We are accredited by the Solicitors Regulation Authority (SRA No. 591917) as Conveyancing Quality Scheme advisers. Whether you are buying a new home or an investment project or selling your property, our English qualified, experienced property solicitors will offer you a full range of legal services, including conveyancing services, advice on and assistance with residential and commercial leases, property finance and property tax, property management, advice on and assistance with resolution of any disputes between landlord and tenant.
Below we offer a concise description of property purchase process, information about main types of property ownership in England and costs associated with a property purchase.
PROPERTY PURCHASE – PROCESS
All legal work related to buying and selling property as well as money transfers is done by lawyers. The seller and the buyer do not usually meet. The parties have to agree on the price and instruct their respective solicitors to start the conveyancing process. Such a process usually takes a few weeks and include the following steps.
Step 1 (Preparation for Completion)
The seller’s solicitors prepare and send to the buyer’s solicitors a draft contract, “Property Information Form” completed by the seller, “Fittings, and Contents Form” and other documents necessary for the transfer of ownership. Your lawyers will check the draft contract and other documents and will negotiate any issues with the sellers’ solicitors on your behalf. They will also carry out Land Registry Searches, a Local Authority Search and any other searches (for example, Water and Environmental searches) as they deem appropriate for a particular property.
When all the documents are agreed, your lawyer will explain you their relevance and advise you which ones you need to sign. At this stage, you should have 10% of the purchase price available to you and under your control ready to be transferred to the seller’s solicitors.
Step 2 (Exchange of Contracts)
At this stage, the seller’s and the buyer’s solicitors exchange signed contracts. Besides, your solicitors have to transfer the deposit to the seller’s solicitors while awaiting completion. Once this has been done, the contracts become legally binding. If you or the seller breach any of the terms of the contract and will not complete the purchase (or sale), innocent party will be entitled to compensation.
Your solicitors and the seller’s solicitors have to agree upon a completion day. On that day, the balance of purchase price is transferred to the seller’s solicitors and the ownership is transferred to you.
Step 3 (Completion)
On completion, the buyer’s solicitors send the seller’s solicitors the balance of the purchase price and you receive the keys. The seller’s solicitors provide the documents to the buyer’s solicitors, which confirm the transfer of ownership. After the completion, your solicitors pay Stamp Duty Land Tax and register you with the Land Registry as the new owner.
TYPES OF PROPERTY OWNERSHIP IN THE UK
There are two main types of ownership in the UK: freehold and leasehold. Freehold owner owns the property outright without any time limit and owns not only the building itself but also the land on which his or her house is built. With a leasehold, you own the property for the length of your lease agreement with the freeholder.
Most flats are bought on a leasehold basis. This means that you do not own the property outright. You buy the right to live there, usually between 99 years up to 125 years, though some leases actually run to 999 years. You do not buy the land on which the building is erected. When your lease agreement expires, the property is reverted back to the freehold owner. Relationship between freehold owner and a leasehold owner are similar to those between landlord and tenant.
Advantage of owning a leasehold is that if a lease agreement is for a long period of time and the property is located in a popular area, there is no difference between leasehold and freehold. Such property could be a lucrative investment as well as your main place of residence which you will sell without a difficulty. In some cases, it is possible to extent your lease agreement and even to re-register it as a freehold property for an additional fee.
A downside of owning a lease is obviously that it expires; it is difficult to get a mortgage on a property with less than fifty years on the lease. Also, ground rent and service charges have to be paid by leasehold owners. These charges are payable to the freehold owner or a Managing Company.
When buying a property, it is important to remember about additional basic expenses associate with such a purchase:
- Stamp Duty Land Tax – it is payable to HMRC after completing the purchase. In accordance with the new rules introduced in December 2014, Stamp Duty Land Tax is collected in the same way as Income Tax, i.e. each new SDLT rate will only be payable on the portion of the property value which falls within each band:
PROPERTY VALUE, £ SDLT RATE 0 – 125,000 0 125,001 – 250,000 2% 250,001 – 925,000 5% 925,001 – 1,500,000 10% 1,500,001 or higher 12%
For example, if you are buying a property valued at over 2 million, SDLT will be £153,750:
- 2% of £125,000 (125,001 – 250,000) – £2,500;
- 5% of £675,000 (250,001 – 925,000) – £33,750;
- 10% of £575,000 (925,001 – 1,500,000) – £57,500;
- 12% of £500,000 (1,500,001+) – £60,000.
- Local Authority, Land Registry and other searches to obtain additional information about a property that is often not obvious – around £500.
- Post-completion registration with the Land Registry. This is necessary to officially register you as the new owner of the property. Land Registry fee could be in the region of £40 to £1,000 depending on the purchase price.
- Survey to check for structural defects of the property is not necessary but we recommend it, especially if the house was built before 1920 – from £500 to £1,000.
- If you are taking out a mortgage, you need to pay expenses associated with its arrangement such as mortgage account fee, valuation fee etc.
- Legal fee – usually from 0.3% to 0.5% of the purchase price.