Questions and Answers
Q
When moving, should I sell first or buy first?A Ask around – estate agents, your solicitor, friends who have bought and sold locally recently. If you are confident your own house will sell, you may be more ready to buy first, especially if there is substantial competition to bid for properties on the market. If you do so, then whether or not you have sold or got an offer for your own house, you may have to conclude missives for the purchase of the new one, hope that everything turns out right, and that you get an offer for your own property in time. If you have a date of entry for your purchase that falls before your sale date, you may have to get a bridging loan from a bank for the whole purchase price, or else for the whole price less the new mortgage (though not all lenders will allow you to utilise your new mortgage before you sell your old house and repay your old mortgage). If by the time your date of entry for purchase comes around you have not at least concluded missives for your own sale, very few mortgage lenders will give open-ended bridging (and note: it is very expensive even if they will). If you cannot secure the funds for the purchase, you will not be able to pay, and you will be in breach of the contract of purchase. Usually the missives allow you a period of grace to get the money – 2 or 3 weeks from the date of entry – but if you cannot then complete, the seller is free to remarket the house, and you are stuck with interest on the price, any shortfall if it gets a lesser price this time, and also any additional costs and fees the seller incurs, such as removal or storage charges, legal expenses. It is safer to sell first, and if you have not bought a new house by the time you move out of your own (remember as your sale is a binding contract, the purchaser is entitled to move into yours if they pay the price on the entry date) then you will have to move in with the mother-in-law and store your stuff.
Q
What are title deeds?A Title deeds are your legal certificates of ownership registered centrally. The Land Certificate is the ownership document issued by the Land Register of Scotland, backed up by computer records there if you lose it. This system of Land Registration is throughout Scotland replacing the Sasine recording of deeds which has its roots in the feudal system of the middle ages. There is now being brought into being a paperless system: ARTL – Automated Registration of Title to Land, being rolled out from this year out. Registration will then be done electronically by your lawyer. In the meantime you can access the Register online at www.ros.gov.uk or visit one of their offices to check deeds. Or your solicitor can do a search for you.
Q
What is Conveyancing?A It’s the word lawyers use for property transfer. The main events in a conveyancing transaction are: a written contract (missives) is concluded between the seller and purchaser, a title deed is drawn up and signed by the seller into the name of the purchaser, delivered to the purchaser in exchange for the price, and then registered. The purchaser takes possession (entry/completion) at the time the price is paid. The transaction also usually involves searches to make sure there are no orders preventing the transaction proceeding, and reports on the property and the ground underneath it. The solicitors for the two parties handle all this.
Q
What are the usual legal costs involved in buying and selling houses?A To correct a common misconception, lawyers do not get all, or even most of what you have to pay out. The bulk goes, one way or another, to the Government. As a buyer, you pay a solicitor’s fee (which is a negotiable figure and should be agreed in advance), plus VAT at 17.5% on top of that (which goes to the state). If your property is being bought for more than £120,000, you have Stamp Duty Land Tax to pay (HMG again), at either 1% of the whole price up to £250,000, 3% if the price is up to £500,000 and 4% if more. There are also registration dues charged by the Land Register of Scotland on a sliding scale - and sliding right into the Government’s bank account. When selling, you have solicitor’s fee, plus outlays for property enquiry reports, title searches and even mining reports, plus a registration outlay if you are paying off a mortgage on the house being sold. Roughly the total of these searches etc. may be around £150 or so. The rates and combinations of figures make it impractical to show you comprehensive examples of the overall costs of conveyancing (and don’t forget you will have survey fees when buying, and estate agent’s fees and home report costs when selling, to add on), but it is a requirement for solicitors that you are provided with an accurate breakdown of costs in writing at the outset of a transaction you are instructing.
Q
When does the contract become binding and what if one person, either buyer or seller, wants out?A After missives are concluded, the binding contract is in place, and even though this may be weeks or months before the date for payment of the price (i.e. the date of entry or settlement), neither party can get out, unless some legal problem arises which is agreed in the contract as a reason to allow the party out (or resile from the bargain). In the absence of such a reason, there are hefty financial penalties for defaulting. It constitutes a breach of contract and the party left can sue the other in court.
Q
What about gazumping - is it only and English thing?A The English form of gazumping cannot happen – that is where a couple of days before completion of the transaction one party threatens to back out if the other party does not pay more money, or does back out when another purchaser comes along with a better price. In Scotland, conclusion of missives means that both parties are legally tied in to the contract – usually within a week or two of the original offer being made – and if one wants to back out or change things, the other can sue them to enforce the contract. However, before missives are concluded, there is nothing to stop either party backing out or holding a gun to the other’s head if he chooses to do so – though a demand for more money in the price or a change in the terms of the contract may result in the purchaser calling the bluff and leaving the seller with no purchaser at all. But if either party changes their instructions unfairly, their lawyer must resign from acting to preserve ethical standards.
Q
How can I be sure the house I am buying is worth it and legally safe?A The seller through his or her solicitor provides your lawyer with clear searches against the property in the Land Register of Scotland, and also a report fro the Personal Registers that the seller has no inhibition or sequestration orders against them that would prevent them having right to sell ( note these are different from ordinary Scottish civil court decrees or English CCJ’s which do NOT show up in this kind of search). Also the house must have a clear property enquiry report that there are no local authority repair orders or planning permission problems on the house, and a clear mining report that there are no underground problems from old mines known about. Also if there have been structural alterations to the house, your lawyer should check the seller provides the correct paperwork for them. And of course we now have Home Reports which are a legal requirement on the part of sellers.
Q
What is something goes wrong in a house sale or purchase?A If your solicitor has missed something that causes a loss to you, he or she may be liable to you for their negligence. If the other party in the transaction, i.e. the seller or purchaser has failed to provide something you are entitled to, you can seek compensation from that party for your reasonable losses as they are in breach of contract. You need to sue them in court if they will not pay up voluntarily.
Q
What if my surveyor makes a mistake?A Every chartered surveyor has a professional duty to those entitled to rely upon his or her expertise. This duty applies both when the surveyor is acting for a purchaser directly, or has prepared a Home Report on behalf of a seller on which the purchaser relies. If an error is made in a survey or valuation which should reasonably have been avoided, you may be able to claim compensation. But watch out. Surveyors can put in reasonable get-out clauses in their contract with you. Also be aware that there are various types or levels of survey from a basic valuation to an in-depth inspection (the seller’s Home Report contains a second-stage, or more detailed and thorough, survey). It depends on what kind you instruct as to whether detailed examination of, say, under-floor areas is to be done, or close inspection of the roof is to be carried out. The more you ask for and pay for, the better your protection. There is a legal difference between a full survey and a mortgage valuation in terms of what protections you have.
Q
Can I buy a property with someone else who is not a spouse or partner?A Yes, any two or more people can buy a flat either to live in or as a let or for any reason (though if letting out, you must now be registered with your local authority, and there is additional paperwork if it a house in multiple occupancy). But the advice is this: set down in writing what the deal is – who is putting in what money, who is entitled to live there (e.g. what if one of the owners want to move a girlfriend or boyfriend in, what happens if one party wants to leave the arrangement, who pays the bills and the repairs – and lots more). And if you are getting a mortgage make sure the lender is happy with the ownership formula. The security on which the mortgage is based should normally mirror the ownership, i.e. you can’t have three people owning and only one on the mortgage.
Q
How do I get the best mortgage deal?A You can take advice from a lender such as a bank, building society or other mortgage company, or you can speak to your solicitor if he or she is capable of giving this advice or is registered under the Financial Services Act (you can check this when you instruct him or her), or you can engage a professional mortgage broker or independent financial adviser. Be careful, shop around, and try to get as much information from the adviser as possible.
Q
If I am extending or altering my house, what do I need to do about consents and permissions? A Any work that changes the structure of the house needs a building warrant before the work is done, and a completion certificate after it is finished, to show it is authorised and satisfactory to the local authority building control department. If the work is done without this, then a purchaser can back out of a transaction when the problem comes to light. There is usually a clause in the missives of sale/purchase that specifies this so both parties know about it. If work has been done by you or a predecessor owning the property without this permission, you can ask the building control for a letter of comfort to be granted, saying that although the proper certificates have not been applied for or issued, the council are satisfied the work is ok and they will not insist on remedial action. If the work was not done safely , the building control dept can force you to put the house back as it was or carry out extra work to fix it. If something is being done that changes the external appearance of the house, planning permission may also be required (and watch out if you live in a listed building, as additional special permission is required for this). And if the title deeds so dictate, an owner may have to get the permission of the superior – who may be the developer if the site is modern, or the former landlord of the feudal estate on which the property is built.
Q
Can I alter or extend my house without asking my next-door neighbour? A If you are doing something that requires planning permission, then as part of the application you will need to give a neighbour notification form to all neighbours adjoining and within a set distance. They then have the right to object to the council, who will take any objections into account when deciding on your application. However, the neighbour has no right to appeal if you are granted the permission. If your alteration is up for 4 years without challenge, the council loses the right to force you to remove it.
Q
If I want to build a wall or fence do I need planning permission?A If the wall or fence in a back garden does not exceed 6 feet, or in a front garden 3 feet, you do not need planning permission.
Q
Can I get access on to my neighbour’s land to maintain my own property or erect a boundary wall or fence?A No, unless your title deeds give you specific permission to go on to neighbouring land for maintenance or repair, you have no right to enter the neighbour’s property. Also that fence needs to be totally inside your own land
Q
Can I buy my council house then give it to my family? A The local authority will only sell to the tenant or joint tenants and members of the immediate family who have lived in the property as their actual residence for the qualifying period. If you transfer to another family member or 3rd party before 3 years after acceptance of the offer to sell by the authority, all or part of the discount will be clawed back.
Q
What if I have a house and want to transfer it to my family? A There is nothing to stop you doing that (though if you have bought your local/public authority house, you must wait 3 years after accepting the offer to sell, or else part of the discount on the price will be clawed back by the selling authority), but see the next question…
Q
What about Notes of Interest, multiple bids and closing dates?A Where a property is on the market and potential purchasers view it, get schedules, examine S1 Homes website, make enquiries about the home etc., one interested party may be more serious or quicker than others about taking things forward. If so, he or she (or their Solicitor) may phone to make a Note of Interest in the property. This is a marker laid down with the estate agent that the party wishes to be involved if there is a closing date. The estate agent should then not fix a closing date nor accept any other offer without allowing the party who has made the Note of Interest to make their own competing offer. If there are multiple notes of interest then a closing date will be set by the estate agent under instruction from the selling client to give all parties the chance to make a formal legal offer through their solicitor, and the offers are all submitted to the estate agent in time for that deadline (it is usually midday). The seller is not duty bound to accept the highest or any particular offer but can choose which offer to accept under their own free choice. It is bad practice for an estate agent to allow an offer to be accepted when there are already notes of interest made by other parties. Unsuccessful bidders are not entitled to know the details of the successful offer.
Q
Can you describe the sequence of events in a house purchase/sale?A A. Conveyancing transaction are like fingerprints – no two are the same! The crucial thing is that purchasers and sellers have an understanding of the process, and are kept fully informed by their own solicitor as their transaction progresses.
Pre Offer:
Whether a purchaser or a seller, assess the market – look through S1 Homes for the range of properties in the area you wish to live – get a feel for the market
Purchaser:
Arrange mortgage ( solicitor, high street lender, mortgage broker, financial adviser, internet) in principle: how much can you/should you borrow, how much deposit have you saved, or how much equity is there in your existing property?
Seller:
Arrange estate agent, ask what services they provide – are they registered with property websites ( as we are) to give your property maximum exposure?
Speak to solicitor to:
a) let them know you might be requiring their services for formal offer, and b) to establish the legal costs of the purchase – stamp duty, registration dues, legal fees, searches, anything else. Don’t wait until you need an offer done that afternoon! Solicitors will not charge for this enquiry.
Offer stage:
Instruct solicitor to make written offer. This can be subject to survey or to inspection of Home Report, but will usually specify the price you’re paying, the date of entry (completion) , and a list of fixtures and fittings you’re buying, as well as a million and one legal clauses there to protect you.
Offer goes to selling solicitor or estate agent:
Selling solicitor receives the offer directly or via estate agent, goes over its terms with his client, and sends purchasing solicitor a written qualified acceptance. So called as it accepts the price etc (assuming it is acceptable!) but qualifies the list of purchaser’s legal clauses by deleting some or amending some, and adding in additional clauses to protect the seller.
Purchasing solicitor then goes over the qualified acceptance with his client and either replies in writing to the seller’s solicitor accepting their qualification clauses, and thus makes the contract binding between the parties, or sends s further missive back to the seller’s solicitor challenging some of his clauses.
This process, which can be of variable length and number of formal missive letters between the solicitors, ends with the seller and purchaser having agreed all legal terms, and being in a binding contract, which neither can escape from without the consent of the other, or without legal/financial penalty consequences.
Conveyancing stage:
This part of the process involves the seller’s solicitor sending the purchaser’s solicitor the title deeds and related documentation for examination, to make sure the purchaser is getting good title and clear searches and reports. The purchaser’s solicitor does this, and draws up a title deed for transfer to the purchaser of the property.
He sends the title deeds and searches back to the seller’s solicitor with the draft disposition (new title deed), the seller’s solicitor processes everything, and sends the purchaser’s solicitor the up-to-date searches.
The purchaser’s solicitor receives the loan papers from the purchaser’s mortgage lender. He processes these and draws up a standard security to be signed by the purchaser(s). This is the fundamental mortgage document and gets registered in the Land Register of Scotland with the purchaser’s new title deed after completion.
The purchaser’s solicitor advises the purchaser what exact sum is needed – deposit, legal costs, stamp duty if any, and arranges for that to be paid to him in time for completion.
Or,
if the purchaser is also selling a property to finance the new purchase, the solicitor will calculate the money to come in from the sale, to be paid out for the purchase, and the relative costs on both transactions, and advise the client if he has to pay money in to finance the purchase, or if there will be money left over that will go back to the client at the end of the process.
At the same time he reports to the mortgage lender as to the title and searches being clear, and asks for the mortgage funds to be sent to him to join with the client’s money ready to be paid over at completion.
Completion:
On the date of entry, the purchaser’s solicitor pays over the full purchase price to the seller’s solicitor, who instructs the seller or the estate agent to release the keys to the purchaser, and sends the title deeds and new disposition to the purchaser’s solicitor (some areas of Scotland have slightly different mechanisms for this settlement stage but the result is the same).
The purchaser’s solicitor pays any stamp duty to the HMRC, and sends the new deed to the Land Register of Scotland with the security for registration of the property in the name of the purchaser.
The seller’s solicitor repays the seller’s mortgage from the money he holds, deducts the legal and estate agency costs, and either sends the balance to the sellers (in their new home) or utilises that money towards the seller’s own purchase if happening at the same time.
Q
What are missives?A Missives are letters sent, as in mission or missile. The usual routine is that the purchaser’s lawyer prepares a legal offer in writing, containing details of the price, date of entry, contents, and a host of detailed legal conditions to protect the purchaser. The seller’s lawyer goes through the offer with his/her client, takes instructions as to the seller’s agreement or otherwise to the terms. The lawyer will then send a written letter (missive) of acceptance, but usually this will not be a simple acceptance, but one qualified by proposals to change or delete unacceptable clauses in the offer – hence the term qualified acceptance which you will hear solicitors use. The purchaser then must decide if he wants to accept or reject those counter-conditions. Once all aspects of the deal are harmonised, missives are concluded and thus a binding contract exists.
Q
What if I have bought, but intend to re-sell my council house within 3 years?A If you sell or transfer the house to someone else before then, you will have to repay all or part of the discount sum. Once you are issued with an offer to sell, you must give written acceptance within 2 months or the offer will lapse. If you sell the house or transfer it away within the first year after you accept the offer to sell, you will have to repay the whole discount to the council. If you sell within 2 years, it’s 66% to be repaid, 3 years, 33%. After 3 years as owner-occupier you can sell or transfer with no clawback. Also, if you die before the 3 years are up, the house can be sold by your executor without any clawback.
Q
This section contains a growing list of practical Q & A and FAQ. if you have a specific question not answered here, e-mail us with the query and we shA
