue has set up a team of investigators to look into
the true value of 'extras'. They can inspect property and there are now heavy
fines for cases of tax evasion.
Preparing The Contract
When all is agreed in
principle, the seller's solicitor prepares a draft contract to send to the buyer's
solicitor for approval or suggested amendment. This is because only the seller
knows what title he can give; whether freehold or leasehold and including any
documents to any critical aspects, such as the death of the original owner and
Probate of the Will vesting ownership in the seller plus any encumbrances (easements)
against the title, such as rights of way.
From June 2007 this information must
be made available at the outset. The changes sound more traumatic than they really
are and we can take care of everything for you. It is all part of our comprehensive
service.
Registered Title
Sales used to involve the physical transfer of the title deeds or lease which
were handed over to your conveyancer or, if the property is mortgaged, obtained
from the lending source. These days the large majority of titles are registered:
then all your conveyancer needs to know is the title number so they can obtain
all the necessary information from the Land Registry. These will come electronically
although they are still called 'Office Entries'.
Incidentally the whole operation of HM Land Registry is changing following
the Land Registration Act 2002 which, in effect, rewrote all the procedures for
the age of electronic communication.
Information Packs
Home Information Packs came into effect for homes in England and Wales August
1, 2007 and are required for all homes. The Packs includes an Energy Performance Certificate, which measures
the energy efficiency of the home concerned, as well as a number of other vital
documents. The Government’s intention in introducing the Packs is greater disclosure
and transparency to help make everything quicker and more efficient.
Packs for homes with fewer bedrooms than three are due to come in on a date to
be announced, while for the moment, the commissioning of a Home Condition Report,
always the most controversial aspects of the Packs when proposed, remains voluntary.
We would of course be delighted to arrange one for you if you wish, while we
will be happy to answer any questions you have regarding any aspect of Home Information
Packs.
Gazumping
But that is for the future. Presently,
while the sale or purchase is going through the initial preparatory procedure,
either side may withdraw without any liability and can do so until contracts
are exchanged. When the market is extremely buoyant with prices rising, the inherent
delays built into the system, may allow 'gazumping' to occur.
This term means the seller accepting a higher offer than the one already agreed
with the first buyer. The seller may have previously agreed a sale verbally but
then reneges on that agreement attracted by the higher amount - or perhaps a
promise by the new buyer to move more quickly which may be more understandable.
Incidentally, the word 'gazump' derives from an old Yiddish word 'to cheat'.
Best Price
When several people are interested in the same property various bids may be
made as the seller is casting around for the best bid. That is the market operating
to achieve a fair price: it is not gazumping which only occurs when he has already
agreed to sell at a definite price and legal work is under way, but it is still,
technically, 'subject to contract'. There is little that can be effectively
done to stop the practice, as the seller is legally entitled to proceed with
the best offer but this is one factor behind the Government's enthusiasm for
HIPs.
Of course a buyer could, when the offer is accepted, ask the seller to
agree, in writing, to treat with him alone for a specific period, to allow him
to conclude his enquiries and exchange contracts within that time-scale. There
are ways of avoiding much of the risk which we can suggest to you. At the end
of the day the best answer is a pro-active conveyancer committed to getting the
job done quickly.
Kept On The Market
If your offer has been formally accepted but the owner still wishes to keep
the property on the market, you will be told. This is not only fair to you, it
is also an obligation in the Estate Agents' Code of Practice to which most estate
agents subscribe.
Back to the procedures... after receiving the draft contract
from the seller's solicitor, the buyer's conveyancer will send a long list
of printed preliminary enquiries in return covering virtually everything that
needs to be known about the property, including insurance, guarantees, disputes,
any unusual charges and, if not already agreed, whether the seller intends to
remove those fixtures, fittings, plants, aerial, burglar alarm, telephone, etc.
Searches
He will also send off an official search, with a printed list of further enquiries,
to the local authority to see, for example, if the property is subject to any
local land charge or any adverse entries; how drainage is connected, what building
or other development has been granted, proposed roads, compulsory purchase or
mining activities past, present or future.
When HIPs come into force most of
this information (plus some new items) will be included in the Package and available
for inspection at the outset with the idea of saving significant time.
Deposit
Once all these enquiries and searches are complete and satisfactory, the buyers
conveyancer will ensure that financial arrangements, such as the mortgage offer,
are in place so that the purchase price can be paid on completion, with the date
proposed inserted in the draft contract. At this stage, the deposit, normally
10% of the purchase price, is forwarded to the sellers solicitor. If the mortgage
advance is more than 90%, the balance is normally sent. The buyer signs the contract
which is sent off with the deposit.
The sellers solicitor will ensure that
his client is ready to be committed. If so, a contract in identical terms is
signed and exchanged with the buyer. Both parties are now legally bound and neither
can back out (without consent of the other) as that would be a breach of contract.
Completion
If the seller or buyer has another property to buy or sell in conjunction,
the conveyancers will normally ensure that all the properties in the chain of
transactions exchange contracts simultaneously.
The buyers conveyancer will make a few final checks to ensure that there
is no undisclosed mortgage and the seller is not bankrupt, for example, before
preparing a Transfer Deed or Conveyance. Normally, prior to completion, the buyer
will receive a statement of account from his conveyancer setting out the financial
position, taking into account any pre-contract deposit paid to the estate agent
and the deposit paid on exchange. On the day agreed for completion, the balance
of the purchase price is paid to the sellers solicitor,
normally electronically. The keys will then be released to the buyer who becomes
liable for the Council Tax, Water Rates, and all other outgoings from that date.
Even
with the best preparation, delays can occasionally occur or hidden liability
surface after completion though this is increasingly rare.
Chains
Selling normally entails another purchase at the same time. Conversely, your
buyer, unless a first time buyer, will also be trying to sell and cannot normally
exchange contracts until his own property has been sold to provide the purchase
money. With the additional delays in searches and enquiries, being involved in
a chain of transactions effectively means you can only move at the speed of the
slowest link in the chain.
This is where we can assist as we can talk to other
agents and other solicitors in the chain and keep you properly advised over what
is happening. We will do everything we can to smooth out the delays that inevitably
occur. Hopefully your solicitor or conveyancer will also do their best to keep
you informed of progress. But always ask them the reason for delay; they are
there to help and keep you fully informed.
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