Buying a house in the UK: 10 FAQs
These are our replies to 10 frequently asked questions when buying a residential property.
1. Should I use the estate agent’s preferred solicitors?
Estate agents will often recommend a solicitor. They often do so because they get commission which may eventually pay from yourself as it adds to your bill. The risk of that would be, firstly, they recommend firms that pays the highest commission instead of the one that provide the best service, secondly, the preferred solicitors may not be just acting in your interest in a view that they would want to maintain their relationship with the agent as the agent refer works to them!
You should ‘shop around’ for fee quotes and speak to the solicitors if possible – you should instruct a solicitor that you trust and will act in your best interest.
2. What is the legal procedure? What happen after I instruct a solicitor to act for my house purchase?
Once received your instruction, your solicitor will contact the seller’s solicitors to confirm they are similarly instructed and also to request a contract pack. A contract pack consist of all the title documents which prove the seller’s ownership. Your solicitor will then carry out searches like local authority search, water authority search, coal mining search and environmental search. Having reviewed all the documents, they will raise enquiries and find out more information about the property and prepare a Report on Title which is a summary of the legal title and search results. The matter will then proceed to exchange, completion and registration.
3. What is the significance of exchange of contract?
On exchange of contract you will normally be asked to pay 10% of the purchase price as deposit (except for new build property, the payment schedule may be different). The balance will be paid on completion.
Until you exchange contract neither side has any legal obligation to buy or sell the property. When the contract is formally exchanged, you enter into a contract to buy or sell the property. If you pull out after the contract has been exchanged, it will be a breach of contract and the other side will be entitled to claim compensation and you could risk losing your 10% deposit..
4. Can I exchange and complete on the same date?
Yes you can. The advantage of this would be to speed things up. However, in situation where there is a chain, simultaneous exchange and completion can be stressful as party can pull off anytime without any penalty and the other transactions will not be able to complete as a result of this. This is also not ideal when you are moving house, if contract has been exchanged and completion date has been agreed beforehand, you will have plenty of time to book in everything you need. However, if it is a simultaneous exchange and completion and anything goes wrong, you will not have enough time to resolve any problems therefore it is important to make sure you have planned ahead and everything including the funds etc is ready before exchange and completion.
5. What are the different options for joint ownership?
There are two ways to hold a property – joint tenants or tenants in common. You must decide which type of joint ownership you want as the Land Registry will need to know this to complete the registration.
The main difference of the two is that in joint tenants you cannot pass on your ownership of the property in your will if you die, the property automatically goes to the other owners. However in tenants in common, the property does not automatically goes to the other owners, instead the shares can be passed on in your will.
Type of ownership can be changed after the purchase of the property.
6. When should I get a mortgage?
Find a property and get your mortgage in place – better do them at the same time. They are like egg and chicken: you need a mortgage to buy a house, but you cannot get a mortgage until you are ready to buy a house. You should start the process of applying for a mortgage before you make your final decision on which property to buy. This is to make sure your mortgage application will not slow down or delay your house purchase.
7. Why does it matter if my solicitor is not on the bank’s conveyancing panel?
Mortgage lenders will only deal with certain solicitors firms – those are on their ‘panel’. If you do not use the firms on the panel, there will usually be a separate representation. Your solicitor may subcontract the mortgage element to another firm in which your solicitor will act for the purchase and that firm will be representing the bank. Most of the high street lender will allow separate representation, however for some of the specialist lenders, they require the same firm of solicitors to act for both the buyer and the bank.
When you instruct a solicitor, make sure you know if they are on the panel. If you have instructed them yet they are no on the panel and the lender does not allow separate representation, you will need find a panel solicitor who can deal with both the purchase and the mortgage element. The transaction may be significantly protracted if this is to be found out at the later stage of the conveyancing process.
8. Fees – what are disbursements?
When you are getting fee quotes, they are usually presented like this: solicitor’s legal fee + VAT + disbursements. So what are the disbursements? They are generally expenses a solicitors has to pay on behalf of their clients for additional services and do not form part of the legal fees. For example, bank transfer fee that is charged by the bank, photocopying and postage and Land Registry fees.
9. Can I get tax advice from my solicitors?
Your solicitor will help you complete your Stamp Duty Land Tax (SDLT) return and file the certificate with the Land Registry. Your solicitor cannot provide you with tax advice or specialist SDLT rules. Should you require tax advise, on SDLT, capital gains tax, income tax etc, is advisable to seek the assistance of a specialist tax advisor or accountant.
10. It is a transaction between family members and I am buying/ selling it at an undervalue. What do I need to be aware of?
A transaction is at undervalue if the purchase price is lower than the actual value of the property. For example, if a property worth £250,000 and it is sold for a price of £200,000. It is a transaction at undervalue. This is common in a family transaction.
The risk is that if the seller goes bankrupt within 5 years of selling the property, the transaction maybe set aside enabling the protection of the bankrupt’s assets for the benefit of their creditors. A declaration of solvency should be obtained from the seller when the property is purchased to show that the he/ she is solvent when the property is sold. The seller should also obtain an undervalue indemnity policy property to indemnify the buyer from any financial loss.
If there is a mortgage, the lender should also be notified about the undervalue.
Take Early Advice
Obtaining legal advice from our expert conveyancing team at Monarch Solicitors is vital to ensuring that you mitigate your risk and secure your investment.
The legal process involved in buying property in the UK is very different to buying a property in China or Hong Kong. We have Cantonese and Mandarin speaking staff who can help you through the process.
