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Property Hawk

CONVEYANCING

Conveyancing is the process of transferring the legal title of a property during the buying and selling process.  It is possible to do the conveyancing work yourself and save £250-300.  However, unless you like that sort of challenge and have oodles of time to spare.  I wouldn’t advise it.

Having a good solicitor or licensed conveyancer is going to make the whole process much quicker and easier.  Solicitors’ involvement in the buying and selling of land is historic & goes back hundreds of years.  

Solicitor or Licensed Conveyancer?
There are in fact two classes within the legal professional that are capable of carrying out conveyancing work, Solicitor and Licensed Conveyancers.  Licensed Conveyancer scope to practice independently only came about in 1987 as a result of the Administration of Justice Act 1985.  Prior to 1987 conveyancing could only be carried out by qualified solicitors.  As a result, conveyancers were saddled with large legal practice overheads resulting in them charging relatively high fees.

Introduction

The legal process of  buying an investment property is often shrouded in what seems like a never ending series of: form filling, searches, signatures, delays, contracts and general confusion.  I have bought numerous properties and sold quite a few. Each time the process starts I find myself confused!  So what’s involved?
 
The Process
In order to buy an investment property a landlord needs to have a number of things in place: a willing seller (vendor), a willing buyer (purchaser), an agreed price and a set of two solicitors representing each of the party’s involved in the sale.  Assuming all those are in place, how long should things take?  The conveyancing which is the legal term for a property transaction, should take between 6-8 weeks; although I have a friend that swears his solicitor can do it in three.  The reality is that with so many forms and bits of paper involved; delays almost become an inevitable part of the process.  The Government has proposed to reform the conveyancing law so that this should eventually lead to less paper and more ‘button pushing’.  In theory this should do much to eventually speed things up.  Having said that; the system will still be inevitably reliant on somebody pressing the right button at the right time. I am sure that ultimately the process can only get quicker as it becomes more digitised.  As things stand now the process can be broken down into approximately 6 key stages.   These are:

1. Searches
2. Document checking
3. Mortgage offer
4. Completion of contract
5. Exchange of contracts
6. Completion

The main stages explainedI now go on to look at the six main stages in a little more detail:

1. Searches
There are a number of different searches that need to be carried out by your solicitor or conveyancer.  If you haven’t got one already or think yours is too expensive have a look in the Recommended Links for a solicitor or conveyancer that you think is right for you.

These searches are ostensibly to satisfy you and also the mortgage company that the property you intend to buy is not subject to action by the local authority or has been affected by works carried out in the past.  All of these could have a detrimental impact on the property’s value.  The searches are as follows:

Local search
These searches are sent to the Local Authority and should reveal such matters as:

a) Enforcement notices
b) If the property is subject to outstanding conditions in respect of improvement grants
c) Planning permissions
d) If the highway is publicly maintained

The results of these searches can take anything from a few days to several weeks to be returned (dependent on local authority and their workloads).  Some authorities now offer an expedited service for a small additional charge and should be able to do the search in a couple of days.  Before the purchaser’s solicitor can send for the local authority searches they like to have a plan of the property.  This comes from the seller’s solicitor, normally when they have received the Vendor’s Title Deeds.  With all these bits of paper floating about, it’s easy to see how delays can occur I would therefore emphasise the importance of ensuring that where possible you keep a close watch to make sure that they don’t.
 
Drainage search
This is a separate search carried out with the Local Water Authority or the Local Authority where they act as agents.  It’s to ascertain where the drains run and who is responsible for maintaining them.  Most of the major drains (e.g. the ones running down the road) will be the water company’s responsibility, whilst generally the drains on your land will be for you to maintain.

Mining search
If the property is in or close to a current or former mining area, a mining search is carried out with the Coal Authority. These searches aim to provide information on whether mining has occurred around or underneath the property.  The main worry is obviously the potential of damage caused through subsidence.  This, if you ever bother to read your standard building insurance is normally excluded from cover.  It is possible however to take out specialist insurance that covers you against any repair works that have to be undertaken as a result of subsidence. Given the massive contraction of the UK coal industry, this issue is less important now than it was; however if you are in a coal area then it should highlight any potential problems.  Whilst the search will indicate whether mining works have been carried out, they won’t guarantee that there will not be a problem in the future.  Therefore, in the best traditions of caveat emptor or ‘buyer beware’; the purchaser will at least be aware of the situation and can then make decisions based on the information at hand.  I understand should you have a property that has suffered from subsidence; it is possible to make a claim for compensation with the Coal Authority

Other searches
From time to time it is also necessary to carry out other searches relating to the property.  One search now carried out by most solicitors is the environmental search.  This is provided by one of the specialist environmental companies such as Landmark Information Group.  For about £40 they will collate additional information not required as part of the Local Authority Search about other potential environmental hazards in or around your property.  These include proximity to waste disposal sites, likelihood of the property being on contaminated ground, air quality to name but a few.  They also provide an assessment of the potential risk of the land being designated as contaminated as defined by the Environment Protection Act 1990.  All this has come about to satisfy the lenders that they are aware of the risks associated with the properties that they are issuing loans on.  They are concerned that properties could have their value and thereby their security detrimentally affected as a result of a sudden change in approach by Government to land designated as contaminated.



2. Document checking
I’m sure that conveyancers will be aggrieved by this description. In many ways this is the skilled part of the ‘job’ as it is this part that makes sure that the vendor gets what they thought that they were buying when they agreed to purchase. This stage involves the solicitor sifting through the key documents in relation to the sale; the contract, title deeds, seller’s replies to enquiries.

a) Contract
This is the formal agreement and provides the terms of the sale of the property to the purchaser.  It describes the property, purchase price and any special conditions that may be attached to the transaction.

b) Title deeds
The conveyancer will check to see whether there is good title to the property, in other words whether the property is what it initially appeared to be and that the vendor does indeed own it.  If the property is registered and most property, particularly residential is; then the solicitors will carry out a search with the land registry www.landreg.gov.uk .  This should be able to tell them in the Title Register who owns the property, the nature of their ownership (freehold / leasehold) and any charges (loans) outstanding.  They will also be able to provide an ordnance survey plan showing the extent of the land owned outlined in red.  If necessary the conveyancer will check the title deeds for any additional information regarding the property’s title. They may do these checks for the Mortgage Lender who frequently they also act for.  Their responsibility to the lender is to ensure that the mortgage company is fully advised of anything that may affect the value of the property and therefore have an impact on the security of the loan.

c) Replies to enquiries before contract
The seller will have a list of questions about their property.  For example, does the seller know of any disputes and are there any alterations to the property requiring planning permission.  In addition, the seller will also have to provide a list of fixtures and fittings that state what is to be left/removed from the property on completion.  This information is used to form part of the sale contract and therefore it should make clear what is included in the sale.  If the property is leasehold, the seller’s solicitor will also be asked to provide additional information from the Landlord or Management Company.

3. Mortgage Offer & Insurance
Copies of the Mortgage Offer will normally be sent to the conveyancer, the applicant and the broker if one is used.  This offer sets out the amount of the advance and the interest rate payable on the loan, together with any other specific conditions attached to the mortgage.  The conveyancer will go through these details and should make the purchaser aware of them prior to signing the mortgage loan agreement that accompanies the Mortgage Offer.

One major requirement of any offer is that satisfactory buildings insurance is in place by the time of completion.  Therefore, it is advisable that cover is in place well in advance of the completion date.  Property Hawk has managed to negotiate some preferential insurance rates with partners because of the numbers and experience of it’s users.  Have a look here for not only some of the most attractive rates in the market, but also the most comprehensive terms.  The mortgage company will insist that a copy of the insurance schedule with their interest noted is supplied to them before they will release the mortgage.

4. Contract
This is the document that has been drafted by the seller’s solicitor.  It sets out the terms and conditions of sale.  Once the search results have been returned and the Mortgage Offer has been received; the conveyancer will normally expect the buyer to go to their office to sign the contract and the mortgage deed or loan agreement.  If the sale is being conducted remotely via the Internet or it is not possible for the buyer to get into the office; the solicitor can advise the purchaser in writing of the findings from the searches as well as providing copies of the contracts and loan agreement that need to be signed.  At this stage the conveyancer will require the payment of the deposit.  This is normally 10% of the purchase price.

5. Exchange of contracts
The exchange of signed contracts by the buyers and sellers conveyancers is the stage where the sale becomes binding.  In other words neither party can simply walk away from the ‘deal’ without the other party having some legal recourse.  Prior to exchange, the parties agree a completion date, which will be worked into the contract prior to exchange.  Once contracts are exchanged, the seller’s solicitor will normally hold the deposit money until completion.

6.    Completion
Following exchange both parties make their final arrangements.  The following matters must be satisfied before completion can take place:

a) Transfer Deed and Requisition on Title
The final questions (“requisitions on title”) will be submitted to the Seller’s Solicitors, together with the Deed of Transfer for approval.  The Transfer Deed is the document that transfers the property from the seller to the purchaser and also acts as a receipt for the purchase money paid.

b) Pre-completion searches

A bankruptcy search is carried out against the purchaser’s name(s).  This shows any matters that may affect the mortgage advance.  A clear search is required to proceed to completion.  A final search is also made against the seller/ their land.  Other searches are necessary in some circumstances and you will be advised of them by your solicitor if this is the case.

c)    Prior to completion the mortgage advance monies will be requested from the mortgage lender by your conveyancer.  The conveyancer needs cleared funds from the mortgage lender in order to complete.  Lenders require anything up to 7 working days notice that the monies are required and this will sometimes influence the completion date

d)    Any funds required as part of the transaction, including legal fees and disbursements, including Stamp Duty are requested and will need to have cleared prior to completion

FINALLY – completion and the property is yours.  The balance of the purchase price is forwarded to the seller’s solicitors by Telegraphic Transfer on the morning of completion and upon receipt the seller’s solicitors will send the following to the buyers conveyancers:

a) Transfer Deed, signed and dated by the Seller specifying the date of completion (this is then sent to the purchaser to sign)
b) Title deeds
c) If there is an outstanding mortgage on the property, a promise to repay it with proof of repayment as soon as possible.

Following completion other outstanding issues will be dealt with, these will include:

a) Stamp duty
If the purchase price is over £125,000 the Transfer Deed will have to be submitted to the Inland Revenue and the respective stamp duty paid
b) Registration
When the Transfer Deed is received from the sellers’ conveyancer duly stamped, it will be submitted to the Land Registry, together with the Title Deeds, the seller’s previous mortgage discharge form (that is proof of repayment of previous mortgage) and the Mortgage Deed for registration.  Once the completed registration is received the deeds will be scheduled and sent to your Mortgage Lender.


Once you have bought your investment, the hard work really begins in setting up your property ready to let out.  

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