Throughout the course of the conveyancing process, there are a number of different procedures to be followed and stages to go through, each of which comes with terminology. To those unfamiliar with the process, understanding what is involved can quickly become confusing.
The last thing we want is for clients to be unaware about what is going on or feel unduly stressed. So here, we provide answers to 5 frequently asked questions.
Why do I need to pay for ‘searches’ and what searches do you do?
If you are buying a property with a mortgage, your lender will often insist that a number of searches are undertaken. Even if you are not buying a house using funds from a mortgage, it is recommended that you have searches undertaken in case there is anything unusual or unexpected about that the property that you may not otherwise have been aware of. Each search has a cost associated with it, which is usually charged to you upfront by your solicitor.
There are 3 main searches:
- Local Authority Search
This is a search of the Land Registry and Local Authority information. These searches will check the planning history of the property, along with the status of roads, drainage and mining near the property. A local authority search will also return information on any protection or conservation orders that may be associated with the property and any ongoing fees that the new owner may become liable for, such as ground rent.
- Drainage & Water Search
The main purpose of this search is to check that the property is connected to mains water and waste removal. This search will also reveal whether there are any public sewers within the boundary of the property. If mains sewer pipes exist within the property’s land, it’s important to establish whether these are accessible. Sometimes, these may have been unwittingly built or paved over by a previous owner, which can prove problematic if they need to be accessed by the water authority for any reason.
- Environmental Search
Environmental searches are undertaken to assess the land on which the house is built and the possibility of it having being contaminated in any way – for example, if the property has been built on a former landfill site.
This search will also look at the property’s proximity to nearby bodies of water and reveal if the property is at risk of flooding.
What does ‘exchanging contracts’ mean?
Exchanging contracts is the point at which the deal becomes binding. Before this point, it is legally possible for any of the parties involved to withdraw from the transaction without any come-back. Upon exchange of contracts you are required to pay a deposit – which is usually 10% of the agreed sale price. If you are selling a property, your solicitor will receive 10% of the sale price from your buyer upon exchange. After contracts have been exchanged, a moving date can be fixed.
What does ‘completion’ mean?
Completion is when the balance of the payment for the property is passed over to the seller’s solicitor and legal ownership transfers to the buyer. This is usually the day that keys can be collected and in the majority of instances, people will move into the property. There is no set time between exchange and completion; this is entirely dependent on how much time the parties require in order to be able to get themselves ready for the completion date. If buying a new build property, the completion date will usually be determined by the developer of agent.
How is Stamp Duty calculated and when does this have to be paid?
Stamp Duty Land Tax (SDLT) is a tax on properties bought in England and Northern Ireland. Applicable on properties over £125,000, Stamp Duty is paid at different rates, depending on the purchase price. To ascertain the Stamp Duty that will be applicable to your purchase, visit the Government’s Stamp Duty calculator.
First time buyers are eligible for relief on Stamp Duty rates provided the purchase price of the property is £500,000 or less. There is no tax payable up to £300,000 and 5% on the portion from £300,001 to £500,000.
Higher rates of SDLT apply if a property is purchased as a second or additional property. In these circumstances, you will usually have to pay a further 3% of the purchase price on top of the normal SDLT rates.
Before completion, your solicitor will need to ensure that all funds are in place, including Stamp Duty. After completion, your solicitor will be required to transfer the SDLT fee within 14 days.
When should I put my buildings insurance cover in place?
We strongly advise clients to ensure that buildings insurance is in place from the day of exchange of contracts, as this is the point at which you legally become responsible for the property. As you will not at this stage have moved in, it isn’t necessary to include contents cover at the same time. Although your buyer will be advised to do the same (assuming you are also selling a property), it’s important that you do not cancel the insurance on your existing home until after the moving date. In effect, there will be a period of overlap during which you will be paying for cover on two houses, although this will usually only be for the short time between exchange and completion.
For more information or to discuss purchasing a residential property, please contact us on 01457 761320.
