House-buying with minimal hassle
THE legal process of transferring property ownership from one person to another in England is commonly known as conveyancing.
Theoretically, while it may be possible to do it personally, it would be difficult for an overseas-based buyer.
It is possible nowadays to use a licensed conveyancer but a better way is to employ a solicitor.
The solicitor should ideally be experienced in dealing with overseas buyers and in particular those in Southeast Asia. Your concerns and considerations may well be rather different from those of local, British-based buyers.
When appointing a solicitor, try to agree on the legal fees which in England are among the world's lowest. But also remember the cheapest may not necessarily be the best.
Some firms have a list of set fees for residential purchases so that clients know what costs will be incurred.
The solicitor's completion statement typically encompasses stamp duty, legal fees including value-added tax, government land registry fee, searches, and out-of-pocket expenses such as faxing and hiring couriers.
Stamp duty is at a flat rate of one per cent on purchases more than GBP60,000 (about HK$731,000). On granting of a new lease, stamp duty is not only assessed on the price but also on the average rent payable during the lease's term. The duty is assessed on a sliding scale depending on the rent and terms of the lease.
The average cost for other legal charges, including disbursements, is about one per cent of the property's purchase price.
The solicitor may levy additional charges for arranging a valuation and for dealing with any occupational lease.
As for the legal fees, scaled rates were abolished in 1973. Although these fees are, theoretically, controlled now by a Law Society Order, in practice most solicitors charge less than the maximum allowed.
Your solicitor, armed with the basic terms of the transaction, will ask the seller's solicitor for the draft contract for scrutiny and will also apply for the local authority search.
In practice, the contract can only be prepared with the title deeds of the property provided by the seller's lawyer. This will usually be accompanied by copies of the legal title including, if it is leasehold, copies of the lease or if it is to be tenanted, any relevant tenancy.
Any lease will be carefully examined for restrictive or unusual covenants clauses. All terms at this stage will be subject to the final version of the contract.
Once the contract is prepared, the seller's solicitor will send two copies plus other documents to your solicitor for approval. If the contract is approved, one copy is kept and the other sent back to the seller's solicitor for signing. These contracts will be exchanged later, making the transaction legally binding.
Searches involve your solicitor raising inquiries with the appropriate local authority. You need to know whether there are any proposed roads, compulsory purchase orders, public health notices or other developments affecting your purchase.
A number of departments within the local authority will be involved in responding to the written questions raised. It can take anything from three days to eight weeks depending on the local authority, with the search the most common cause of delay.
In some cases, it is possible to conduct an initial, simplified, quick search when time is short.
Not all local authorities will co-operate and some will respond only to selected questions. Although this form of search may be processed within 24 to 48 hours, it will not be as reliable as a full search and some lenders will not be prepared to accept it.
The process continues with the solicitor raising inquiries.
Include any matters which you have specifically asked your solicitor to deal with. These inquiries also deal with issues such as access to the property, planning permissions, details of any past disputes and other matters which sometimes only the owner of the property will be in a position to answer. This is important and the solicitor should ensure any problems are brought into the open.
Then it is necessary to agree the contract's exact terms of the contract - reflecting the agreed arrangements between you and the seller, including the price and extras such as furniture, equipment commonly known as fixtures and fittings.
Once the terms of purchase are agreed 'subject to contract', the seller will sometimes require a small preliminary deposit paid to his agent or solicitor. This is not the full deposit paid on exchange of contracts that is usually 10 per cent of the purchase price, and sometimes a lesser sum can be agreed.
If you have already paid a preliminary deposit to the seller, perhaps as a sign of good faith or maybe as a reservation fee or even an option sum, this should normally be deducted from the amount payable on exchange.
Your solicitor will then check the basis upon which the deposit is paid. The seller's solicitor may hold the deposit as 'stakeholder'. This means it can only be paid over to the seller on completion or as set out in the agreement. The advantage is that if the seller defaults or goes into liquidation, the deposit is safe.
The other way the deposit is received is as agent for the seller. Here, the deposit can be paid directly to the seller by his solicitor immediately upon exchange. It is not as advantageous to the buyer but it is often normal, especially outside London, and for where there is a developer involved.
At this stage, the solicitor should also check the terms of any rental guarantee being offered. This is done to ensure it is consistent with what the client negotiated.
Assuming the search is in order and the contract and title are agreed, there are still two major aspects - mortgage arrangements and valuation - requiring consideration before exchanging legally binding contracts.
If you require finance for the purchase, it is unwise to exchange contracts without a formal mortgage offer.
A valuation can take various forms but you should ensure the valuer you intend to instruct is acceptable to your prospective lender. In addition, it should always be carried out before a decision is made to buy and the price agreed upon.
The contract can be posted or sent by courier to you for signing or your solicitor can sign it on your behalf. At the same time, you need to give your solicitor cleared funds for the deposit so legally binding contracts, for completion on a fixed date, may be exchanged.
At this stage in the proceedings either you or the seller can withdraw. The seller can even decide to sell to another party who has made a higher offer or request you to improve your offer. This is a phenomenon known as gazumping, particularly prevalent during buoyant market conditions.
In England, neither the buyer nor the seller has any legal commitment until contracts are exchanged and regardless of how much has been spent by either party, whether in legal fees or surveys or even airline tickets.
There is no specific legislation in England to prevent this, although the Law Society and the government have tabled proposals aimed at improving this.
However, recent case law has given some protection to buyers in the form of a 'lock-out' agreement which, for a consideration, normally involves a commitment from the seller not to sell to anyone else for a period of say two weeks. This does not give you an option, nor does it prevent the vendor from raising the price before exchange. However, it does 'lock out' others from buying during the agreed period.
The benefit of the lock-out agreement is that any seller will think twice before taking the risk of foregoing you after the lock-out period elapses and the other buyer losing interest during the lock-out period.
If possible, arrange your finances before leaving the region, ensuring your seller does not feel the distance will cause delay.
In reality, you are likely to move much faster than the local buyers but you need to ensure your solicitor makes this clear and will move with speed.
The completion date itself is often a moving target - you may have your preferred time and the seller may have their preference. If you do have a preferred date, tell your solicitor. Otherwise give the solicitor some discretion over the completion date to stop him coming back to you which may only delay matters.
In practice, completion is normally agreed about four weeks after exchange of contracts, except where there is a property under construction when it is normally 14 days after construction is essentially completed.
With a new property, while it is almost impossible to have a firm date from the builder, as a general rule you can assume builders will finish as soon as possible so they can complete and receive payment.
Once contracts are exchanged, the property should be insured if it is a house and not, for instance, covered by a block insurance policy.
Building insurance is normally designed to protect against damage from accidental causes such as fire, storm, flood, theft and other standard perils. Your solicitor or the mortgage lender will invariably be able to organise the insurance for you so speak to them about it.
Unless your solicitor tells you otherwise, insurance should be valid from exchange and not from completion. Under most contracts, if there was to be a fire between exchange of contracts and completion, you would still be bound to complete.
Thereafter, the mortgage documents need to be agreed and signed, if not previously dealt with by the buyer or borrower. Your solicitor will carry out final searches against the company or person selling it, to ensure the seller can still sell. This double-checks the seller has not remortgaged the property. It also ensures if the seller is a company, it has not been placed into liquidation or receivership.
Your solicitor will arrange for the lender, if appropriate, to remit the mortgage funds and you should receive an account from the solicitor setting out the exact amount payable. This will normally be the balance of the purchase money less the net mortgage advance, together with stamp duty, legal fees, land registry fees and if applicable, the relevant amounts of insurance, ground rent and service charge.
You should ensure the money is received in cleared funds by your solicitor, the day before completion. This is because all conveyancing contracts provide for payment of interest at about four or five percentage points over base rate if completion takes place late.
Once the final searches are clear, your purchase can be completed and vacant possession given when the keys of your property are made available to you or an agent. The deeds are then passed to your solicitor who deals with the payment of stamp duty and then registers your title and the bank's mortgage at the government land registry.
Once everything is registered, the deeds are held by your bank in accordance with the mortgage over the property. If a mortgage has not been raised, you may hold the deeds yourself or leave them with your solicitor for storage.