Buying a first home is an exciting experience filled with hope and anticipation. For many, selling an existing home in order to upgrade or downsize is equally exciting. In either case, the law dictates property transactions be carried out according to certain procedures. These procedures protect the interests of all parties involved.
Knowing these procedures is the responsibility of licensed solicitors and conveyancers. They go through extensive training programs prior to being licensed then continue with ongoing training to remain up-to-date. The knowledge they bring to the table is one of the main reasons why it is advisable to use a solicitor or conveyancer for property transactions.
Legal Implications of Buying a Home
According to information provided by GOV.UK, a typical residential property transaction takes between two and three months to complete. During the course of the transaction, certain legal implications pertain to the buyer beginning with the offer to purchase. This offer is extended to the seller via the buyer’s agent.
Although the completion of a contract is defined differently through the four main UK jurisdictions, a formal offer to purchase is normally considered a binding offer barring any unforeseen circumstances, such as the inability to obtain a mortgage. That means you should be cautious about making an offer if you are not sure you are serious about following through. Backing out of an offer can result in significant financial penalties.
After a purchase offer is accepted, the buyer’s solicitor is then responsible for making sure there are no problems with the property. This process is known as “making enquiries and searches.” During this process, the solicitor is checking on current ownership as well any possible problems having to do with rights of way, future access to the property, or future development.
Prior to the exchange of contracts the buyer is responsible for arranging financing, making a deposit (usually at least 10% of the purchase price), and acquiring proper insurance. Once contracts are signed and exchanged, the sale is legally binding even though it has not yet been formally completed.
Legal Responsibilities of Selling a Home
Between buyers and sellers, the sellers have the greater burden of legal responsibilities. This makes sense when you consider what a large risk the buyer of a property is assuming. It is incumbent upon the seller to guarantee a certain amount of safety to the buyer, thus the legal obligations.
Here is a brief description of what is required of sellers:
- Energy Performance Certificates – The Citizen’s Advice Bureau explains that sellers must provide potential buyers an Energy Performance Certificate within seven days of the home’s initial listing. Certificates must be provided free of charge as well. Certificates are provided by a certified assessor and are valid for ten years.
- Estate Agents – Sellers can choose to work with buyers on their own or enlist the services of an estate agent. If the latter option is chosen, the seller will be required to enter into a binding contract with the agent. There are two contract options available: sole agency and sole selling rights. Both options need to be made clear to the seller prior to signing a contract.
- Discrimination – It is illegal in the UK to refuse to sell a property through an agent, or to give a buyer a less favourable deal, based on sex, ethnicity, religious beliefs, disability, etc. If you are selling without the aid of an agent, only ethnic discrimination applies in most cases, according to the Citizen’s Advice Bureau.
- Accepting Offers – This is one area where sellers have more latitude. Even after a purchase offer has been accepted, a seller has a reasonable amount of time to change his or her mind should he or she want to accept a better offer from a different buyer. However, once solicitors begin the contractual process, that latitude no longer exists.
- Buyer Inspections – After contracts are exchanged the sale is considered binding unless either of the parties fails to meet contractual obligations. Between contract exchange and completion, sellers are obligated to allow buyers reasonable access to inspect the property. However, they do not have to allow buyers to perform any improvements.
- Representation of Property – Throughout the entire selling process, sellers are required to offer an honest representation of the property being sold. Any misrepresentation could scuttle the deal and leave the seller with unfavourable financial consequences.
Stamp Duty Land Tax
Properties in the UK are subject to the Stamp Duty Land Tax (SDLT) if the sales price exceeds £125,000. Rates are anywhere from 1%-7% of the total purchase price. Homes sold for less than £125,000 are not subject to the tax. SDLT is the responsibility of buyers, so they need to consider funding this payment when arranging a financing package.
Regardless of whether or not a property is subject to SDLT, the appropriate paperwork (known as a “return”) must be filed with HM Revenue and Customs within four weeks of the completion of the transaction. They will return documents showing the tax was paid or the property was exempt. Those records should be kept in a safe place along with the rest of the documents of the purchase.
Failure to file the SDLT paperwork on time could result in a levy and slow down the registration of the ownership transfer. These are headaches no homebuyer really needs. It is just easier to file the paperwork as required.
The official transfer of a home from seller to buyer is called conveyancing. It is the last step between the two parties and the one that concludes the transaction. It goes as follows:
- Contracts are Exchanged – Contracts are exchanged along with any other necessary documents. This is typically done through solicitors or conveyancers.
- Financial Exchange – Monies are transferred from buyer to seller. A typical transaction sees a bank cheque transferred to the seller via the dedicated account of a solicitor or conveyancer.
- Seller Vacates the Property – On the date agreed to in the contracts the seller vacates the property. He or she is required to leave it in the condition stipulated in the contract; usually it must be clean and in good repair. If the seller agreed to make certain repairs or upgrades then those must be completed before moving out.
- Keys are Transferred – On or before the date of vacancy, the seller turns over the keys to the home to his or her solicitor or conveyancer who them passes them on to the buyer. At that time, the buyer receives the keys the law sees the transaction as formally completed. Records of the transfer still must be recorded with local authorities.
Choosing a Solicitor or Conveyancer
Both sellers and buyers have the right to retain the services of a solicitor or conveyancer. In fact, it is advised for both to do so. Trying to complete a sale without legal advice is very difficult. Under some circumstances it is not even allowed by law.
When choosing, it is important to know the difference between a property solicitor and a conveyancer. Beginning with the latter, a conveyancer is a licensed individual whose only job is to handle conveyancing needs. Conveyancers are ideal for simple property transactions between private buyers and sellers. Transactions that are more complicated may be out of their league.
Property solicitors are trained and licensed solicitors with a speciality in property law. They are capable of handling all property transactions regardless of their complexity. That said, buyers or sellers of investment or commercial real estate are better off looking for a solicitor with expertise in these types of deals.
It is common for both solicitors and conveyancers to offer a flat fee for their services. However, be cautious of price offers that seem too low. It is not uncommon, especially for retail conveyancers, to offer extremely low prices to entice new business, only to add to the final cost through extra fees and charges. Make sure your solicitor or conveyancer provides a detailed statement explaining all the costs involved.
When it is time to buy or sell residential property, protect yourself by using a qualified solicitor or conveyancer. Be sure to ask plenty of questions if you are not fully confident in everything you are doing. The point of obtaining legal help for these transactions is to make sure that your interests are protected and the law is followed. You have the right to full understanding of the process, so exercise it.
Finding a solicitor to handle your property transactions is fairly easy thanks to the Internet. There are a number of websites allowing you to search for solicitors by entering just a small amount of information. The following links will take you to some of those sites:
Law Society – The law society lets you find registered solicitors and law firms by postcode or according to areas of practice.
Contact Law – Find property solicitors here through this website’s trained consultants.
Search4Solicitors – This site lets you search for solicitors based on postcode, area of practice, or type of work.
Find-Solicitor.co.uk – Here you can find a solicitor by simply entering your postcode and clicking the search button.
Solicitors.co.uk – Another website allowing you to find solicitors by postcode or town.
Right Solicitor – This site is maintained by a group of law firms. You can ask a question or find a solicitor quickly and easily.
Use the following links if you would prefer to use a conveyancer rather than solicitor. Keep in mind that conveyancers are somewhat limited in the scope of services they can offer.
Council for Licensed Conveyancers – A website for a conveyancer’s professional organisation. On the bottom of the page, you will find an online search form.
Money Supermarket – Get quotes from multiple conveyancers using this popular search site.
Agent Quote – This site lets you search for multiple quotes for either buying or selling.