Conveyancing Explained

In a bid to reduce property fraud, the Land Registry has introduced “Protect your Property”. The idea is that homeowners, particularly those with no mortgage, are at greater risk of property fraud if the Land Registry can’t contact them when someone makes an application (fraudulently) to register a financial charge against the property. It is also particularly relevant to buy-to-let landlords for the same reason.

You can contact the Land Registry or download the update form from their website at www.landregistry.gov.uk. The service is free of charge.

A new code operated by the National House Building Council (NHBC) and Premier Guarantee applies to all new build buyers’ reservations made on or after 1st April 2010. The aim of the code is to require homebuilders to provide more information to homebuyers, to ensure that they are treated fairly and that they are given enough information to know what to expect. In particular, the builders must provide specific information on delivery dates and the homebuyers’ right to terminate a contract.

In addition, a new dispute resolution service will be available for homebuyers who may dispute whether a builder has complied with the code. Gross non-compliance can result in the builders being removed from the NHBC and Premier registers.

You can find more information by visitng www.consumercodeforhomebuilders.com.

The latest indicators are that HIPs are to be abolished by our new Government, echoing what property professionals have been arguing for years – that HIPs do not add anything of assistance to the conveyancing process and in some instances, even slow the process down!

EPCs are to remain however; good news for all those who spent thousands of pounds training to become Energy Performance Assessors. Personally, I have found the EPC the most useless part of the HIP pack from a conveyancing point of view. Although I understand they will continue in an attempt to improve energy efficiency, I have yet to speak to a client who has actually read, understood and actioned or proposed to action anything contained in the EPC.

A new relief was put in place for first time buyers for completions taking place on or after 25th March 2010, for a period of two years.

The term “first time buyer” is defined as follows;-

1. The purchaser (or all purchasers for more than one) have never owned residential property before in the UK (with the exception of a lease with less than 21 years to run) or the equivalent anywhere else in the world.
2. They intend to live in the property, using it as their only or main residence.
3. The purchase price of the property is 250,000 pounds or less.

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.