We have provided this Guide in the hope that it may explain some of the terms used in conveyancing and the steps that are usually taken.
A short written explanation like this cannot cover all the points which may arise; we hope you will discuss with us any further questions you may have.
CONVEYANCING – WHAT IS IT?
Conveyancing is the name given to the process transferring ownership of the land from one person to another; Solicitors for the Seller and the Buyer each being obliged to safeguard their own client’s interest.
Transferring the ownership of land is not like transferring the ownership of, say, a piece of furniture or a car. The land is always there and in the course of time many rights and obligations may be created in relation to it: they are often not evident on an inspection of the property. For example, someone may have a right to occupy part of it but are not there when you visit; a neighbour may have a right to enter the garden and dig up the drains in order to inspect or clean his drains.
The public, too, may have claims – perhaps there is a responsibility to contribute to the repair of the Parish Church; the Council may have rights in respect of any improvement grant or unpaid charges for making up the road; the Planning Authority or the Highway Authority are perhaps considering schemes which would affect the environment surrounding the house you are buying.
Then there is the question: does the Seller really own it and, if so, is he free to sell it? If he inherited the property, were the correct steps taken to transfer legal ownership to him, or is it still outstanding in someone else’s hands? Is the Seller separated from his wife and does she have a right to prevent the sale? These are only a few of the snags which may arise. Accordingly it is your Solicitor’s duty to discover if they exist, and to advise you accordingly.
WHAT HAPPENS IN A CONVEYANCING TRANSACTION?
There are three main areas to consider, and they are:
1. Period prior to exchange of Contracts
The work carried out after the agreement in principal is reached but before the Seller and Buyer are bound by Contract to proceed with the matter.
2. Period between exchange and completion
The stage between “exchange of Contracts” (where the parties become Contractually committed) and “completion” (the day on which the money changes hands in return for keys and the transfer of ownership; that is the day on which you are entitled to move in).
3. After completion
The conclusion of the formal side of the transaction when documents are submitted to the Inland Revenue with payment of Stamp Duty Land Tax and if appropriate to HM Land Registry for registration of title.
PRIOR TO EXCHANGE
You have found the house you want and the Seller has accepted your offer.
Some of the most important work has to be done by your Solicitor at this stage.
The making of searches including a Local Search submitted to the Local Authority (if this is not provided in the Home Information Pack), a Water Search, an Environmental Search, a Plan Search and a Chancel Check (a search to check if there is any liability to repair the Parish Church).
We will summarise for you the information obtained about the property and advise you on any special or unusual provisions in the draft Contract.
We will receive from your Mortgage Lenders mortgage instructions and, again, we will report to you on any unusual or special terms requiring your action.
Once all these elements have come together, we will ask you to sign the Contract and pay the agreed (previously 10% but in days of high mortgages smaller amounts may be agreed) deposit to us so that Contracts can be exchanged.
Having found a Buyer, you will instruct us to send a draft Contract to the Buyer’s Solicitors. To do this we will need the Deeds to check the nature of your ownership and the existence of any rights or burdens which might be revealed and passed on to the Buyer.
We will apply to the Land Registry to obtain copy entries (copies of the entries of the Register of Title) and if you have a mortgage, we will ask you to provide us with details so that we may write to obtain any additional documentation that they may hold such as Planning Permissions, Guarantees etc.
In recent years the mortgage companies have changed their policy and some no longer hold these documents, and it may be that these have been sent to you for safekeeping.
We will send you a Sellers Property Information Form and Fixtures and Fittings Schedule for completion. In the case of Leasehold properties there is an additional Sellers Property Information Form to complete in relation to the provisions of the Lease and the management of the property. Please would you return the Sellers Property Information Form(s) to us as soon as possible.
Once we have copy entries and have received property information forms back from you, we will prepare a draft Contract and send it to the Buyer’s Solicitors who will then usually raise additional enquiries in relation to the information provided or from their searches and survey of the property.
Once the Buyer’s Solicitor is satisfied, he will approve the draft Contract and send it back to us. We will then either send the Contract to you for signature or ask you to make an appointment to come in and sign the Contract.
The Buyer and the Seller and if there are further parties involved in the chain will then advise their Solicitors of their preferred completion date and once this is agreed, the Solicitors will then exchange Contracts. If there is a sale and purchase they will first obtain a release of the Contract on the sale, then exchange on the purchase and finally they will confirm the exchange on the sale. This is to ensure that your sale and purchase are exchanged and completed contemporaneously.
If there is a Mortgage, the Mortgage Document is competed and we will ask you to attend the office so that the Mortgage Deed can be explained and your signature can be witnessed.
BETWEEN EXCHANGE OF CONTRACTS AND COMPLETION
In this period the Buyer’s Solicitor checks the title to the property and carries out “final searches” which are searches to the Land Registry to confirm there have been no changes to the property since the Contract was exchanged and bankruptcy searches to ensure that none of the parties to the Mortgage are bankrupt. The Transfer document is also prepared. In certain cases, the Transfer only has to be signed by the Seller. In others it must be signed by the Buyer too, either because the Buyer must covenant with the Seller to observe the restrictions or because there is more than one Buyer and the Transfer document contains a Declaration of Trust.
Shortly before completion, the Buyer’s Solicitors raises Requisitions (enquiries in relation to completion) and requests a completion statement showing the amount payable on completion.
You will then be provided with a Financial Statement showing the amount which is due to be paid on completion.
Once all the necessary monies are received they are transferred on the completion date to the Seller’s Solicitors by way of a Bank transfer.
Once receipt is confirmed by the Seller’s Solicitors, you will be entitled to occupy the house and take possession of the keys.
We as the Seller’s Solicitors will account to you, the Seller, for the balance of the purchase price after paying off the Mortgage Loan, the Estate Agent’s fees and deducting our professional fees.
If we are acting for you as Buyer, there is rather more to be done. We will send the SDLT Land Transaction Return form to the Inland Revenue with the necessary Stamp Duty. The Revenue will return to us the Land Transaction Certificate.
Once the Land Transaction Certificate is returned, and if the property is registered, we will make an Application to register the Title which we send to the HM Land Registry with the appropriate fee.
On return of the document, we confirm to you that registration is completed and send to you any material documents to be held until such a time as you sell the property.
Stamp Duty is paid on a sliding scale:
- Where the consideration exceeds £175,000 but does not exceed £250,000, the current rate is 1% of the purchase price.
- Where the consideration exceeds £250,000 but does not exceed £500,000, the rate will increase to 3% of the purchase price.
- Where the consideration exceeds £500,000, the rate will increase to 4% of the purchase price.
DEFINITION OF TERMS
Exchange of Contracts: Literally exchange of one copy signed by the Buyer and another copy signed by the Seller. At this point both parties become committed to proceed and if they fail to complete are liable to damages. Where a Buyer fails to complete they lost the deposit paid to the Seller on exchange.
Completion: The date fixed for the transfer of ownership on payment of the price. Originally four weeks after exchange but no very often reduced to two weeks or less.
Registration of Title: Registering the ownership with HM Land Registry. The Register records ownership and all important details of rights and liabilities.
Local Search: The searches in the registers maintained by the Local Authority or District Council in relation to such matters as road charges, planning decisions, building regulations, financial charges etc. The expression includes the enquiries made of the different departments of the Council with a wide range of other matters which may affect the property.
Water Search: A search carried out by our Agents of the Water Authority to show whether the drainage is connected to a public sewer and to confirm mains water and whether this is metered or not.
Environmental Search: A search giving a Certificate as to whether or not the environmental risk is sufficient for the property to be described as contaminated and contains a wide range of information with regard to risk of subsidence, flooding etc. in relation to the property.
Sellers Property Information Form: Answers given to a standard form of enquiries which the Seller is expected to answer from his own knowledge about such matters as disputes with neighbours or works done on the property needing Planning or Building Regulations Approval etc.
Deposit: Part of the purchase price paid on exchange of contracts, normally 10% but can be much lower depending on what is agreed at the time of exchange.
Mortgage/Charge: Document recording loan of money secured on the house. If payments are not maintained the Lender may have the right to take possession and sell the property.
Transfer: The document transferring ownership when the property is registered at HM Land Registry.
Disbursements: Monies paid on your behalf to third parties and which do not form part of the professional charges search including Local Search, Water Search, Land Registry Searches, Environmental Search, Stamp Duty.