Overview of a Conveyancing Transaction
1. PRE –SALE
The process of conveyancing: The Vendor will locate the title Deeds for the property. Most people will never have seen their own title Deeds and many will have no idea where they can be located. If a mortgage has been used to finance the purchase then the title documents will be located in the security department of the bank. They may also be located in the Solicitor’s office. Some clients hold their own title documents in safe at home but more usually they are held by the bank that has a mortgage on the property. The Vendor will engage an Auctioneer to sell the property and notify his Solicitor that the property is on the market.
The Purchaser confirms how much they can afford to spend and begins the search of the properties within that budget. We recommend that Purchasers register their interest with Auctioneers in the area that they wish to purchase the property in. The Purchaser will engage with their financial institution and seek a letter of loan offer for any mortgage they may require for the purchase of the property.
2. SALE AGREED.The price of the property is agreed between the Purchaser, Vendor and Auctioneer. The Auctioneer agrees with the Vendor what is included in the sale price. It is important to clarify the specific contents passing with the property. Perhaps the white goods, the curtains, some furniture may be included and it is important that the items are listed so that there is no dispute when it comes to closing.
The Purchaser will pay a booking deposit to the Auctioneer and the property is taken off the market. The booking deposit is fully refundable at this stage if either side pulls out of the transaction. There is an agreement in principle by the Purchaser to purchase the property and by the Vendor to sell that property to the particular Purchaser but there is no binding agreement at this stage.
Any agreement at this stage is not binding and is subject to contract. Many sales can fall through between the Sale Agreed and the Contract stage for reasons such as the purchaser can’t get loan approval, the Engineer’s survey on the property shows up unexpected problems or either side simply changes their mind about buying/selling.
Once the parties reach sale agreed stage, the Vendor engages a Solicitor to draft contracts which are sent to the Purchaser’s Solicitor setting out the agreement made in relation to the sale together with a copy of the title and ancillary documents relating to the property. The Purchaser engages a Solicitor to receive the Contracts and deal with the transaction on his/her behalf.
3. ENTERING INTO A CONTRACT
THE SOLICITOR FOR THE VENDOR WILL:
Draft the Contract for Sale . – The Solicitor for the Vendor will draft the Contract for Sale and send it to the Purchaser’s Solicitor along with a copy of the Vendor’s Title Deeds. Both Solicitors must ensure that the Contract reflects the agreement their respective clients intend to commit to and must take detailed instructions from their clients, either the Purchaser/Vendor to ensure all aspects of the transaction are reflected in the Contract. The Purchaser’s Solicitor will investigate the title produced and raise queries with the Vendor’s Solicitors. Please note that this can take some time depending on the nature and the complexity of the queries that need to be answered.
Usually fixtures and fittings are included in the sale unless specifically excluded. Fixtures and fittings are items like shelves, curtain rails, fire place, light fittings etc. anything that is fixed or fitted to the property and removing it would require some repair work afterwards.
Contents don’t go with the property unless specifically provided for in the Contracts e.g. furniture, curtains, electrical goods; A garden shed if removable would not automatically be included in the sale. It is for that reason that we recommend that the Auctioneer negotiating between both parties list the contents that are agreed for sale so as to avoid any delays once the contracts have been issued. The contract should exhibit a list of the contents included.
For a contract to be binding the Standard Law Society Conditions of Sale and Contract for Sale must be in writing, signed by both parties, exchanged and consideration such as the deposit paid. The contract will describe the specific area of land being sold, Names of Parties, identify the property in Sale and the price agreed.
The general contractual conditions will cover various situations likeTime limits for delivery of documents and replying to queries raised by the Purchaser in relation to the property.
What happens to the Contract deposit if the Purchaser decides post contract not to go ahead with the purchase.
What happens if one party is not ready to close on the appointed closing date.
The general conditions also provide a warranty that all planning matters are in order. If there is a planning difficulty this general condition must be deleted and the matter dealt with in the Special conditions of the contract.
Special Conditions are drafted by the Solicitors for each party and will deal with any changes to be made to the general conditions and any other matters not dealt with in the general conditions that are to be agreed between the Vendor and Purchaser.THE SOLICITOR FOR THE PURCHASER WILL:
Check the title to the property. You will need to get what is called a “good marketable title” to the property i.e. that there will be no problems if you have to sell the property. As they say “the day you buy is the day you sell.” You want to be able to sell on the property or mortgage it and a bank will not lend on a property that has not got good marketable title. Your solicitor will give an undertaking to the bank that in return for the bank lending the money to you to purchase the property. Your Solicitor will ensure that you get a good marketable title to the property. The Solicitor will not pay over the loan or mortgage funds until he/she has raised any queries arising on the title and carried out final searches on the title on the day it is agreed closing will take place.Checking the Title generally involves carrying out an investigation on the title deeds produced and making sure from the Title Deeds that no other party has any interest in the property other than the Vendor. If an interest is not disclosed in the title Deeds, is not obvious from an inspection of the property or doesn’t show up in closing searches done at completion of the transaction then the Purchaser will have a legal remedy in law against the Vendor. Survey of the Property – As Solicitors for the Purchaser we advise every Purchaser to have an Engineer inspect the property if it is a second hand property. There is a caveat “Buyer Beware” and any issues arising with the property must be discovered prior to entering into the contract. We also advise that the Engineer check the boundaries on the ground against the map of the property. Confirm that all the Planning documentation is in order – It is a matter for the Purchaser’s Solicitor to review the planning documentation produced with the contract and raise any pre-contract planning enquiries with the Vendor’s Solicitors. An inspection of the planning documentation can always be carried out by the Engineer at the offices of the local authority. Planning searches with regards to future development in the area are also advised particularly in an area that is not yet built up.
Advice on tax implications – With all property transactions there is tax to pay and consider. The Purchaser will have to pay stamp duty at the rate applicable at the time of purchasing. There are different rates for a residential purchase or commercial purchase. If a voluntary transfer (no payment passing between the parties) takes place there may be Gift Tax implications. Any Vendor of property will have to consider if the property is tax-exempt for Capital Gains Tax of if there is Capital Gains Tax payable. We discuss all these implications in advance with our clients.Undertaking to Lender – Where the property is being purchased by way of a loan or mortgage the Solicitor for the Purchaser will confirm the property being bought has marketable title to the bank. The Solicitor will then give an undertaking “which is a legal promise” to the bank in return for the bank furnishing the loan funds to the Solicitor. The promise that the Solicitor has given to the bank is an oath that the Solicitor will not release any of the funds to purchase the property until that Solicitor is in a position to certify that the title being obtained by the purchaser is a good marketable title. The Solicitor also promises to register the first legal charge and mortgage over the property at the same time as the Purchaser is being registered as the owner. If there is any difficulty with the property this must be notified to the Lender at the earliest stage and the bank will agree what is acceptable. Sometimes the roadway to a house is by a Right of Way and the bank will need to be notified accordingly ( you can find more details by visiting the Atlantic Union Bank website here.). The undertaking also provides that on completion of the purchase the Solicitor will schedule all the Title Deeds and send them to the Lender along with the Certificate of Title to be held by the Lender until the mortgage is redeemed. Once the purchase is completed the title documents will be released by the Solicitor to be held in the securities department of the financial institution that extended the mortgage. The title documents will be held as security by your bank.
4. Post-Signing of Contract
Once a legal and binding contract is in place a date to close the transaction will be agreed and both parties are bound to complete the transaction. The Purchaser risks losing the deposit which is usually at least 10% of the purchase price if he/she fails to go through with or pulls out of the purchase.
The purchaser’s Solicitor will continue with the detailed investigation of the title and will raise Objections and Requisitions on the title of the property. This is a long list of questions regarding the property.
The Vendor’s Solicitor’s are duty bound to reply to the requisitions on title. They will gather all documentation sought by the Purchaser’s Solicitor which will be required at closing.
The Purchaser’s Solicitor drafts the Transfer Deed naming the Purchaser and the Vendor and forwards it to the Vendor’s Solicitor for approval.
5. ClosingThe Solicitor for the Purchaser – The Purchaser’s Solicitor will request closing searches on the day the funds are due to be handed over. These searches must be right up to date and are done on the day the monies are to be handed over to the Vendor. There are specialist companies, called Law Agents, which carryout the searches. The Solicitor for the Purchaser, usually on the day before the closing, will send a request for closing searches to the Law Agents The following searches will be carried out:
Registration searches against the property: This will show if there are any mortgages or other rights over the property which have not been disclosed by the Vendor.
Judgment and bankruptcy searches against the Vendor: These will show if there have been any judgments obtained in Court against the Vendor in the past or currently pending. The danger is that if there has been a judgment made against the Vendor it could be registered against the property prior to the purchaser registering his/her ownership. If this happens the judgment could affect the property as bought. Therefore the search is carried out just prior to closing.
At this stage the Solicitor will requisition the mortgage. They will arrange to draw down the loan that has been agreed to purchase the property.
Solicitor for the VendorThe Solicitor acting for the person selling the property will have agreed with the Purchaser’s Solicitor the specific documents required by the Purchaser’s Solicitor on the day of closing. The schedule of documents being exchanged will list the closing documentation that has been prepared.
On the day of closing the Purchaser’s Solicitor may fax the closing searches to the Vendor’s Solicitor to be answered in advance of closing the sale. Provided nothing unexpected shows up on the closing searches, the closing will take place at the office of the Vendor’s Solicitor if the transaction is taking place between two Solicitors in close proximity. If the Solicitors are located in different towns the sale will close by post with an agreed timeline. The title documents and the funds are exchanged between the Solicitors and the keys will be released by the Auctioneer once the exchange of title and funds has taken place.
6. Post Closing
The Vendors Solicitor will:
Use the proceeds received at closing to pay off any mortgage on the property . It is commonly referred to as redeeming the mortgage.
The Solicitor will then deduct any fees and outlay payable for the transaction and release the balance the pay the balance sale funds to the Vendor.
The Purchaser’s Solicitor will:
The Purchaser’s Solicitor will arrange to stamp the transfer Deed. It must be stamped within 44 days of the date of the Deed or there are penalties and interest on the amount of the stamp duty due. A document cannot be registered in the Land Registry unless it has been stamped. It cannot be produced in Court as evidence in any dispute relating to the lands unless it has been stamped.
The Purchaser’s Solicitor will send the stamped Deed to the Land Registry. They make an application to the Property Registration Authority (P.R.A.) to register the Title to the property in the name of the Purchaser(s).
Once the property is registered in the name of the new owner and a first legal charge is registered in favour of the financial institution (if applicable) the title documents will be listed so that a record of all the title documents received on closing are available and recorded on the file. Where there is a Mortgage the Solicitor for the Purchaser will have given an undertaking to the Lender to return the title documents as security to the bank.
When the property has been registered in the P.R.A. the Solicitor will schedule all the title documents and the Solicitor will deposit the original title documents with the bank that gave the mortgage where they will be held in safekeeping and until the mortgage has been paid off.