First time buyer(s) legal guide

Buying your first home is a big step and one of the biggest financial and lifestyle decisions you will ever make, so it’s important to get it right. Our highly experienced property lawyers advise hundreds of first time property buyers every year, so below are some tips to guide you through the process and pitfalls.

Offer accepted. What happens next?

Once your offer is accepted, appoint a solicitor to act for you. The conveyancing process then starts, which involves:

• Your solicitor liaising with the seller’s solicitor

• Checking paperwork including the Land Registry title for the property you are buying and the contract produced by seller's solicitor. The main terms of the contract will be largely standard.

• Your solicitor will need to obtain searches, including a Local Authority search, to check things like the planning history of the property. If you are buying a flat in a large block, the seller's solicitors will need to obtain and send over to your conveyancer a management pack, containing information about service charges and whether the freeholder has any plans tp carry out major works to the block which leaseholders will need to pay for.

• Checking your mortgage - your solicitor will also most likely act for your lender, which means he/she will have to comply with your mortgage lenders legal requirements and even if you are willing to overlook a legal issue, your lender may not. This can cause frustration, delay and sometimes for the transaction to not go ahead.

• Dealing with exchange of contracts - the key stage in the transaction when you will need to pay a deposit of typically 10% and will be committed to complete the transaction on the agreed completion date in the contract.

• Preparing for completion including preparing a financial statement and obtaining funds from your lender.

• Dealing with post completion work including paying any stamp duty and registering your ownership at HM Land Registry.

It’s important that you choose the right solicitor, and keep your solicitor updated with anything you agree with the seller. For example, if you agree to buy their sofa. Never pay any money to the seller directly, always check with your solicitor first. Until you formally exchange contracts, nothing is not legally binding and you could still lose the property if another buyer comes in with a higher price and the seller agrees to it. You can also reduce your offer at any time before exchange of contracts and will not be liable to pay any of the seller's legal and other fees if you pull out or the seller does, based on any reason.

What is a conveyancing chain and why does it create risks?

One of the important things to consider when buying a property is whether there is a chain of dependent transactions and how long (how many transactions) is any chain of transactions. The people selling to you are likely buying and the people selling to them may also well be buying. This creates a chain of dependent transactions.

The most important implication is that if any transaction up the chain doesn't go ahead, for any reason, it likely means your transaction will be at best delayed. If this happens, it will happen before you reach exchange of contracts stage, and you will have no rights to claim any additional legal fees from the seller to you, A chain of transactions usually means delay as well because even if you are ready to exchange contracts quickly, you will probably have to wait until the entire chain are ready, and then all the exchanges of contracts for all the related transactions exchange at the same date and time, so are synchronised.

Buying from a seller where there is no chain, perhaps a probate sale or from a non-occupying owner, avoids the dependent chain problem but in most cases, there will be a chain.

At what point do you need a formal mortgage offer?

As early as possible and definitely before you exchange contracts because that is when you are legally committed to find the rest of the funds to complete, with a  set completion date, typically a few weeks later. The mortgage that was approved in principle now needs to be arranged, based on the home you have decided to buy.

The lender (your mortgage provider), needs to know that the property is worth the amount being lent, and will arrange for a valuation report that you may have to pay for.

You may find that if you do not have a formal offer quickly after your offer to buy is accepted that you and your lawyer will get chased a lot about this. A seller may even continue dealing with other potential buyers until you get a formal mortgage offer or withdraw from dealing with you if you do not get your offer quickly, so time is of the essence.

Importance of physical checks at the property

Try not to be swayed by decor and furnishings and look at the design of the rooms as well as the general condition of the property. It can be all too easy to think emotionally and once you've set your heart on a property, to overlook or miss details. This is especially important because your lawyer will not visit the property so will rely on you to spot details that should result in formal pre-contract enquiries being made by the lawyer. This is especially important with flats where unauthorised alterations may have taken place. Even after you have had your offer accepted by the seller, there is no reason you cannot view again to check things before you exchange contracts.

View at different times of the day and on different days of the week. A place that might seem quiet during the evening could be noisy during the day. Make sure you visit the neighbourhood at peak times, such as morning, evening, and school times.

What is a  survey and is it needed?

A survey is a detailed report on the condition of the property you want to buy. It is highly recommended, as it will give you peace of mind and make sure you are aware of any immediate problems with the property. There are two main types of surveys a Homebuyer’s Report or a Full Structural Survey.

Homebuyer’s report vs Full structural survey?

Your mortgager lender will insist on at least a homebuyer's report, which you will have to pay for. It is often added to the mortgage loan amount so may not be payable upfront by you. A Homebuyer's report is quite a lot less expensive than a full structural survey.

• A basic survey, known as a Homebuyer’s Report, only concerns the parts of the property that are easily accessible or visible.

• A Full Structural Survey, on the other hand, is more in-depth and can unearth problems that could be costly in the future. If the survey does reveal serious problems, you are free to withdraw or lower your offer on the property.
  

Importance of buildings insurance

Once your solicitor has started the legal work, it’s time for you to start looking at buildings insurance and removal arrangements. It’s compulsory to have buildings insurance in place before your mortgage completes, and most solicitors will want to see your insurance details before you exchange contracts to check they are suitable for your lender.

Once you have exchanged contracts, risk in the property may pass to you so you will need to ensure that the building insurance is put on risk, as depending on the wording of the contract you may be legally responsible for the insurance. Make sure your solicitor tells you whether you need to insure the property from exchange of contracts or completion. If you get it wrong and the property burns down between exchange and completion, you may be legally obliged to complete the purchase but your lender will not advance you the money.

Completion arrangements

Always check with your solicitor before you book your removals, the completion date is not legally binding until exchange of contracts, even if you and the seller agreed on the date some time ago.

You should remember that you are legally bound to complete on the agreed date once you have exchanged contracts so make sure the removal company can do it all in one day.

If you are moving out of a rented property, remember that there will be a time in your contact that you must vacate by, its a good idea to check this with your solicitor.

However, as soon as your solicitor receives the buyer’s money, the property is theirs, so try and have everything packed and out of the property as early as possible.

There may also be a delay between you having to leave your present house and getting your new keys, as until your seller’s solicitor receives your money from your solicitor, they will not let you have the keys. Check that the removals company will be able to wait for you to get your new keys.

Utility services and other essential notifications

Don’t forget to inform your old gas, electric, water and telephone suppliers that you’re moving out and take meter readings, as well as tell your new suppliers that you have moved in.

You’ll also need to let the council know about your move so you don’t pay Council Tax at your old address.

You may also want to ask the post office to redirect your mail from your old address. Make sure that you carefully file away all the important documents you have gathered. They are your primary record of your purchase and your mortgage and you may need them in the future.

Remember it might take a couple of months for your solicitor to get the Land Registry paperwork showing you as the owner, but they should always send you this for your records once it’s completed.

They may also send you all the old deeds that no longer prove ownership.

Please note that this is a basic guide, for more information, please contact us.