When buying or selling a property, there are two main stages. These are known as “exchange of contracts” and “completion”. These are the expressions you will hear most frequently from your solicitor or estate agent.

You may say “But I have found the perfect property and I wish to exchange contracts NOW”.  However, there are certain steps that need to be taken before contracts can be exchanged.

1. Investigating the Title

We will check that the seller has the right to sell the property. At the same time, we highlight other matters that affect the property.

NB. If the property is leasehold, we check that the remaining term of the lease is sufficient to satisfy the requirements of your mortgage lender and long enough that you will be able to sell the property in due course.

2. Obtaining Searches of the Property

We carry out searches which reveal whether the property is affected by any potential legal risks, also that your intended use of the property is permitted.

3. Raising Enquiries for Buyers or Responding to Enquiries for sellers

If acting on a purchase, we obtain detailed information about the property from the seller.  We may then raise further questions arising out of the seller’s replies.

If acting on a sale, we will deal with any questions raised by the buyer’s solicitors.

If the property is leasehold, we will obtain information from the freeholder’s managing agents in the form of a management pack.

4. Mortgage offer

We will not normally allow you to exchange contracts until you have received written confirmation of your mortgage offer and we are satisfied that it does not contain any unusual or onerous conditions that you are unable to comply with.

5. Surveys and Inspections

As well as a mortgage valuation, you may decide to commission a private survey, eg. a Homebuyer Report or a full structural survey. This may recommend additional inspections such as an electrical survey or an inspection by a timber and damp specialist firm or a boiler check. Sometimes the purchase price of the property will be renegotiated as a result of these surveys and inspections.

6. The chain of transactions

It may be that a seller is tying in their sale with the purchase of another property. In turn, that seller may be tying in the sale of their property with the purchase of another property and so on. If there is a chain of transactions, then if one link in the chain breaks, this affects every other transaction in the chain. Your solicitor must therefore establish that every single party in the chain is ready to exchange contracts before contracts can be exchanged. It can also take several days for all the parties involved in the chain to agree the completion date.

7. Exchange of Contracts

At this point, you become legally bound to buy (or sell) the property. Exchange of contracts takes place by way of a telephone conversation between the seller’s solicitor and buyer’s solicitor. During the telephone conversation, the solicitors run through the main points of the contract and then agree the time of exchange of contracts. The seller’s solicitor undertakes to send his client’s signed part of the contract to the buyer’s solicitor that evening and the buyer’s solicitor undertakes to send his client’s signed part of the contract to the seller’s solicitor that evening. The buyer’s solicitor also has to pay a deposit normally representing 10% of the purchase price of the property to the seller’s solicitor.

8. Between Exchange of Contracts and Completion

Much of the work between exchange of contracts and completion consists of formalities such as the seller signing the transfer deed, the buyer signing their mortgage deed, the buyer’s solicitor ordering the mortgage monies and so on. It is more complicated where the property is leasehold because if ground rent and service charge have been paid by the seller beyond the date of completion, the buyer will need to reimburse a proportion of the amount paid by the seller on completion.

9. Completion

On completion, the 90% balance of the purchase price is paid by the buyer’s solicitor to the seller’s solicitor (together with any apportionments of ground rent and service charge if the property is leasehold) and the seller’s solicitor authorises the estate agents to release the keys to the buyer.

10. Stamp Duty Land Tax

After completion, we deal with the payment of Stamp Duty Land Tax.

11. Registration

We then register the purchase at HM Land Registry.

NB If the property is leasehold, there are other formalities which need to be dealt with such as serving notice containing details of the buyer on the freeholder’s managing agents so that they may update their records as to whom should be billed for the ground rent and service charge.

Buying a Property:

1. Property address
2. Purchase price
3. Type of property (e.g. house, flat)
4. Amount of any mortgage or other borrowing (including Help to Buy)
5. What you will use the property for (e.g. main residence, buy-to-let)
6. Whether you have a related sale
7. Whether you will be using a Help to Buy bonus

Selling a Property:

1. Property address
2. Sale price
3. Type of property (e.g. house, flat)
4. Where you have a mortgage, whom it is with and the approximate amount outstanding
5. Whether you have a related purchase

This list is not exhaustive and other disbursements may apply depending on your transaction.  The disbursements which we anticipate will apply will be set out in our estimate of costs.

When Selling:

You will need to make provision for estate agents’ fees and any potential mortgage penalty such as an early repayment charge if you are paying off your mortgage early.

When Buying:

You will need to cover search fees, Land Registry fees and Stamp Duty Land Tax. If you are obtaining a mortgage there may be associated fees which you should consider.

You should also be aware that, in the case of a leasehold property, ground rent and service charge will continue to be payable throughout your ownership of the property.

Also, there might come a time when you would need to extend the term of your lease or possibly join with the owners of the other flats in the building to collectively purchase the freehold interest in the building.

Stamp Duty Land Tax (SDLT) is payable to the Government if you buy a property or land over a certain price in England and Northern Ireland. In Wales the tax payable is Land Transaction Tax (Land Tax). The amount you will need to pay depends upon the purchase price, whether you will be replacing your main residence and, if not, upon how many properties you will own once you have completed the transaction.

Please see the links below to the SDLT and Land Tax calculators which will provide information as to the SDLT or Land Tax payable on your transaction. We would be pleased to provide you with any further assistance you may require in this respect.

www.stampdutycalculator.org.uk
www.beta.gov.wales/land-transaction-tax-calculator

On average, a transaction takes approximately three months from start to finish. However, if there is a chain involved and one link in the chain breaks, it is possible that your transaction could take several months at least to complete.

Surveys

While your lender may provide you with a valuation report, this simply confirms to the lender that the property is good security for their loan. The survey will not reveal any other issues that may affect your desire to purchase the property, such as structural problems. We strongly advise you to obtain an independent survey of a property before you purchase.

Planning

If you are purchasing a property but wish to use it for a different use other than that for which it is currently being used or wish to make any changes to the property you might need planning permission. We can advise you further about this.

Solicitors are allowed to pay a referral fee to an estate agent or other person who introduces a client to the firm.  In some cases we pay referral fees from our own funds to the estate agent on the completion of a transaction.

Please be assured, however, that any advice that we give is independent and you are free to raise questions on all aspects of the transaction.  We will advise you at the start of the transaction if we are paying a referral fee.

If you wish to transfer a property from joint names into a sole name or from a sole name into joint names, this is called a ‘transfer of equity’. The process can be different depending on each individual case and type of transfer. If you have a mortgage, you will need to obtain the written consent of your lender to the transfer.

You may also need to pay Stamp Duty Land Tax if you are taking over responsibility for part or all of the existing mortgage on the property.