Residential Conveyancing Basics
Residential conveyancing is the legal
transfer of ownership in a residential property from buyer to seller,
or the granting of an encumbrance on that property such as a mortgage.
The two major landmarks in any conveyancing transaction are the
exchange of contracts and completion. At the point of exchange, the
agreement to transfer ownership becomes legally binding and it is no
longer possible for one side to pull out without paying compensation to
the other (this is the transfer of equitable title stage). The point of
completion is the point in residential conveyancing at which money is
transferred from the buyer to the seller and legal title is transferred
from seller to buyer. It is at this stage that the property becomes the
buyer’s.
Conveyancing Solicitors and Licensed
Conveyancers
Conveyancing is usually conducted by
a qualified property lawyer or licensed conveyancer, though people are
free to conduct their own residential conveyancing. Conveyancing
solicitors or licensed conveyancers must have passed qualifying exams,
work to a code of conduct and have insurance to cover their costs in
the event of something going wrong. If you are unsatisfied with the
service that you have received from a licensed conveyancer or
conveyancing solicitor, it is possible to raise a complaint with the
Legal Complaints Service or the Council for Licensed Conveyancers.
There are a number of points to consider when conducting your own
residential conveyancing. Firstly, you will not receive any expert
legal advice, for example on a complex term in the contract or on other
property rights existing in the house you wish to buy. Unless you are
very experienced in this area, you are in danger of missing important
details such as the boundaries of the property. Secondly, the other
side may be less likely to enter into a contract with you if they are
not convinced of your legal conveyancing experience. If they do enter
into a contract with you and something goes wrong for which you are
legally responsible, you will have to pay the bill personally (as
opposed to your residential conveyancer). Thirdly, if you are taking
out a mortgage, you will have to pay the lender’s full legal costs. In
ordinary residential conveyancing transactions a mortgage lender will
use the borrowers conveyancer, but not if they are doing their own
legal work.
The Pre-Contractual Stage
At the pre-contractual stage of
residential conveyancing (before exchange), various tasks need to be
carried out. Obviously, the contract itself needs to be prepared. Your
conveyancing solicitors will carry out this work on your behalf. If you
are selling, your conveyancers will draft the contract and propose it
to the buyers. If you are buying, your conveyancers will negotiate the
terms of the seller’s contract to protect your best position. Some of
the important matters dealt with by the terms of the contract include
the boundaries of the property, whether any fixtures and fittings are
included, the utilities received by the property such as water and
electricity, the selling price, certain legal rights affecting the
property (such as a right of way) or planning restrictions and the
intended completion date.
Standard contracts used in residential conveyancing typically also
contain a clause exempting the seller from any liability arising from
the condition of the property. In other words, if it is necessary to
carry out repairs on a property you have just bought, you will have to
foot the bill yourself. It is therefore highly advisable to have a
survey carried out before the exchange of contracts and ask your
conveyancing solicitors to carry out searches to find out as much as
possible about the property. The seller is not required to tell you
about possible problems with their house or the neighbourhood, but if
you ask them directly about a problem they should reply truthfully.
The searches that should be carried out on your behalf vary according
to the property you are buying. In all cases, your conveyancing
solicitors should look into the title of the property – as a buyer you
would need to be sure that the property you are hoping to acquire is
free from any encumbrances that might impede a mortgage or your right
to later sell-on the property. The seller should be the legal owner of
the property. If not, they will be unable to transfer ownership to the
buyer.
Other searches might include a check for planned works with the local
authority, to make sure that the buyer is aware of any planned
roadworks or new developments that might negatively impact upon the
value of the property. If the property is in an old mining area, a
mining check should be carried out by your conveyancers to ensure that
there are no risks to human health or the structural integrity of the
property. This would include information on mineshafts, previous
subsidence claims, reported hazards and mine gas emissions that may
affect the property.
It would be wise at this stage to consider insurance over the property.
Residential conveyancing contracts usually provide that the risk of
damage or destruction to the property transfers to the buyer on
exchange. Should a fire occur on the property between exchange and
completion therefore, it will be at the buyer’s expense (or, if they
have a policy, at the expense of their insurer). Sometimes the seller’s
insurance policy will cover buyers for damage or destruction to the
property incurred up until completion. To be certain of protection, it
is advisable to consider all relevant documents and if necessary take
out a new insurance policy that grants the desired protection.
At this stage, because the buyer’s offer and the seller’s acceptance of
that offer are not legally binding, there is a risk of gazumping. While
the sale is ‘Subject to Contract’ either party can pull out at any
time, which a seller may be tempted to do if they receive a higher
offer during the pre-contractual negotiations and checks. When this
happens, the buyer will be left disappointed and potentially out of
pocket. There is little that your conveyancing solicitors can do to
prevent this practice, but good communication with all parties at this
stage is the best way of ensuring that things are moving along as
quickly as possible. Where the buyer has established some sort of
relationship through being flexible and amicable with the seller, they
may be better protected against this sort of let down.
Exchange of Contracts and Completion
Between exchange and completion,
there are often a number of tasks that need to be completed. The
deposit is usually paid at the point of exchange, and it is necessary
to confirm that the funds are in place for the full transaction to take
place. It is important to confirm also that the terms of the contract
have been complied with by both parties. For example, all of the
fixtures and fittings mentioned in the contract should be in place and
any agreed repairs complete. Final checks with the Land Registry can
ensure that everything is in order. Your conveyancing solicitor or
licensed conveyancers will also check through your mortgage documents
and carry out the final checks on the contractual documents to ensure
that legal title transfers as intended.
Once completion is achieved, the property belongs to the buyer, who
will receive the keys and legal documents confirming their good title
to the property. It will then be necessary to register the change of
ownership with the Land Registry and pay any Stamp Duty.
