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Contracts & Completion
There are three main steps in the legal procedure for buying and selling property in England and Wales:
1) Initial enquiries
2) Exchange of contracts
3) Completion (conveyance)
Before the legal transfer of title takes place, the property lawyer for the purchaser will make detailed enquiries (known as 'searches') to ensure that the person selling is the current legal owner; the lawyer will also check that the property you intend to buy is not the subject of any legal dispute or difficulty, such as being on a list of properties due to be purchased compulsorily by a public authority. The buyer's property lawyer will also check the details of any fixtures and fittings included in the purchase, as well as ensuring that there are no disputes regarding boundaries, rights of way or any other legal issues.
The next step is for the lawyers acting for the buyer and seller to prepare a contract, so that when both parties have signed their contract and these documents have been "exchanged" by the lawyers, this then becomes a legally binding commitment by both the buyer and the seller to proceed with the agreed sale and purchase on the date that is set in the contract. If either side were to back out after this stage, except for very precise reasons specified in the contract, this would likely give rise to financial penalties for any financial losses incurred.
Anyone intending to buy a property will not wish to make a legally binding commitment until they are absolutely certain about the property itself and that any necessary finance has been arranged to pay the agreed purchase price for the property. So if you are buying a property and need to finance the purchase with a mortgage, it is therefore vital to ensure that you have not only applied for a mortgage, but you have a legally binding offer in writing from your mortgage lender before you sign the contract.
If you have any concerns about the physical structure of the property, any issues of this kind also need to be investigated and resolved before signing the contract. Remember that once contracts have been exchanged, you cannot normally back out of the deal. Obviously if you are selling your current home at the same time as buying another one, the timing of the sale and purchase is especially critical.
It is common practise for the purchaser to pay a deposit, often 10% of the purchase price, when contracts are exchanged. The buyer must be prepared to pay the amount of the agreed deposit in cash.
Also bear in mind that the purchaser needs to take out an insurance policy on the property they are buying, which takes effect from the contract date - not the date of completion. If any damage were to occur to the property after the contract date but before the date of completion, the buyer is still legally committed to go ahead with the purchase.
The date set for completion of the contract, when transfer of the ownership takes place, is generally fixed for a month or so after exchange of contracts. This gives both parties enough time to make the necessary arrangements to organise the removal and all the other details that need to be taken care of. At the same time the lawyers are making final arrangements for getting the finance in place and drawing up the documents for the legal transfer of ownership (known as a 'conveyance'), and the mortgage documents.
On the date of completion, the lawyers will deal with the transfer of the money, the conveyance and mortgage, so that the ownership is transferred legally from the seller to the buyer, enabling the buyer to take immediate possession of the property. If you live in England or Wales, the transfer document and details of any mortgage will then be sent to the Land Registry for registration, who will provide an official guarantee for the new title that has been created.
Remember, buying a property involves serious legal obligations and if you have any doubts about what you are doing you should seriously consider taking advice from a solicitor or other suitably qualified property professional. These notes are offered as a general guide only and do not constitute legal or financial advice.
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