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The Basic steps in property sales/purchase
Sale of Property
The solicitor acting for the seller (frequently known as the vendor), will do the following:
1) Obtain official copy entries
These are official copies of the documents representing the seller’s title to the property. The seller’s solicitor will base the draft contract for he sale of the property on the official copy entries.
2) Prepare draft contract for sale
The seller’s solicitor prepares a draft contract. This is then sent to the buyer’s solicitor, who will consider it and may suggest amendments. When the solicitors have agreed the terms of the contract, the buyer will sign a copy and the seller will sign the other.
3) Exchange contracts
The copy of the contract signed by the buyer and seller are exchanged, and both parties are then contractually bound to go ahead and complete the transaction.
The date for completion will be stated in the contract.
At this stage, the buyer will usually pay a deposit towards the price.
4) Prepare and send the completion statement
This tells the buyer’s solicitor exactly how much will be payable on completion. It takes into account any deposit which the buyer has already paid.
5) Check mortgage redemption figure
The property may be subject to a mortgage. If so, the seller must repay the outstanding amount to the mortgage lender out of the proceeds of sale after completion.
6) Get estate agent’s invoice
The estate agent acts for the seller to find a buyer and will charge commission. The agent’s commission will usually be paid out of the proceeds of sale after completion.
7) Send the seller a bill of costs and a financial statement
Sending the bill requires the solicitor to make entries for profit costs and VAT in the accounts. The financial statement shows the seller how much money will be available following completion after taking into account the mortgage redemption, profit costs, VAT and disbursements.
8) Complete the sale
The solicitor receives the balance of the price due from the buyer, and ownership of the property is transferred to the buyer.
9) Final steps
Redeem any mortgage, pay the estate agent, transfer the solicitor’s professional charges from client account to office account, send the remaining balance of money to the client.
Purchase of property
The solicitor acting for the buyer (a buyer of property is also knows as the purchaser):
1) Receive draft contract
The draft is prepared by the seller’s solicitor. The buyer’s solicitor can require further information and suggest amendments before agreeing the terms of the contract.
2) Make local authority search and Land Registry search
This is to check whether anyone has any legal rights over the property which could affect the buyer’s enjoyment of it.
3) Obtain deposit money from buyer
On exchange of contracts, the buyer will normally have to pay a deposit. The buyer’s solicitor will want to get this money from the buyer in time to clear the cheque before exchange.
4) Exchange contracts
The solicitor usually pays the deposit money to the seller’s solicitor.
5) Receive completion statement
6) Calculate stamp duty land tax and Land Registry fees
These are payable by the buyer after completion. Stamp duty land tax is a tax based on the value of the property transferred. Registration of the title to the property at the Land Registry is necessary to protect the buyer. The registration fee depends on the value of the property.
7) Send the buyer a bill of costs and a financial statement
Sending the bill means that you must make the usual entries for profit costs and VAT. The financial statement shows how much the solicitor requires from the client to complete the purchase. It takes into account the deposit already paid, any mortgage which the client is getting and the solicitor’s profit costs and disbursement.
8) Make bankruptcy search
This is done when the solicitor is also acting for the mortgage lender in connection with a mortgage advance, to check that the buyer is not bankrupt
9) Receive money prior to completion
Receive from the client the amount shown in the financial statement; receive any money which the client is borrowing from a mortgage lender towards the purchase price
10) Complete the purchase
Pay the balance outstanding to the seller’s solicitor. Ownership of the property is transferred to the buyer.
11) Final steps
Pay stamp duty land tax and Land Registry fee. Transfer money for costs and any paid disbursements from client to office bank accounts.