Conveyancing

What is conveyancing?

Conveyancing is the legal transfer of a property from one person to another. The property can be leasehold or freehold. On behalf of the buyer, the conveyancing solicitor or licenced conveyancer must ensure that that the person selling the property has the right to sell with no factors that would obstruct a mortgage or a re-sale. This is known as having ‘title’ to the land. The solicitor will also commission searches on the property.
Under English and Welsh Law, agreements are not legally binding until contracts are exchanged. Although this gives both parties the advantage of freedom before a contract is finalised, it also has the disadvantage of time wasting and expense in the event a deal does not go through.
The normal practice is for the buyer to negotiate an agreed price with the seller. The buyer then organises a survey and the buyer’s solicitor subsequently carries out searches and pre-contract enquiries.
The seller’s solicitor will collect and prepare property information for the buyer’s solicitors.
On average it takes approximately 10-12 weeks to complete a conveyancing transaction, however this can be affected by many reasons such as personal, social and financial issues.

Conveyancing – The Buying Process

The following is a general guide to the conveyancing procedure when buying a property. If you are in doubt about any specific issue you should consult your solicitor directly.

Initial Stages

  • Once you have told the solicitor that you wish to use their services you should receive a Letter of Engagement or Confirmation of Terms of Business. You should sign and return this as soon as possible so that they can start work. Funds will be requested to cover initial expenditure such as the cost of the searches.
  • Your solicitor will write to the seller’s solicitor to confirm that they are instructed and request the draft contract. This should arrive with a pack that includes information on the property’s title and the standard forms completed by the seller. If the property is leasehold a copy of the lease will also be included.
  • If you intend on buying a property in joint names there are two ways in which you can jointly own the property, and you need to decide which is right for you. Joint tenants – this is where both parties have an equal interest in the property and if one of you dies the survivor automatically owns the property. Tenants in common – you each own a specific share of the property and can leave that share by Will, in the event of your death. Before you commit to buying the property your solicitor will ask you your wishes regarding shared ownership.
  • You need to let your solicitor know from the outset if you are also selling a property and need the transactions to be linked together.
  • You should inform your estate agent of the solicitor you plan to use so that they can send a “Memorandum of Sale” to all the relevant parties together with a copy of the property particulars.

Legal Work prior to Contracting to Buy

  • The solicitor will examine the draft contract documents and if necessary raise enquiries with the seller’s solicitor. You will be required to go through the standard forms that the seller has completed and let the solicitor know if everything is as you expected.
  • If the property that you are buying is leasehold your solicitor will send a standard Managing Agents Questionnaire to the seller’s solicitors which will in turn be sent on to relevant Landlord/Managing Agents/Residents Association.

Your Mortgage

  • If you are taking out a mortgage your solicitor will receive a copy of the offer and go through the conditions.
  • Your solicitor will also normally undertake legal work on behalf of your lender.

Signing your Contract

Once answers to all the enquiries have been returned they will be examined by your solicitor. If they are satisfactory you will be invited in to sign the contract and any mortgage documents. You will need to make arrangements for the deposit to be transferred into your solicitor’s bank account so that it is cleared in time for an exchange.

Exchange of Contracts

  • Before exchange of contracts can take place your lender (if you have one) will require you to have a Buildings Insurance policy in place.
  • All the parties involved need to agree on a completion date.
  • From the point at which contracts are exchanged you are legally bound to buy and the seller is legally bound to sell. Should either party back out the other will be entitled to claim compensation for losses incurred.
  • At the point that contracts are exchanged your solicitor will send your deposit to the seller’s solicitor. This acts as security for the seller in case you change your mind or for some reason are unable to pay the balance and complete the purchase. If that happens, the seller can keep your deposit, and may take you to court if the deposit is not enough compensation for breaking the contract. In the same way, if the seller exchanges contracts and then refuses to complete the sale, you could apply to the court for an order to force the seller to complete, or else get your deposit back and sue the seller for compensation. It is very rare for a sale not to complete once contracts have been exchanged.

Between Exchange and Completion

  • Your solicitor will draw up the transfer deed so that the property can be registered in your name as soon as possible after completion. Your solicitor will also carry out some further searches of a technical nature.
  • During this period you should receive a statement from your solicitor showing all your expenses and giving you a final figure which you will need to make sure is cleared in to your solicitor’s bank account before completion. If you are taking out a mortgage your solicitor will draw down the loan amount in time for completion.

On Completion

  • Completion is normally set for around lunchtime on the specified day although in practical terms completion takes place when the seller’s solicitor confirms that they have received all the money that is due. Once this has happened the seller should drop the keys off to the estate agent ready for you to collect.
  • Your solicitor will arrange for the title deeds to be registered in your name and if the property is leasehold ensure that your name is entered on to the lease. They will also get the transfer stamped to officially approve the sale
  • Finally, if you have taken out a mortgage, the deeds are sent to your lender for safe keeping until you either sell the property or pay off the loan.

Conveyancing Terms

Arrangement Fee

An arrangement fee is a fee charged by lenders (Banks / Building Societies) to cover the cost of setting up a mortgage. The average arrangement fee for residential mortgages may be in the region of £1000. This can be checked with the mortgage lender and in some instances the lender may waive this fee for taking out a mortgage with them.

Survey

There are three types of survey:

  1. Lender’s Valuation (Basic Valuation) Prior to agreeing to a mortgage, lenders require a valuation of the property to check that it is worth the amount borrowed. This is commissioned by the mortgage lender but must be paid for by the borrower. This is a survey which gives advice on the value of the property. The surveyor (this would be a ‘valuer’ rather than a chartered Building Surveyor) will advise in broad terms on any major defects that are apparent that may have a significant effect on the value. This type of survey will report in summary i.e. on roofs, walls, floors, structural stability and dampness, and will not provide any detail. A more detailed survey may be required if any defects are found.  The cost of the valuation depends on the value of the property ranging from £100 for a flat around £50,000+, to £250 or more for a property worth more than £200,000. Some lenders offer the valuation free of charge as an incentive for taking out a mortgage with them.
  2. Homebuyer’s Report This is a detailed inspection and report designed by the Royal Institution of Chartered Surveyors to give the buyer important information on the property’s condition and whether or not any repairs need to be carried out. This service is less thorough than a full ‘structural survey’ which might be more useful for older properties, but still provides reasonably detailed information at a slightly higher outlay than a basic valuation. Features of the Homebuyer survey include: any serious defects and urgent repairs, colour coded condition ratings for each part of the building making the report easy to understand, serious risks and hazards such as structural movement, damp and timber defects, any further investigation the surveyor considers necessary, any issues which need to be referred to the legal adviser, a market valuation and advice on whether or not the property is a reasonable purchase at the agreed price, and highlights what decisions and actions should be taken before contracts are exchanged.
    Home buyers surveys cost from around £250, but it is advisable to check this with your Solicitor.
  3. Building Survey Formerly known as a Structural Survey, this type of survey is suitable for all residential properties and provides a full picture of the property’s construction and condition. Because the level of detail is higher than the Homebuyer’s Report, a Building Survey is more expensive. This type of survey is required when a property is of an unusual construction or has had extensive alterations, if it’s old, in need of serious structural repair or if you are planning a major conversion or renovation. This survey involves a comprehensive inspection of the property and a detailed in-depth report which is necessary for complex buildings: a detailed appraisal of the method and materials used in the construction, a technical assessment of significant defects and advice on appropriate further actions, identification of less significant defects, general disrepair and shortcomings in physical condition, maintenance and design, a photographic inventory of the property, defects and other issues, and a market valuation.
    Buildings Surveys cost from around £500 plus vat.

Land Registry Fee

The Land Registry is a government department which looks after the registers of all registered properties in England and Wales. It charges a fee for transferring the register to the new owner. This fee is charged according to property price.
Contact the Land Registry for the most up to date fees.

Local Authority Search Fees

Local searches are carried out by a solicitor to ensure that there are no potential problems such as planning permission on neighbouring properties or plans for new roads/buildings in the local vicinity. A local authority search will cost between £100 and £200. This may increase up to £250 in London. You need to contact your local authority for their up to date fees.

Exchanging Contracts

In the phase before the exchange of contracts (exchange is the point when the transaction becomes legally-binding) either party can cancel the transaction. This can be done at any time and for any reason, with no obligations to the other and can lead to a risk of gazumping and in contrary, gazundering.
When you exchange contracts, you commit yourself to the purchase and to the agreed terms. This is an important hurdle in the home-buying process and you will also normally pay a deposit, typically 10 per cent of the purchase price.

Legal Fees

Conveyancing is a legal process and must be transitioned by a solicitor or licenced conveyancer. It is they who receive the fees for the process, not your mortgage lender or local authority. The fee charged is based on the time spent, costs of legal registrations, and miscellaneous costs (known as disbursements).
Solicitors’ fees vary from practice to practice, although 1% of the purchase price may be used as an average guide. People selling an existing property also have an additional charge to pay for the conveyancing of their existing property to a new buyer.

Disbursements

Disbursements are additional costs incurred by a Solicitor/conveyancer such as search fees, land registry fees and stamp duty during the purchase of a property. These fees are passed on to the buyer.

Stamp Duty

Stamp Duty is a tax charged for properties above £125,000. The cost is worked out as a percentage of the purchase price of the property and the rate is charged on a scale as follows:

Purchase price/lease premium or transfer value SDLT Rate
Up to £125,000 Zero
Over £125,000 to £250,000 1%
Over £250,000 to £500,000 3%
Over £500,000 to £1 million 4%
Over £1 million to £2 million 5%
Over £2 million (from 22 March 2012) 7%
Over £2 million (purchased by certain persons including
corporate bodies) from 21 March 2012
15%

Completion Date

At the completion date, you pay the balance of the price with the stamp duty and other fees) and take ownership of the premises. This is organised via the Transfer Deed which is a document that transfers the ownership of the property from the seller to the buyer.
It is dated with the completion date and sent to the Land Registry after completion. The Land Registry needs this deed to change its records and show the buyer as the new owner of the property.

Other Considerations

When you finally move house you may need to register with a doctor or dentist, inform your council for the electoral roll, inform utility providers, and notify DVLA etc.
Use the following link to help you get everything into place:

“Who to notify when you move home”