What should I do first?
- Not many people can buy a property without getting a loan from a bank or building society. So the first thing is to get an agreement in principle from a lender as to how much you can borrow – so you know how much you can offer.
- You’ll want to remember that there are various costs in the buying process including in particular Land and Buildings Transaction Tax; legal fees; removal costs; and the cost of registering the purchaser’s ‘title’ to the property in the ‘Land Register’.
Do I need a solicitor?
- In theory no. In practice, yes.
- A solicitor can help with arranging a mortgage; arranging a survey of the property; and arranging insurance. But the main reason for using a solicitor is that there’s still quite a lot involved in buying a house.
The legal work may include:
- Putting in a ‘note of interest’ i.e. formally telling the seller’s solicitor that you’re interested in making an offer;
- Making a formal offer in writing to the seller’s solicitor on your behalf;
- Sorting out any conditions of the sale contract (usually known as ‘the missives’) with the seller’s solicitor;
- Checking the seller does indeed own what he or she is selling;
- Checking there are no potential problems such as council repairs or alterations by the seller which did not have planning permission;
- Drawing up the deed transferring ownership of the property to you;
- Preparing a Land and Buildings Transactions tax return;
- Drawing up the ‘standard security’ to give your mortgage lender certain rights over the property and making sure any ‘standard security’ granted over the property by the seller is discharged; and
- Getting the money for the transaction from your lenders and any third parties providing funds and paying it to the seller’s solicitor in exchange for the deed transferring the property to you. NOTE – We must comply with strict Anti-Money Laundering Regulations and will be required to verify “Source of Funds”.
Do I need to get a survey?
- Subject to a few exceptions, a seller is now obliged to make available to purchasers a form of survey called a ‘Home Report’.
- A ‘Home Report’ may generally be enough. However some lenders may not be happy with a Home Report in which case you might have to get your own independent survey done.
- Importantly, if that is the case, you should get your independent survey done before you make an offer because if you make an offer and it is accepted you will be legally bound to buy the property and you need to know before you are legally bound that:
- there are no major problems with the property; and
- your mortgage lender will be prepared to lend you enough money.
- You can, if you wish, make an offer ‘subject to survey’. In other words your offer says that you will only get an independent survey done if the seller accepts your offer. If that survey is unsatisfactory you can walk away. Generally sellers (unsurprisingly) don’t like a ‘subject to survey’ offer. But in a buyer’s market they may agree to it.
When do I make an offer?
- Properties are usually advertised as being either ‘offers over a certain sum’; or for a ‘fixed price’.
- Generally, with properties advertised for ‘offers over’ a certain sum your solicitor will formally ‘note your interest’ with the seller’s solicitors so that you are told when the ‘closing date’ for offers will be. On that date you will have to decide how much to offer – without knowing what anyone else may offer. The seller’s solicitor will then normally open all the offers at the same time and usually the highest offer wins.
- A property with a ‘fixed price’ means it will be sold to the first person who puts in an offer which is accepted by the seller. In such a case it is ‘first come first served’.
- Apart from the price your offer will in particular cover the ‘date of entry’ i.e. the day on which you will get the keys; and any ‘moveable’ items (such as curtains and white goods) which are to be included in the price.
- The offer will also usually include an extensive range of standard conditions as are required for the purchase of a property; and any particular conditions as may be appropriate in your particular case.
What happens next?
- The seller does not have to accept any offer – even if the sale has gone to a ‘closing date’. But it is unusual for that to happen if the sale has gone to a ‘closing’.
- If your offer is unsuccessful you will still have to pay for any survey you may have instructed and there may be a charge for legal work carried out in relation to submitting the offer.
- If your offer is successful the acceptance will almost always be a ‘conditional acceptance’: for example it may accept the price offered but seek to adjust the ‘date of entry’ or exclude certain ‘moveable’ items (e.g. curtains or white goods) from the sale.
- There will usually be a series of formal letters (known as ‘the missives’) passing between your solicitor and the seller’s solicitor until all contractual matters between the seller and purchaser are agreed. At that point the ‘bargain is concluded’.
- Once the bargain is concluded each party is bound by the conditions in the missives: it is too late for either to have second thoughts. Until that stage is reached however either party can still pull out.
- Once ‘missives are concluded’ it is time for the stuff of ‘conveyancing’.
What is the stuff of ‘conveyancing’?
- All the bits and pieces involved in transferring the property to the purchaser is generally termed the ‘conveyancing’. It includes, for example:
- Checking the seller actually owns what he is selling;
- Checking the plan of the property in the ‘title’ or ‘Land Certificate’ matches what the purchaser has offered for;
- Checking that the right paperwork is there for any alterations that may have been made to the property;
- Checking the ‘title conditions’ particularly as regards liabilities for repairs and maintenance of stairwells, roofs, boundary walls or fences etc;
- Checking access rights and any restrictions as to use of the property (e.g. in relation to using the property for business purposes; keeping pets; or parking);
- Drawing up the ‘disposition’ or deed conveying the property to the purchaser;
- Preparing the ‘standard security’ which gives the lender certain rights in relation to the property if the purchaser fails to comply with the loan agreement; and
- Preparing a Land and Buildings Transactions Tax return and arranging payment of the tax due by the purchaser.
When do I get the keys?
- If all goes well the stuff of conveyancing will be happily completed and the ‘date of entry’ as provided for in the ‘missives’ arrives. This is usually referred to as the ‘settlement date’.
- In time for the settlement date the purchaser’s solicitor, having checked that everything is in order, will have obtained the loan funds for the purchase; the funds provided directly by the purchaser; and will then draw a cheque from his or her ‘client account’ for the purchase in favour of the seller’s solicitors.
- That cheque will then be handed over (or more likely posted) to the seller’s solicitors in exchange for (in particular):
- the keys;
- the ‘disposition’ transferring the property to the seller; and
- a binding letter ensuring that any security of the seller over the property is cleared.
Is the system in Scotland different from England?
- Yes, although the basic idea is, of course, the same.
- Perhaps the main difference in practice is that, in England, the system involves an ‘exchange of contracts’ between seller and purchaser – signed by each personally – which often happens very shortly before the seller moves out and the purchaser moves in. Up until that ‘exchange of contracts’ there is no binding deal: either party may be able to walk away from the transaction.
- In Scotland however ‘missives’ are usually concluded at a much earlier stage – at which point there is a binding contract so that neither party can walk away from the deal. And in Scotland, these ‘missives’ are not signed personally by seller and purchaser but by their respective solicitors.
- In particular if you have a property to sell in England and are buying in Scotland and relying on the proceeds of your English sale to fund (or part fund) your Scottish purchase the timings will be important. You would not want to be bound by a purchase here only to find that your sale in England falls through.
- And, because of the differences in the two legal systems, you will require an English qualified solicitor to deal with your sale in England and, correspondingly, a Scottish qualified solicitor to deal with things for you here.
Note: This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact Martin McLellan:mdm@mitchells-roberton.co.uk