Buying & Selling

Buying & Selling A guide for private clients

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Contents Introduction

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What you need to know: if you’re selling if you’re buying if you’re purchasing together if you’re doing both

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Purchase payments: who, what and when A guide to other costs Frequently Asked Questions Mortgage types and distinctions Sorting out rates & utilities

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A guide for private clients

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Buying and selling property is an exciting time, but it can also be an anxious one too.

The sums of money involved are significant, the process has a language all its own and there are a whole host of legal requirements.

We believe it shouldn’t have to be something you face with dread.

That’s why we’ve created a specialist team to take as much of the hassle as possible off your hands. And why we’ve compiled this short guidebook. It covers virtually everything you need to know. And if you can’t find the information you need in here, we’re only a phone call away.

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Selling What You Need to Know

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When you’re selling a property the legal term used to describe you is the Vendor.

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How it works We will obtain the Deeds of your property, usually from your Bank or Building Society if you have a mortgage.

We then prepare a “Contract” for the sale of the property and send this to the Purchaser’s Solicitor together with your Deeds, on accountable receipt - legal proof that the property is yours to sell.

The Purchaser’s Solicitor will contact us with any questions, known as ‘Enquiries before Contract’. These deal with issues like ownership of boundaries, disputes with neighbours, fixtures and fittings included within the sale and possibly some other queries relating to title. We will need to ask you some questions to help us complete your transaction.

Don’t worry we will be on hand to assist with any you are unsure about.

We will also ask the Local Authority and Department of the Environment regarding Roads, Planning Notices, Drains etc. to ensure everything is in order and all the legal permissions are in place. Searches will also be carried out to confirm that you are not bankrupt, or that there are no Judgements registered against you or anything else that could affect the sale. It’s nothing to worry about and is all standard procedure, but if you want further reassurance, just ask.

The Purchaser’s Solicitor will return the Contract to us for you to sign. Once you have signed and a copy has been sent to the Purchaser’s Solicitor you then have a binding agreement.

Once you’ve accepted the Contract we will ask your Building Society or Bank (if you have a mortgage) how much is required to repay the loan. We will also ask your estate agent to provide details of their fees.

The Purchaser’s Solicitors will then send us any further queries they may have about the title along with a draft Transfer, Assignment of Lease or Conveyance for our approval on your behalf.

The final document (or engrossment as it is known) is then signed by you.

At completion we will ensure that all the sale monies are received, and in return we will send your title documents to the Purchaser’s Solicitors. We also pay your Building Society or Bank and if required, Estate Agents.

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Buying What You Need to Know

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Even if you don’t have a property to sell, it’s worth reading the previous section to make yourself aware of the process from the seller’s (Vendor’s) point of view.

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How it works We will receive a draft Contract and the documents of Title from the Vendor’s Solicitor and will examine these on your behalf and raise any questions concerning it.

We will prepare a Report on Title, talk you through any issues and then give you some time to consider it.

We will receive the Local Authority and Department of the Environment Property Certificates regarding such matters as Roads, Planning Notices, Drains etc. and any bankruptcy or Judgements searches against the Vendor. This is to ensure that there is nothing that could prejudice or adversely affect the sale and we will talk you through any issues that we find.

At this time, it is extremely important that you check the Deed Map of the premises to verify boundaries. We can advise and assist if required.

Once we are both happy with the papers and you have received and accepted your mortgage offer (if appropriate) and a satisfactory result to your survey (if you requested one) the Contract is signed by you.

Whenever the Contract has been accepted (signed) by the Vendor we raise any further questions if necessary. We will also draft your title document if required.

If you are obtaining a mortgage, we will usually act for the Building Society or Bank as well and will deal with the mortgage documents and any other requirements they may have. We will ensure that the mortgage monies are to hand on the day required and at completion of the sale we will ensure that in return for the purchase monies all appropriate documents are collected and sent to your Building Society or Bank for safe custody.

Properties bought for more than £125,000 attract Stamp Duty (SDLT) in tiered percentages, depending on the purchase price. Higher rates of Stamp Duty will apply to additional residential properties purchased in England, Wales and Northern Ireland.

(See the ‘Outlay’ section on page 18 for full details.) After completion we will submit the SDLT Return and pay any Stamp Duty required. Your title will then be registered in the Land Registry. It should be noted that registration in the Land Registry may take some months. In the event that the property is still registered in the Registry of Deeds, we will register the Deed of Assurance to you, and the mortgage to the Bank or Building Society firstly in the Registry of Deeds and then secondly submit an application in Land Registry for Compulsory First Registration.

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Important information if you are purchasing property jointly

Property purchased with another person or persons can be held jointly in two ways: joint tenancy or tenancy in common.

Joint Tenancy

Tenancy in Common

In a joint tenancy if one joint owner predeceases the other then the property automatically passes to the surviving owner irrespective of any wishes to the contrary expressed in the deceased owner’s Will.

The joint owner’s share does not pass by survivorship to the surviving owner and the deceased owner’s Estate will have the benefit of his/her share in the property.

This means that the deceased’s share would pass to the surviving spouse and the children of the deceased party may unwittingly be disinherited. Please discuss the implications of this with us if you are unsure about the best option for you.

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Tenancy in common is the normal way unrelated parties hold property jointly and it may be advisable for married couples to hold property in this way if either party has children from a previous marriage.

Buying and selling at the same time?

If you are buying and selling, we will ensure that both transactions are completed simultaneously and that you do not commit yourself to a purchase until your own property is subject to a binding Contract.

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Money matters: who gets what and when If you’re selling: We receive the purchase monies and pay off any existing mortgages. We will also arrange to pay for your new property, if applicable, and forward any balance monies to you with a statement of account.

If you’re buying: We will arrange to obtain the loan monies from your lender. There will be additional money required to make payment in full including expenses and taxes that we pay on your behalf, such as Stamp Duty, and registration fees. (See ‘Outlay’ section on page 18 for further details.) We will need to receive this money from you before we can complete the purchase. We will provide you with a cash statement detailing everything, one week prior to completion, so that you know exactly who to pay and how much.

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How much will it all cost?

When we have all information about the property in question, we will be able to advise you about the charges either for acting for you alone or for you and any lending institution if a mortgage is involved. Although we won’t have seen the papers involved and do not know how complex or otherwise the transaction will be, we will be able to give an estimate of costs.

This is divided into two parts: 1. Our fees.

2. Sums of money spent on your behalf. These are normally called “outlay”.

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Outlay costs explained The main items of outlay are: 1. VAT on charges for our services.

2. S tamp Duty is charged on residential property at different rates depending on the portion of the purchase price that falls within each rate. The following rates apply: Purchase Price

Rate of Stamp Duty

Up to £125,000

Zero

Over £125,000 - £250,000

2%

Over £250,000 - £925,000

5%

Over £925,000 - £1,500,000

10%

Over £1,500,000

12%

Example Calculation Purchase price £275,000 0% Stamp Duty on the first £125,000 = £0 2% Stamp Duty on the next £125,000 = £2,500 5% Stamp Duty on the remaining £25,000 = £1,250.

Total Stamp Duty payable would be £3,750.

We would also advise that on or in after the 1st April 2016 higher rates of Stamp Duty Land Tax will apply to additional Residential Properties purchased in England, Wales and Northern Ireland. The higher rate will be 3 percentage points above the current SDLT rates as set out above and will apply to most purchases of additional Residential Property in England, Wales and Northern Ireland where, at the end of the day of the transaction, individual Purchasers own 2 or more Residential Properties and are not replacing their main residence. The surcharge will apply even if the home you already own (or part – own), is overseas.

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Examples X sells the Property which was her main residence and purchases a new Residential Property. At the end of the day of the transaction, she has one Property, so X will not pay the higher rates of SDLT. Y is purchasing his first Property. At the end of the day of the transaction he owned one Property, so he will not pay the higher rates of SDLT. This is regardless of whether Y intends to use it as the main residence or, for example, a rental Property.

K who lives in rented accommodation, sells the only Residential Property he owns, a buy-to- let, purchases another buy-to-let. At the end of the day of the transaction he owns one Property, so he will not pay the higher rates of SDLT. If at the end of the day of the transaction an individual Purchaser owns 2 or more Residential Properties, whether the Purchaser pays the higher rates or not will depend on whether they are replacing their main residence.

If the Purchaser has sold a previous main residence within 36 months before the day of the transaction and the transaction is a purchase of a new main residence, the Purchaser will be considered to be replacing a main residence. Where an individual is replacing a main residence the higher rates of SDLT will not apply.

If, the Purchaser is not replacing a main residence (either because they have not sold a previous main residence within the 36 months or the Property being acquired is not a new main residence), the higher rates will apply.

If you move out of your main residence (Home A) but keep it and buy another main residence (Home B), you will have to pay the 3% Stamp Duty surcharge initially. If you sell Home A within 36 months of completing on the purchase of Home B, HMRC will make a full refund in respect of the difference.

For more information, please contact us but it would be prudent to obtain advice from your accountant or tax advisor.

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3. S earch fees are paid to check in various registries that the person selling the house to you has no charges registered against the property and he or she is registered as the owner. If you are selling a property then we are required to bring the searches up to date and therefore you, as the Vendor, will be responsible for the cost.

4. Local

Authority and DOE Property Certificates are required from various statutory authorities to ensure that the property complies with various regulations such as Planning and Building Control. You as the Vendor will be responsible for the cost of these certificates.

5. I f the Property is registered in the Registry of Deeds then the registration fees of your Deed and mortgage is £30. In addition, the fees in respect of your application for Compulsory First Registration are £167 with fee to register a Charge being £110 together with the additional fee of £70 if the charge includes an Inhibition.

If your property is already situated in a designated Land Registry area, then your title will be registered in the Land Registry and the fees for this depends on the value of the property. For example, if the value of the property is between £20,000 and £80,000 the fee is £160.

We are able to complete the registration online on your behalf which will reduce this fee to £120. The fee increases gradually to a maximum of £535 (£445 if completed online) as the value of the property increases to over £250,000.

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Other costs to consider If you are selling: 1. Estate Agents fees 2. Removal expenses If you are buying: 1. Building Society valuation fee 2. Other survey fees eg. structural surveys 3. Removal expenses

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Frequently asked questions How long will it take?

Deposit?

As a very rough guide, expect to sign the contract 3-4 weeks after solicitors receive instructions, with completion about 3 weeks after that. It’s hard to give an estimate because every sale and purchase is different. Once we have all the facts in front of us we can give you a better idea of timescales. Factors influencing the speed of the transaction include:

How much?

Traditionally 10% of the purchase price is payable by the purchaser, although it may be possible to negotiate a lower figure.

1. How many people are involved in the “chain” - how many purchasers and vendors there are.

2. H ow quickly the parties obtain their surveys and mortgage offer.

3. H ow quickly or slowly the parties want to move.

4. H ow long it takes to provide/obtain local searches and property certificates.

Following completion, it is important to note that it only takes one or two weeks to register your title if registration is to be effected in the Registry of Deeds. However as the property will thereafter be subject to compulsory first registration or may already be a property registered in the Land Registry, registration may take many months and this aspect of a conveyancing transaction is outside your Solicitor’s control.

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When?

After the Contract has been signed by both vendor and purchaser.

Why? It’s an act of good faith, rather like putting down a deposit on a holiday. One of several remedies open to a vendor if a purchaser does not complete is to forfeit the deposit.

How? If you are obtaining a mortgage through a bank or building society they can only advance money on the security of a mortgage on the property which it will not obtain until completion. Therefore your mortgage won’t cover the deposit element of the transaction.

When do I have to insure my property?

On completion of the purchase. If you are getting a mortgage, the building society or bank may be involved in setting up the insurance of your behalf. If not, your lender will need to have details of and approve your insurance prior to releasing the mortgage advance.

Should I have a survey carried out?

If you are obtaining a mortgage, the lending institution will inspect the property for their valuation purposes. They may let you see the result, however please note that the survey carried out by the lender is principally to satisfy them that the property is worth the amount you are offering and will be good security for their loan. Generally, you will not be able to hold any institution’s surveyor accountable if he or she fails to find a fault with the property that later becomes

an issue. It should be stressed that this survey does not provide a detailed structural assessment covering damp, woodworm etc. Accordingly, it is always sensible to at least consider a private survey as you may be able to make the surveyor accountable for any faults he or she has spotted. It may be possible to have the building society surveyor carry out a survey for you at the same time as carrying out the society survey.

Even if you are not obtaining a mortgage you should consider a survey for your own peace of mind. Your solicitor will be happy to discuss this with you.

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Mortgage types and distinctions

Variable mortgage interest rates rise and fall according to bank rates.

With a fixed-rate mortgage you’ll pay the same amount each month, protecting you from upward fluctuations in interest rises, but conversely, penalising you if rates fall below the one you’re fixed at. There is often a penalty if you withdraw early from your mortgage package, especially the fixed-rate type.

An endowment mortgage involves a payment of interest only each month. In addition to the loan, an endowment insurance policy is taken out to repay the mortgage in the event of the death of the borrower(s). It also provides a savings plan so that at the end of the mortgage THERE SHOULD BE sufficient to funds pay off the mortgage, although this is never guaranteed.

There are other types of savings plans available and you should talk to your solicitor so that you know precisely what’s on offer and which deal suits you best.

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Sorting out rates and utilities If you’re selling: Once you have a binding contract and a fixed completion date you should let the local rates department know the date of moving and ask them to make up final accounts to that date. Depending on whether you pay in advance or by monthly debit there will be either a refund due to you or a final payment required.

Arrange for the gas/electricity meters to be read on the day of completion and make your final payment.

And don’t forget to transfer your contents insurance.

If you’re purchasing: On completion you should take the gas and electricity reading and arrange to take over the accounts from this date.

Notify your local rates office and don’t forget to transfer contents insurance cover to your new address.

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The Home Charter The Home Charter exists to ensure that you obtain a quality service from your solicitor.

One method used to check the standard of work is through random inspection by the Law Society. It is possible that your files may be subject to inspection like this, so if you have any objections you should tell us immediately.

Complaints procedure If you have cause for complaint you should initially contact the solicitor in charge of the real estate department. If they are unable to resolve the problem, you should contact our senior real estate partner, Mr John Mills. And if the matter hasn’t been resolved to your satisfaction you can refer it to the Charter Committee of the Law Society of Northern Ireland.

If you feel that the professional fees we have charged you are unreasonable then you can have this matter resolved through an Officer of the Court. Your solicitor is obliged to provide you with full information regarding this process.

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If you have any questions about buying or selling property, no matter how small or insignificant you think they are, please get in touch with our Private Client key contacts.

John Mills Partner T: +44 (0) 28 9055 3305 M: +44 (0) 77 3688 6604 E: john.mills@tughans.com

Noelle McKay Director T: +44 (0) 28 9055 3357 M: +44 (0) 75 2866 3143 E: noelle.mckay@tughans.com