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1. Title deeds.
2. Local Authority Search
3. Energy Performance Certificate (EPC)
4. Home Use Form
5. Home Contents Form
6. Mortgage
7. Survey
8. Exchanging Contracts
9. The Deposit
10. Completion Date
11. Form TR1
12. Land Registry fees
13. Stamp Duty
14. Notes on Stamp Duty Land Tax
15. SDLT1 Form
16. Due Diligence
credits
1. Title deeds.
These are nowadays nearly always a computerised record of the property retained at the Land Registry and for a freehold property it is usually only the Land Registry document that is required. For leasehold properties, however, the possession of the original Lease is vital and you should investigate its whereabouts and if you have the Lease you should keep it safely.
2. Local Authority and Other Water Searches
These searches answer basic questions about the property and warns you if the particular property is going to be affected by major works, such as new roads, or if the property is subject to planning consent. However, be warned. It will not tell you that there are to be developments to the property next door, or behind and you may be advised to further investigate this possibility.
3. Energy Performance Certificate (EPC)
This will be included in the pack and advise on the energy efficiency of the property [click here for an example]
4. Home Use Form
From the Seller’s point of view this is an Optional document. However, every Buyer will regard this as essential. These are effectively a Question and Answer format, which must be answered truthfully by all parties. Misleading and untruthful answers can prove to be very expensive as there have been a number of cases where Sellers glossed over problems with neighbours or problems with rights of way which are inevitably discovered after the purchase has been completed and expensive claims have been made against the Seller for being less than accurate in providing information about the house or flat that is being sold.
5. Home Contents Form
This is a printed form list in which you will be invited to list all furniture and fittings that you are taking, those which you are leaving and those which you might be willing to sell if the Buyer were willing to pay towards them.
6. Mortgage
Most people borrow money from a bank or building society to help them buy their house. This is usually quite a substantial sum and the mortgage will be registered against the title of the property. If the Buyer intends that there will be persons over the age of 18 years including children living at the property who are not owners, they will need to sign a form of consent to the mortgage. They may need independent solicitors advice before they sign this form. They will need to sign that form before the mortgage is taken up by the Buyer’s Solicitor. The Buyer/s will also need to sign the mortgage deed, preferably in their Solicitor’s presence so that the terms of the mortgage can be explained to them and the Buyers understand the obligations that they are accepting by taking the mortgage.
7. Survey
The original proposal by the Government was that a survey known as a Home Condition Report (HCR) has to be included in the HIP. This has been abandoned, not least because it was felt that neither Buyers nor Mortgage Lenders would accept the Seller’s Survey. Under the HIP Rules it remains an option for the Seller to supply an HCR but it is anticipated that most, if not all, Buyers will want their own survey.
We at WGS recommend that Buyers do obtain a survey (see survey). In addition their bank or mortgage lender will carry out a valuation on their behalf to ensure that they are getting a property which equates to the value of the loan. However, this provides Buyers with no information or security. If you are buying a property WGS advise Buyers to obtain their own survey. Most lenders will organise either a valuation survey which really is for their benefit, or a full survey, at a higher cost, which is the Buyer’s survey.
WGS recommend a full survey because:-
7.1 It will tell if there are any defects in the building which you should know about.
7.2 It provides you with ammunition to negotiate price if there were hidden defects that a Buyer could not have seen when he/she first made your offer of purchase.
7.3 If there are hidden defects which have been spotted by the surveyor but which a Buyer could not have known about then since Buyers are entitled to rely upon their surveyor’s expertise in preparing a survey a Buyer might have a negligence claim if such defects should appear and prove to be expensive.
The provision of a survey (now known as a Home Condition Report) supplied by the Seller is an optional document in a HIPS pack.
8. Exchanging Contracts
In the last century when the parties agreed to be bound to buy or sell a property the solicitors would meet and literally pass over a desk an agreement that each client had signed so that they, at that time, exchanged contracts and handed over the deposit. Nowadays, sadly, the two Solicitors almost never meet. Exchange of contracts is effected by telephone and each solicitor promises to deliver to the other the contract which his client has signed and the Buyer's Solicitor also promises to deliver the deposit to the Seller's Solicitor.
9. The Deposit
Usually 10% of the purchase price, which will be held by the Seller’s solicitor in a stakeholder client account, and it can be used by the Seller in the purchase of another property as payment of, or part payment of, the Seller’s deposit. If a Seller agrees to accept a deposit of less than 10% Buyers must appreciate that if the Buyer fails to complete his purchase the contract will contain an obligation for the Buyer to pay the full 10% which will be recoverable from the Buyer by legal action if, having failed to complete, a full deposit was not paid. The Contract will also provide for the Seller to be able to make other claims against the Buyer in the event of the Buyer delaying completion or failing to complete. The Seller will be entitled to be compensated for expenses and losses that the Seller has suffered if the Buyer has not fulfilled your obligation under the Contract.
10. Completion Date
When the parties are ready to exchange contracts they will need to agree on a completion date. That date will be the date of the actual move when the money will be transferred and the keys will be handed over. On the day of completion the Buyer’s Solicitor will send the monies to the Seller’s who will redeem any mortgage if applicable, will deduct fees as agreed and, if selling a property, the money which remains will be forwarded to the Seller’s bank Obviously if the Seller is purchasing a property on the same day then the Solicitor will use the money received for the purchase. Completion date needs to be a working business day.
11. Form TR1
This is the form that the Seller will be asked to sign which, when selling, transfers the property to the Buyer. The TR1 must always be signed by a Seller but frequently must also be signed by a Buyer when the Buyer is giving assurances to the Seller that the Buyer will in future fulfil the obligations imposed by the ownership of the property.
12. Land Registry fees
These are fees on a sliding scale, which are charged by the Land Registry for registering your title in its computerised records of all properties registered in the UK. Details can be obtained from WGS or from the Land Registry website.
13. Stamp Duty
Now known as Stamp Duty Land Tax. "SDLT"
This is now a major factor that you must take into account when you buy a property. Stamp duty is the most expensive element of house purchasing over and above the purchase price. The stamp duty scales at the present time are:
£0 - £125,000:- 0%
£125,001 to £250,000:- 1%
£250,001 to ,500,000:- 3%
£500,001 and above:- 4%
The Buyer will need to pay stamp duty to his/her solicitor before completion as the solicitor if acting on behalf of a mortgage lender must be able to guarantee that stamp duty will be paid because without the payment of stamp duty the property cannot be registered.
NB Stamp Duty payable on leasehold purchases also needs to reflect any Ground Rent payable. (see HMRC website)
14. Notes on Stamp Duty Land Tax (“SDLT”):
14.1. SDLT is a new tax effective from December 1st 2003 to replace Stamp Duty and is chargeable on all transactions for Sale of Land.
14.2. In theory the Tax Return SDLT 1 it is to be completed by The Client (the Tax Payer) who MUST SIGN a Declaration like any other Tax return. In practice we as Solicitors will usually complete most of it. WHY? Because we are answerable to Mortgage Lenders and we have a duty to ensure Registration of Title and cannot be left with a situation where the Return is not completed, the Tax not paid, the Tax Paid Certificate is not returned by the Revenue and we cannot register your title and the Mortgage.
WGS charge a fee of £50 + VAT for completing the SDLT Return.
15. SDLT1 Form
This is a new form imposed by the Land Registry. Before December 2003 the Buyer’s Solicitor prepared a simple form, which was lodged at the Inland Revenue and recorded the address of the property and its value for stamp duty purposes. Since 2003 the SDLT form must now be lodged comprising 71 questions, which is effectively a tax return. Furthermore it must be signed by you, the Buyer. It cannot be signed by your solicitor save where you have given a formal Power of Attorney to your solicitor to sign all other documents. At WGS we will assist you in completing the bulk of the form but it must be completed by you, signed and returned by us promptly as the form and stamp duty payable must reach the Inland Revenue within 28 days of completion otherwise penalties and interest are charged. [see above]
16. Due Diligence
Until recently the relationship between the solicitor and client was a pleasant and informal one. Since the introduction of the government's money laundering regulations, whilst Solicitors hope it will still be pleasant, it has to be more formal and we, as solicitors, have to keep on our file, for a minimum of 5 years, evidence of your identity comprising a photocopy of the photo page of your passport having seen the original and a recent form of evidence of your name and address such as a domestic or mobile telephone bill.
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