This guide has been prepared on the basis that it may well answer a number of questions that you may have about moving home and you will be able to refer to it during the process of moving home.
The sale or purchase of a property is generally a two stage procedure and you will become familiar with the phrases “Exchange of contracts” and “completion”.
Exchange is the time/date when the two copies of the sale/purchase contract signed by the Seller/Buyer respectively are dated by the solicitors. It is at this point that the parties become legally contracted to proceed with the sale/purchase. It may well be you are requested to sign the contract days if not weeks before exchange can be achieved and no significance should be attached to the fact that you or the other party has signed – it is merely a preparatory step in readiness for exchange.
The necessary investigative work (the searches & enquiries detailed below) are carried out before exchange. For a buyer it is essential that any mortgage offer must have been confirmed. You will appreciate that it is rare that a house is being bought/sold in isolation – usually one if not both parties will have another property to buy or sell & so on – hence creating “the Chain”. On the basis that usually (and unless we are instructed to the contrary e.g that you are willing to move out of your property before you secure your purchase) conveyancing proceeds on the basis that no-one wishes to become bound (i.e. exchange ) on their sale without securing (i.e. exchanging upon) their purchase at exactly the same time so as to avoid the risk of ending up with either two properties or none. The Deposit is paid by the Buyer to the Seller upon Exchange.
This means therefore exchange cannot occur until the slowest/latest sale/purchase in the chain is ready to do so even if we for example have been ready for a while. We acknowledge that where such delay occurs it will be extremely frustrating but you will appreciate it is completely beyond our control and often beyond our influence as well.
Completion is the day when you complete your obligations in the purchase/sale contract. It is the day when a buyer pays the rest of the purchase price for the property and is entitled to move in and the Seller must vacate. It is also the day when the buyer completes the new mortgage and the Seller must pay off the old mortgage. It is also the time the Seller usually pays the Estate Agent and the Buyer pays the legal fees and Stamp Duty Land Tax
If you are selling we will prepare a draft Contract as soon as we have the Deeds in our possession and an offer has been accepted by you for your property. If you are buying a property we will ask your Seller’s Solicitors for a draft Contract with supporting papers and we will advise you about their content once they have been received. There are various other matters that need attending to and vary depending upon whether you are buying or selling.
Searches
Local Authority searches will reveal any matters that may directly affect the property itself and which concern the Local Authority. For example, it will reveal whether the property has planning permission. The Local Authority search does not, however, deal with surrounding land except in a very limited way. If you have any particular concern over any neighbouring property we cannot do anything about it on your behalf unless you mention this to us. We will then guide you as to what investigations, if any, could be made on your behalf. We can also advise you about specialist searches such as environmental or coal mining for example.
A drainage search may be carried out with the relevant water authority, though the fee may often be avoided by obtaining copies of the last water and sewerage bills from the Seller so proving the existence of such facilities.
The various searches attract different fees and indeed different Local Authorities charge different fees. We will discuss those fees with you at the outset or during the course of the transaction as appropriate.
Surveys
If you are taking out a Mortgage, the lender will require at least a valuation, though it may also offer you one or more grades of report. A valuation report will normally only be a brief inspection and the valuer will have no legal obligation to you. Indeed, he would generally only be concerned to know that the property is worth the value of the Mortgage (and remember this will include the value of the land itself and may therefore be no useful comment upon the state of the actual house).
It is therefore very important that with all properties and especially with older properties, you consider having a Home Buyers Report or Building Survey Report. The surveyor who carries out the report then has a legal obligation to you. You can either arrange for your own survey or most lenders will arrange for a more detailed report from their surveyor for an additional fee.
It is even advisable to have a survey on a property covered by a National House Building Society (NHBC) Policy because if the defect arose before you bought the property and you could have discovered it if you had the property surveyed, then the NHBC will refuse to accept the claim.
Specialist surveys can be obtained for free or a small fee, for example for woodworm/rot and damp/drains.
Even if you are not obtaining a Mortgage you should still consider a full survey.
Please note that we do not visit the property ourselves as part of our role. We will send you a copy of the plan of the property from the legal title to the property and you should check the boundary positions and the property is generally what you are expecting. You should not make any assumption that we will be considering a particular point in relation to the property because we will not be familiar with it at all so if in doubt mention “it” to us.
Enquiries before contract
When acting for a Buyer of a property we will send to the Seller’s Solicitor a comprehensive standard form of enquiries with a questionnaire about fixtures and fittings together with additional enquiries tailored to the specific property being purchased. If you would like us to ask any specific questions about the property please let us know. We will copy these to you together with the replies in order to identify any concerns or queries.
Leases
If the property is a leasehold property you will receive a copy of the Lease and you should read it through carefully to establish your obligations and restrictions. It is not unknown for leases to be defective and not acceptable to a lender. In those cases the lease may need to be altered or an insurance policy obtained. Our quotation or estimate does not include the additional cost of dealing with that and this is something that we would need to discuss with you if and when it arises.
Buildings Insurance
All lenders offer buildings insurance and if this is taken up with the lender they will notify us. If you do not insure with your lender then we will need to have at least a letter from your Insurance Broker or Insurance Company, before Exchange of Contracts, confirming that the Policy is ready to go on cover for your new property and giving us some basic details to ensure that it meets the lender’s requirement. If you do not have a Mortgage then whilst we do not insist upon you confirming to us that Buildings Insurance is ready to go on cover, you should of course ensure that adequate insurance is in place before Exchange of Contracts. Generally speaking a Buyer acquires legal responsibility for buildings insurance from Exchange of Contracts and not at completion.
MORTGAGES
If you are obtaining a Mortgage or indeed paying off a Mortgage, we will usually be instructed by your lender. We are obliged to regard the lender as a separate and distinct client from yourself. On rare occasions there can be a conflict of interest between yourself and the lender that might result in us not being able to act for one or both parties.
Please note in this respect that we are obliged to inform the lender if we think they should be aware of a particular matter. For example if there is a difference between the purchase price stated on the Contract and the purchase price stated in their instructions, then we would need to inform them of that which may result in a difficulty with the matter proceeding. We will assume that you authorise us to tell the lender about such matters unless you inform us to the contrary. If so informed we would probably have to cease to act but in such circumstances would require payment of our charges for work done to that stage.
We will also need to check your identity and obtain copies of original documents such as a passport or a driving licence and may need to do this even if we have acted for you before.
If there will be insufficient funds on completion to repay your Mortgage in full, then we will require payment to us of the shortfall in cleared funds prior to Exchange of Contracts.
Clearance of Funds
Please note that when we need money from you, we need to have funds which are cleared. Ideally, we would like to receive any money from you by way of a Bank transfer from your Bank to our Bank and need to have that money at least one working day (and preferably sooner in case of any hold up) before the completion date. If you wish to pay by Bank draft we would need to have it at least four working days before completion and preferably sooner. Bank drafts go through the same clearing system as cheques. If you wish to pay us by cheque, though it is possible to pay a fee for special clearance of the cheque which can reduce the clearance time to about three or four working days, generally we would need to have a cheque about 10 working days before completion because it takes a number of days to clear the cheque and a further number of days for our Bank to inform us of an unpaid cheque. If you wish to pay by Building Society cheque then we would ask to receive it at least four working days before completion as although we may regard it as a safe payment it will still need at least three working days to clear.
In respect of Mortgage advances we normally ask the lender to send us the money on the day before completion, again to avoid any hold ups and so that we are not waiting on receipt of the money through the Bank system on the day that we need to use it.
Deposits
The usual amount to be paid as a deposit on Exchange of Contracts is a figure equal to 10% of the purchase price. The balance of the purchase price is then paid on completion.
It may be possible to negotiate a lower amount. People often refer to the deposit by meaning the difference between the Mortgage they are obtaining on a purchase and the price they are paying. That is often less than 10%.
The deposit may be held by the Sellers Solicitors as a stakeholder and if so it can not go anywhere else. Occasionally, for example on a sale by a builder, the deposit is paid to the Seller Solicitor as agent and the deposit is paid over to the Seller. In a chain of transactions each person in the chain is usually allowed to use the deposit they receive on their sale towards the deposit on their purchase.
Unless you are at the start of a chain as a Buyer you will probably not be expected to provide a deposit in cash but having said this if completion does not happen and you forfeit your deposit, you lose your deposit, you may have to find it in cash and if the deposit actually paid is less than 10% you will be expected to make it up to the full 10%
Exchange of Contracts
Until Contracts are exchanged by us on your behalf there is no binding agreement between a Seller and a Buyer. Either party can withdraw from the transaction at any time and has no obligation to the other party for wasted expenses.
Exchange is effected by the exchange of two identical Contracts one signed by each party. Each Solicitor then sends the signed Contract to the other. Once Contracts have been exchanged between Solicitors the parties are legally bound.
Removals
It is only at Exchange of Contracts that you should commit yourself to a removal company. On the day of completion you will be expected to move out in good time in the morning to allow access to your Buyer to move in. Once the completion monies are paid in full the Buyers are entitled to full possession of the house.
Completion
Completion takes place on the day specified in the Contract. The Contract usually provides for completion to take place 20 working days after Exchange of Contracts but it can be longer or shorter. To have less time can cause pressure and stress that could otherwise be avoided. In the intervening period there are various tasks that we need to carry out whether acting for a Seller or a Buyer. Buyers carry out searches and raise what are called Requisitions on Title. One of the Requisitions involves confirming where the keys will be to be handed over at completion. The keys should not be handed over by a Seller or the Seller’s Estate Agents unless and until the full purchase monies have been received by a Seller’s Solicitor. If Agents are involved then Sellers would normally place a set of keys with the Agents for release and when the Sellers leave their home for the last time they put the balance of the keys back through the letter box.
We will obviously ensure that, when it is essential that completion of a sale and purchase needs to take place on the same day, the two Contracts both specify the same date.
Usually the money transfers occur around midday enabling you to collect the keys but sometimes, particularly if you are at the end of a long chain, the money can arrive later. We will keep you informed on the completion day as soon as we have news of how things are progressing.
Between exchange and completion we will endeavour to give you a note of our charges and a completion statement in good time before completion. Occasionally we do need to inform people in round terms what the figures may be, for example if we have not yet received a statement from an existing lender on a sale of the exact monies that are required to be repaid.
In general terms there may be last minute problems throughout the transaction which need to be attended to and we would ask that you ensure that we have all available contact telephone numbers for you and it would preferably be the case that you remain local or at least within the UK.
Please note that if you are due to receive monies from the transaction there are various ways that we can send you the money, whether by Bank transfer or cheque. We would not normally provide a Bank draft or cash. Please note that for various reasons, such as obtaining an exact redemption statement or not receiving money until late in the day of completion, that sending you the money may take a few working days. If you wish us to send the money direct to your Bank by same day transfer this will incur an additional fee.
Money laundering
We are required by law to consider money laundering issues and to comply with all statutory provisions and procedures. Please refer to the separate leaflet provided in relation to such matters
If you have any concerns or queries about what we have said in this guide, please do not hesitate to ask the person dealing with your sale and/or purchase