Conveyancing – FAQ’s
When should I instruct my solicitor?
It is always advisable to instruct a solicitor before an offer has been accepted, in order to accelerate the transaction. Plus, it is worth remembering that most solicitors operate on a no move no fee basis, which means that you will not pay any more by contacting them at an early stage.
You will only be liable for their services and associated legal fees in the event that the property sale/purchase goes ahead. However, it is worth checking this with your solicitor ahead of time, in case they have payment policies that differ from the norm.
How much should I budget for conveyancing costs?
Costs vary significantly from one transaction to the next, therefore should be discussed with your solicitor at the earliest possible stage. On average, legal fees associated with buying and selling a UK property with the value of approximately £230,000 (the national average) come in at around £1,000.
Though in all instances, this will depend on the nature and extent of the services provided by your solicitor. Always discuss your solicitor’s pricing structure before agreeing to their services.
How long will the conveyancing process take?
Conveyancing takes different amounts of time, in accordance with the complexity of the case and whether any delays occur along the way. Average conveyancing times vary from 8 to 12 weeks, though the process can be wrapped up quicker or take longer than expected.
Some of the tasks a solicitor will carry out on behalf of the buyer include detailed searches on the history of the property and the surrounding land, handling all financial aspects of the transaction, performing detailed investigations and raising enquiries, reviewing the information the seller provides, writing a full report on title and registering the property under the ownership of the buyer.
As a general rule of thumb, instructing your solicitor at the earliest possible stage holds the key to a smooth and streamlined transaction.
Can the same solicitor act for seller and buyer?
Technically speaking, there is no legal requirement for separate solicitors to act for the seller and buyer. In fact, it was once quite common for a single solicitor to support and represent the individual selling the property and the person buying it. However, it is a practice that resulted in frequent complaints, problems and delays, which led to the Solicitors Regulation Authority (SRA) forbidding the practice in their Code of Conduct for solicitors in 2011.
This was deemed necessary due to the potential for conflicts of interest. With a solicitor representing two parties on exact opposite ends of a transaction, there’s a risk they will disproportionately favour one party or the other – perhaps for their own financial gain. Hence, while it isn’t technically illegal for the same solicitor to act for the seller and the buyer, it is a practice forbidden in the industry’s own Codes of Conduct.
Am I a first-time buyer?
If you have never owned any type of property before, you are classified as a first-time buyer. The same also applies to couples, where both partners have never purchased or owned a property.
Clarifying the grey areas of first-time buyer classification, you are still considered a first-time buyer if you have purchased or owned a commercial property. Just as long as the commercial property has never been used for residential purposes, it does not affect your status as a first-time buyer.
However, it is worth noting that any residential properties you (or your partner) may have inherited without actually buying will typically disqualify you from any first-time buyer privileges. Roughly summarised, first-time buyers are those who have never owned a property that has (or can be) used for residential purposes, whether purchased or inherited.
What is the difference between “exchange and completion”?
The main difference between exchange and completion is purely logistical. The term ‘exchange’ refers to the exchanging of contracts between the buyer and the seller, at which point the transaction becomes formal and legally binding. By contrast, ‘completion’ occurs when legal ownership of the property has been transferred and the purchasing party moves in (or takes the keys to the property).
What’s important to be aware of is how when buying or selling a house, the transaction is not considered legally binding until all contracts have been signed by both parties. Until the contracts have been exchanged and signed, any party wishing to do so can walk away from the deal without facing any legal repercussions.
Can you exchange and complete on the same day?
Theoretically, it is perfectly possible to exchange contracts and complete the transaction on the same day. Just as long as all parties agree to it and all financial and administrative technicalities have been handled, simultaneous exchange and completion is possible.
However, this is not normally recommended. The reason being that if you exchange and complete on the same day, you do not have a binding contract in place until the day you are due to take the keys and move in. Simultaneous exchange and completion also means that up until the day you move in, the seller could change their mind and pull out of the transaction at their own free will.
Accelerating the property sale and purchase process is appealing for all parties, but exchanging contracts and completing the transaction on the same day can be risky.
What is a contract race?
A contract race occurs when a seller agrees to sell their property to several interested buyers at the same time – whoever completes the transaction quickest ‘wins’ the race. This occurs when a property attracts a lot of interest and the seller doesn’t want to risk wasting time on a prospective buyer who pulls out of the deal at a later stage.
Under the supervision of a solicitor, the seller distributes ‘contract packs’ to multiple interested parties, who must then work as fast as possible to beat the others to the punch. The downsides of a contract race being that not only can it be quite expensive (due to the extra legal work required), but many would-be buyers are simply unwilling to enter into these kinds of hurried and competitive transactions.
What is a “local search”?
A local authority search (or local search) will be carried out by your solicitor as part of the conveyancing process. There are two parts to a local authority search – a LLC1 and a CON29 – both of which ensure that there are no legal or administrative issues with the property and the surrounding land, prior to the purchase going ahead.
Checks regarding potential issues and restrictions conducted as part of a local search include:
- Environmental searches to determine risk of flooding
- Proximity to waste sites or contaminated land
- Water authority searches
- Whether the building is listed
- Tree protection orders on the property
- Requirements for improvement or renovation grants
- Buildings located in conservation areas
This is a relatively complex and time-consuming process, which involves scouring through official local government records and additional resources. While it is technically possible to complete a property transaction without a local search, doing so nonetheless opens the door to a wide variety of potential risks.
Is a survey really necessary?
Organising a professional property survey is considered mandatory by most real estate experts. While there is no legal requirement for a survey to be carried out, it is nonetheless the only realistic way of ensuring the property is up to scratch and there are no discrepancies with the history of the deed or who has rightful ownership of the property at the time of the transaction.
Nevertheless, estimates suggest that as many as 7 million movers each year in the United Kingdom choose not to organise a survey. Most of which make their decisions based on the costs of professional property surveys alone, not realising surveys are carried out to save homebuyers money long-term.
If you purchase a property that hasn’t been surveyed and find yourself facing an enormous construction or renovation bill shortly afterwards, you may regret skipping this invaluable service.
What is gazumping?
Gazumping occurs when a verbal offer on a property is accepted by the seller, who then goes and sells their property to someone else at a higher price. It is worth remembering that until all contracts have been exchanged and signed, both the seller and the buyer are legally entitled to walk away from the deal at any time.
Verbal contracts are in no way binding or formal where property transactions are concerned. Irrespective of the assurances a seller provides, there is still a chance they will (enthusiastically) accept a higher offer from somebody else.
This is one of many reasons why it is important to get things formalised and finalised as quickly as possible, if you want to avoid the risk of being gazumped.
Do I Pay Capital Gains Tax?
Capital gains tax (CGT) is payable on the proceeds of many types of property sales in the United Kingdom. If you sell your primary residence for any purpose, you will not usually be liable for capital gains tax. Instead, capital gains tax applies when selling second homes, buy-to-let properties, investment properties and most types of commercial properties.
The UK’s current capital gains tax rate is relatively high, with basic rate taxpayers facing an 18% charge on gains made when selling a property. Those in the higher-rate tax band are liable for a full 28% CGT payment. There is an annual CGT allowance of £12,000 for 2019-20, which is the maximum profit you can make on a property sold without being liable for capital gains tax.
Can I avoid inheritance tax?
Avoiding inheritance tax entirely can be difficult or impossible. If you intend to leave behind a relatively large estate, you will be liable for certain taxes and levies that cannot be avoided. Nevertheless, there are various strategies available that can significantly reduce your inheritance tax liability, which should be considered at the earliest possible stage.
A few examples of which include the following:
- Giving gifts
- Leaving money to charity
- Leaving your estate to a spouse
- Maximising your property allowance
- Considering equity release
- Taking out life insurance
- Using a deed of variation
Each of these represents a way of redistributing your wealth and your assets in advance, in a way that minimises your liability for inheritance tax. Consult with a solicitor to discuss which of these (and other) strategies are most appropriate for your case and your intentions for your estate.
What is Remortgaging?
The term ‘remortgaging’ refers to the process of paying off an existing mortgage with an entirely new mortgage, which is secured against the value of your home. Remortgage deals may be offered by the original mortgage provider, though are often sought from competing lenders to get a better deal.
In essence, a remortgage is very similar to a traditional mortgage – it’s just that it is used to pay off your existing mortgage and replace it with a new loan.
Why should I remortgage and can I save money?
Remortgaging at the right time and with the right lender could save you a small fortune. If a competing lender is willing to offer you a remortgage at 2% and you are currently locked into a 5% deal, the long-term savings could be enormous.
Some of the most common motivations for remortgaging a home in the UK include the following:
- Your current introductory deal is coming to an end
- A competing provider can offer you a better deal
- You want to raise money by borrowing a larger sum
- You’re separating from your partner and dividing your assets
- The flexible rate on your mortgage is increasing
- You are simply dissatisfied with your current lender
Whatever your reasons for considering remortgaging, it’s advisable to speak to a solicitor or broker in advance to discuss the available options. In addition, conducting a detailed and thorough market comparison is essential, in order to ensure you get the best possible deal.
What Are the Differences Between Tenants in Common and Joint Tenants?
Tenancy in Common applies when two or more persons purchase a property together and (may) have unequal shares in the overall value of the home. For example, one of the tenants may take up to 50% stake in the home, with the other two tenants own 25% each. Tenancies in common can also be entered into at different times.
With a joint tenancy, all buyers are entered into the same deed on the property at the same time, and take up an equal share of the home – there is no flexibility regarding individual shares of the property’s ownership.