Conveyancing Explained

This search is compulsory where you are purchasing a property from a company.

The search is undertaken in order to check that the company exists, is not subject to insolvency and has not been struck off the Register at Companies House.

If you are buying unregistered land from a company, the search is also undertaken to ensure that there are no adverse entries that may affect you as buyer i.e. fixed or floating charges or the appointment of a receiver or liquidator.

Just to remind you that as of 1st January 2010, we revert to the previous Stamp Duty threshold rates. You can find details on the website of HM Revenue & Customs here:-

http://www.hmrc.gov.uk/so/rates/rates-mar08-sep08.htm

You can also find the HMRC Stamp Duty Land Tax online calculator here;-

http://www.hmrc.gov.uk/so/new-sdlt-calculators.htm

Shared Equity Schemes were introduced in 2006, and branded as “Homebuy”. This scheme means that instead of buying part of the home and renting the other part, a Shared Equity home is bought on the open market. The purchase of it is funded via a Shared Equity Mortgage and by an equity loan from a Registered Provider.

Generally speaking, you need to meet the following requirements in order to qualify for HomeBuy;-

1. Buyers must be a tenant of a Registered Provider or Local Authority, or on their waiting list, or;
2. Be a Key Worker.
3. Be a Priority First Time Buyer; and
4. Have an annual household income of less than 60k.

Some property developers also offer shared equity schemes – I know that Miller Homes offer several Shared Equity property developments in my area. I’m not sure whether all mortgage lenders offer Shared Equity Mortgages, but I do know that most of the big ones, Halifax, Royal Bank of Scotland, The Cooperative Bank do have particular Shared Equity Mortgages.

Shared ownership property was first introduced in the 1980s, with the aim of assisting people in need of housing to get onto the housing ladder who do not have enough funds to buy a house outright. People also seem to use phrases such as “Part Buy Part Rent property”, “Part Ownership Housing”, “Affordable Housing” etc. to describe this scheme. Essentially, a Registered Provider of Social Housing or “RP” as they are known, grants a lease of a percentage of the equity in a property and rents the remainder to the tenant. For example, the tenant might buy 40% of the equity and rent the remaining 60%.

There are two different schemes introduced in respect of property ownership – SHARED OWNERSHIP and SHARED EQUITY. Both are marketed under the “Homebuy” branding.

Dealing with Shared Ownership – the main points are as follows;-

1. You must be a qualifying person, usually a Housing Association or Local Authority tenant, those on Housing waiting listings, or key workers (i.e. Police Officers, Nurses etc).

2. The Shared Ownership is dealt with in legal terms by means of a Shared Ownership Lease. You can find sample leases currently in use on the Housing Corporation’s website at http://www.housingcorp.gov.uk/server/show/ConWebDoc.8720

3. Some Shared Ownership Leases offer the right to buy further shares in the property at a later date, sometimes with a right to eventually buy the freehold. Many New Build HomeBuy Schemes are likely to be granted in this way.

4. STAIRCASING is the ability to buy additional equity in the property in the future. Some leases restrict the amount of equity that can be purchased via staircasing, in particular those intended for the elderly, which may also have a minimum age limit for the owners.

5. General rules contained in Shared Ownership Leases are absolute prevention of the buyer subsequently letting the whole or part of the property to another person, a requirement to notify the Housing Association of an intention to sell the property to obtain their consent or their nomination for another person to buy, a requirement to pay a service charge (particularly for a flat), and an annual review of rent.

SHARED EQUITY is explained in a separate article, as this is another type of marketed HOMEBUY SCHEME.

As I said in my article, “Want a low cost conveyancing service? Are you sure?“, it’s not necessarily just about finding the lowest conveyancing quote. Conveyancing is an important transaction in your life and you need to make sure it’s done properly. You want someone who gives you a good service, is knowledgeable, keeps you updated and explains things in a way you understand.

Are you going to get this from the cheapest conveyancing company? You might, but on balance of probability, it’s not likely. I would be more inclined to see what I thought of the conveyancing firm when I rang them. Did they seem knowledgeable when you asked them questions? Would they explain what the disbursements were and what the process was? Did they offer to let you have the conveyancing quote in writing so that you can see the breakdown of what they are including for you? If the answer to all these questions is yes, then I think you’ve found your conveyancer, provided the price isn’t astronomical!

Don’t be afraid to ask questions. Do they have online case tracking so you can see how far things have progressed when you want to and not just when they’re open? Do they write to clients via email, speeding up the rate at which you can get information about what’s happening? Can they explain a basic outline of what the process is? How quickly can you see or talk to your conveyancing solicitor direct once you’ve instructed them? All these issues can help you make your decision. Don’t just go on price. If you ring a conveyancing firm and they’re unhelpful when they’re trying to get your business, what will they be like when they’ve actually got it?

Make a considered choice with more information than just the cost!

I know when you read my next sentence, you’re unlikely to be impressed. The old maxim “You get what you pay for” applies to a conveyancing service, just like any other.

I know everyone nowadays wants the cheapest deal and that people think solicitors are grossly overpriced in what they charge for fees. That may be true of some solicitors, I’m sure, but if you actually saw the amount of work that your conveyancing solicitor actually does, then I believe you’d be more agreeable to paying a proper fee and not just using a cheap conveyancing service.

I would expect to pay from £300.00 upwards for a conveyancing solicitor’s fees alone. That being said, for a single transaction freehold purchase, I would not expect to pay more than £500.00 for the solicitors’ fees.

Remember that your conveyancing solicitor’s total quotation will also include third party fees, known as “disbursements”. You need to ask when getting a quote what the solicitor’s actual fee is.

On average, I would estimate that a conveyancing solicitor on a freehold purchase transaction, is likely to send and receive at least 40 letters and telephone calls and would spend at least 2 ½ hours working on your file throughout the whole of the transaction. When you look at the amount of work that should be done, you can see that really, conveyancing solicitors don’t actually charge that much in terms of their fee!

I do understand that people want to save money, I’m no different, but if you want a proper job to be done, then you need to pay a reasonable fee to your conveyancing solicitor and not just pick the cheap conveyancing quote. If your solicitor reduces his price too much, then it’s simply not cost effective for him to spend time on your file making sure everything is done properly and you’re more likely to be passed to an unqualified unsupervised fee earner. Corners can be cut, and you could simply end up with more problems in the future.

Obviously there is nothing wrong with wanting to get a good deal but cheap conveyancing companies are not likely to give you all the information you need about your new house because it takes too much time. Ring around your local solicitors by all means but see my separate article on “What to look for when getting a conveyancing quote” before you decide who to go with.

Whether contained in the Home Information Pack or whether undertaken independently, the Local Land Charge Search will reveal any planning permissions and building regulation approvals granted in relation to the property. Your solicitor needs to check that there have been no breaches of any permissions or approvals that might leave you open to enforcement action in the future

If the permissions are dated within the last four years, then the terms of them are still enforceable by the Council if a breach has taken place; however, if a period of four years has elapsed, then breach of planning permission is no longer enforceable. This is because after this period of time, any action by the Council is statute barred.

So, if you’re buying a property and you’re asked to pay for copy planning permissions to be obtained, they only need to be provided if they’re dated less than four years ago and usually, they would be provided by the seller. That’s assuming of course that the seller hasn’t refused to pay for them, which does happen.

The time period may not apply in relation to building regulation approvals and completion certificates however. Due to the findings of a case called Cottingham v Attey Bower & Jones (2000), solicitors should always ask for and obtain copies of the building regulation approvals and completion certificates (if cc’s were granted by that Council at that time). Breaches of building regulations can be enforced via an injunction under Section 36(6) of the Building Act 1984 and therefore, the Council can take action at any time, (although usually a period in excess of ten years expired is seen as satisfactory by mortgage lenders if no action has been taken), for works undertaken since 1985.  Prior to that, building regulation breaches cannot be enforced.

If the building regulation approvals cannot be provided by the seller, then they should be obtained through the local Council. Depending on the age of the documents, you might be able to get copies via the Planning Portal, which now enables people to access planning permissions and building regulation approvals relating to any property, online. You can’t always get them if they’re older documents though.

Please note that a building regulation approval is issued at the start of the building works when plans etc have been checked. A completion certificate is a more recent document that is issued by the building control officer once the work has been completed satisfactorily following his inspection.

If the documents cannot be provided, then indemnity insurance should be obtained by the solicitor to protect both you and if relevant, your mortgage lender.

If your solicitor has told you that you need one of these policies, it’s either because;-

1) He is protecting your interests if you are buying without a mortgage.

2) He is protecting both the interests of you and your mortgage lender, if you are buying with a mortgage.

If option 2) is relevant to you, then it’s unlikely that you have any choice in the matter. The mortgage lender will not allow the conveyancing solicitor to proceed to get your mortgage monies without the relevant policy is in place, protecting the mortgage lender’s security.

It is unlikely that your conveyancing solicitor benefits in any way by recommending policies to you. To my knowledge, it’s not something that the solicitor makes any money from, the money is just a third party fee (known as a disbursement) paid direct to the insurance company on completion.  Solicitors usually use the cheapest insurers offering the best cover, or they should do if they want to offer a good service to their clients.  Some I suppose may receive an incentive from the insurer for passing clients to them but if this is the case, then the solicitor is duty bound to inform you, so check the small print.  If this is the case, then ask for alternative quotes, because you may find a cheaper supplier.

If your seller refuses to provide a policy for something that’s wrong at the property, then you can either pull out of the transaction, threaten to do so and see what the result is, or bite the bullet and pay for the policy yourself. Unfortunately, some sellers point blank refuse to pay for policies, even though those policies are required due to something that the seller has done. In my view, this is completely unreasonable but as explained above, your conveyancing solicitor can’t actually proceed if you’re getting a mortgage without the policy is in place. It’s therefore up to you as to how you want to proceed.

It’s worth asking your conveyancing solicitor whether or not they obtain their indemnity insurance policies online. I get mine through a company called Legal & Contingency Limited. Their online policies are actually quite a bit cheaper than the paper ones, I recently managed to save my client over £50.00 on two policies by getting them online. Otherwise, the conveyancing solicitor basically has a file of sample policies, called “instant issue policies” which they just write out, and then send the cheque to the insurance company.

Before issuing the policy however, you should see a copy of the proposed policy, its terms and the quotation as to cost.  I always provide these documents to my clients for them to look through before we go ahead and instruct Legal & Contingency.  GCS and Norwich Union also offer such policies; however in my experience, they are more expensive, even when obtained online.

The Solicitors’ Disciplinary Tribunal recently found in a case brought to them that solicitors must specify clearly to you when preparing your bill, what they are actually paying out on your behalf for a bank charge and what they are charging for “organising the transfer”. In my view, no admin charge should be made, seeing as the work required is minimal and should form part of the conveyancing process.

If a solicitor is charging you more than the direct cost to them, plus VAT, they must make it clear to you that the excess is a charge by the solicitor and not an expense.

The recent decision by the SDT involved a case in which a firm of solicitors charged clients £30 plus VAT for telegraphic transfers. The actual cost in bank charges to the solicitors was £10 for each TT (a TT or telegraphic transfer is just a same day electronic payment from account to account). The remaining £20 represented profit for the solicitors, to reflect the work they did in organising the transfer; they billed their clients for a “disbursement” of £30, without making it clear how that figure was calculated. It is my view on speaking to clients that many other solicitors, certainly in my area, have done the same.

The SDT found that the solicitors had attempted to deceive their clients. This was a breach of their obligation to act with integrity (under rule 1 of the Code of Conduct to which all solicitors must comply) and of their duty to give clear information about costs (rule 2 C of C). The partners of the firm were fined £1500 each.

The same principle applies to fees for undertaking Money Laundering electronic identification check (EID). Some firms charge their clients more than the EID costs the firm. They cannot do so without making this clear to the client.

If you find yourself in any way unclear regarding disbursements, always bear in mind that you have the right to ask how the figure is calculated and whether it represents exactly the fee charged to the firm by the relevant third party.

Any breach of the Solicitors’ Regulation Authority Code of Conduct is treated very seriously and you would be entitled to make a complaint if you find yourself being deceived in the way described above.

Yet another thing to be aware of regarding solicitors’ costs!

As you may be aware, due to the current market difficulties, the Government announced on 3rd September 2008 that for one year, the stamp duty land tax threshold would be increased from £125,000.00 to £175,000.00.

This means that if you are buying a property for £175,000.00 or less and you complete the transaction before 2nd September 2009, you will be exempt from the requirement to pay stamp duty land tax.

On current information, it appears that on 2nd September 2009, the SDLT bands will revert to the usual thresholds i.e. £125,000.00 or less = no duty, £125,001.00 to £250,000.00 = 1%, £250,001.00 to £500,000.00 = 3%, £500,000.00 plus = 4%.