What first-time buyers need to know about conveyancing

In 2017 the number of first-time buyers in the UK reached its highest level in more than 11 years. That number is likely to increase further due to changes to Stamp Duty Land Tax (SDLT) and Government policies such as the Lifetime ISA.

Recent research highlights that first-time buyers can misunderstand the house buying process. Many misjudge the costs involved and are unaware of property professionals’ responsibilities. SDLT and general conveyancing terminology can cause confusion. Understanding these issues will help to improve the chances of a smooth transaction for a first-time buyer. Here is a summary of the process:

Agreeing the sale and instructing a solicitor

Once an offer on a house is accepted and the sale agreed, the buyer can instruct a solicitor to carry out the legal process in order for the property to change owners legally.

The solicitor will receive title and contract papers from the seller’s solicitor. The buyer’s solicitor will then:

  • ensure that good title is being given (the seller is in fact the registered owner of the property)
  • examine any rights or restrictions that may affect the land
  • check the terms of the lease if it is leasehold property
  • make enquiries about the owner’s use and enjoyment of the property
  • ensure that the buyer is happy with the arrangements for the purchase
  • organise various searches on the property with public bodies such as the local authority, assess the search results and report to the buyer with the findings
  • deal with the mortgage offer and conditions, if a mortgage is required.

The buyer should arrange a survey of the property. This will involve a detailed inspection of the property’s condition and identify any physical or potential defects.

Exchange of contracts

If everything is in order and the buyer is happy to proceed, the transaction can progress to exchange of contracts. This is where the buyer’s and seller’s solicitor exchange signed contracts on behalf of their clients. It is only from this point in the transaction that the buyer is legally bound to purchase the property. Up until exchange, the buyer is free to withdraw from the transaction without penalty.

The completion date agreed between the parties will appear in the contract. On exchange, a deposit is usually required to be paid to the seller’s solicitor. This is traditionally 10% of the purchase price.

The buyer’s solicitor then requests mortgage funds from the lender so that they arrive in time for the completion date. The solicitor will also request the balance of completion funds required from the buyer, along with the solicitor’s own fees for the conveyancing and third party costs such as Land Registry fees, searches and SDLT.

The solicitor will then carry out the final searches, such as a bankruptcy search of the buyer. A priority search will also be carried out at the Land Registry to protect the buyer’s interest in the property and to ensure that no last-minute problems have occurred with the title to the property.

Completion

Once the buyer’s solicitor has received the mortgage advance from the lender and the required balance from the buyer, they will send the completion funds to the seller’s solicitor on the date of completion.

Once the seller’s solicitor has confirmed that they have received the completion money and that completion has taken place, the transfer deed is dated by the solicitors. Keys will be released so that the buyer can collect them from the estate agent and move into their new property.

Post-completion formalities

After completion has taken place, the solicitor will arrange payment of SDLT to Revenue and Customs. As of 22 November 2017, first-time buyers do not have to pay SDLT on purchases of residential property for £300,000 or less, provided that the buyer intends to occupy the property as their only or main residence. If the purchase price is over £300,000 but does not exceed £500,000, the buyer has to pay 5% on the amount above £300,000. If the purchase price is more than £500,000, the buyer will not be entitled to any relief and will pay SDLT at the normal rates.

The solicitor will deal with the application to the Land Registry to register the transfer of ownership of the property into the buyer’s name. They will also deal with any notice of transfer or notice of charge that is required to be sent to the Freeholder or Landlord. Finally, the solicitor will send any documentation to the lender that is required.

Instructing a reputable firm of solicitors for conveyancing will help to ensure that the conveyancing process is completed as quickly and as smoothly as possible. If you have any questions about this article or you would like to instruct us to act for you on your purchase or sale of a property, please contact Ben or Karen.