When will completion take place?
We may already have your instructions about a target date for completion. If not, please tell us when you want to complete and any subsequent change in your requirements. We suggest that you also contact the estate agents involved in the transaction so that they can liaise with relevant parties. The contract that will be sent to you to sign will be blank as to the proposed completion date – this will be inserted by hand by us when agreed at the actual time of exchange of contracts.
What you need to know about the contract
Most contracts for the sale of residential property in England and Wales incorporate Standard Conditions of Sale. These are detailed and designed to strike a fair balance between the respective interests of seller and buyer. Matters such as remedies for default are covered. We do not negotiate or comment on every provision but draw your attention to specific matters and raise points of concern in correspondence.
What happens if the price is renegotiated?
If you agree to alter the purchase price, you must tell us straight away. If you are borrowing to assist the purchase, a change might affect the amount you can borrow. Please note that changes in price and allowances have to be reported to and acknowledged by your lender before exchange. This may result in a delay in exchange, whilst a revised mortgage offer is issued or considered by the Lender or its underwriting department or surveyor.
Is a deposit payable?
The Standard Conditions of Sale provide for the payment of 10% deposit by the buyer on exchange of contracts, unless a reduced deposit of 5% or less is agreed. If you have an associated sale we will try to use the deposit from that. This may have to be “topped up” by you to bring the purchase deposit figure up to the required amount.
Who will hold the deposit monies and on what basis?
The deposit will be held by the Seller’s solicitors either as:
‘As Stakeholders’ – the deposit paid cannot be released to the Seller until completion or until any Notice to Complete has expired (see below) OR ‘As Agents’ – the deposit paid may be used on the seller’s related purchase.
The Standard Conditions of Sale allow the Seller to use any deposit received as a deposit on the Seller’s related purchase in England & Wales. If the Seller has no related purchase, the Seller’s solicitors must hold the deposit as Stakeholder. In a chain of transactions, a deposit may be passed ‘up the chain’. We may advise acceptance of this provided the money is ultimately held in a Solicitor’s client account and shall assume you have no objection unless you tell us in writing. Please note that if the seller fails to complete you may have difficulty in reclaiming the deposit. Please also read our Guidance Note on Exchange of Contracts and Deposit.
How do you report to me about the property?
We will send you copies of the Seller’s Property Information Form (SPIF) and replies to any additional enquiries we have raised. If you have queries, please tell us. If there is any matter that is of importance to you, ask us to raise the point directly with the Seller’s solicitors.
We will report on the title number and tenure of the property and send you two copies of the Land Registry plan. We will ask you to check it for accuracy against your knowledge of the property ‘on the ground’ and sign and return one copy to acknowledge its accuracy.
How will I know if there are rights benefiting and/or restrictions affecting the property?
Once we have seen the title we will tell you what rights are expressly granted for the benefit of the property or another property/piece of land in somebody else’s ownership/occupation: also whether there are any rights which benefit the property.
What is a covenant?
‘Covenant’ is a technical word that means a promise to do/not to do something. Before 1948, there was no planning legislation and on the sale of land, it was usual for a seller to impose covenants relating to the use and occupation of the property on the first and every subsequent buyer. These sorts of covenant were and continue to be common where a large plot or estate is sold off as individual plots. Many old covenants have been overtaken by modern planning legislation and may be irrelevant now. We will tell you about any covenants that do affect the property (such as fencing or planning restrictions) and any other relevant entries on the Land Registers.
We use the following risk bands:
* Minimal risk of breach
** There is a risk of breach, but we do not feel you require advice on indemnity options
*** There is a potential breach and indemnity options are a matter of choice.
**** Potential breach – Insurance is recommended and/or Lender requires it.
***** We advise against proceeding.
Covenants are important and in some cases, can affect the value or the use of a property. Where there is uncertainty concerning a restriction that appears to affect the property, further enquiries should be made.
What information is available about Utilities and Services?
It is always necessary to consider whether drains, water, gas and other services may cross private property. The legal title should be checked to establish the position and clarify the repairing obligations, and who are required to contribute to the cost of repairs to shared services. The seller may not have any information about the run of the services. Asking the relevant authority may discover this but could involve substantial fees and even the cost of a survey. To the extent that any of the services may pass over neighbouring property to or from the mains, it may be possible to argue that the necessary rights have been acquired by the passage of time, but this cannot be guaranteed.
What can I learn about the physical condition of the property?
We recommend that you commission a full building survey before the exchange of contracts. As the property is being sold to you in its present state of repair and structural condition, the Seller is not generally liable to you for defects.
Anything the Seller or the selling agents may tell you about the property will need to be checked against information available.
You should not place reliance on anything you have only been told verbally. If you have been told something upon which you want to rely, then you must let us know before the contracts are exchanged.
We can then ask the Seller’s solicitors to verify what you have been told.
Should I rely on my Lenders survey report?
The survey or valuation arranged by your Lender (unless otherwise specifically agreed) is for their benefit and to satisfy their valuation requirements. It may not detail matters that would affect your enjoyment or use of the property, or be as comprehensive as a full structural survey, which is why we make the recommendation above.
What can you tell me about the boundaries of the property?
The Land Registry filed plan is based on the Ordnance Survey Map. The word “boundary” has no special legal meaning, and when related to ownership of land it is understood in two ways:
- The “legal” boundary – this is an invisible line that divides one person’s land from other land. It is an exact line having no thickness and is an abstract concept, which can rarely be identified precisely.
- The “physical” boundary – this is a physical feature such as a fence, wall or hedge. These boundaries do have a thickness and, although they may be intended to follow the legal boundary, the precise limit of ownership, e.g. whether to the centre or to one side of the feature, is not usually specified.
Although physical features define the boundaries of most land, the precise position of the legal boundary is often difficult to establish for certain because title documents rarely attempt to define boundaries in any detail and the maps/plans used to establish and record the position of boundaries are subject to survey and plotting inaccuracies.
Generally, Land Registry filed plans are prepared under the “General Boundaries rule”. This means that the exact line of the legal boundary is left undetermined, i.e. the filed plan will not state whether it includes the wall, the hedge, the ditch, or runs along the centre of the wall or fence or its inner or outer face.
However, where the position of a physical boundary on a filed plan can be clearly interpreted as a fence or wall on the ground, then the legal boundary will be within the thickness of the fence or wall, which will usually only be a matter of centimetres. Where the position of a physical boundary on a filed plan can be clearly interpreted as a hedge on the ground, then the legal boundary will be within the thickness of the hedge.
How will I know what Contents are included in the price for the sale?
A copy of the list completed by the Seller will be sent to you for your information. When agreed, it will be attached to the contract. It may identify other items that are available for sale at an additional price. We will ask you to check the list carefully and let us know immediately if you believe there are any errors/omissions.
What time will completion take place?
The sale contract stipulates the completion time, that is when the purchase money must be received by the Seller’s solicitor‘s bank by that time and then the Seller must give you vacant possession of the property. If the purchase is completed after the time specified in the contract, you will be liable to pay interest on the balance of the purchase money (purchase price less deposit paid on exchange) until the Seller’s solicitors receive it. Please note that if monies are received after the time in the contract, but on the completion date, nevertheless, completion is deemed to take place on the next working day for the purposes of interest due. Late completion on a Friday will result in interest payable for Saturday and Sunday as well.
How will interest for late completion be calculated?
The annual rate of interest is set out in the contract and interest is payable in addition to the purchase price. For every day that you are late in completing, you will have to pay daily interest at the rate specified in the contract.
By way of example, if there is an unpaid balance of £100,000 and interest at 10%, if a full 10% deposit has been paid, about £27 a day is payable. The Seller can also claim damages for breach of the contract, including any direct loss such as hotel accommodation or wasted/increased removal expenses.
What happens if I don’t complete on the contractual date?
If you have not completed by the contractual completion date, the Seller may serve a “Notice to Complete” which requires you to complete within a further 10 working days. After that period, the Seller may keep the deposit and resell the property to another party and claim damages from you. Additional legal fees will be incurred if a Notice is issued.
Will I be required to arrange buildings insurance?
Under the terms of the contract, you will generally be responsible for insuring the property (not the contents) from the date of exchange. It is therefore vital that this insurance is put in place at the proper time. If you are borrowing money, your Lender may arrange for the property to be insured on its block building insurance policy from the exchange of contacts. It would be prudent to check with your Lender and clarify their insurance provisions.
In the case of a leasehold flat, the Freeholder, Landlord or Management Company is usually responsible for the building insurance under the terms of the lease. Once we have seen the lease we will advise.
What about contents insurance?
You should make sure that you arrange for contents insurance to be in place from the date of completion. If you require any assistance about insurance, we will be happy to help.
The property has an NHBC insurance policy/certificate – what does this mean?
The National House Building Council (NHBC) was set up in the 1960s as a self-regulatory body of the private house building industry to help builders to build better homes. It is a private, non-profit organization, which offers technical and inspection services to its registered builder members, and insurance protection to the buyers of newly built and converted homes.
Protection is available for ten years from completion of the building (if the policy was issued before 1 April 1999) or ten years from the date of legal completion of the first purchase (for policies issued after 31 March 1999).
Only builders who can show their technical and financial competence are supposed to be accepted onto the NHBC register and they must agree to abide by the NHBC rules and standards. The standards provide technical requirements and guidance on practical design, suitable materials and quality of workmanship.
The NHBC insurance policy gives buyers cover against loss caused in three main ways-:
- It protects against loss of deposit if the builder is declared bankrupt after exchange of contracts, but before completion of the building
- During the first two years, it provides cover against defects due to faulty workmanship or materials, in the case of builder default.
- From the third to the tenth year, the protection is reduced and the buyer is protected against loss due to “major structural damage”. However, disputes do arise between homeowners and the NHBC concerning liability and, accordingly, we always recommend that you carry out a full structural survey of your own and do not solely rely on the NHBC.
We would also recommend that you carry out a survey before the two year period of the warranty, so that defects due to faulty workmanship can be put right – please bear in mind that the protection for years 3 -10 is lesser in extent than the first two year period.
More information is available from the NHBC Buildmark House London Road Sevenoaks Kent TN13 1DE or at www.nhbc.co.uk.
What happens if either the Seller or the Purchaser does not complete?
The Standard Conditions of Sale previously referred to provide remedies for breach of contract. In particular if there has been any material error in the SPIF/replies to enquiries, you may be entitled to claim damages from the Seller. You may only be entitled to rescind (withdraw from) the contract where the error results from fraud or recklessness or where the property differs substantially in some material respect from your expectations.
If the Seller fails to complete on the contractual completion date you may serve a Notice to Complete on the Seller. If completion does not then take place within the time specified in the Notice, you may revoke the Contract and require your deposit to be repaid with interest. You may also have a right to claim damages against the Seller to compensate you for other losses and unavoidable expenses.
Generally, litigation is a costly way to resolve completion disputes and claims for relatively small amounts of money. We try to ensure that arrangements are in place that reduces the likelihood of disputes arising.
What is a Local Authority Search?
We will make a search relating to the property with the Local Authority and copy the results to you. The search only provides protection up to the result date. Other matters can be registered by the Council between the result date of the search and completion. The search result should reveal the planning history of the property, any pending compulsory purchase orders, maintenance of public/other highways, smoke control orders, financial charges affecting the property and breaches of planning control, and any road proposals within 200 metres of the property.
However, the results are often not as full as required and some authorities have poor planning records. The search relates only to the individual property. It will not usually reveal details about neighbouring properties, or what may be proposed for adjoining land, or land use policies. We therefore always commission a plan search report, (referred to below).
What sort of entries are commonly disclosed?
- that the road on which the property fronts is a public highway maintainable at public expense.
- that the property is located in a Conservation Area (see below). This may result in more stringent criteria being adopted when planning applications are dealt with.
- that the property is a Listed building (see below). This means that Listed Building Consent will be needed for any alterations to the property in addition to Planning Permission and Buildings Regulation Consent.
IMPORTANT
The search relates exclusively to the property you intend to buy and does not cover any other property or land. The replies from the Local Authority will not indicate development plans for any neighbouring property. If you have any concern about neighbouring land, you must tell us so we can advise what steps can be taken to investigate further. The SPIF should disclose details of any notices received by the Seller from the local authority regarding applications affecting adjoining or surrounding property, but as the information may not be reliable or forthcoming, please tell us about any other property/land where you would like to know the planning position or history.
What is a Conservation Area and how will it affect my use and occupation of the property
This is defined as “an area of special architectural or historic interest, the character or appearance of which it is desirable to preserve or enhance”. Many different types of area are covered by this definition. They may be large or small and they are often centred on listed buildings, on groups of fine buildings, terraces of townscape quality, attractive squares and open spaces, trees, a historic pattern or ancient monument.
The prevailing view is that increasing pressure from developers and homeowners, if not properly controlled, could threaten to overwhelm “our heritage”. Designation as a conservation area gives statutory recognition and protection to such areas. Whilst recognising the need for change and acknowledging that historic areas should not stagnate, designation places a duty upon the Local Authority to ensure that the character and appearance are protected and that the design of any new development makes a positive contribution to such areas.
All planning applications for new buildings, extensions or alterations to existing buildings within conservation areas are carefully considered by the Local Authority to ensure that they will harmonise and reinforce the architectural and historic character of a particular area. Before carrying out any alterations or extensions affecting the external appearance of the property, you should contact the Local Authority to discuss matters.
Please also note that before any work is carried out to trees in a conservation area, including topping, lopping, uprooting or felling, you must discuss the matter with the Local Authority and obtain their written approval.
If building works that require planning permission are carried out without the approval of the Local Authority, enforcement action to require their removal may be taken. This could involve an owner in considerable avoidable expense. Therefore we recommend you always check with the Local Authority first.
What is a Listed Building and how will a listing affect my use and occupation of the property?
When a building is “listed” it means that it is included on a list of buildings, which are considered to be of sufficient historic/architectural interest to merit special protection. The list is drawn up by central government on the advice of English Heritage.
Planning policy guidance issued by central government provides a description of the various grades and summarises the criteria for listing. Listed buildings are divided into three categories:- I, II* and II. Grades I and II* represent 6% of all listed buildings and are considered of national importance. Grade II are of local importance but regarded as still warranting protection.
Listing covers the whole of the building (interior and exterior) and listed building consent is required to alter the property “in any way that reflects its character”. Repairs carried out in matching materials do not usually require consent but it is always best to check with the Local Planning Authority first.
Local Authorities have powers to prosecute where work has been carried out to a listed building without consent. Additionally, owners who deliberately neglect a listed building may be forced to carry out necessary repairs or may find that the Local Authority acquires the property by compulsory purchase at minimum cost.
If you have any queries relating to listed buildings, it is always advisable to check with the Planning Department of the Local Authority first.
What is a Drainage Search and why is it important?
This search made with the local Water Company usually reveals the location of soakaways, surface water, foul drains and sewers and other recorded matters.
Many homeowners have a responsibility for the repair or maintenance of drainage pipe work that they do not appreciate. The following is outline guidance of a general nature. Each case would require specific consideration and advice.
There are three main terms used to describe underground drainage pipes. This description will usually determine who is responsible for the repair and maintenance of the pipe in question.
What is Radon and is there a specific search that can be made?
Radon is a radioactive gas given off by the natural decay of uranium found in rocks and soil. The gas can seep into buildings via cracks in the floor, and it will usually be drawn into the building because the air pressure inside is slightly lower than the pressure outside. The end result can be a harmful concentration of Radon which is said to be the second greatest cause of lung cancer in the UK.
Local Authority and Plansearch results may indicate whether a property is in a Radon affected area (i.e. an area where it is estimated that 1%+ of homes come above the Radon action level). Please note that as any indication will be based on statistics (i.e. the likelihood of the property being in a Radon area, as oppose to actual knowledge), a negative reply will not necessarily mean that the actual level of Radon is below the Radon action level for the property in question.
The highest concentration of Radon is found in Cornwall, Devon and Somerset and it is primarily in those areas that further investigation should be made. But Radon is present elsewhere, and you may decide to have the level of Radon tested. The National Radiological Prediction Board can provide a ‘DIY’ test kit which takes measurements over a three month period, and also provides a report summarising the results for other homes in the area, together with the statistical probability of the effect on the subject property.
If your proposed property is located in an area affected by Radon and has not been tested, it is possible to avoid further delay by purchasing a “Radon Bond”, which might be sufficient to cover the costs of any works (probably no more than £1,000 for a domestic property) and that sum could be retained on completion until a further test result is clear, which could be up to 12 months after completion.
As enquiries of the Environment Agency, kit requests and Radon reports are not part of our standard Core work, if you require us to make further investigations about Radon, any additional time and expenses will be reflected in our fee.
What is the difference between a drain, a public and a private sewer?
Drain – A drain is a pipe that carries the foul or surface wastewater from just one property. This drain is the sole responsibility of the owner(s) of that property for its full length up to the point where the pipe connects to another pipe. At this point, the drain becomes a sewer.
There are two types of sewer:-
Private Sewer – A private sewer is any pipe which is taking wastewater from more than one property, but which is not a public sewer. Such a sewer is the joint responsibility of those properties that drain into it. This responsibility continues up to the point where the private sewer (including the connection) joins to a public sewer, after which the responsibility changes to the Sewerage Undertaker. This means that often people are responsible for the repair and maintenance of drainage pipes that are beneath land owned by someone else, such as a neighbour or even the Local Authority. Unfortunately, there is little likelihood of there being plans showing drains and private sewer routes and you must rely on your own survey of the property. Insurance may be available for the cost of repairs.
Public Sewer – A public sewer is a pipe that is the responsibility of the Sewerage Undertaker for the area. The wastewater from every property connected to mains drainage will eventually flow into a public sewer before reaching its final treatment point. Most public sewers run beneath the public highway and not over private land.
What other searches will be carried out and why are they important?
Where appropriate, we will carry out certain of the following searches before exchange:-
Environmental Search – Legislation provides for the identification and remediation of contaminated land and has introduced liabilities for homeowners living on such land. Local Authorities are establishing which sites are contaminated and determining what steps need to be taken to ensure proper remediation. The law is designed to make the polluter pay but, if he cannot be found, the owner of the land may have to pay for remediation.
An environmental search report will disclose the available information from statutory sources such as the British Geological Survey, the Coal Authority, the Health and Safety Executive and the Environment Agency. But it may not disclose all existing information or be strictly accurate – as the information may be based on historical records. We do not offer advice on the search result and we ask you to consult with your Surveyor for such advice.
Plan search report – this will provide details of:
- applications made for planning permission for development and alterations over the last five years (which is the normal life span of most applications).
- a summary of the Local Authority’s policies for future development and land use within a 500-metre radius of the property
- flood plain information, using the Environment Agency’s assessment to identify whether the property or the surrounding area is within either a natural river flood plain or a coastal flood plain.
Land Registry Search (registered land) – A certificate of search which is clear of adverse entries creates a priority period within which we will apply to register you as the new owner of the property and any lender’s mortgage secured on the property. The priority period effectively “freezes” the Land Registers and prevents any adverse interest being registered against the property during that period.
Bankruptcy Search – This search is carried out against the names of the buyers and any guarantors to protect your lender. If it reveals any entries against a name or any part of it we will need to establish that the entry does not apply to you, otherwise your lenders will not proceed with the mortgage advance.
Index Map Search (unregistered land) – This search confirms whether any part of the property is unregistered and whether anyone has registered a “Caution Against First Registration.” Such a caution (which is rare) would prevent us from perfecting title to the property and we would require your Seller’s solicitors to arrange for it to be removed before completion.
Land Charges Search (unregistered land) – This search reveals whether there are any restrictive covenants or other adverse matters registered against the current and previous owners of the property. If any matters appear which have not been revealed by the Sellers solicitors we will request full details. The search also creates a minimum priority period of 15 days.
Company Search – Where you are buying from a company this search is made to reveal any restrictions on its ability to transact the contract.
Commons Registration Search – a search to establish whether any part of the property has been registered as common land.
Mining Search – a search made to establish if there are old or current any coal workings near the property. Similar searches can be made in relation to Tin and Clay.
What is ‘Vacant Possession’?
The contract will provide that the property is sold with vacant possession on completion. This means that only fixtures and fittings which are included in the sale price or which you have agreed to purchase separately ought to be left at the property. The property should otherwise be clear, including the loft and garage, gardens sheds etc.
Do you provide advice about Mortgage Finance?
We will consider the terms of your mortgage offer. Please ensure that you read our pink Mortgage Information Sheet. Please raise any queries that you have with us and respond quickly when required to do so. The mortgage advance will be subject to your Lender’s General Mortgage Conditions and they will provide you with a copy. In summary in plain English, the main General Conditions are as follows:-
- You must make your monthly payments on time.
- You must pay your property insurance premiums on time.
- You must, if you have chosen an endowment, interest only, pension or PEP mortgage, pay the policy premiums on time.
- You must keep the property in good repair.
- You must seek your Lender’s approval before altering/extending your property or changing how it is used.
- You must abide by any restrictions/covenants mentioned in the title deeds and all planning laws/building regulations.
Once you have read your Lender’s General Conditions, let us know if there are any matters that concern you. Your property could be at risk of sale by your Lender if you break any of the Conditions. If there is any document that your Lender has given you or advice you are unsure of, you must contact us to discuss matters.
What taxes are payable on a purchase?
Stamp duty land tax – If the purchase price is more than £125,000 or if you are buying a new lease, stamp duty land tax is payable at completion. (Budget 2010 concession for first-time buyers) Stamp duty land tax levels are shown on our fee estimate and on a separate advice sheet.
Although we will advise you with more information on the amount specific to your purchase, a futher information including a text calculator can be found on the UK governments Stamp Duty information page.
SDLT is payable on a purchase by the buyer and is currently levied on property sale price in slices that are liable to alteration and additional SDLT may be chargeable on the purchase of a second property and on the grant of a lease depending upon the rent
Capital Gains Tax (CGT) – Provided you are occupying the property as your main residence you will normally be exempt from CGT when you sell it. However if you are buying the property as a second home, there will be a potential charge to CGT when you sell it on any increase in value.
There are certain reliefs and deductions available when you calculate the gain e.g. solicitor’s fees, estate agent’s fees and the costs of improvements. In addition, an annual exemption is available and so you will only pay tax on any gain exceeding this sum. CGT is currently charged at the highest rate of income tax that you pay.
Inheritance Tax – On death the property will form part of your Estate. There may be a charge to inheritance tax depending on the total net value of your Estate and to whom it is left. For example, if you make a gift of the property to your surviving spouse or a charity, the value of that gift will be exempt from inheritance tax.
I am buying from a Relocation Agency – are there differences?
A relocation agency is not usually the legal owner of the property but may have a contract with the legal owner entitling them to sell on the owner’s behalf. You may not be able to place great reliance on the SPIF/replies to enquiries so we emphasise the importance of a full inspection of the property. If there are matters of specific concern upon which you intend to rely, please let us know about them.
I am buying from a mortgagee – are there differences?
Where a property has been repossessed, the seller will be the previous owner’s lender. Because mortgage payments fell into arrears, the lender has obtained an order for possession of the property and is selling it under a statutory power of sale. This means that you cannot place great reliance on the SPIF/replies to enquiries so we emphasise the importance of a full inspection of the property. If there are any matters of specific concern that you rely upon, please let us know about them.
The same may apply where you are buying from trustees or executors, where the Seller has not been in actual occupation, or has rented out the property. There may be little information available to respond fully to the usual enquiries.
