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Steps in the legal work of buying a property

Although it is impossible to give a precise idea of how long the legal work involved in buying a property takes, it is possible to offer guidelines. From having an offer accepted to exchange of contracts can take up to seven weeks and from exchange of contracts to completion can take up to four weeks. However, if there are any problems the time taken may be longer.

Enquiries made by the solicitor or, in England and Wales, licensed conveyancer

Once you have instructed the solicitor or, in England and Wales, a conveyancer, the seller’s solicitor or the licensed conveyancer draws up a contract which will eventually be signed by you and the seller. However, before the contract can be signed, your solicitor or licensed conveyancer must make sure that there are no problems with the ownership of the property, rights of way, access, or future developments in the area that might affect the property. This is called ‘making enquiries and searches’. The solicitor or licensed conveyancer makes the enquiries and searches as follows:-

• local searches. These are enquiries made to the local authority (or in Northern Ireland, the appropriate government department) about any matters which affect the property which involve the local authority, such as whether there is a compulsory purchase order on the property. Local searches also include questions about any proposed changes or development in the area that might affect the property such as roads, housing, shops. During the local search, the local Land Charges Register (Registry of Deeds in Northern Ireland) is also checked. This gives information about any matter which affects the property such as tree preservation orders, if it is a listed building or in a conservation area; and
• enquiries made to the seller by the solicitor or, in England and Wales, a licensed conveyancer. These are a set of standard questions about the property, boundaries, neighbour disputes and fixtures and fittings that will remain in the property. There may also be additional questions that the solicitor or licensed conveyancer thinks are necessary, such as the transferability of guarantees for any work done on the house, for example, a damp proof course; and
• from the Land Registry.
  

Arranging to pay the 10% deposit

Whilst the solicitor or, in England and Wales, a licensed conveyancer is making the enquiries, you should sort out how you will pay the deposit that has to be made when the contracts are exchanged. This deposit is usually 10% of the price of the home. However, it is sometimes possible to come to an agreement to pay a smaller deposit. If you are also selling a house it is usually possible to put the 10% deposit on the property being sold towards the deposit on the property you are buying.
If you are unable to provide the 10% deposit it is possible to use a ‘deposit guarantee scheme’. Your solicitor or licensed conveyancer can arrange this with an insurance company.
If raising the deposit may be a problem, you should discuss the options with your solicitor or licensed conveyancer.
To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
Alternatively, you could consider borrowing the money for the deposit from elsewhere, for example, from relatives or a bridging loan from a bank. However, the amount of interest you will have to pay for a bridging loan will be high and you should check how much this arrangement will cost.

Insuring the property

You should make sure that buildings insurance is arranged from the date of exchange, because once contracts have been exchanged you are responsible for the property.
You may be able to get information on buildings insurance from your mortgage lender, solicitor or, in England and Wales, a licensed conveyancer.
To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

Exchange of contracts

The final contract between you and the seller is prepared when:-

• the solicitor (or licensed conveyancer) and you are satisfied with the final outcome of all the enquiries
• any surveyor’s report has been received and any necessary action taken
• the formal mortgage offer has been received
• arrangements about the payment of the 10% deposit have been made
• the date of completion has been agreed.

You and the seller each have a copy of the final contract which you must sign. These signed contracts are then exchanged. At exchange of contracts both you and the seller are legally bound by the contract and the sale of the house has to go ahead. If you drop out, you will lose your deposit.

You should make arrangements for the supply of gas, electricity and telephone service and make sure that the seller is arranging for final meter readings to be made.

Completion

Completion of the purchase usually takes place about four weeks after exchange of contracts, although it can be earlier. On the day agreed for completion:-
the mortgage lender releases the money
the deeds to the property are handed over to your solicitor or licensed conveyancer
the seller must hand over the keys and leave the property by an agreed time.
The solicitor or licensed conveyancer (in England and Wales only) will usually send their account to you on, or soon after, the completion date.

Buying with someone else

Legal ownership

If two or more people are buying the property jointly they will be joint legal owners. The agreement of all legal owners is needed if the property is to be sold, although if there is a dispute an owner can apply for a court order.

Beneficial ownership

As well as the legal ownership of property, there is the beneficial ownership to be considered. This means the shares in the property to which the owners are entitled.
There are two types of beneficial ownership - joint tenants and tenants in common. If you are joint tenants, your property cannot be sold without the agreement of both of you. If one of you dies, their share of the property passes automatically to the other. If you own your property as tenants in common, each of you will have a share in the property that you can dispose of as you like. It is up to you to decide how much each share will be. If one of you dies, you can leave your share to whoever you like.

When the offer has been accepted

When your offer for the property has been accepted you will have to consider the following:-

• whether a holding deposit is payable
• arranging a mortgage - see below
• whether a survey is necessary - see below
• who will do the necessary legal work - see below
• whether you want to buy with someone else - see below.
  

Holding deposits

Once the owners have accepted your offer the buyer may be asked to pay a small deposit to the estate agent. This is not usually more than £500. It is meant to show that you are serious about going ahead with the purchase. It is repayable if the sale does not go ahead.

Arranging a mortgage

If you have not already begun to arrange a mortgage, you should start to do this now. It should take about three weeks from the application for the mortgage to the formal offer being made by the lender. However, this time-scale may vary.
Whoever agrees to lend the money will want to have the property valued. This is to make sure that the lender could get the loan back if for any reason you stopped paying your mortgage and the house had to be sold again. The valuation will be done by a surveyor on behalf of the lender but you will have to pay for this valuation. The fee will be payable in advance, usually when the you send a completed mortgage application form to the lender.
If the amount of money to be borrowed is more than a certain percentage of the valuation of the property (usually 75-80%), your lender makes it a condition of the loan that you take out extra insurance to cover the extra amount. You pay a single premium to your lender which is usually added to the loan. This is known as a higher lending charge (or mortgage indemnity guarantee).

Arranging a survey

The valuation which is done for whoever is lending the money is not a survey. You should consider whether or not to have an independent survey carried out in addition to the valuation. The survey would not only consider the value of the property but would also examine the structure of the property and should identify any existing or potential problems.
There are two levels of survey that you can choose between:-
a full structural survey. This is suitable for a property which is large, more than 80/90 years old or in doubtful condition
an intermediate or ‘house/flat buyers report’ that gives a report on the condition of the parts of the house that are easy to see and to get at and may recommend further tests or investigations, for example, a specialist check for woodworm. This is particularly suitable for properties built this century which appear reasonably sound. It is much cheaper than a full structural survey.
It is possible for you to use the same surveyor who does the valuation to carry out the survey and this may be cheaper. However, you can use a different surveyor if you wish.
If the surveyor reports that there are some problems with the property, you will have to consider whether you still want to go ahead with the purchase or want to negotiate further with the seller about the price. The surveyor will usually advise you as to how any problems they have identified should be dealt with and the likely costs of this.

Choosing who is to do the legal work (conveyancing)

The legal process of transferring the ownership of the property from the present owner to the buyer is known as conveyancing. You should decide who you want to do the conveyancing work. You can do it yourself – although this can be complicated – or you can:-

• use a solicitor; or
• use a licensed conveyancer.

Using a solicitor
Most firms of solicitors offer a conveyancing service. Although all solicitors can legally do conveyancing, it is advisable to choose a solicitor who has experience of this work.

Using a licensed conveyancer (EW only)

You can use a licensed conveyancer to do your conveyancing. Licensed conveyancers are not solicitors but are licensed by the Council of Licensed Conveyancers.

Making an Offer

When you decide you would like to buy a particular property you do not necessarily have to pay the price being asked for it by the owners. You can offer less if, for example, you thinks there are repairs to be done which will cost money.
If the property is being sold through an estate agent, you should tell the estate agent what you are prepared to pay for the property. The estate agent will then put this offer to the owners.
If the owners do not accept the first offer put to them by you, you can decide to make an increased offer. There is no limit on the number of times you can make offers on a property. If you make a written offer it will always be made subject to contract. This means that you will not be committed to the purchase before finding out more about the state of the property. If you make an oral offer this is never legally binding.

Deciding A Property

When you find a property you should arrange to look round it to make sure it is what you will need and to get some idea of whether or not you will have to spend any additional money on the property, for example, for repairs or decoration. It is common for a potential buyer to visit a property two or three times before deciding to make an offer.
Is the property leasehold, freehold or commonhold
Freehold property
If the property is freehold, this means that the land on which the property is built is part of the sale and no ground rent or service charge is payable.
Leasehold property
A property may be leasehold, which means that the land on which the property is built is not part of the sale. You have to pay ground rent to the owner of the land - who is called the freeholder.
The length of a lease can vary and you should check that the length of the lease on the property you are interested in buying is acceptable to the mortgage lender. You should consult an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.
In addition to ground rent on a leasehold property, you may have to pay an annual service charge. This usually happens with a flat. The service charge covers such items as maintenance and repairs to the buildings, cleaning of common parts and looking after the grounds.
A group of leaseholders living in the same building may have a right to jointly buy the freehold of the building or take over its management.

How to find a property

There are a number of ways in which you could find a property to buy:-

• using estate agents
• looking at the property pages in local newspapers
• contacting house building companies for details of new properties being built in the area.