By Maz Adam Iqbal
Once an offered has been accepted on a property, the legal process to transfer the property from the seller to the buyer begins and is known as conveyancing.
Each party will appoint their own solicitor and it is the role of each solicitor to safeguard the interests of their own client. For example, the sellers’ solicitor has a duty to safeguard the interests of the seller.
Usually, each party pays their own legal fees unless otherwise agreed. For example, sometimes a developer may provide an incentive that all legal fees are paid for a buyer if they use a nominated solicitor.
It is importance to emphasize that whilst the parties have agreed in principle that the seller has accepted the buyers offer, neither party is legally bound until an exchange of contracts takes place. Consequently, if one party drops out before exchange of contracts, legally there is nothing the other party can do.
A buyer may drop out of the agreed deal for a number of reasons and these include not being able to obtain finance or a mortgage or discovering something is wrong with the property whilst preliminary enquiries are being made.
A seller may also drop out of the agreed deal for a number of reasons and these include not wanting to sell, difficulty in moving elsewhere or simply that another buyer has made a better offer.
The Homework Stage
Before either the buyer or seller exchange contracts and be legally bound, there is a lot of information that needs to be gathered, searches done and enquiries made. The logic of course is that before any party enters into the legally binding stage that all the necessary homework has been done and the parties are happy to proceed.
The buyers’ solicitor will undertake what is known as local searches. These are requests to the local authority where the property is based to search their registers for data. Local searches can include environmental searches and mining searches. The aim of the searches is to ensure that the buyer is provided with full details of any matter in the local authority registers that affect the property being purchased.
The buyers’ solicitor will also send the sellers’ solicitors a series of questions that the seller needs to answer from personal knowledge on matters such as neighbour disputes. These questions are known as preliminary enquiries.
If a property is leasehold and in particular, a flat or apartment in a block, there is a lot of work to be done in checking the leasehold, the service charges over the last three years and many other leasehold specific work.
Once all the searches are in, the answers to the preliminary enquiries and any other enquiries, the buyers’ solicitors should consider all the information and advise the buyer of any issues.
A final check any prudent solicitor will undertake before exchange of contracts is to ensure the buyer has a mortgage in place (if required) and the purchase monies are definitely available.
Whilst the buyers’ solicitor is busy with homework, the sellers’ solicitors also has work to do. One of the first things a sellers’ solicitor will do is check ownership of the property and the nature of that ownership. For example, is the property owned as a freehold or leasehold? The sellers’ solicitor will also look into whether there are any rights or burdens attached to the property that must be revealed to the buyer. For example, a mid-terrace property may give the owner of the property next door a right of way to walk through your garden to get to their property.
The sellers’ solicitor will also send the sellers a Property Information Questionnaire. This is a relatively straightforward form that asks a series of questions about the property. For example, for apartments or flats, the Property Information Questionnaire will ask questions about the managing agents.
A second document that the seller will also receive from their solicitor is a Fixtures, Fittings and Content List. The seller needs to go through this thoroughly to confirm what is and what is not included in the sale price.
The sellers’ solicitors will send the Property Information Questionnaire and Fixtures, Fittings and Content List together with a draft contract to the buyers’ solicitors.
Once both parties are satisfied, the buyers’ solicitor will go through the contract and request any amendments if need be before asking the buyer to sign it.
Exchange of Contracts
The parties now exchange contracts. This means both buyer and seller are now legally bound to complete the purchase. The solicitors should now finalise transfer of ownership documents, check finance/the mortgage and fix a date for completion.
Completion means the day when the purchase price is fully paid to the seller or sellers’ solicitors and the property is transferred from the seller to the buyer. The property now belongs to the buyer and keys can be collected from the seller or their agent.
Sellers should be aware that it is standard practice for any estate agency fees to be paid from the sale proceeds before the balance is paid over to the seller.
Post Completion Matters
The sellers’ solicitor needs to pay off any outstanding mortgage and pay any fees such as estate agency fees and their own legal fees before sending the balance to the seller together with a completion statement.
The buyers’ solicitor will usually complete the stamp duty return, arrange for payment of any stamp duty and finalise the transfer of ownership with the Land Registry.
For more information and advice, contact us via http://www.sheffieldresidential.com
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