Wealth transfer

Here is perhaps a useful snapshot barometer of the world, in terms of finances :-

• Only 1 of the 20 most expensive homes in Britain has been bought by a Brit in the last 5 years
• 8 of the top 20 properties were sold by Brits in the last 5 years
• Outside of the top 20, in the £10,000,000.00 plus bracket, estate agents report that foreign buyers are responsible for about 50% of purchases, rising to around 90% when prices rise above £30,000,000.00.

GUIDE TO BUYING AND SELLING YOUR HOME

The conveyancing process starts after an offer has been made and accepted for a property. The estate agent will prepare a sales memorandum confirming details of the sale and provide details for the buyer, seller and their respective solicitors.

Most straightforward conveyancing transactions will then follow five main stages detailed below:-

1. PRE EXCHANGE

Both the seller and buyer will instruct their respective solicitors. The buyer will put his solicitor in funds for searches and arrange mortgage finance and survey. The seller will complete standard property information forms and a fittings and contents list setting out the items which are included as part of the sale. The seller’s solicitor will prepare a contract package to included these completed forms and send the contract package to the buyer’s solicitor. The buyer’s solicitor will then raise enquiries and submit necessary searches.

Once the mortgage offer has been issued the buyer will receive a copy of the offer and the mortgage company will send a copy to the buyer’s solicitor. The buyer’s solicitor will check the mortgage offer and deal with any special conditions contained in the offer.

Once the buyer’s solicitor has received replies to all enquiries from the seller’s solicitors, all search results and a satisfactory mortgage offer he will report to the buyer and arrange for the buyer to sign the contract and mortgage deed and request a deposit of ten percent of the purchase price.

The seller’s solicitor will at the same time, arrange for the contract to be signed by the seller.

2. EXCHANGE

When the buyer’s solicitor is holding a contract signed by the buyer, the ten percent deposit in cleared funds and a signed mortgage deed and the date for completion is agreed, he will be able to effect an exchange of contracts. The seller’s solicitor and buyer’s solicitor exchange contracts and fix the date for completion over the telephone and the buyer’s solicitor will send the contract to the seller’s solicitor with the a solicitor’s client account cheque for the ten percent deposit and the seller’s solicitor will send the contract signed by the seller to the buyer’s solicitor.

3. PRE COMPLETION

The buyer’s solicitor will request the mortgage advance from the  mortgage company to arrive either on the day of completion or the working day before completion. The buyer’s solicitor will also send a breakdown to the buyer setting out the full balance payable before completion. This figure will included solicitor’s costs, stamp duty and land registration fees.

The seller’s solicitor will obtain a redemption statement for the seller’s existing mortgage which must be redeemed on completion. The seller’s solicitor will also send a breakdown to the seller setting out the net proceeds of the sale due to the seller on completion. The mortgage redemption, solicitors costs and estate agents commission invoice will be reflected in this breakdown and paid buy the seller’s solicitor on completion.

The buyer’s solicitor will carry out pre completion searches and prepare a transfer deed to be signed by the seller which is used to register the transfer of the property at the Land Registry. If approved, the seller’s solicitor will forward the transfer deed to the seller which must be signed and witnessed and returned to the seller’s solicitor on or before completion.

4. COMPLETION

When the buyer’s solicitor has received the mortgage advance and buyer’s balance of funds, the buyer’s solicitor will send the payment to the seller’s solicitor. When the seller’s solicitor receives the funds he will call the buyer’s solicitor to confirm completion and call the estate agent to confirm that the keys can be released to the buyer. He will then redeem the seller’s existing mortgage (if any).

5. POST COMPLETION

The buyer’s solicitor pay the stamp duty for the property to Revenue and Customs and arrange registration of the purchase at the Land Registry. Once registration has been completed the buyer’s solicitor will send any documents required to the mortgage company and send all other documents to the buyer for safekeeping.

House prices falling, properties not selling

House asking prices have remained very static in the last year and have now started falling. Whilst this is not good news, anything which may start some momentum in the market may be the lesser of 2 evils.

Rightmove reports that in July, the average property lost nearly £3,800.00 in value which is around 1.6% of the average value, and it seems this has been caused by the fact that properties are simply not selling with only 3 out of 10 properties which have been on the market during 2011 having been sold. The average number of unsold properties per estate agent is at historical highs at nearly 80, mortgages are still hard to come by and sellers may have the problem that even if they are reluctantly willing to reduce their price, lack of equity or negative equity issues may come into play.

As ever, there are regional , area and property type fluctuations so it is always worth checking about the type of property, area and latest available information whether you are a buyer or a seller.

If you live in London and need fast, efficient conveyancing in East London at competitive cost, simple click on the link just posted. Similarly, if you are a Landlord or tenant and either are negotiating a new lease, assignment of a lease or in fact any type of commercial lease in East London, click on this last link.

Borrowers and lenders – growing trend for separate legal representation

Historically, solicitors have commonly represented both borrow and lender on a conveyancing transaction. This has created advantages in some respects for the buyer in that they typically save costs, but creates issues for the lawyers in that lender’s typically have more stringent requirements than buyers, who often don’t see or understand issues which can create legal problems in the future. This in turn commonly creates friction since the buyer may feel that their conveyancer is slow and being unnecessarily difficult.

Things are changing in the conveyancing market. After several decades when the public have increasingly perceived conveyancing almost as a non-legal service and where conveyancing fees have not risen for 20 years, the market had become cut-throat. As with almost anything in life, you get what you pay for, and paying £300.00 or thereabouts for a technical legal service involving many steps and checks and legal input, should ring alarm bells. No other country has such low costs for a technical legal service and frankly, being quoted a fee at that absurd level should make a buyer or seller ask questions about whether the work will or can be done properly. Unfortunately, most clients don’t think like that.

Returning to the issue of separate representation, the Council of Mortgage Lenders (CML) has now prepared separate instructions for conveyancers acting only for lenders – a helpful step forward.

The trend  for separate representation has been prompted by lenders significantly tightening up on who can be on their solicitors panel, with sole practitioners particularly vulnerable. It is also thought likely that panel membership may well very soon be dependent on the firm being a part of the Law Society’s Conveyancing Quality Scheme, which is a vetting scheme by the law Society for best practice in conveyancing.

Lease extension FAQ’S

What qualifying criteria are there to extend a residential lease ?

There are 2 crucial qualifying criteria, as follows :-

• The orginal lease for the flat must have been for a term of more than 21 years
• In order to use the statutory procedure to force a lease extension, the applicant has to have owned  the flat for more than 2 years (but see below for a way around this in some situations)

Why are lease extensions becoming more popular and/or necessary ?

First, there is the point that a shorter lease term does have an impact on the value of the flat, but this is far more significant if the lease has less than 80 years remaining, because the freeholder will then be entitled to add what is known as “marriage value” to the premium to extend, and this will increase it quite significantly. Lease extensions have become more popular simply due to the perception that a longer lease is better and also because some mortgage lenders now have policies whereby they will not lend if the lease has less than a certain number of years left, typically around 50-60 years remaining. Perhaps the key reason relates to extending before the 80 year period is passed and marriage value becomes chargeable.

What are the likely costs for a lease extension ?

It is important to stress that most lease extensions ultimately are completed without using the full statutory procedure and by negotiation between freeholder and leaseholder. This is because :-

• The freeholder cannot resists an extension as long as the leaseholder meets the qualifying criteria and complies with the right statutory procedure to start with ; and
• The price for extending the lease will generally be between certain parameters so there is not a huge incentive for the freeholder to delay and dispute the extension. Whilst the valuation figures do vary, in London, with a flat worth perhaps £250,000.00 with 82 years left to run on the lease, a typical cost of extending, in terms of premium, might be somewhere between £8-12k.
• Be aware that it will be necessary generally to pat not only your own costs as leaseholder for the extension, including legal fees and land registry charges, but also the freeholder’s legal costs and any costs of valuers for valuing the extension premium. This can easily add £3-4k plus vat of fees to the extension premium.

Is it strictly necessary to get a valuation ?

Don’t forget that to succeed in agreeing a suitable premium and extending by consent with the freeholder, it is often necessary to proceed some way down the line with the statutory procedure, and that will involve using a professional and qualified valuer. Even with negotiations it is vital to have a realistic idea of the correct premium in your case and this will need to be specified on the Initial Statutory Notice. Not using a valuer or offering a much too low initial offer will not only aggravate the freeholder but could cause big problems if the premium is disputed all; the way to a final Leasehold Valuation Tribunal hearing.

What is the standard length of new lease after a lease extension ?

This is 90 years in addition to the remaining term of the existing lease but again, remember that outside of the statutory procedure, this can be negotiable between the parties.

What about ground rent ?

Under the statutory rules, the ground rent, post extension should be a peppercorn (effectively nothing) but outside the statutory rules, some freeholders seek to negotiate that the ground rent will actually increase as part of the agreed lease extension.

Is there a way round the 2 year rule ?

This situation commonly arises where a buyer of a flat either wants to extend or needs to as part of the purchase process. If the seller of the flat has owned for more than 2 years, quite commonly what happens is that the seller starts the process in terms of the statutory requirements and then will assign (transfer) the benefit of the notices served on the freeholder to the buyer on completion of the transaction. This way the buyer does not then need to wait a further 2 years before being in a position to start. Clearly, if the seller has not owned for 2 years, this will not be possible.

Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!