The second instalment of our Conveyancing series looks at the Conveyancing Pre-Contract Stage. You can read Part 1 here.
Once you’ve agreed to sell your property, or had an offer accepted on a purchase, you’ll hear the estate agents use the term “subject to contract”. This means that everything agreed and discussed from here until exchange is to be treated as part of the contract you’re agreeing to, whether buying or selling.
So everything from the point of agreeing the sale through the estate agent to exchange of contracts by your conveyancer, we call the “pre-contract stage” as contracts haven’t been formally entered into yet, however everything said, or more importantly written up to this point, is before the contract is binding yet still treated as part of the overall deal.
Getting the process started
As mentioned in Part 1, once you’ve found a conveyancer you would like to instruct, they will send you a Client Engagement Pack. This will include their terms of business, an outline of the work they will do for you, fees, and what information they require from you at the outset i.e identification.
The documents more specifically included are:
- Client Engagement Letter: This will outline the overall role that the conveyancer will take in your transaction, outline the fees that have been agreed, and provide you with some preliminary information about the overall conveyancing process;
- Terms and Conditions of Business: This will set out the specifics of the conveyancers obligations towards you, how you can complain if you’re unhappy, the regulatory bodies the firm are governed by, and also the hourly rates should your conveyancer be required to undertake any further work on your matter over and above what would be required in a normal conveyance;
- Request for identification: Before your conveyancer can begin working for you, they need to be able to verify who you are. Unfortunately the property industry, like most industries in the 21st Century, has it’s fair share of fraudsters. This has caused the various regulatory bodies of the legal profession to have to impose very strict regulations on the matter of identifying the clients we represent.
Depending on whether you are buying or selling a property, there will be certain other documentation you will be required to provide to your conveyancer to begin the process.
When you agree to purchase a property and receive your Client Engagement Pack from your conveyancer, there are one or two other pieces of information they will need from you:
- Proof of origin of funds: This is somewhat related to the request for identification referred to earlier. In addition to verifying your identity, we are also required to verify where the funds you are using to finance your purchase are coming from. Often now they are coming from a mortgage lender in the main part which makes all our lives considerably easier. However the portion that is coming directly from you, we will require evidence of where that’s come from at the outset of the transaction. Examples of evidence of funds and where they’d come from are:
- Sale of property- you’d be required to provide the completion statement from your conveyancer who acted in the sale
- Inheritance – a copy of the will showing the amount you received
- Sale of a car- a copy of the contract for sale
- Wages- a copy of your P60 for as many years back as to show the amount you’re paying towards the property
- Gift from a family member or third party – identification for the donor as well as evidence of where their funds have come from. If you are having a mortgage on the property we will also have to send your donor a gift letter for them to sign to confirm the gift does not give them an interest in the property.
In addition to the evidence of funds, your conveyancer will also require at the outset is a copy of your bank statements showing the monies in your bank account. All monies received by your conveyancer from you need to be sent from an account held in your name.
It sounds arduous but unfortunately, it’s all necessary to protect yourself as well as your conveyancer!
- Monies for searches: We’ll touch on searches and what they’re for later on, however when initially instructing your conveyancer, take note in their Client Engagement Letter of the monies on account they require for your searches. Not providing your solicitor with this could cause delays in their being able to progress the transaction for you.
Conveyancing Searches- what are they and why do I need them?
Conveyancing Searches are desktop reports carried out against the address of where you are purchasing to collate all the data available about the past and present of the property. They provide invaluable information that can be incredibly important in assisting you in making your decision on whether to proceed with your purchase.
Why do lenders need them?
For the same reason that you do. When your conveyancer is acting for you, they are also often obliged to represent the interests of your lender, therefore the Conveyancing Searches are as much for their benefit as for yours. If any of the search results reveal an issue with the property that could pose a risk to the lenders interest, it will be the responsibility of your conveyancer to report it to them, as it may affect the lenders decision whether or not to proceed with the mortgage.
What are the different searches that can be done and what do they tell me?
There are a whole range of searches that can be carried out against a property that can reveal all sorts of information (or risks!) however the standard four that the majority of mortgage lender require to be carried out are:
- Environmental Search Report
These are prepared by search providers who use data held by the Environmental Protection Agency based on previous historic assessments of the site where the property is located. The types of risk this search looks at are:
– Flood risk
– Subsidence risk
– Energy Schemes (wind turbines in your back garden!)
– Contaminated land
The report itself will also include a certificate which states whether the property is “passed”, “failed”, or “in need of further investigation”. These all relate to whether the property is suitable for a lender to offer a mortgage against it. If the property fails it’s environmental report, your lender will need to be advised and further information may need to be obtained. Your conveyancer will advise you beforehand if such a referral needs to be made and whether the property has been passed.
- Water and Drainage Report
This report is prepared by the local water authority based on the billing details they have for the address of the property. It looks at whether the property is connected to the mains and whether the drainage for foul and surface water is into public or private drainage systems.
Where this becomes important is in relation to whether there are any obligations to maintain the drainage systems if any or all of them are private. If your water and drainage report for the property you are purchasing reveals that any of the drainage or supply systems to the property are private, your conveyancer will need to make enquiries with your sellers conveyancer as to what the arrangements are for payment of maintenance for this.
- Chancel Repair Liability Report
This report is compiled by the search provider that looks at whether the property is within a district where chancel repair liability is claimed. Chancel repair liability is a very ancient law whereby the local parish could claim monies from parishioners for repairs to the local church. This isn’t terribly common in the 21st Century however it is still a risk and many areas across the UK still have an existing liability for chancel repair.
Your conveyancer is obliged to ascertain whether such a liability exists and if so, an indemnity insurance policy will need to be obtained to protect yourself and your lender (because if you couldn’t meet any chancel payments claimed from you your lender may have to pay) to cover any costs should such a claim be made
- Local Authority Search Report
This search is compiled by the local authority for where the property is situated, and includes information regarding most of all the planning history for the property, including the building control records for any works carried out there. This information is very important as any works carried out to the property without the relevant consents and permissions could cause problems for you later when you become the registered proprietor.
A common misconception however for what the local authority search report can reveal, is the planning history or current status for the properties in the surrounding area. There is a separate search that provides this information called PlanSearch Plus, however you will need to request this is ordered by your conveyancer as it is not a standard search required by your lender.
When you come to sell a property, you will be responsible for providing all the basic information about it in order for your conveyancer to compile the contract pack for the buyers solicitors review. This pack consists of the following documents:
- Draft contract
This is drafted by your conveyancer using the information they have at the outset of the transaction in terms of names, figures and addresses. Often they won’t have the buyers full name as all they’ll have is what is shown on the sales memorandum from the estate agents therefore there will always need to be that amendment to a contract even at the very beginning of a transaction.
- Title documents
In the good old days these were simply referred to as “deeds” but in the new paperless 21st Century, all of what you could need to know about a title to a property is contained in a few sheets of paper known as the title register. This will also be accompanied by the title plan which will show the outline of the property as it is shown on the ground with all the boundaries correct. You’ll often find the solicitor acting for your buyer will want confirmation from you that these boundaries are correct. Of course your conveyancer cannot answer this as they often won’t ever see your property. You have lived in it and therefore you are considered the one to know the most about it.
In addition to the register and plan you will often find other documents that accompany them. If the property is a freehold house, there will often be shown on the title a transfer deed or conveyance from when the title to the property was first created. This document will contain rights and restrictions applicable to the property that you will have complied with (or should have done!) during your period of ownership, and you will most likely be asked to confirm compliance during the course of the sale.
If the property you are selling is a leasehold flat the key document will be the Lease that grants the title to the property. This will again show all the rights and restrictions applicable to the flat as well as the covenants that will bind any owner.
- Protocol forms
When your conveyancer sends you your Client Engagement Pack once you’ve instructed them in your sale, they will include several forms that will need to be completed by you as the registered owner known as Protocol Forms. This is because they are the standard forms required on any sale under the Law Society Conveyancing Protocol. There are three main forms:
- The Property Information Form will ask questions about all aspects of the property, including any building works you’ve had carried out, any charges you pay in relation to the property, who is responsible for the boundaries etc etc.
- The Fittings and Contents Form will be for all the items and fixtures in the property that you either intend to leave behind, include in the sale, or want to sell at a separate price. This will often be annexed to the draft contract on exchange.
- And if you are selling a leasehold property, you will also be required to complete the Leasehold Information Form which contains specific questions regarding service charges, shared facilities, and the management structure for the development your flat is in.
- Planning permissions, certificates and guarantees
When you return your completed Client Engagement paperwork to your conveyancer along with your completed Protocol Forms, it’s always wise to look through all the paperwork you hold on the property. If you’ve ever had any building works done, any extensions, the central heating upgraded, the windows replaced etc etc, you will need to provide the relevant certificates to demonstrate these works were carried out to a safe and legal standard. It is also helpful to provide any guarantees you may have received when the works were done.
The general principle when selling a property is to provide as much information as possible. You therefore minimise the number of enquiries received and hopefully progress to exchange of contracts that much sooner the more transparent you can be.
Misrepresentation… what happens if you’re not transparent!
Now completing all the Protocol Forms may seem unnecessary and frustrating and by the time you’ve got to the third one (if you have the misfortune to be selling a leasehold flat) you may just about have had enough!
However…be aware, this initial stage is just as an important for you as it is for the buyer.
Whilst the latin term Caveat emptor (buyer beware) still applies, putting the onus on the buyer to investigate and discover any defects effecting the property before exchange, you as the seller are under a duty to disclose accurate replies to the Protocol Forms to the best of your knowledge as the buyer will be relying upon them.
In giving replies to these enquiries, sellers should note that a statement of fact (reply or answer to a Protocol Form question) will constitute a ‘representation’. Once that representation that has been relied upon by the buyer if it turns out to be false, misrepresentation has occurred.
Depending on the nature of the misrepresentation the buyer will have remedies available to be claimed from you as the seller. This will result in further time, cost and emotion spent following completion that should have been avoided, had you fulfilled your duty of disclosure from the outset.
5 tips in order to avoid misrepresentation
- Read the instructions on page 1 of the Law Society Property Form before supplying replies
- Provide accurate replies to all enquiries raised, inform your solicitor of any changes that should be made
- Disclose any supporting documentation available
- Do not guess; it’s better to say nothing than provide wrong or inaccurate replies
- If in doubt ask your solicitor / conveyancer for help
You should always check that your replies are correct and relevant when selling your property to avoid future litigation and issues. You buyer’s obligation to check does not always trump your obligation as the seller to be true and accurate having made reasonable enquiries.
So…..what are the next steps!
Well you’ve got through the hard part! You’ve signed on the line, conveyancer instructed, monies on account paid over!
The next stage once, if selling, your contract pack has been issued and, if buying, your contract pack has been received from the sellers solicitors, it’s time for the conveyancers to start reviewing the title and documentation available. Once this has been looked through and searches ordered, enquiries will be raised to cover any gaps in the picture of the property that’s been presented to the buyers conveyancer.
And as mentioned earlier….the more transparent and accurate you are in the information you provide in the beginning……the less enquiries asked and the faster you get to that much anticipated exchange of contracts!
At SO Legal our Eastbourne, Brighton and Uckfield Conveyancing lawyers provide swift, efficient and cost effective legal solutions for all your conveyancing needs. Call us TODAY on 01323 407555