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#16681 - Finance And Surveys - Property Law and Practice

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Buyer Seller

Purchase price

  • Inclusive or exclusive of VAT?

  • Cash buyer or mortgage required?

Existing mortgage to repay?

Contents

  • Included in price or payment required?

  • Check ‘fixtures and fittings’ form

  • No SDLT payable on amount of price related to contents

Deposit

  • On EXCHANGE

  • Standard deposit = 10% [SC 2.2.1/SCPC 3.2.1] (often reduced to 5% in residential transactions or even 0% in commercial)

  • May be held by seller’s solicitor as agent or stakeholder

Stamp Duty Land Tax

Residential Properties:

  • 0-125K: 0%

  • 125K-250K: 2%

  • 250K-925K: 5%

  • 925K-1.5M: 10%

  • Over 1.5M: 12%

Commerical Properties:

  • 0-150K: 0%

  • 150K-250K: 2%

  • Over 250K: 5%

Other special rates & exemptions:

  • First-time buyers for properties 500,000 or less do not pay any SDLT up to 300,000 and pay 5% on the portion from 300,001 to 500,000

  • Purchase of additional properties – extra 3% on top of usual rate

  • Purchases by corporate bodies – rate of 15% applies to residential purchases of over 500,000 by certain corporate bodies and ‘non-natural persons’

  • Property left by will is not subject to SDLT

Other costs

  • Searches

  • Legal fees

  • Survey

  • Insurance

  • Land Registry registration fee

FINANCE

INSURANCE

  • At common law/ under contract standard conditions (SC 5.1.1/ SCPC 8.1), risk of damage to the property passes to Buyer at exchange of contracts

  • Buyer becomes beneficial owner of the property upon exchange of contracts - so in the Buyer’s interest to ensure the building is insured

  • Important for Buyer to have insurance policy ready to be put ‘on risk’ from date of exchange

Surveys

Caveat emptor – Buyer beware – SC 3.2.1/SCPC 4.2.1 – Important for the buyer to ascertain the physical state of the property.

Valuation

  • By the lender in order to establish whether the property will be adequate security for the loan

  • Buyer pays the cost and is usually permitted to see the valuer’s report

  • Assesses the value of the property

  • It will NOT contain detailed commentary on the state of the structure of the property

 Not necessarily sufficient information about the state of the property to allow the buyer to make reasoned judgement as to whether to proceed
Condition Report Designed to complement the lender’s valuation

  • Snapshot of the condition of the property on the date of inspection

  • Red, amber and green colour-coding system to rate individual elements and highlight matters of concern
Home Buyer’s Valuation and Survey Report

  • More expensive

  • In many cases the buyer’s lender will agree (for an additional fee) to instruct the lender’s valuer to undertake the report at the same time as the mortgage valuation is carried out (saving time and expense)

  • Additional advice on the issues that affect the value of the property

  • Market valuation and insurance reinstatement cost

  • Advice on repairs and ongoing maintenance requirements

  • Attractive option of a residential client who is reluctant to commission a full survey

  • Better than a mere valuation but still relatively superficial in scope
Full Survey The potential expense deters many clients Detailed commentary on the condition of the structure of the building Preferable to discovering that many thousands of pounds need to be spent on carrying out structural repairs on the property he has just purchased
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