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Procedure for Buying Property In The UK | Golden Roof Property Consultancy

Procedure for Buying Property In The UK


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(This fact sheet is for guidance only and while believed to be accurate, it necessarily contains summary, opinion and generalisation. It should not be relied upon as a basis for entering into transactions without specific professional advice tailored to the precise circumstances of the client. This fact sheet is copyright to GRPC and should not be reproduced for commercial purposes without our permission. However, it may be freely used by way of link to our website or for private purposes.)

 

Introduction

 

Although the UK procedure for buying property and verifying legal title and structural integrity is not especially complicated by comparison to other countries, taking professional advice is still essential. Even highly experienced UK nationals investing in property would normally instruct an expert lawyer and surveyor to guide them through these aspects of the purchase. At GRPC, we work with experienced professionals (solicitors, expert property surveyors and others) who we use for our own property transactions, to ensure our clients get good advice.

 

There are 3 types of purchasing process typically seen in the UK:

 

The private treaty sale

This is the most common type of purchase process. The seller markets a property for sale and concludes a privately negotiated sale with a purchaser.

 

Auction or tender sale

Here the seller advertises their property for sale in an auction catalogue and the sale is achieved through a public bidding process in an auction room.

 

Off-plan purchase

Technically this is just a type of private treaty sale, but the process can be slightly different because the property will not have been built when the initial offer for purchase is made.

 

Whatever type of sale is involved, most of the features are the same. The explanation here concentrates on the normal private treaty sale method as used in England and Wales. (There are important differences to purchase procedures in Scotland.)

 

Step 1. Offer

The purchaser makes an offer for a property and, perhaps after some negotiation, a price is agreed between buyer and seller. Normally an estate agent will act as go-between, trying to bring buyer and seller together into a deal (though the agent acts for the interests of the seller, not the buyer). Even when the offer is accepted by the seller, it is not legally binding. The buyer could still walk away from the process without legal liability. However, most buyers will not deliberately walk away at this stage as it is a waste of their time and money as well as everyone else’s.

 

In a normal private treaty sale, no deposit is paid at the offer stage. However, when buying off-plan, a developer would usually ask for a deposit, which may be quite small, for example £1000 (10,000 yuan).

 

The law does not require the seller at this stage to disclose any details about the property to the buyer other than its energy efficiency. However, the estate agent’s sales details must by law be accurate, though this accuracy really only applies to what they do say, not what they don’t say. Thus, there may still be quite a lot that the buyer doesn’t yet know about the property at this stage and the next stages of the process are therefore designed to increase the level of disclosure to the point where the buyer can safely enter into a legally binding purchase (subject to professional advice).

 

With auction sales, the procedure is quite different at this stage. When an offer (a bid in the auction room) is made and is successful (because it is the highest and exceeds the seller’s minimum price), the offer is legally binding . Unsurprisingly therefore, auction property sellers normally make available more information at this early stage, such as proof of title.

 

Step 2. Obtaining a survey (and a mortgage offer)

The surveyor will report on the structure and condition of the property and highlight any defects. There is no legal obligation for the buyer to obtain a survey. However, where the purchase is partly paid for by a mortgage, the bank will normally require a survey to be commissioned at the buyer’s expense. Provided the survey highlights no serious problems, the buyer’s lawyer (solicitor) will now go into action to investigate the legal title of the property and the bank (if there is one) will issue a formal mortgage offer to the buyer.

 

Step 3. Investigating the legal title

The buyer’s solicitor examines the legal title to the property as shown at the UK Land Registry. This will record the current property owner and the nature of the legal interest available for sale (freehold or leasehold), as well as a plan of the land which is actually included in the sale. The Register will also record whether there are any special restrictions on the property which might have negative consequences. The solicitor will also make searches of the local council to ensure that there are no planning issues within the vicinity of the property which may affect its value, such as the imminent construction nearby of a large and noisy road, or factory.

 

Step 4. Exchange of contracts

Assuming the examination of title and local searches did not produce any major concerns, the solicitor for the seller and buyer draw up a contract of sale. The terms and conditions are mainly in standard form. Once these contracts are “exchanged” (in practice these days there is no exchange as such), both buyer and seller are legally committed to the purchase. It is normal at this stage for the buyer to pay between 5 and 10% of the purchase price as a deposit.

 

In auction cases, the exchange of contracts takes place at the time the successful bid was received.

 

There is an exchange of contracts process in off-plan sales too, but the time specified to reach that stage after the offer was made will usually be quite short compared to pre-built private treaty sales.

 

Step 5. Completion

In most private treaty sales, there is a period of approximately one month between exchange and legal completion, when the sale is finally complete and the full purchase monies have been paid. This period is designed to give the buyer time to prepare to take possession of the new property (for example to buy furniture for it) and for any bank involved to arrange for the loan monies to be transferred to the buyer’s solicitor, from where it will be sent to the seller’s solicitor and then onto the seller. The new owner’s title is then registered with the UK Land Registry.

 

In off-plan purchases, there may be a stage between exchange and completion when the buyer visits the property now that it is hopefully fully-built, or very close to completion, to check that it is free of defects. Buyers maybe wise to bring with them a professional surveyor or building consultant to spot any defects which might only be visible to experts. The objective is to get the developer selling the property to rectify these defects before legal completion of purchase.

 

In auction sales, there is normally a strict 28 day gap between when the bid is accepted and when completion takes place. Auction sales are therefore the fastest way to purchase a property but, perhaps for that reason, the most risky way to purchase.

 

Most private treaty sales take about 3 months between offer and completion. Sometimes they can take a lot longer if there are complications.

 

How safe is the process?

 

By international standards, the process for purchasing property in the UK is very safe. Money is handled by the solicitors and instances of fraudulent misappropriation of funds by them are very rare. Where they do occur, the professional body for Solicitors (to which all Solicitors must be a member) would compensate the defrauded party out of an insurance fund.

Also, instances of attempted fraud by the seller are very rare but where, for example, a seller attempts to sell a property that he does not legally own, checks by solicitors would normally pick this up. In rare cases where it is not picked up for some reason, compensation schemes run by the Land Registry are likely to apply.

 

In some countries, there are reports of people paying large amounts of money to buy off-plan properties which are never actually built, perhaps because it was a complete fraud or because the developer went bust. While such risks do in theory apply in the UK , instances of outright fraud seem extremely rare. The great majority of new building projects are started by well-known large developers with a long track record. Furthermore, deposit monies are usually held in trust against possible company failure. The answer to the risk, as always, is to instruct diligent professionals to act for you and where possible, to buy from well-known developers with a good commercial history.

 

With regard to latent defects in the structure of the property, the level of safety is more in the hands of the buyer. It is up to the buyer to engage professionals, such as a surveyor, to make detailed structural checks before purchase. In the case of newly built properties, nearly all developers offer a 10 year guarantee underwritten by the National House Building Council, who can provide compensation for any latent defects that the developer fails to put right.

 

Finally, in some countries, there are stories of arbitrary and retrospective law making which might, for example, have the effect of seriously undermining the value of a property purchase. Again, instances of this type of problem in the UK seem rare and this is greatly assisted by powerful human rights laws (which protect property interests as well as other rights) and a powerful and fully independent judiciary.

 

In summary, with all the right checks and diligent professionals acting for you, buying property in the UK should carry a very low risk of fraud or other serious error compared to other countries.

 

We retain close links with trusted legal advisers used by us for our own property transactions, who we can be recommend for our client’s property purchases.