England & Wales
Conveyancing is the legal name given to the transfer of a property from one person to another. The property can be freehold or leasehold. Most houses are freehold and most flats are leasehold.
In the UK conveyancing is usually dealt with by either a conveyancing solicitor or a licensed conveyancer.
The conveyancing solicitor or licensed conveyancer acting on behalf of the buyer must ensure that he or she obtains a “good title” to the land - i.e., that the person selling the property has the right to sell it and there is nothing that would prevent the buyer from obtaining a mortgage or re-selling the property at any time in the future.
Under English and Welsh law an agreement for the sale of land is not legally binding until “exchange” of contracts. This is the point where the transaction becomes legally binding. Before this both parties have the advantage of being able to withdraw from the transaction but also the disadvantage of wasted time and expense in the event that an exchange of contracts does not eventually take place.
The ability to withdraw prior to exchange at any time and for any reason without obligation to each other can lead to a risk of what is commonly known as “gazumping” (where the seller increases the price before exchange) or “gazundering” (where the buyer submits a lower offer prior to exchange).
The normal practice is for the buyer to negotiate and agree a price with the seller. The buyer usually then arranges a survey and the buyer’s solicitor subsequently carries out searches and pre-contract enquiries.
The seller's conveyancing solicitor or licenced conveyancer also collects from the seller the information necessary to prepare a property information form which he or she then sends to the buyer's solicitors or conveyancer.
It usually takes approximately 10-12 weeks to complete a conveyancing transaction but this can be affected by many factors such as personal, social and financial.
When contracts are exchanged the buyer and seller legally commit themselves to going ahead with the purchase on the agreed terms. This is the most important stage in the home buying process and at this time the buyer will also normally pay a deposit of up to 10 per cent of the purchase price.
“Completion” is the date when the buyer’s solicitor or conveyancer hands over the balance of the purchase price and the buyer takes ownership of the property. At this time the buyer’s solicitor or conveyancer will also send to the Inland Revenue any stamp duty payable in respect of the purchase.
Legally completion is effected by way of a transfer deed which passes ownership of the property from the seller to the buyer.
After completion the signed and dated transfer deed is sent to the Land Registry which then changes its records to show the new buyer as the owner of the property.
SUMMARY OF MAIN CASE STAGES
There are three main stages involved in any conveyancing transaction and set out below is a summary of what each solicitor does at each stage
FIRST STAGE – SALE AGREED
- Applies for title deeds and asks seller to fill in enquiry forms
- Prepares a contract and sends this out with completed enquiry forms
- Negotiates the moving (completion date)
- Asks buyer for money on account of expenses
- Receives contract etc from sellers solicitor and asks additional enquiries
- Carries out searches
- Receives mortgage offer
- Reports to buyer with contract for signature and requests deposit (or uses deposit from sale – if any)
SECOND STAGE – SALE AGREED
- Receives the buyers deposit
- Obtains a settlement figure for the sellers mortgage (if any)
- Approves the transfer deed and arranges for the seller to sign it
- Sends contract and deposit to sellers solicitor
- Prepares transfer and mortgage deed and sends them to buyer to sign
- Arranges final searches
- Prepares final accounts and requests any monies required from buyer
THIRD STAGE – COMPLETION
- Receives balance of purchase price
- Pays off the mortgage (if any)
- Hands over the deeds
- Sends seller the balance or uses this towards purchase (if any)
- Sends balance to sellers solicitor and collects deeds
- Pays stamp duty (if any)
- Registers purchase at Land Registry
- Sends deeds to Bank or Building Society (if any)
The position in Scotland under Scottish law is that the contract is generally concluded at a much earlier stage, and the initial offer, once accepted by the seller, is legally binding. This results in a system of conveyancing where buyers get their survey done before making a bid through their solicitor to the seller's solicitor. If there is competing interest for a property, sellers will normally set a closing date for the initial offers.
The contract usually consists of an exchange of letters between the solicitors on behalf of each of the seller and purchaser, called missives. Once all the terms of the contract are agreed, the missives are said to be concluded, and there is then a binding contract for the sale of the property.
Normally the contract is conditional upon matters such as the sellers being able, before completion of the transaction, to prove that they have good title to the property and to exhibit clear searches from the property registers and the local authority.
The fact that there is a binding contract at a relatively early stage, compared with the normal practice in England and Wales, makes the problem of gazumping a rarity. The disadvantage for the buyer is that they usually have to bear the cost of the survey for unsuccessful bids, though trials have been made of a system where the seller arranges for one survey available to all bidders.
From 1 December 2008 properties for sale will have to be marketed with information, now branded as the ‘Home Report’. This is a pack of three documents: a Single Survey, an Energy Report and a Property Questionnaire. The Home Report will be made available on request to prospective buyers of the home. The date of final settlement (the "completion date" in England) is in Scotland known as the "entry date".