Buying a property in England and Wales

How to hold/own property

Individuals

There are two ways in which a property can be owned by two or more individuals:

Option 1 – ‘Joint Tenants’

Each joint owner owns the whole of the property. When one joint owner dies, their interest disappears. No part of the property can be transferred under a will. The surviving joint owner(s) are left owning the whole of the property.

In the event of a sale during the joint owners’ lifetimes, the general rule is that they will be entitled to equal shares of the net sale proceeds, even if one has made a greater contribution. Exceptions to this rule can and do arise.

Option 2 – ‘Tenants in Common’

Each party owns a separate and distinct share of the property; 50%, 70%, 30% etc.

When one owner dies their share in the property will pass to the person named in their will. If no will exists, it will pass to the next of kin under English and Welsh intestacy rules – subject to challenge.

This option may be appropriate where:

  • one co-owner does not wish the property on death to pass automatically to the surviving co-owner
  • co-owners make unequal contributions towards the purchase price and/or deposit
  • co-owners will make unequal contributions to the mortgage payments and/or maintenance of the property
  • it is a business venture

If Ownership in Common is chosen:

  • a precise agreement between the co-owners must be documented in a formal Declaration of Trust or Cohabitation Agreement, updated to reflect changes in circumstances
  • each co-owner must make a Will setting out what is to happen to their share in the property on death
  • a restriction can be entered on the title to the property at the Land Registry to protect the value of any deceased’s co-owner’s share in the property on their death

(Note) Converting from Joint Ownership to Ownership in Common is possible.

Companies

Companies can purchase/own properties directly. It can be advantageous for a new company to be used to hold each property, the company can then be sold rather than the property. This will avoid Stamp Duty on a sale with potentially lower Stamp Duty paid on the purchase of a company’s shares. There may still be other tax issues to consider.

Other points of Note

Financing Property -- Mortgages

No matter which type of joint ownership is chosen, each borrower or guarantor could be liable to a lender for the full amount of money owed.

Client Identity

This is governed by the Council of Mortgage Lenders Requirements, Money Laundering Regulations 2007 and Law Society Requirements.

Only original documents are acceptable – if a client is not being seen with the documents then copies should be certified by a qualified lawyer, notary, embassy, consulate or high commission in the country in question. The authenticity of the certificate should be verified. Photocopies must be retained. Examples of appropriate paperwork are below, one from each column is required:

Evidence of name

  1. A valid full passport.
  2. A valid forces id card with signatory’s photo.
  3. A valid UK or EEA Photo-card driving licence.
  4. A national identity card.

Evidence of address (must not be the same document as used for evidence of name)

  1. Any item listed in column 1.
  2. A letter from a qualified lawyer in the country of main residence confirming that the individual is known to him and confirming either a residential or business address.

Other documentary evidence of identity may be taken.

Costs

Legal costs for acting can vary depending on the following factors:

  • Purchase price
  • Complexity of the transaction
  • Tenure of property – Freehold or Leasehold
  • New build or established

In addition to our legal fees, we charge an additional sum for acting for a mortgage lender. At present this is £250 + Vat (20%) and a Stamp Duty Land Tax procedure fee of £100.00 plus Vat.

Disbursements

The cost of searches varies slightly from area to area but an estimate of £300 is realistic. This will normally include; Identity verification; Bankruptcy searches; Land Registry priority search; Local Authority search; Water, Environmental and GroundSure searches; and Chancel Check.

The Conveyancing Process for a Typical Property

The seller’s solicitor will supply a draft contract and other details such as the property’s title. The buyer’s solicitor will examine it and any supporting documents and raise any necessary enquiries. These will be sent to the buyer to check and raise any queries or concerns on by way of a Report on Title.

There are things which a buyer may not know about the property just from viewing it with estate agents or even from a survey. The conveyancing process therefore addresses a number of legal searches to ensure there are no other factors you should be aware of. These will be things like;

  • Local authority searches: are there plans for a motorway in the garden or concerns about radioactive gas!
  • Checking the ‘title register’ and ‘title plan’ at the Land Registry
  • Checking flood risk - water authority searches – find out how the property gets its water and if any public drains on the property might affect extensions or building works
  • Chancel repair search – to ensure there are no potential leftover medieval liabilities on the property to help pay for church repairs.
  • There may also be certain location specific searches – examples include: Tin searches in Cornwall, mining searches in Warwickshire, Radon gas search in Somerset, an environmental search from the Environmental Agency which shows whether, for example, the plot used to be a landfill site.

Additional questions may be necessary where the property is being purchased “off plan”, that is to say before the property has been constructed. Newly built properties may have warranties that need consideration. If the property is being purchased as an investment there may already be tenants in it and their lease(s) will need to be considered.

A mortgage valuation is carried out on behalf of any mortgage company so they can establish it provides sufficient security for the loan.

A buyer will consider any other necessary surveys. The type of survey will depend on the specific circumstances.

Before the exchange of contracts can take place a lender will require Buildings Insurance to be obtained. Under UK law, a purchaser is responsible for the property as soon as contracts have been exchange.

Before signing/exchanging contracts it is necessary to ensure:

  • that all enquiries have been returned and are satisfactory
  • that fixtures and fittings included in the purchase are as expected
  • A completion date has been agreed – usually 2 to12 weeks after exchange of contracts
  • That arrangements are in place to transfer the deposit so that it is cleared in time for exchange. The deposit is normally 10% of the purchase price of the property. If less than 10% a buyer may still liable for 10% of the purchase price if they later pull out of the agreement.

Exchanging contracts is usually done by telephone. Once exchanged a buyer is legally bound to buy the property. If not they will normally lose their deposit and be liable for other losses for breach of contract.

Between exchange and completion a buyer will lodge an interest in the property which will mean that the deeds to the property are frozen, to allow completion to take place and to enable post completion matters to be carried out.

After completion Stamp Duty Land Tax needs to be paid, registration paperwork lodged with the Land Registry, title deeds need to be sent to any lender.

Please note that neither these notes nor anything said during the presentation should be relied upon as legal advice. Neither these notes nor the presentation constitute advice on the interpretation and application of the law to particular circumstances or matters.

The material for this presentation has been designed solely for the benefit of delegates attending the presentation. The material does not stand on its own and is not intended to be relied upon for giving specific advice.

To the fullest extent permitted by law, neither Gisby Harrison nor its presenters will be liable by reason of any breach of contract, negligence or otherwise for loss or damage (whether direct or indirect) occasioned to any person acting or omitting to act or refraining from acting on the presentation material or the presentation arising from or connected with any error or omission in the presentation material or presentation. Nothing in this paragraph shall be deemed to exclude or limit liability for death or personal injury.

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