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Conveyancing FAQs for First-Time Buyers

What are the key steps in the conveyancing process?

Answer: The conveyancing process can be divided into five essential stages:

1. Onboarding and Background Checks: We will conduct onboarding procedures, which include necessary background checks. This step involved verifying the source of funds, a legal requirement before proceeding with any property transaction.
2. Contract and Title Review: Once background checks are clear, we will review the contract and title documents to ensure that there are no issues or discrepancies that could affect your purchase. We then report to you on the title and provide you with the related documents we have reviewed.
3. Exchange of Contracts: This pivotal stage involves the formal exchange of contracts, at which point you will pay your deposit. Once contracts are exchanged, the agreement becomes legally binding, and both parties are committed to the transaction and a completion date is set for you to collect your keys.
4. Completion: On completion day, ownership of the property officially transfers to you. You will pay the final balance to the seller, and you will receive the keys to your new home.
5. Post-Completion: After completion, you will be responsible for paying any applicable Stamp Duty Land Tax. We will handle the submission of this tax and registration of your ownership with the Land Registry to ensure that your title is officially recorded in your name.

How long does the conveyancing process take?

Answer: The duration can vary based on several factors, such as the property type, any chain involved, and local authority processes. On average, it can take between 6 to 12 weeks, but it may be longer in complex situations.

What is the difference between freehold and leasehold properties?

Answer: A freehold property means you own the property and the land it stands on outright, giving you full control. In contrast, leasehold means you own the property for a specific period but not the land. You may need to pay ground rent and service charges. Leasehold property will generally have more restrictions. Our report to you will summarise relevant restrictions.

I am happy to proceed. What do you need from me to start the process?

Answer: To initiate the conveyancing process, we need the final terms of sale, often referred to as the sales memo, from your estate agent or the reservation form detailing the terms of your transaction. Once we receive this information, we will create your file and guide you through the initial steps, which will include you providing us with a copy of your passport, proof of address, and source of funds information.

Does your retainer include tax advice?

Answer: We will provide details of the Stamp Duty Land Tax that is payable. We have a dedicated Tax Team that can assist you with further specialist enquiries as may be necessary.

I have agreed an incentive with my seller. How does this work?

Answer: Any financial incentive will be deducted from the final balance due to the seller, and addressed in their completion statement. For example, if the seller has agreed to contribute to your legal fees, they will deduct that amount from the final balance we send to them.

Do you recommend I use a surveyor?

Answer: Yes, we strongly recommend using a surveyor, even when purchasing a new build property. A survey can identify defects or issues that need addressing before you finalise your purchase. You must arrange any survey before the exchange of contracts so that any findings can be raised with the seller, allowing for negotiations or repairs to be arranged as part of your transaction.

What are property searches, and why are they important?

Answer: Property searches are investigations conducted to uncover important information above the property and its surroundings, such as planning permissions, local authority issues, and environmental risks. These searches are crucial as they help identify potential problems that could affect your decision to proceed with the purchase. You don’t have to order searches if you are purchasing without a mortgage, but in most cases we would recommend them so you can have a more holistic view of the purchase and factors that may affect the property.

When should I apply for a mortgage?

Answer: You should check with your mortgage broker how long the mortgage process is likely to take. If you are buying a finished property, you must have your mortgage offer before you exchange contracts and commit to the purchase. If you are buying off-plan, it is advisable to speak with a mortgage broker early in the process to understand your options and get pre-approval before committing to the purchase.

What happens on completion day?

Answer: On completion day, the buyer’s solicitor transfers the final payment to the seller’s solicitor. On receipt of the funds, the seller’s solicitor dates the legal transfer, which has been signed by the seller, and contacts the selling agent to release the keys. You will usually be able to obtain the keys at about 1pm. The seller’s solicitor will send the transfer to the buyer’s solicitor, who will then deal with the land registration.

If you have any further questions, please contact our Residential Real Estate team.

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Assignment of Off-Plan Contracts

We regularly deal with off-plan contracts at Quastels. These are contracts to buy a property, usually an apartment, that is still being constructed. A significant difference between off-plan contracts and those for buying ‘second hand’ property is the flexibility to ‘assign’ the contract before completion.

An ‘assignment’ of a contract is the transfer of the benefit of the contract to a third party, who then completes the purchase. An assignment may be to a relative, or to your own company (often referred to as ‘family assignments’); or to an unconnected party, where you are effectively selling the contract on.

The Standard Conditions of Sale for second hand properties would not usually allow the purchaser to assign the contract before completion. Off-plan contracts, however, would usually allow this.

Upon exchange of contracts for an off-plan contract, the completion date will be on written notice from the seller (when the property is finished). This contract will contain an anticipated/target completion date for when the developer aims to complete the property (this will usually refer to quarter of their target completion year, for example Q1 being between January and March). When the property is finished, the buyer will be required to pay the remainder of the purchase funds to complete.

After exchange of contracts, and before the developer completes the building, assignment will provide an exit for the original purchaser with an assignee taking over the deal with the developer. The original purchaser would usually have paid a 10% deposit, they may also have paid a stage payment subsequently, sometimes an additional 5% or 10%. If the original purchaser is selling on the contract, they will require their buyer (the ‘assignee’) to reimburse the deposits paid, adjusted to take into account any profit or loss in the selling price to the assignee. The amount being paid for the assignment is known as the ‘assignment fee’. The assignment is effected by a Deed which transfers the benefit of the contract and the obligation to pay the remaining funds due to the developer.

Certain conditions are usually imposed by the developer to assign an off-plan contract:

1. obtaining developer’s written consent to assignment;
2. providing satisfactory ID and AML documentation for the potential assignee;
3. a time period within which the buyer cannot assign (usually not before 12 months from exchange of contracts and one month before estimated completion);
4. paying the developer’s lawyer’s administration fee (usually in the region of £500 plus VAT);
5. restrictions against using the developer’s marketing material;
6. only one assignment being permitted.

Overseas investors are specifically interested in the ability to assign contracts due to the potential to make financial gain in a rising market, or to address taxation changes. The provision also allows sensible flexibility for the purchaser, for example if their circumstances change, or they wish to add a relative to the contract.

It it important to be aware that not all mortgage lenders will agree to fund purchases that involve an assigned contract. An ‘assignee’ should always check with their mortgage broker first, as should a buyer thinking of assigning their contract to a relative.

If you would like to discuss issues involving this topic further, please contact Nargiz Abdullayeva.

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Why is there Leasehold Property Ownership? What Buyers Need to Know

When purchasing property in England and Wales, there is a clear distinction between properties being held on a leasehold basis as opposed to being held as freehold property. Leasehold property ownership derives from an historical feudal system, that has been phased out in many parts of the world, but remains a common way of owning property in England and Wales. Nearly every apartment in England and Wales is held on a leasehold basis. It is no wonder then that leasehold ownership has has a spotlight shone on it in the recent years, and is part of the UK government’s legal reforms to change some of the legislations surrounding property ownership.

Leasehold vs Freehold Property

Firstly, we set out the key features for freehold property:

• The property includes the land that it sits on, and is owned for an infinite time.
• No ground rent is payable, although for some freehold houses there may be an estate charge payable as a contribution towards estate management costs.
• The owner is responsible for the maintenance of the building, this includes the structures, roof and the foundations. It is entirely their property.
• Flexibility for alterations to be made to the building, subject to local planning laws and building regulations.

The key features for leasehold property include:

• Leasehold interest means that you hold the property for a fixed term, commonly the lease terms granted would be for 99, 125, 250 or 999 years from the lease commencement date.
• Ownership will be held under a lease whereby the freehold owner (the owner of the building) will be known as the Landlord or Lessor, and the leasehold (the property owner) will be known as the Tenant or Lessee.
• Annual ground is payable to the Landlord under leases granted prior to the Leasehold Reform (Ground Rent) Act 2022 coming into effect. Levels of ground rent can differ from property to property.
• Service charges are payable to the Landlord or an appointed management agent as a contribution towards the maintenance and repairs of the building and estate, and building insurance.
• Restrictions within the lease govern the leasehold owner’s rights and use of the property, including the terms on which the property can be let out, how the ownership can be transferred or sold, how common parts are managed and insured by the freehold owner, what alterations may be restricted.

Practical considerations for Buyers purchasing leasehold property

The remaining term of the lease is one of the most important considerations when purchasing leasehold property. The number of years remaining will affect the marketability and value of the property, some lenders will not consider the property as good security should the remaining term be below a certain number of years. The extension of lease terms is a niche area of property law and such rights and processes have typically been costly for a leasehold owner.

The ground rent and service charge structure and provisions should be reviewed as these need to be considered carefully as it can also affect the type of lenders that are willing to lend on the property, as well as having an effect on the marketability and affordability of the property.

Restrictions and regulations set out in the lease must be adhered to, any breach of a lease covenant (including non-payment of ground rent and service charges) could lead to a right of re-entry and forfeiture of the lease by the Landlord taking enforcement action in the courts. Complying with, or defending such action may be costly.

Key legal reforms

The Leasehold Reform (Ground Rent) Act 2022 effectively abolished ground rents on newly granted long residential leases granted after 14 February 2022.

Future reforms expected, particularly under the Leasehold and Freehold Reform Act 2024 will include:

• Easier and cheaper ways to extend lease terms.
• More control and rights for leaseholders in making decisions on how their buildings and common shared parts are managed.
• Potentially replacing the feudal system of leasehold ownership altogether, and replacing it with commonhold as introduced by the Commonhold and Leasehold Reform Act 2022.

Conclusion

Whilst there are more restrictions affecting the use, and potentially more charges payable under leasehold ownership in comparison to owning a freehold property, leasehold property is still an attractive ownership option for many property owners, particularly for overseas based owners who may want to own a ‘lock-up and leave’ holiday property, or a landlord to take care of maintenance and management for the building. The leasehold framework ensures that the Landlord is responsible for the maintenance, security and insurance maintained and implemented for the building, as it is in accordance with the Landlord’s legal obligations within its lease and required under current UK building safety regulations and guidance, which has also seen recent changes.

Our specialist residential property team are experienced in advising on leasehold property as well as freehold property, our aim is to ensure that you are fully aware of your legal obligations whilst owning a property in England and Wales. We would also be able to advise on the status of some of the key legal reforms mentioned in this article and how this may affect you buying property, whether it is for the first time in England and Wales, or as an existing property investor.

To get in touch with our Residential Real Estate team or APAC Desk, please fill out the form below.

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