I am often asked by buyers, either first time buyers or buyers who have not purchased a property for a number of years, for a brief synopsis of the buying process. The following is an outline of that process, which I hope you find useful.
It would be difficult, not to mention lengthy and laborious (to read and to write), to set out every stage in detail as no two transactions are the same and some take far longer than others to reach completion.
For the same reason, I suggest that you don’t try to draw too many comparisons between your purchase and that of your parents, friends and colleagues. The speed at which transactions take place depends on various factors, and the combination of factors rarely identically match.
Agreeing a deal – “subject to contract”
Firstly, you need two parties, a willing seller and a willing buyer. Action from both sides is required: the seller in completing various bits of paperwork and the buyer in putting together their proof of funds and, if applicable, arranging a mortgage.
Once a price has been agreed, the estate agent will issue a memorandum of sale to both parties’ solicitors confirming that a deal has been agreed “subject to contract”. You may be tempted after receiving the memorandum to tell your friends that you have “bought a house!” This is very common. I said it myself after I agreed to buy my first flat when I was already a practising property lawyer and should have known better.
Of course, you haven’t bought a house (or a flat) at all, but you’re well on the way. What you have done is agreed in principle to buy a property, but this is not binding on either you or the seller until “exchange of contracts” takes place (for more on this see below). Apart from picking up the keys, this is the most exciting moment in the process.
The start of the legal process
On receipt of the memorandum of sale, the solicitors will confirm to each other that they are instructed, and the buyer’s solicitor (your solicitor) will request draft documentation from the seller’s solicitor.
The draft documentation will usually include a draft contract, Land Registry title information, an energy performance certificate (EPC) and property information forms, which have been completed by the seller. If you are purchasing a flat rather than a house, then a copy of the lease will also be provided. Other documents may form part of this draft documentation package, but the above items are usually supplied as a minimum. If the seller has already completed the property information forms, it should only take the seller’s solicitor a couple of days to send across the draft documentation to your solicitor. If the seller has not completed the property information forms then there could be some delay. If it takes the seller more than a few days to complete these forms, you may be able to draw some idea as to how speedily the rest of the transaction might roll (or drag) along.
If you are purchasing a flat, the seller’s solicitor will also supply a leasehold sales pack, which they will obtain from the landlord or managing agents of the building. This pack will set out the service charge information, confirm whether any major works are planned to the building, and should contain a fire risk report and other relevant paperwork for the building. The pack is unlikely to be supplied with the initial papers as it can take up to two weeks for the managing agents to put it together and send it across.
Once your solicitor has received the draft documentation, they will request “searches”. You’ll no doubt have been told about searches already as the word will have crept up on a number of occasions. At this stage you’re probably not entirely sure what they are, you just know you need them. You do. You will normally have to pay money in advance to your solicitor for the searches (and your solicitor will hopefully ask for this within a day or so of receiving the paperwork). Searches are mandatory where you are purchasing with a mortgage, and are highly recommended where you are using your own money to fund the purchase.
Briefly, (and stay with me here), searches will normally include:
- a search of the local authority asking for information about planning, any enforcement action taken in relation to the property, and plans for changes to the local neighbourhood, including new roads and road adoption, etc
- a water and drainage search confirming (primarily) that the property is connected to mains water, and public sewers and drains (or not, as the case may be)
- an environmental search (giving information on any environmental constraints local to the property – this could be about flooding, ground instability and/or contamination, for example), and
- a chancel liability search (you don’t need to know about this one particularly and if you ask for information from your solicitor, you’ll probably regret doing so. Your solicitor will no doubt report on the result of the search once received and at that stage you’ll know you were right not to ask…).
Searches are ordered by your solicitor and the replies to these searches are usually supplied by a third party search provider. The searches are not conducted on site and the replies are based on information held electronically
The local authority search will be received later than the others, which are usually returned within 24 hours of being ordered. The time it takes for the local authority search to return will depend on the speed at which it processes the request. For some it is three days, for others (notably London Borough of Camden at the time of writing), it is closer to three months.
It is important that your solicitor requests searches as soon as possible to avoid delays.
The contract, title and enquiries
Next, your solicitor will fully review the draft documentation and raise enquiries of the seller’s solicitor. These enquiries will be based on the documents supplied to us and will be made to clarify matters, request additional paperwork and ask further questions. The intention of these enquiries is to try to reach a position where we can comfortably confirm that the property is legally sound and compliant. Some solicitors will wait for all the searches to return before moving to this next stage, but it is usually better (and quicker in the long run) to start this process as soon as possible. At Portner, we review the papers and raise enquiries as soon as possible as the back and forth between solicitors that usually comes at this enquiries stage can determine the time it takes to reach exchange.
Dealing with enquiries can take anything from a few days to several weeks or, dare I say it, months. It all depends on the time it takes for the selling party to respond to the enquiries and the extent of the enquiries raised.
Where you are purchasing with a mortgage, your solicitor will need to ensure that the property adequately meets any requirements of your lender as your solicitor is acting for both you and them. There may be some missing information or paperwork that the seller cannot supply, for instance, that you are happy to take a view on not having but your lender would not. This should be kept in mind if you ever find yourself becoming frustrated with your solicitor for not taking a risk you’d be willing to.
It is at the enquiries stage that all parties need to work together to try and reach a satisfactory conclusion allowing the transaction to advance.
Once all enquiries are dealt with, all searches are back and you have received your mortgage offer, your solicitor will report to you on theproperty. This report should explain all the paperwork supplied to your solicitor, run through the search results and provide detail on the enquiries and replies received. Your solicitor may have reported to you as the matter progresses or may wait until this stage to send a final report on all findings to you.
Exchange of contracts
If you’re happy to proceed, then an exchange of contracts can take place. Before exchange, you will need to sign the contract, pay a deposit of 10% of the purchase price to your solicitor (except on occasion a lower deposit may be accepted on exchange) and a completion date will need to be agreed with the seller. Completion is usually between one and three or four weeks from exchange, but this is transaction specific and there is no set rule.
Exchanging contracts sounds exciting, and it is (!), but in reality it is a three-minute telephone conversation between the two solicitors. It is important that you are totally happy to purchase the property at this point as once contracts have exchanged you cannot withdraw from the transaction (except under certain unusual circumstances). Nor can you change the completion date unless all parties agree.
Before the completion date, your solicitor will put together a financial statement setting out the balance of the purchase price payable plus fees (including legal and land registry fees), disbursements and Stamp Duty (if payable), less the amount you are receiving under your mortgage (if you are getting one). You will need to put your solicitor in funds in advance of completion.
If you are purchasing with a mortgage, your solicitor will request the mortgage monies. These will not be sent directly to you, and once you’ve accepted your mortgage offer there is usually no reason for you to be in touch with your lender until after completion.
Prior to completion, you will need to sign various documents. The documents you will need to sign will depend on the transaction, but you will usually be asked to sign a transfer and the mortgage deed. If the property is leasehold, there may be a new lease to sign, a deed of covenant and a licence to assign too but your solicitor will let you know exactly what needs to be signed in advance of completion.
On completion, (at last!) you will be able to pick up keys from the estate agent and move in. Keys will only be released once the seller has moved out of the property and all monies have been transferred to the seller’s solicitor. The time the keys are released depends on your place in the chain (if there is one). For the purposes of this article, I am assuming that you have no property to sell and you are therefore in the lucky position of being the “bottom of the chain”. It doesn’t sound great, but it is.
The above is a broad overview of the buying process, and I do hope it has proved useful. My advice is always to stay optimistic but remain realistic. Some transactions can complete very quickly and some take longer, but it is only in rare circumstances that purchases crumble entirely when all parties remain committed to completing the deal.
For any further information in relation to this article please contact Sarah Richardson: [email protected]