Following on from Part 1 and 2 of our in-depth look at the conveyancing process where we talked about the initial steps and the early stages to any conveyancing transaction, we move on to arguably the most important and lengthiest part, the conveyancing enquiry stage.
Now that the initial papers have been completed, signed and returned to the conveyancer, the seller has submitted the contract pack to the buyer, pre-contract searches have been ordered and funding arrangements have been put in place, it is time for the buyer’s conveyancer to investigate the title that has been made available.
What is the conveyancing enquiry stage?
The simple answer is the word ‘enquiry’ and that is what the stage is based on. Once the buyer’s conveyancer has examined the information supplied by the seller and has gathered any further information from their client and the estate agent they will more often than not produce the seller’s conveyancer a list of enquiries/questions that require answering prior to exchange of contracts.
Why is the conveyancing enquiry stage so important?
The enquiry stage is very important, more so for buyer than the seller as the term Caveat emptor (buyer beware) still applies to the conveyancing process. This puts the onus on the buyer to investigate and discover any defects affecting the property before becoming legally bound at exchange. Once exchange has taken place there is no turning back, therefore obtaining relevant information beforehand by enquiring is crucial.
What is the purpose of enquiring?
There are two mains purposes of enquiring;
- To ensure that the buyer and any lender is completely satisfied with the property and the content of the transaction as a whole before committing them to exchange
- To ensure that the buyer has a good and marketable title free from any onerous incumbrances mitigating any issues when they buyer decides to sell
How many enquiries and when should they be raised?
There isn’t a set number of enquiries that can or cannot be raised. The number of enquiries will depend on the nature of that specific transaction and the issues that may need investigating further. On average there are more enquiries that are raised on a Leasehold or Unregistered transaction than a standard Freehold transaction.
When should enquiries be raised?
Commonly, initial enquiries are raised as soon as the buyer’s conveyancer has received the contract papers from the seller. A good conveyancer will do this to save time whilst waiting on outstanding information such as search results or management information to come in. Additional enquiries may then need to be raised following receipt of outstanding information. It is best practice to raise enquiries in chunks rather than individually to avoid any friction with the seller.
What enquiries should I expect as a seller or their conveyancer?
Expect a variety of enquiries. The conveyancing protocol tries to limit the number of enquiries by requesting that only property specific enquiries are raised. The enquiries will be based on the following;
- Pre-contract search results
- Information contained within the Protocol Forms
- Lenders requirements
- Buyers own enquiries
Enquiries on Title
The main reason a conveyancer is instructed by a buyer is to provide their legal expertise on the title in which they are buying. The rest of the information and enquiries that are raised will assist the buyer when deciding whether they are going to go through with the transaction.
The legal title is split into different parts.
Part A- The Property Register
The property register describes the extent of the property that is to be sold. It will contain the full description including the address and reference any other parcel of land that is attached to it for example a detached garage.
The buyer’s conveyancer will make sure that there is nothing contained within or omitted from the property register that should be. Such would lead the conveyancer to enquire as to why such inconsistences are present and request that the Land Registry amends this prior to exchange.
The property register will also make reference to any easements that are registered against it and in the case of the Leasehold property outline the particulars of the Lease that is registered within.
Easements – What are they and what implications will they have on the property once purchased?
An easement is a right that someone may have to use land that they do not own. Examples of common easements include rights of ways and a right of light. The buyer’s conveyancer will want to establish that there are adequate easements registered on the title, for example, a right of way over an access route to the property that doesn’t form part of your title. As well as establishing that adequate easements are in place the conveyancer will enquire that throughout the seller’s ownership there have not been any issues in exercising their rights granted by that easement. A monetary contribution will usually be attached to the easement allowing the property owner to continue to benefit from it. The buyer will need to be made aware of the extent of the contribution that they will be taking on, the frequency of the contribution and the formal arrangements that are in place to discuss any maintenance and repair.
Part B – The Proprietorship Register
The proprietorship register will contain the name of the current owners. Should this differ from the information contained within the estate agent’s memorandum of sale then a question needs to be asked as to why. If there is such a discrepancy then establishing that that person has the right to sell will be the most important enquiry that will need to be raised.
Price paid on purchase
In some cases, this part of the register will give information on the price that the seller purchased the property and the date in which it was purchased. Should the date be within the last year then an enquiry will be made as to why they are selling so quickly after they purchased. If the price paid was significantly less than the sale price the conveyancer will ask for an explanation as to how the property has increased in value over the short period. The seller’s response may trigger a request to see consents to alterations that may prove to be the reason behind the increase in value. The buyer’s conveyancer will also request confirmation that the property was not originally purchased at an undervalued price. An undervalued sale may result in a winding up order or bankruptcy notice that would make the current sale void. If this was to happen, the buyer must prove that they have proceeded in good faith and have produced credible evidence and that enquiries have been raised into any previous sale. This makes it very important for the buyer’s conveyancer to have a good eye for detail when reviewing this part of the title, ensuring that potential undervalue issues are adequately considered.
Class of Title
When a legal estate is registered, the Land Registry give the title a class. The most common classes awarded are;
- Title Absolute – This is the best class of title and the one that will be granted in the vast majority of cases. By awarding title absolute the Land Registry guarantees that there is no risk that any other person will claim a right in the land
- Possessory Title – This class may be granted when the current owner claims to have acquired the land by taking over possession of it from the true owner. Alternatively, it may be granted when the owner cannot produce documentary evidence of title to an estate
- Good Leasehold- There are applications to register leasehold estates where the title of the Landlord granting the Lease has not produced evidence to the Land Registry that they have the power to do so. In this case the at best a Good Leasehold will be granted
- Qualified Title – Qualified titles are granted where there is some specific defect that has been identified and this is stated in the register
Applications can be made by the seller to upgrade the class to title absolute. If required the buyer’s conveyancer will request that an application is made to the Land Registry to upgrade the title as some lender’s will only lend if the class is absolute. Upgrading the title will also make it more attractive for any future buyer and their lender too.
Notices and Restrictions
When reviewing the title, the conveyancer acting for the buyer may discover that the title contains a Notice or Restriction registered against it. These entries are registered to restrict a certain type of transfer taking place or protect a third parties interest. They can be an absolute bar against a disposition, or state conditions which need to be fulfilled before a disposition can be registered such as offering the property back to the original owner before putting it on the open market.
The buyer will need to make sure that the notice or restriction will either be removed or ascertain information as to how to such can be complied with. If the buyer’s conveyancer fails to enquire into the status of the notice or restriction, they may risk not being able to register the property, increasing the chance a professional negligence claim being brought against the firm by anyone who has an interest in it.
C – The Charges Register
Any lender will register a charge against the property to protect their loan. Such charge will be found in this part of the register. When investigating the title, the buyer’s conveyancer will request a legal promise from the firm acting for the seller that on completion they will redeem the charges allowing the buyer to be registered free from the charge and allow their own lender to register their charge in place of it.
As well as financial charges, this part of the register will list other legal interests in the property such as covenants or Leases.
Covenants- What are they and what implications will they have on the property once purchased?
A covenant is an agreement or promise to do or provide something, or refrain from doing or providing something. A covenant can be either positive or negative.
- Positive covenants are obligations to do something, such as contributing to a maintenance fund or maintaining a wall
- A negative obligation is often referred to as a restrictive covenant preventing certain things from being done on the land, such as keeping animals or preventing alterations to the property without consent
It is vital for the buyer’s conveyancer to investigate the nature of any covenants that are registered on the title and make sure that there has been nothing done to the property that would be in breach of the covenants contained within. Unfortunately, many property owners are not altered to, or advised properly on the purpose of the covenants being registered against the title, risking a claim being made for a breach. When investigating the covenants, the buyer’s conveyancer will review these along with the other information offered to see whether there has been a potential breach. it is vitally important that the buyer’s conveyancer enquires into any current or previous l breaches as the courts may enforce an injunction to prevent the breach from continuing or awarding damages to the injured party.
The charges register will list Leases that are registered against the property. The buyer’s conveyancer will need to make sure that there are no unknown Leases registered against it, ensuring that their client is purchasing exactly what they were expecting when they made the original offer. On the other hand, if the buyer is purchasing a Leasehold property and the Lease is not registered on then the buyer will asked the seller as to why it is not registered and ensure that this is done before exchange.
It is rare for the conveyancer acting for the buyer to view the property, therefore the buyer will need to examine the plan and ensure that they are satisfied that the extent of the land in which they were believed to be purchasing is reflected. Any discrepancies will have to be satisfied within this stage on the process.
When acting on a Leasehold purchase the enquiry stage will often be longer as there is a lot more information that needs to be examined which tends to lead to more enquiries.
No Leases are ever the same. Some may be new and more up-to date than others. The older Leases often include clauses that are now not accepted by lenders. A competent conveyancer would be able to pick out these clauses and request that the Lease is amended.
Common issues that give rise to enquiries following review of the Lease: –
- Short Lease term remaining
- Inadequate insurance provision
- Lease plan provided in black and white when the Lease refers to colouring
- Lack of appropriate rights of access over the common areas in order to reach the front door
- The definitions of the property and the remainder of the building not being clear which may result to issues in respect to responsibility for maintenance and repair
- The presence of a forfeiture clause that is now out of date
- Failure to provide adequate rights of support shelter and protection
- Covenants and easements being too onerous on the propriety owner or not adequate to ensure a smooth running of the building
When reviewing the Lease the buyer will require full information as to who has been instructed to take over the Landlord’s responsibilities under the Lease to manage the day to day running of the building. The management information will contain information on;
- the level of service charge and ground rent
- any arrears that will need to be cleared
- the buildings insurance
- the presence of a reserve fund to cover major works
- any major works proposed to be carried out
- confirmation that the Landlord has consented to alterations to the property since the Lease has been drawn
- whether a Fire Risk and Asbestos Assessments have been carried out
It is rare that there isn’t anything contained within the management information that doesn’t give rise to further enquiries having to be raised.
There are still plenty of properties that are unregistered. When purchasing an unregistered property, the seller must supply a full history of owners, covenants, easements and charges that have affected it at some point. Should the seller not be able to supply the full history the Land Registry will not be in a position to register the title with title absolute. This puts even more importance on the enquiry stage as at the point of exchange the buyer’s conveyancer will need to be certain that the Land Registry will provide the title class that will make the property more marketable for when they come to sell.
Enquiries on Contract
The buyer’s conveyancer will check though the contract before it is approved and if not satisfied enquire as to whether the seller would be willing to make amendments to the draft before agreeing on a final version. The following will be checked;
Names- All parties to the contract will need to be named correctly. The seller’s name will need to be consistent with the title unless the seller has sufficient evidence to show why there is a discrepancy
Property description – The property will be written on the contract as it is shown of the title. This will include any garages or other parcels of land to be transferred
Title number(s) – The contract will need to list the correct title number or numbers should there be more than one title
Price – The price written on the contract needs to be consistent with the accepted offer. If there has been a price alteration during the transaction then this will need to be amended from the original price
Title Guarantee – Depending on whether the property is being sold by the registered proprietor or their representative will determine whether the guarantee is full or limited
Vacant Possession or Subject to Tenancy – If the agreement was to supply vacant possession on completion but the contract makes reference to a tenancy agreement existing then the buyer will enquire into have this changed and vice versa
Occupiers – Occupiers that are living at the property but are not registered proprietors will sign the contract confirming that they will leave on completion
New Build- On new build purchases conditions will be imposed within the contract to ensure that the seller provides the buyer with an adequate 10 year insurance policy to cover defects in the construction as well as making reference to the disposition of the freehold title upon completion of the development
Onerous Conditions – It will be the buyer’s conveyancers job to ensure that the seller hasn’t placed any onerous conditions on the sale
Standard Conditions of sale – The buyer will make sure that their client is protected by the industry accepted standard conditions of sale being incorporated within the contract
Enquiries following the results of the Pre-Contract searches
Enquiries may need to be raised on the seller following the results of the pre-contract searches. Part 2 to the conveyancing process explained the typical searches that are ordered. Below are examples of enquiries that may need to be flagged up with the seller. This list is not exhaustive.
Local Authority Search
The search will reveal whether the road is adopted by the council or not. If private then enquiries will be raised as to how maintenance and repair of the private road is decided, the cost associated and whether sufficient rights of way are grant to use it.
The search may reveal that the Local Authority has placed a planning charge on the property for works that were carried out without the required planning consents, or where consent was granted but the works were not carried out in line with the conditions attached to the consent. If this is the case the buyer will want to make sure that there are no outstanding obligations attached to the charge as it will pass over on completion
Planning and Building Regulations Consent for works
If works have been carried out with correct consents these will be revealed within the search. Enquires may be raised to request the documentation supporting the consent. Alternatively, if works carried out to the property failed to obtain consent then this would be confirmed by the results of the search not making reference to such
As well as the above, the search may also reveal issues in respect to land acquired for road works, railway schemes, conservation areas and radon gas being identified. Should any of the answers be out of the ordinary then the buyer will enquire with the seller as to whether they have experienced any issues as a result of the issues highlighted.
The search may reveal that the property is built on contaminated land. It doesn’t necessarily mean that the owner would be in risk of harm but enquiries will be raised as to the extent of the contamination.
High Risk of Flooding
Should the results raise flooding issues the buyer will enquire as to how frequent flooding occurs, what damage has previously been caused and whether there are any defence barriers in place to mitigate the risk of future flooding as such may cause issues with insuranc
Water and Drainage Search
Connected to the mains?
If the water and drainage search results fails to confirm that the surface water and waste are connected to the mains, the buyer will enquire as to the sewage arrangements that are in place. Additional enquiries will then be raised as to maintenance of the sewage system, whether it complies with building regulations and any charge associated with discharging the sewage from the property.
Water pressure is low, has the seller experienced issues with such?
Drains and Sewers running through boundaries
If there are drains or sewers that run through the boundaries of the property, the buyer will ask the seller to confirm whether these have ever been built over and if so request build over consent from the sewage undertaker as without consent it is an illegal act.
Enquiries raised from the information contained within the Protocol Form
Signing and Completing the Forms
The first place to start when raising enquiries following receipt of the protocol forms is to check that all of the questions have been answered and the forms have been signed and dated by the seller. Whilst this might appear obvious, the amount of times a buyer’s conveyancing will receive unsigned or incomplete forms is very common. It is very important that if this does happen that if exchange doesn’t take place without the forms being completed as the buyer may be prevented from some information that may have caused them to think again about the transaction.
Should issues occur following exchange and the buyer raises a claim against a representation within an unsigned form then without signature there is no declaration.
Property Information Form
The buyer’s conveyancer will review the property information form alongside the pre-contract search results, survey and the estate agent’s sales particulars.
As the form contains information on all aspects of the property and land that is being sold, a buyer’s conveyancer will look out for any potential concerns or inconsistences with the seller’s disclosures.
Some enquires raised may be more important than others;
Section 4 of the form requests the seller to disclose information regarding changes that have been made to the property, for example an addition of a conservatory, replacing windows or knocking down an internal wall. These works may have required Planning and or Building Regulations, Listed Building, Conservation area or other consents from the Local Authority. As a buyer It is very important to be satisfied that any works that are disclosed have received the correct consent as failing such may result in the Local Authority seeking action against the property owner even if it wasn’t that owner who carried out the work. The results of the local search, surveyors report, estate agents particulars and any certificates that are available will assist the buyer’s conveyancer with determining whether any further enquires will need to be raised on any particular modification.
In addition, without adequate consent any works might be unsafe putting the buyer at risk of injury and any lender at risk of losing their security.
Section 13 requests the seller to list the utility providers. If the seller has never lived at the property they may not know who the utility providers are. Whilst it is important to try and obtain the information for your client, not having full information on the utility providers is not going to cause the buyer too many problems following exchange.
Other enquiries raised on the property information might include;
- asking the seller to supply more information on a boundary dispute that they have had with a neighbour
- requesting evidence to show that the property is connected to mains drainage when the water and drainage search has revelled an inconsistency with the seller’s reply
- If the buyer is planning to move into the property but the seller has a tenant the conveyancer request evidence that correct notice to vacate has been served on the tenant ensuring that on completion the property will be empty
Fittings and Contents Form
The Fittings and Contents will be disclosed to the buyer as early as possible. The buyer’s conveyancer will check it to make sure that the items that the seller is taking are not fixtures that should remain at the property. The onus will then be passed to the buyer to advise their conveyancer of any irregularities with the contents beng left, or taken that will need to be investigated.
Leasehold Information Form
The seller will often get confused when answering the questions contained within the leasehold information form. This occurs more often when the seller has been letting the property and as a result answers the questions as a Landlord rather than as the Leaseholder.
The form will alert the buyer to any disputes that the seller has had with the Freeholder or their representatives over the payment of service charge and ground rent, unhappy with the standard of services that are carried out or that any attempt that is made to purchase the Freehold. All of which may require further information to be supplied with any irregularities be ironed out prior to exchange.
Enquiries raised following the survey and/or mortgage valuation
Importance of a full survey
It is always important to have full structural survey of the property as this will report into issues affecting the state and condition of the property that may not be spotted by an untrained eye. The report will also help the buyer’s conveyancer when raising enquiries as there may be items highlighted that require further investigation that would not have otherwise been raised, for example, requesting party wall notices for works that may have been carried out to the party wall that the seller has failed to disclose within the protocol forms, or historical works carried out by previous owners.
Don’t rely on a just a mortgage valuation
The mortgage provider will only be concerned with ensuring that the property is of the correct value to protect their lending. The valuation will not reveal whether planning consents should have been obtained or provide comprehensive information on the state and condition of the property so should not be relied upon for those purposes. The valuation will not provide the conveyancer the same level of information that a full structural survey would so will limit enquiries raised and increase the chance of missing important ones.
Enquiries raised by the Lender – CML guidelines
When a buyer is mortgaging the property to provide for funds to purchase, the lender will also instruct the conveyancer acting for the buyer to act for their interest too. This means that the transaction will have to fall in line with the guidelines contained with the Council for Mortgage Lenders Handbook, ‘the CML’ and any special conditions to the mortgage.
If investigations reveal that the guidelines or conditions have been breached, enquiries will be raised on the seller’s conveyancer to request amendments to the transaction that satisfies the lenders full requirements.
It is just as important to ensure that the CML guidelines are complied with when acting for a cash buyer as failing to do so will limit the re-saleability to similar buyer’s only.
Enquiries raised by the buyer themselves
The buyer may have their own enquiries that they would like to be answered. These can be anything that may affect their decision to proceed. No property or buyer is ever the same and therefore these enquiries may vary from property specific to random issues such as ghosts living in the cupboards.
What happens if the seller cannot provide the answers to the enquiries that have been raised?
Indemnity insurance is commonly used during conveyancing transactions to cover some sort of legal defect which can’t be resolved swiftly, or at all. As an alternative to rectifying the defect, an indemnity insurance policy will be requested by the buyer’s conveyancer from the seller. This will be accepted by the buyer’s conveyancer when the buyer is otherwise satisfied with the property and simply wants to make protect themselves and any mortgage ledger against future problems. The issues covered by indemnity insurance usually have a very low risk of causing any actual loss – but if they did cause a loss, it would be significant, such as a potential breach of covenant, lack of access or contaminated land issues.
The indemnity policy doesn’t remedy the defect – it simply provides financial compensation in the event of the defect causing a loss. The buyer will have to consider the cost of supplying their buyer with a similar indemnity policy when they come to sell.
As caveat emptor applies why is this stage important for a seller?
The seller has a duty to disclose accurate replies to the enquiries raised. In giving replies, a seller should note that a reply will constitute a ‘representation’. Once a representation has been relied upon which turns out to be false a misrepresentation has occurred.
Depending on the nature of the misrepresentation the buyer will have remedies available from the seller. This will result in further time, cost and emotion spent following completion that should have been avoided, had the seller fulfilled their duty from the outset.
Purchasing a property is likely to be the biggest financial commitment that one is going to make. It is prudent that with the assistance of your conveyancer you take time and not rush. Should this result in having to raise a large number of enquiries then so be it. A property is meant to be an asset that can be passed on without issues and not a liability that no future buyer will want to take a risk on.
The more transparent and accurate you are in the information you provide at the beginning the less enquiries will be asked and the faster you get in a position to exchange. Be patient and make sure that there is nothing that you do throughout the transaction that may bring rise to a post-completion claim for misrepresentation as claim will be more of an issue then than had the correct information been disclosed in the first place.