Buying and selling your home - the legal aspects
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The basic procedures
There are two separate stages in buying or selling a property. The first stage is that leading up to exchanges of contracts. When exchange of contracts happens, both the seller and the buyer are legally committed to the transaction. The completion (or moving date) is then fixed and the second stage of the transaction is the period between exchange of contracts and the completion date.
The actual process of exchanging contracts is dealt with by your solicitor and he or she will arrange for you to sign the contract in readiness for the exchange about a week or so before the anticipated date. You may have heard that when contracts are exchanged, the buyer has to pay a 10% deposit. It is correct that the buyer does pay a deposit since that is the seller’s guarantee that the buyer will not withdraw from the transaction after exchange of contracts. Usually, the deposit is between 5% and 10% of the purchase price.
If you are selling as well as buying, it is usually possible to use the buyer’s deposit for your purchase. It is advisable to discuss the deposit with your solicitor as soon as possible after the commencement of the transaction.
How long will it take?
Obviously, there are many factors (in particular the length of the chain of transactions ) that can influence this but generally, if there are no unforeseen difficulties, it should be possible to exchange contracts from to four to eight weeks after instructing your solicitor to proceed with the matter. The completion date is then about two to four weeks after exchange of contracts.
What does your solicitor actually do?
A broad outline of the service your solicitor provides is as follows:
For the seller
- Prepare the sale contract which contains all the terms and conditions of the transaction.
- Provide detailed information (excluding structural details) in response to enquiries made on behalf of the buyer (pre-contract enquiries).
- Deal with all financial aspects of the sale - including mortgage redemption.
- Arrange for the preparation, approval and signing of all necessary property transfer documents.
- Gas and electric checks
- Liaise with all parties to co-ordinate the timing of the sale.
For the buyer
- Check thoroughly the sale contract and amend where necessary.
- Peruse and check all legal documents affecting the property (including the lease, if the property is leasehold).
- Raise all relevant enquiries relating to the property, including any particular points specifically raised by the clients.
- Investigate planning and other local matters concerning the property with the Local Authority.
- Advise on relevant points in the survey report and negotiate and ensure that any agreement concerning repairs etc. is covered in the contract.
- Check through the mortgage offer and deal with any special conditions.
- Investigate the Title, i.e: ensure that the seller has the right to sell the property to you free of all legal encumbrances.
- Deal with all financial aspects, including the mortgage.
- Register ownership at HM Land Registry.
- Ensure that the clients are kept fully informed at all stages of the transaction.
How much will it cost?
Obviously, solicitors’ charges do vary between different firms but most solicitors are willing to give you a fixed written estimate of their fee for dealing with your sale and/or purchase. The solicitor’s fee is subject to VAT. There will also be certain disbursements which are payments which your solicitor has to make on your behalf. These are not subject to VAT.
If you are buying, the following disbursements apply (approximate figures):
The HM Land Registry fee which is between £190 to £550 (for properties in the price range of £100,000 to £1,000,000), depending on the exact price of the property. This is halved if the application is submitted online and there is an existing title.
The fee payable to the Local Authority for providing local, drainage and environmental searches to confirm there are no matters adversely affecting the property to the knowledge of the Council, is usually about £250, within Cheltenham Borough Council.
Stamp Duty charges from November 22 2017
- Up to £125,000 – Zero
- The next £125,000 (from £125,001 - £250,000) - 2%
- The next £675,000 (from £250,001 - £925,000) - 5%
- The next £575,000 (from £925,001 - £1.5million) - 10%
- The remaining amount (above £1.5million) - 12%
First-time buyers (from November 22 2017)
You don’t pay any tax on a property value up to £300,000 and 5% on the portion from £300,001 to £500,000.
If the price is over £500,000, you follow the rules for people who’ve bought a home before. Other minor disbursements such as land charges and bank transfer fees will be about £50.
Buy-to-Let and Second Homes Stamp Duty 2016
From April 2016, property buyers in England and Wales will have to pay an additional 3% on each Stamp Duty band.Find out more
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