BUYING A HOUSE OR FLAT
THE STEPS TO TAKE
1. Agree a price with the Estate Agent or seller
2. Provide Estate Agent with your Solicitor’s details
3. Decide on your finance
4. Decide on a property survey
5. Your solicitor takes delivery of Contract, Deeds
6. Your Survey
7. The Local Authority Search and other searches.
8. Raising enquiries and advising on any issues arising from the enquiries
9. The mortgage offer
10. Exchange of Contracts
10. Completion date
12. Signature of Documents
13. Completion and fees
14. After Completion
15. Move in!
-SDLT PROPERTY RESIDENTIAL
1. Find your property and agree the price with the Estate Agent or directly with the seller.
2. Provide the Estate Agent with the name address and contact details of your Solicitors and the person who will deal with it there.
3. Decide on your finance and contact the preferred mortgage lender.
4. Decide if you want a full survey and discuss this with your mortgage lender. Most lenders will provide, at your expense, either a valuation survey, which really is for their benefit, or a full survey, at a higher cost, which is your survey. We generally advise clients to have a full survey. This serves three purposes:
i) It will tell you if there are any defects in the building, which you should know about.
ii) It gives you ammunition to negotiate on the price if there are hidden defects that you could not have known about when you first made your offer of purchase.
iii) If there are hidden defects which have not been spotted by your Surveyor but which you could not have known about, then, since you are entitled to rely upon your Surveyor’s expertise in preparing a survey, you might have a negligence claim against the Surveyor if such defects should appear and prove to be expensive.
5. The seller’s solicitor will deliver to your solicitor a Contract and Deeds package.
6. This is usually carried out by a surveyor who you have instructed. Your bank or mortgage lender will carry out a valuation on their behalf to ensure that they are getting a property which equates to the value of the loan. However, this provides you with no information or security. If you are buying a property you are advised to obtain your own survey. Most lenders will provide, at your expense, either a valuation survey which really is for their benefit, or a full survey, at a higher cost, which is your survey. We urge you to have a full survey. This serves three purposes:
(a) It will tell you if there are any defects in the building which you should know about.
(b) It gives you ammunition to negotiate price if there were hidden defects that you could not have seen when you first made your offer of purchase.
(c) If there are hidden defects which have been spotted by your surveyor but which you could not have known about then since you are entitled to rely upon your surveyor=s expertise in preparing a survey you might have a negligence claim if such defects should appear and prove to be expensive.
7. Your solicitor will need to order on your behalf a Local Authority and other appropriate Searches which answer basic questions about the property and warn you if your particular property is going to be affected by certain proposed major works such as new roads or if the property is subject to planning consent. However, be warned. It will not tell you if there are to be developments to the property next door, or behind and you may be advised to further investigate this possibility.
We also recommend Environmental and other searches which vary according to the property and which we will discuss with you.
We will ask you to cover the costs of obtaining theses searches.
8. Once the Deeds have been received your Solicitor will advise you on any problems that are revealed in the deeds, in the Lease for leasehold properties, in the Local Search or Planning Consents.
9. Whilst you are waiting for this information and the result of any further enquiries, your mortgage lenders will be inspecting and valuing the property, investigating your ability to pay the mortgage and will then make an offer which they will send to your nominated solicitor who will act on behalf of you and also on behalf of the mortgage lender in proceeding with the purchase.
10. Once all is in good order your Solicitor will then be ready to exchange Contracts. If you are just buying this is relatively straightforward. If you are selling a house at the same time it would normally be a client’s preference that your Solicitor should arrange a contemporaneous exchange of contracts on your sale and purchase and this can be very tricky. It is sometimes necessary to work hard to keep everybody happy and to persuade other parties to be patient if you are not quite ready so as to hold the chain of transactions together. When your Solicitor is ready to exchange you will need to pay a deposit, normally 10% of the purchase price. If you are selling the deposit you receive from your sale can be used as part of the deposit for your purchase. If the property has a very high value, or if completion is agreed to be delayed, it is sometimes possible to persuade your vendor or his/her solicitor to accept a lower deposit of, say, 5% rather than a 10% deposit. However, you should not rely upon this being possible without having reached agreement first and if finding a 10% deposit is a problem for you, you should raise this with your solicitor as soon as possible. The deposit needs to be in your Solicitor’s bank account as cleared funds by the day of exchange of contracts and it is best transferred directly into your Solicitor’s bank account. If it is to be sent by cheque it should be sent at least 6 working days before contracts are to be exchanged. If your Seller agrees to accept a deposit of less than 10% you must be warned that if you fail to complete the purchase the contract will contain an obligation for you to pay the full 10% which will be recoverable from you by legal action if, having failed to complete, you have not paid a full 10% deposit. The contract will also provide for the seller to be able to make other claims against you in the event of your delaying completion or failing to complete. The seller will be entitled to be compensated for expenses and losses that the seller has suffered if you have not fulfilled your obligation under the contract.
11. Before contracts can be exchanged all parties need to agree on a Completion Date, which is the date when the rest of the money over and above the deposit and including the mortgage money will be transferred to the Seller and the keys will be handed over and you can if you are ready move in. This date has to be agreed at the time of exchange of contracts and you should think about what dates are convenient to you and how they will affect others by the time you are ready to exchange contracts. Between exchange and completion your Solicitor needs to carry out further searches at the Land Registry both on behalf of the mortgage lender and for you to ensure that there are no unexpected mortgages registered and that the parties to the transaction are solvent. Traditionally completion used to take place 28 days after exchange of contracts. Nowadays with technology and emails this time can be greatly reduced. Two weeks is comfortable, one week is possible, less than that is very stressful.
12. In most contracts (especially of freehold properties) it is provided that the Buyer must arrange insurance by the date of exchange and thus before completion. Please discuss this with your solicitor.
13. Between exchange and completion you would also have to have signed the mortgage deed usually at your Solicitor’s offices in the presence of a Solicitor and you will sign other completion documents. If the property is leasehold and you are acquiring a new Lease you will have to sign a counterpart Lease and that must be delivered to the freeholder before Completion.
14. On the Completion Date your Solicitor will transfer the purchase money to the Seller’s Solicitors by automated bank transfer. Your Solicitor will therefore need to receive the money from your mortgage lender (usually sent early on the day of completion) from you (preferably received the day before) and your Solicitor will also need to receive payment for our professional fees and for the disbursements that your Solicitor will have incurred on your behalf, particularly the Stamp Duty Land Tax (SDLT) and Land Registry fees. Unfortunately under new Revenue rules your Solicitor also have to ask you to fill in a complex stamp duty tax return which your Solicitor will assist you in preparing but which has to be signed by you.
15. What happens after completion? Your Solicitor will assist you in completing a Stamp Duty Land Tax (SDLT) return and act in registering your title and when the title is registered at the Land Registry your Solicitor will send a copy of the deeds to you and to your mortgage lender to be kept as evidence of your ownership of the property.
16. And you move in!
SDLT PROPERTY RESIDENTIAL
Stamp Duty Land Tax (“SDLT”)
Stamp Duty Land Tax (“SDLT”) was introduced in 2003 to replace Stamp Duty and is chargeable on all transactions for Purchases of Land above a certain value.
In theory the Tax Return SDLT 1 should be completed by the Client (the Tax Payer) who must sign a Declaration like any other Tax return. In practice WGS as Solicitors will complete most of it. Why? Because Solicitors are answerable to Mortgage Lenders and have a duty to ensure Registration of Title and thus they cannot be left in a situation where a Return is not completed, Tax is not paid, a Tax Paid Certificate is not returned by the Revenue and we thus we cannot register your title and the Mortgage. This form must be signed by the Buyer. It cannot be signed by your solicitor save where you have given a formal Power of Attorney to your solicitor to sign all other documents. At WGS Solicitors we will assist you by completing the bulk of the form but it must be signed you you and returned by us promptly as the form and stamp duty payable must reach the Inland Revenue within 28 days of completion. Otherwise penalties and interest are charged.
Payment of SDLT
Before 2003 some Buyers sought to avoid payment of the old Stamp Duty. This is not possible now. The amount payable varies according to the latest Budget and you should visit the HMRC SDLT on-line calculator to assess the stamp duty payable on a property which you might wish to buy. The amount payable varies according to rates imposed in the latest Budget. Increasing House prices make SDLT an unpopular tax whilst HMRC find the tax very effective as it costs them almost nothing to collect. There are schemes offered by sophisticated tax advisers which seek to mitigate and even avoid payment of SDLT but HMRC attack these as quickly as they are promoted. SDLT is also used by HMRC to attack purchasers who buy properties through companies to minimise their tax liabilities and SDLT is charged on a higher rate to many Companies known as Non Natural Persons (NNP’s). The Tax regime for NNP’s is becoming more aggressive and the rate of SDLT charged to NNP’s buying residential properties is much higher than to individuals. Clients buying some Commercial Properties may pay SDLT at different rates from residential properties.
Advice on SDLT
WGS Partners in the property department can advise you about these variable rates and the SDLT regime generally.