What You Should Know About Restrictive Covenants

 

 

 

 

 

 

 

 

 

 

 

When you are buying a property, you may encounter what is known as a restrictive covenant. This is a written binding condition included in a property’s deed or contract by a seller. This dictates what a homeowner can or cannot do with the property under specific circumstances. For instance, a restrictive covenant can prevent new owners from altering the architectural style of the building or keep them from building new structures on a specific part of the land. It could also state that the new owner cannot use the property for trade or other businesses. 

In this post, Conveyancing Expert, a trusted conveyancer in Manchester discusses all you need to know about restrictive covenants:

Why Are Restrictive Covenants Used?

In most cases, they are established to maintain certain standards for residents in a particular community. Housing developers usually add restrictive covenants to transfer deeds so that owners won’t do anything that could possibly affect the neighbourhood negatively or break from the desired “uniformity” of the area.

The restrictions in such cases are often minor, like the prohibition of installing satellite dishes, parking a boat or a caravan in front of the house, keeping livestock in the yard, painting the house a loud colour, or others. 

Land owners may also create restrictive covenants on the lands they are selling to protect their value and minimise damage. 

Are Restrictive Covenants Only Applicable to New Builds?

No. They can be placed even on older properties. Moreover, the age of the covenant won’t have any effects on its validity. There are cases, though, where really old covenants are accepted as unenforceable due to the fact that its original builder cannot be traced or because of ambiguous wordings that make it hard to apply. It may also be deemed void if the covenant is historically obsolete. 

How Will a Restrictive Covenant Affect You?

What you should know about restrictive covenant is that it is applicable to all future purchasers of the property and not just the first or original buyer. They call it “running with the land”. That’s why it is important for you as a buyer to discuss this with your conveyancing solicitor so they can examine the deeds to see if there are any covenants before you sign anything. Remember that once signed, you will already be accountable for any breaches that you incur. 

Additionally, you should check where the ‘benefit of the covenant’ is located and whether or not it has passed onto another person or company. This is because they will be responsible for the enforcement of the restriction and answering queries related to the covenant. 

As a buyer, you should also determine if the property’s value will be affected in the future due to the provisions of a covenant. There are cases in which mortgage lenders refuse to approve loans on properties where a covenant is determined to potentially affect their saleability in the future. In such cases, you can contact the successor in title and current vendor and tell them that you cannot proceed due to the covenant. It’s possible for them to remove the restriction, especially if it’s evident that the covenant is going to affect their ability to sell the property, too. 

Conclusion

These are just some of the basics that you need to understand about restrictive covenants. As you can see it can be one of the factors that can make purchasing a property more complicated, and definitely among the reasons you need quality conveyancing services. A seasoned conveyancer can review deeds to determine if there are any covenants that you should be aware of and give you advice regarding the best steps that you should take.

Losing the plot: Residential conveyancing complaints and their causes

 

 

 

 

 

 

 

 

 

 

Has the Legal Ombudsman opened a can of worms with his recent report ‘Losing the plot: Residential conveyancing complaints and their causes’?

Part of the problem is that conveyancers have no idea how difficult or complicated a transaction might be until they are part way through it. As an ex-conveyancer, with 25 years’ experience at the coal face, I think I have encountered pretty much every problem there is. Having said that, a very modest number of transactions are straightforward, with a clear title, no mortgages to deal with, no alterations to the property and clear searches.

Quoting for conveyancing work without seeing any paperwork is like taking a car to the garage and asking the mechanic to provide a ‘fixed fee’ for servicing it (and carrying out any unexpected repairs) without allowing them to lift the bonnet. They just wouldn’t do it.

It has baffled me for years as to why there is not more helpful information provided to buyers and sellers at the outset of all transactions. Surely a free helpful guide, perhaps available in estate agents offices, could be produced by someone; the Law Society, the Legal Ombudsman or even the Legal Services Board?

Many conveyancers explain in their client care letter (are some too long to be easily understood?) that local searches don’t cover neighbouring properties and that buyers should check their plans carefully. But how many people can really tell if the boundaries on the ground actually reflect the drawn boundaries on the plan? I remember back in 1976 visiting properties with my conveyancing supervisor and not just checking plans but looking for alterations and taking measurements. Very few, if any, mistakes were made.

To add to the problems, despite the fact that there are many more registered titles than unregistered titles, conveyancing has become slower and more complicated (tedious?) than ever, caused partly by the introduction of too much red tape and bureaucracy. Conveyancers can no longer use their experience and knowledge to ‘take a view’ on a particular issue. Everything, no matter how small or insignificant, now needs reporting to lenders, fixing and/or insuring.

Conveyancers are now understandably frightened of their own shadows.

Not all conveyancing factories are bad (although in my experience, few are great) and not all high street conveyancers are good. The problem for the consumer is sorting the wheat from the chaff.

Another thorny issue is referral fees. Again not all firms who pay referral fees are poor. It partly depends on the amount of fee being paid versus the conveyancing fee being charged. I remember a solicitor in Bristol in the ‘80s who used to take an estate agent out to lunch every month and hand over a brown paper bag, containing varying amounts of cash, depending on how many transactions introduced by that estate agent had completed that month. Yes, the method and secrecy involved was dubious but did it make the solicitor a bad conveyancer, no, he was quite the opposite.

I used to receive a lot of work from a particular estate agent (with no referral fee being paid) until they had new owners. I was then told I would not be sent any more new work unless I paid a referral fee. I declined the kind offer and the flow of new work pretty much stopped overnight, except of course for complicated cases, or cases involving the agents themselves, their friends or family, because the referral fee paying conveyancer was not up to scratch!

The LeO has produced another document: ‘Using a conveyancing lawyer: Ten helpful tips’. One tip is to be wary of using an online or call centre conveyancing service if “your conveyancing transaction is not straightforward”. The problem is, as explained earlier, until the transaction is underway no one really knows how complicated a transaction may or may not be.

Surely when it comes to one of the biggest purchases of your life it is better to err on the side of caution and assume that the transaction might be tricky?

Another tip is ”to be wary of referrals and recommendations”. Exactly how will the average buyer or seller know if the referral is to a good firm or to a poor one simply paying the highest referral fee? I am sure that the Legal Ombudsman means well and the tips are a step in the right direction but they only scratch the surface.

In order for the LeO to get a much clearer picture of how difficult conveyancing really is might I suggest that he, or a colleague, spend the week before Christmas in the offices of a busy conveyancing firm?

That would truly be a baptism of fire.

Conveyancing Glossary

 

 

 

 

 

 

 

 

 

 

 

Advance notice

Is a notice between two or more parties for a 35-day period that protects a deed intended to be registered in the Land Register in Scotland.

Agreement 

Often used as a word for contract.

Assent 

The formal document required to transfer ownership of a property to a person entitled following the death of the owner.

Basic fee 

The fee charged by the solicitor for their time and skills. This is most often calculated as a percentage of the property’s sale price, although it can also be calculated as a fixed-fee or on a per-hour basis.

Breach of Contract 

Once contracts have been exchanged, if either party pulls out and does not complete the conveyancing process they are in breach of contract and the non-defaulting party can legally seek reparations.

Brine search

Carried out to establish if a property is affected by disused workings in close proximity.

Boundaries 

Boundaries define the extent of the property in question and are usually marked with fencing, hedging or walls. They are usually shown explicitly on the deeds plan.

Building insurance 

Once contracts have been exchanged, you will in most cases become responsible for the new property’s building insurance. This must cover the cost of rebuilding the entire property if it is destroyed. Your mortgage lender may want to see proof of this insurance.

Caveat Emptor 

This literally translates to ‘let the buyer beware’ and means the buyer is responsible for finding out the condition of a property using a surveyor.

Chain 

Where the success of one purchase depends on the sale and purchase of another. Several ‘links’ in the chain can make the conveyancing process particularly complicated.

Charge

A debt secured against your house or another property that you own.

Chattels

Items of personal property left over at a house and included in the purchase price, such as furniture. These are described on the Fixtures, Fittings and Contents form.

Client care letter 

Solicitors will send a client care letter for you to sign and return. This is a formal contract and should be read thoroughly. It will detail what services will be provided and a breakdown of the cost, in addition to the solicitor’s complaints procedure.

Coal mining search

If the property is situated in a coal mining area this search will be conducted by the property lawyer to find out if coal mining activities will affect the property in the future.

Commons registration search 

A search carried out by the local authorities to ensure a property is not registered as common land or connected to a village green, resulting in third party rights over the property.

Completion date 

The legal end of the conveyancing process – the point at which full payment has been made and the title deeds transfer from one party to another. In everyday usage it refers to handing over keys and physically moving into the new property.

Completion statement 

A documented financial breakdown of the property purchase normally sent after exchange but before completion. This important letter details the conveyancer’s full fees including disbursements and VAT.

Conservation area 

If the property to be bought lies in a conservation area protected by a local authority, it may be subject to exterior planning restrictions to preserve the look of the area.

Contract 

A legal document that sets out all details regarding a property purchase including information on the property itself, the buyer and the seller.

Conveyance

A common name for the legal document that officially confirms the sale or purchase of a property or piece of land. Nowadays the transfer is conducted using a Transfer deed/document although in some cases a conveyance may be used.

Conveyancing 

The legal and administrative process of transferring property title from one party to another. This is most often undertaken by solicitors or licensed specialists and is a necessity for most property sales taking place within the United Kingdom.

Conveyancer 

Conveyancers are those who have undertaken the conveyancing process. Traditionally they are solicitors, but in recent years specialists have appeared who solely offer conveyancing as a dedicated service. These may be solicitors who have decided to specialise, or licensed and regulated firms that are not qualified as solicitors.

Council for Licensed Conveyancers (CLC) 

The governing body that licenses and regulates Licensed Conveyancers. All conveyancers must be regulated by the CLC or the SRA. See 'Law Society' and 'Solicitor's Regulation Authority'.

Covenant 

Obligations and restrictions, known as ‘positive’ and ‘negative’ covenants respectively, that can be attached to a property. Obligations require you to maintain something within your boundaries whilst restrictions prevent the construction of specific structures.

Deeds 

Official documentation outlining the owner of a property which is in possession of the owner or mortgagees in the event the property is mortgaged.

Deposit 

A deposit is paid to the seller, usually via the conveyancer, on exchange of contracts: this is normally 10% of the purchase price although is negotiable subject to agreement from the seller.

Disbursements 

Disbursements are fixed costs incurred by a conveyancing provider undertaking the conveyancing process on your behalf, which are then passed on to you. Examples include local authority and bankruptcy searches.

DIY conveyancing

Most people appoint a solicitor or conveyancer when buying or selling a property but some choose to undertake the process themselves. This can be very risky in some cases, such as when dealing with leasehold properties.

Drainage search 

A check carried out during the conveyancing process that ensures a property is connected to both fresh and foul water sewers.

Easement

The right of way over another person’s piece of land.

Encumbrance 

An issue with your property that reduces its value or makes it less marketable.

Equity 

The difference between the value of a property and the figure owed to the mortgagee.

Exchange of contracts 

Contracts are signed and exchanged through your property lawyers. At this point the process becomes legally binding. Past this point neither buyer nor seller can pull out of the transaction without possible legal consequences.

Fixture, Fittings and Contents form 

Provided by the seller’s property lawyer, this form sets out what parts of the property are included in the sale and must be completed and signed off by the buyer before purchase.

Freehold 

A freehold property involves a permanent change in ownership of land or a building that is not time-sensitive and will not revert to another owner unless a new sale is agreed. Compare with leasehold.

Gazumping

When a seller accepts a verbal offer on their property from one buyer, but then accepts a higher offer from another potential buyer.

Ground rent 

Paid by a lessee to a lessor in the event a property is leasehold, usually in yearly amounts.

Insurance Policy 

An insurance policy taken out to protect the buyer against any issues incurred by a defect in the legal title.

HM Land Registry 

The government body that deals with ownership of property and land throughout England and Wales, but not Scotland and Northern Ireland.

Home Report 

You need a home report before you can market your property in Scotland. The pack includes three documents: a Single Survey, an Energy Report and a Property Questionnaire. 

Index map search 

A search undertaken at the Land Registry to determine whether a premises is registered or unregistered.

Land certificate 

The official certificate issued by the Land Registry when a property is registered detailing ownership and interest in the property without any legal charge.

Land Buildings and Transaction Tax (LBBT) 

A tax applied to property transactions and that replaced Stamp Duty Land Tax (SDLT) in Scotland in April 2015. 

Land Registry office copies 

The legally permissible document outlining who owns your property, held by HM Land Registry. It is requested by your conveyancing provider during the conveyancing process.

The Law Society

The Law Society is the representative body for solicitors in England and Wales.

The Law Society of Scotland

The Law Society of Scotland is the professional governing body for Scottish solicitors. All practicing solicitors in Scotland are members of the Society and must adhere to their high quality and standards.

The Law Society of Northern Ireland

The Law Society of Northern Ireland was set up in 1922 and is the regulatory and representative body for solicitors in Northern Ireland.

Leasehold

In contrast to a freehold property, a leasehold property is one where a party buys the right to occupy land or a building for a given length of time, which may extend into hundreds of years. Compare with freehold.

Leasehold property information form 

An alternative version of the Property Information Form (SPIF) that is used when dealing with leasehold properties.

The Legal Ombudsman

The Legal Ombudsman offers an independent and impartial complaints handling service to all those that are not happy with their legal professional. Once you have complained to your own solicitor they have 8 weeks to deal with your complaint. If you are not satisfied by the outcome of the complaint, then you may escalate your complaint to the Legal Ombudsman.

Local authority searches

These searches are conducted during the early stages of the conveyancing process and are designed to protect you from council plans that may affect the state of your property once you’ve moved in. Note that this only refers to things affecting the land up to the legal boundaries of your property: for a more comprehensive check you’ll need to ask your solicitor to perform a ‘planning search', which will cost approximately £25 more.

Management company 

An organisation set up to fulfil a landlord’s obligation under a lease.

Missives 

The exchange of letters between solicitors when buying or selling a house in Scotland.

Mortgage 

Allows you to loan money from a bank or building society so that you are able to buy a house.

Negative equity 

An issue where the amount of money you owe on the property, usually via a mortgage, is more than the sale value of the property.

NHBC

National House Builders Council provide 10 years’ warranty and insurance for new homes.

Occupier’s consent

Required when a person lives at a property but will not be signing the mortgage deed. Consent is asked to allow the mortgage being taken out by the owner, agreeing to move out if the mortgagee takes possession due to the default of the mortgage.

Office copy entries

A set of official copies of the register which can be obtained from HM Land Registry confirming the ownership of the property.

Power of attorney

This document allows a person to act as a legal representative of somebody else with their consent. These are often used to protect the financial interests of the ill or the elderly.

Pre-completion searches 

These are searches undertaken by your conveyancing provider before contracts are exchanged. They check to see if you have been bankrupt and that the property in question is legally owned by the seller. Also known as priority searches.

Priority searches 

See pre-completion searches.

Property Information Form 

Sellers are required to fill this form in and return it to their conveyancing provider. It asks questions regarding boundaries, disputes, services, relationships with neighbours, legal rights, restrictions and other important information. Failure to provide correct information is an offence; in cases where you’re unsure your solicitor should be able to help.

Redemption settlement

This is the sum of money transferred to a lender if you decide to pay back your mortgage early, consisting of the outstanding lump sum balance in addition to a penalty fee charged to cover the interest the lender will subsequently lose out on.

Reparations 

The compensation or remuneration required in the event of a breach of contract.

Reservation fee 

An administration fee charged to cover the cost of reserving a mortgagor’s entitlement to a loan on certain terms or a fee paid to a builder or property developer to reserve a new property.

Service charge 

A charge paid to the landlord to cover any repairs, maintenance or improvements that need to be made to a property. 

Solicitor 

The legal conveyancing process is traditionally undertaken by a solicitor who acts on your behalf once instruction has been received. In this instance conveyancing is one of the services the solicitor offers. See conveyancer.

Solicitor’s Regulation Authority (SRA) 

The independent regulating body of the Law Society of England and Wales, the SRA can be called upon to deal with disputes if you have received an unsatisfactory service from your solicitor.

Stamp Duty

Buyers pay stamp duty based on the purchase price of the property in question, with some exemptions e.g. First Time Buyers up to a purchase price of £300,000. The money accrues to HMRC.

STC 

This is the abbreviation for Sold Subject to Contract.

Subject to contract 

A term used during contract negotiations, nothing is legally binding until contracts are exchanged.

Subsidence 

Where a property moves due to inadequate foundations or significant change in underlying ground resulting in the instability of a building structure.

Tenure 

Freehold or leasehold property ownership.

Third party rights 

When someone other than the legal owner of a property has the right to use or control the land of which they have no ownership.

Title deeds 

Title deeds provide proof of ownership on a particular property. Mortgage lenders will hold onto title deeds as they legally own the property until the mortgage is paid back. Once you have instructed a solicitor they will arrange to obtain the title deeds from the lender, which may take up to 3 weeks.

Transfer deed 

A document that legally transfers your property into the name of the buyer. It must be signed by you in the presence of a witness.

Transfer of equity 

The document transferring the ownership of a share or interest in a particular property from one person to another.

Forfeiture of a Residential Long Lease

 

 

 

 

 

 

 

Generally speaking, forfeiture is the right for a landlord to terminate their leaseholder’s long lease where the leaseholder is in breach of covenant.

To begin with, there must be a provision in the lease allowing a landlord to enforce the covenants in the lease, to include initiating forfeiture proceedings. Those provisions are fairly standard in most residential long leases. However, if those clauses do not exist and a landlord tries to forfeit then the repercussions for the landlord can be significant.

Examples of the grounds under which a landlord may forfeit (if the lease allows) include the following:

• When a leaseholder carries out activities not authorised in the lease, such as subletting without permission;
• When a leaseholder carries out unauthorised alterations to their premises;
• Failure to pay service charge or ground rent.

In order for a landlord to start the process they must serve what is called a section 146 notice. For that notice to be valid, either the leaseholder will need to have admitted the breach (so if you are a leaseholder it is important that you do not do this either deliberately or otherwise) or a landlord must first obtain a determination (normally from a court or tribunal) that the leaseholder is in breach of covenant. This notice will include information about the breach of the lease. It is important to note there is no automatic right to apply for an order authorising forfeiture; a leaseholder must generally be given the opportunity to remedy any breaches.

If the breaches remain following a reasonable time after the service of a valid section 146 notice then a landlord may apply to the court for a possession order.

However, that is not the end of the matter. A leaseholder still has the right to apply for relief from forfeiture. The court has a very wide discretion on whether to grant relief and will take all of the circumstances of the matter and conduct of the parties into consideration. In deciding whether to grant or refuse forfeiture it will be guided by the principle that the right to forfeit is merely a mechanism to ensure the performance of the covenants in the lease. So provided the landlord can be put in the same position as it was before the breach and forfeit occurred then relief should generally be granted.

“Sheer frustration” sees panel manager launch conveyancing service

 

 

 

 

 

 

 

A panel management provider has launched it’s own conveyancing arm in response to what it describes as a “worrying shortage of firms willing to commit to delivering a market-leading service.”

Elite Conveyancing started life as a conveyancing panel manager which introduced strict protocols designed to encourage firms to work more closely, thereby reducing timescales and improving the client journey.

Six years on, Elite Conveyancing has launched its own law firm. Carl Brignell, CEO of Elite Conveyancing explains

“Our sole aim has always been to deliver the best service within the marketplace, I knew that once we achieved the service then market share and profitability would naturally follow. Other providers within the industry I’m sure all share the same aims although arguably in a different order and this is why the conveyancing industry is in the state that it is today.”

“In all honesty the law firm was never part of our original business plan but has been born out of sheer frustration from the lack of other law firms willing to commit providing a true service-focused conveyancing model, to protect their lawyers from taking on too much work, and to recognize and reward their conveyancing lawyers for the amazing work they do.”

According to Mr Brignell Elite Conveyancing’s new law firm has been set up to allow all of their lawyers to work remotely with a centralised administration team on hand to provide full support behind the scenes. It has adopted a digital first approach and employs a strict capacity management strategy to ensure the “Elite” service remains sustainable.

Cryptocurrency – can you buy a house using it?

 

 

 

 

 

 

 

 

 

 

 

A look into the world of cryptocurrency and buying houses, we ask whether it’s even possible in the majority of cases, given the extra risks at play with Bitcoin

 

 Recent years have seen the boom, bust and boom again of alternative currencies, which can be lucrative for investors but also famously volatile and unpredictable.

But are cryptocurrencies – the best known of which is Bitcoin – a legitimate means by which to purchase a property in the UK?

Here we take a closer look and explore what the future could be for property and cryptocurrency.

Can you use digital coins to buy a home?

Some 12 years after bitcoin was first launched, recent commentary suggests that investors are still finding it very difficult to use their digital money to purchase a house.

It can be hard to document bitcoin in the same way as a traditional pound sterling deposit, and mortgage lenders are told to report any deposit that appears too odd or large – something that crypto investments can fall foul of, leading to the need for further verification.

Buyers may find that lenders and conveyancers are unwilling to accept cryptocurrencies when it comes to purchasing a house because of the extra risks and suspicion at play.

Daniel Browne, a senior associate at London-based law firm Kingsley Napley, told the Financial Times recently that there is currently very low appetite for sellers to accept cryptocurrencies throughout the UK. As a result, if people want to use their crypto investments towards a house purchase, it will typically mean converting the cryptocurrency into government-issued currency like sterling.

Much of the reluctance to accept cryptocurrency comes from its well-publicised association with criminal activity, in particular money laundering.

In a recent advice column on whether cryptocurrencies could be used for house purchases, the FT said that, although most lenders are unwilling to lend money where some or all of the deposit is made from the proceeds of crypto, there are some big high street names who are now prepared to do so. This includes Nationwide, the UK’s biggest building society, as well as Halifax and Barclays. Buyers seeking to use crypto are recommended to search for a crypto-friendly lender as early in the house buying process as possible, as they may be more difficult to come by.

Even once this stage has been traversed, however, and you’ve found a lender willing to accept the likes of Bitcoin or Ethereum, buyers are likely to find it very difficult to secure a conveyancer willing to accept crypto.

That’s because conveyancers are required, under strict money laundering regulations, to implement measures to identify who their client is and verify that the funds they receive from a client are not proceeds of crime.

“This means that the provenance of the crypto assets must be understood, including the way they have been traded and with whom,” the FT advice article said. “This typically involves the instruction of an expert who is able to carry out a full audit on the crypto proceeds being used. That audit can then form the basis on which the conveyancer can make a judgment as to whether it is safe to proceed with the proposed transaction.”

There are firms out there who do, but they will be very hard to come by and very much in the minority. Before you commit to attempting to buy a house using crypto funds, you should first make sure you have a lender and conveyancer willing to accept this form of payment.

Has it been done?

There are isolated examples of homes being bought through cryptocurrency in the UK, but they are still very much the exception rather than rule. Buying homes via Bitcoin certainly hasn’t gone mainstream, as some might have expected by now.

In the rental sector, co-living brand The Collective started accepting deposits and rent in Bitcoin as far back as 2017, but it’s not 100% clear if this is still the case and it hasn’t really spread far and wide to other providers in the lettings sector.

Meanwhile, in the sales market, purchases made via cryptocurrency have been extremely rare – and unique stories as a result of that.

Back in December 2017, property developer Go Homes became the first to sell homes in the UK using Bitcoin, while the odd agency here and there has said they will accept Bitcoin to act as a USP. There have also been a number of luxury properties with have gone up for sale only accepting offers in Bitcoin.

On the whole, though, it remains highly niche, with worries over money laundering putting many agents, conveyancers and lenders off, not to mention the amount of due diligence and verification that is required in comparison to a normal house sale.

What about the future?

Some believe, with millenials more likely to invest in Bitcoin rather than traditional stocks and shares or placing their money in the savings accounts of high street banks, that mortgage lenders will simply have to start accepting crypto more readily to meet increased demand.

Research published by Charles Schwab UK earlier this year found that over half of young UK investors are now trading cryptocurrencies, while a further 70% view it as a ‘good investment’. However, there has been a push back against the rise in crypto investing, with the Financial Conduct Authority spending considerable sums on a campaign warning of the dangers of investing in cryptocurrencies.

Crypto companies can be notoriously difficult to regulate, with often a reluctance to work with regulators, which in turn makes the market potentially more vulnerable to nefarious operators. There have been a number of high-profile cryptocurrency scams which have played on the fact that many see it as a quick, easy and lucrative way to make lots of money.

Chris Sykes, associate director and mortgage consultant at Private Finance, told FT Adviser that he doubts UK lenders will accept bitcoin any time soon. 

“From looking at US clients' bank statements, often US mortgages work very differently to UK ones. Where UK mortgages are paid 99/100 by direct debit to the lender, in the US it seems that applicants physically send the money to their mortgage lender on a monthly basis,” he said.

As mentioned above, only a few lenders in the UK allow people to use crypto as a source of deposit, and even fewer allow it for the mortgage repayments themselves. Until this changes, and crypto becomes stable, trusted and mainstream – in the same way that banks are largely viewed, despite their own issues – then it will remain very difficult to buy a home using crypto in the UK. Especially given the fact that most conveyancers are reluctant to accept it and there aren’t many developers or agents happy to consider the digital asset, either.

If you’re a buyer looking to fund your purchase with crypto, you may strike it lucky and find a lender and conveyancer willing to help you, but this is likely to require a whole heap of research and is certainly something that is far from guaranteed.

For now, the traditional way of buying with pound sterling is king, but if cryptocurrency continues to grow at the rate it has over the last decade or so, this could start to change – with the buyers and sellers of tomorrow potentially being more comfortable in a world of digital coins.

How Long Does the Entire Conveyancing Process Take?

 

The conveyancing phase is a crucial part of the entire buying and selling process of any property. 

If you want any transaction to go smoothly, it needs to undergo conveyancing just like any other property on the market. However, don’t expect this to happen overnight or even in a matter of days. This article should help you get a better idea of how long the entire conveyancing process takes and what to expect from it.

The Conveyancing Process

Generally speaking, conveyancing is going to take anywhere between 8-12 weeks if it goes without any issues. The entire process itself involves a lot of moving parts in the form of documents and paperwork. More often than not, there are many parties involved, not just the buyer and the seller.

The main reason why commercial and residential conveyancing takes a long time to complete is because of several factors that can slow down the sale, which is often beyond the solicitor’s control. Conveyancing firms aren’t usually the ones causing the delay. In fact, it’s in the conveyancing firms’ best interests to process things quickly so they can accommodate more clients. To better understand why the process takes too long, let’s break it down, step by step.

1. Pre-Contract Work (1-2 Weeks)

The moment you accept an offer for a house, or you’re the one who made the offer, and it got accepted, the conveyancing process begins. Both the buyer and seller will need to appoint their own conveyancing solicitors to help them obtain and review the legal documents involved in the sale. If you’re the buyer, your solicitor will speak to the other party’s solicitor for the draft contract and start local searches. This alone could take more or less ten days. However, when local authorities miss their deadlines, this could take up to several more weeks.

2. Mortgage Offer (2-4 Weeks)

Hopefully, before you made an offer on the property, you had a Mortgage Agreement in Principle in place. As your solicitor is processing the searches and the contract, next comes your mortgage offer, which relies on your mortgage lender. This process takes about a month from your application.

3. Drafting a Contract (2-10 Weeks)

While all the other processes are happening, the next step is drafting a contract. This is one of the most arduous parts of the conveyancing process because you need to work with your solicitor to get all the necessary paperwork from the land registry and the seller’s conveyancer. You may have the results of the local searches already done by now, which could also raise some issues that need to be resolved.

4. Exchanging of Contracts (2-4 Weeks)

After all the other processes are done, it’s time to exchange contracts. This could take a week or two or even more, depending on how fast both parties are able to exchange and review the contracts. Even if you finished reviewing everything, you wouldn’t be able to proceed until the seller is also done reviewing their contract. After review and completion, only then can you set a completion date.

Three Easy Steps to Protect Your Property From Fraud

Property fraud is on the rise and your property is probably the most valuable asset you own so it is important to protect it from the risk of fraud.

People are increasingly falling victim to property fraud because the tactics fraudsters use are much more sophisticated.   Fraudsters are targeting properties by pretending to be you so they can try and sell or mortgage your property.

The Land Registry advise that you are more at risk if your property is one of the following:

• Rented out
• Empty
• Mortgage-free
• Unregistered  

Over the last 10 years around £55 million has been paid out under the Land Registry indemnity scheme because of forgeries.  Do not become a victim of property fraud and take these easy steps.

Firstly, you should make sure that your property is registered at HM Land Registry. Your property will be registered if you bought it or mortgaged it since 1998. If you are unsure, you can check with the Land Registry who will be able to confirm whether it is registered.  If your property is registered and are a victim of property fraud where you suffer financial loss, you will be compensated through the Land Registry indemnity scheme.

If your property is not currently registered with the Land Registry, then you can apply voluntarily for this to be registered.  The Land Registry charges a discounted fee for voluntary registrations and we can prepare these applications for you at Brethertons.

Once your property is registered, you must then keep your contact details up to date. You can include an email address or an address abroad.  Keeping contact details up to date is particularly important if you do not live at the property and have moved addresses since the purchase.  Many Landlords with Buy-to-Let properties often overlook updating their rental property contact details when moving home themselves.  

The second step is to sign up to the Land Registry Property Alert Service which is completely free of charge www.gov.uk/property-alert .  Once you have signed up to this service the Land Registry will notify you of certain applications affecting the property you are monitoring. You will receive a notification for example for a new mortgage or change of ownership.  You can monitor up to 10 registered properties in England and Wales. You don’t have to own the property, so could monitor the property for an elderly relative for example.

Alerts are normally sent by email but, you can still use the service if you are not online. If you receive an alert about an activity that seems suspicious you should take immediate action and contact the Land Registry Fraud Line.

Thirdly, if you feel that your property is particularly at risk from fraud then you can apply for a restriction to be placed on your property designed to help prevent forgery. The restriction prevents the Land Registry registering a sale or mortgage on your property unless a conveyancer or solicitor certifies the application was made by you.

It is important that you do what you can to protect your property.  

 

5 reasons why digital connectivity should be a priority for all conveyancers

 

 

 

 

 

 

 

 

The importance of digital connectivity for the future of conveyancing

The property market is a diverse ecosystem of multiple professions operating independently. Estate agents, conveyancers, mortgage brokers and lenders provide individual services throughout a property transaction, but unlike other industries such as banking, they aren’t connected by a universal digital network.

The lack of digital connectivity in the property market creates challenges and additional administrative work for conveyancers that hinders efficiencies and productivity. Conveyancers often find themselves using disparate systems and communication channels to rekey data, chase – and be chased – for updates, and check data for consistency to progress a transaction.

During the last 18 months, the unprecedented volume of transactions created by the SDLT holiday meant that trying to keep on top of those additional manual tasks was a challenge, resulting in many conveyancers working into the night to complete transactions by the SDLT deadline. Something that isn’t effective for conveyancers in the long-term when managing workloads.

Connecting in a hybrid-working environment

The importance of connectivity is heightened further with many businesses and professionals across the property market moving to a hybrid-working environment. Firms, departments, and clients are now more physically disconnected than ever before, which only emphasises the need for a digital connection to effectively communicate and collaborate.

Conveyancers can’t continue with siloed data, disparate systems, and disconnected operations because it slows down processes and affects scalability and profitability. It increases the risk of errors, which can lead to unsatisfied clients and increases a conveyancer’s workload of administrative tasks. It also takes up time that otherwise could be spent nurturing client relationships or winning new business.

Of course, not all digital connectivity is equal. Having hundreds of APIs doesn’t give you a ‘single source of the truth,’ just a reconciliation headache. Data that is collected digitally, but not in real-time, may not be up to date. Connectivity needs to be secure – it matters who is seeing it on the way from source to destination. Finally, true connectivity is two-way; it ensures the connection allows both parties to share data with each other.

5 reasons why digital connectivity should be a priority for all conveyancers 

The future of conveyancing is digital, which invites opportunities for improving the connectivity of the market. A digitally connected property market will help to improve the workloads of lawyers, increase the profitability of law firms, but importantly remove the friction and pain points within a property transaction for clients. Listed below are five benefits for digitally connecting data and systems across the market.

1. Visibility and accuracy

Connecting various property software platforms through one network creates a single source of truth for all actions, updates, and key information within a property transaction. When platforms, processes, and data are connected you immediately reduce the need for manual intervention which reduces the risk of errors. Synchronising your data with other parties helps provide visibility across your firm and ensures accuracy. The right network enables you to easily share that data with clients and third parties too. When everyone is working from one source of truth, all parties can be confident their data is accurate and ensures everyone has visibility of progress.

2. Efficiency

A goal for most law firms is to drive long-term efficiencies, and digitally connecting and streamlining your operations is one of the crucial ways you can improve efficiencies and the profitability of your firm. Remove the time-consuming and manual admin tasks involved in keeping records up to date, chasing third parties or updating clients and run your firm through a centralised platform that can act as the core for all processes and data to be stored and shared. A practice management system connected in real-time will help to significantly speed up a transaction and make it incredibly easy to share updates with all parties. When your conveyancing processes are streamlined, you improve the scalability of your firm so you can grow without working late into the night or without additional overhead costs.

3. Enhanced communication and collaboration

A truly connected property market can instantly improve communication and collaboration across all parties. With secure, real-time connectivity conveyancers can be confident that the data they are sharing and receiving is accurate without needing to manually review it. Connectivity helps to automate the communication needed between parties so diary reminders for updates are a thing of the past and data is effortlessly shared. Conveyancers can work quicker with access to everything they need at their fingertips so they can focus on progressing a transaction, not maintaining its data.

4. Client satisfaction

Online property search platforms, like Zoopla and Rightmove, are leading the way for removing friction and pain points throughout the property transaction. By providing a digital self-service platform they put the client back in control of their experience and provide the tools they need, when they need them, to sell and buy a house. Consistent connectivity across the property market will help reduce friction points further helping conveyancers to deliver an effective and transparent service that exceeds client expectations and removes the familiar challenges of buying and selling a property.

5. Security

If all parties involved in a property transaction had full visibility from their existing software solutions, it would significantly reduce the need for email and phone updates. By reducing your reliance on email communication, you increase the protection and security of your client data. Connect using a secure network and all data remains within your existing platform with controls on who can access it, you’re reducing the need for human interference, therefore, reducing the risk of errors.

The future of conveyancing

To improve efficiencies for your firm that positively affect your bottom-line, to streamline workloads for lawyers and third parties, and to enhance the client experience and reduce the time it takes to buy a property, the property market needs to get connected. The future of conveyancing is a secure, real-time, synchronised network of connected platforms, processes, communications, and data that enables an effortless and streamlined transaction, benefitting all involved.

Digital connectivity should be the number one priority for conveyancers looking to future-proof their firm as it provides new opportunities and possibilities. A connected network of moving parts improves scalability, growth potential and success and it also enables flexibility and adaptability.

 

Average house prices are starting to fall

The average price of UK houses has fallen by £ 10,000 in July compared to the previous month, this has been put down to the market cooling after the final part of the stamp duty is coming to an end, the average house price is still around £256k and around £18999 higher than the previous July average this data is taken from the office of national statistics.

The huger rise has been put down to the holiday that was given to house buyers the 1^st July 2020 to June 2021 up to £500,000 purchase price  and then from the 1^st of July until 30^th September 2021 it was reduced to £250,000 purchase price .  On the first of October it will fall back to £125000.

If the purchaser was purchasing as a second property they would still benefit from the holiday as the first part of the stamp duty up to £500,000 was still not payable only the 3% on the second property part of the stamp duty .

The savings on a property based on 1 property owned after completion between July 2020 and 30^th June 2021 £500,000k purchase price

Stamp duty 0

Stamp after end of Sept £10000

If it was a second property buys to let or second home after completion between July 2020 and 30^th June 2021 £150000

If it was a second property buy to let or second home after completion after end of September 2021 £30,000

As you can see the saving was a lot on 1 home or buy to let , the issue was this stimulated the market so pricing went up and in a lot of circumstances the increase in property price wiped out the saving .

According to the ONS data, average house prices rose at different rates in the four UK nations over the year, with the largest increase, just under 15%, in Scotland, where the average reached £177,000.

In Wales, the increase was almost 12%, taking the average price of a Welsh home to £188,000, while 9% was recorded in Northern Ireland, taking the average house price there to £153,000.

House prices climbed at the slowest rate in England, by 7%, although the nation records the UK’s highest average at £271,000.

London remained the region with the lowest annual growth (2.2%) for the eighth consecutive month.

Soaring house prices over the past year have pushed home ownership further out of reach for many people, said Nitesh Patel, a strategic economist at Yorkshire building society.

 

Stamp Duty changes

 

 

 Stamp Duty Land Tax (SDLT) is the payment of tax required if you buy a property or land over a certain price in England and Northern Ireland.

There are particular thresholds which determine just how much SDLT is due starting at £125,000 for residential properties. If you are buying your first home however, you get a discount which means you pay less or no tax at all, subject to certain criteria. If you are buying a second home or adding to your portfolio of properties and not replacing your main residence, a surcharge is required on top of the usual tax payment.

Along with the required payment, you must file a return to HMRC this being, on their required forms, a breakdown of the transaction, the property and the parties to the transaction.

Not all transactions require a filing to be made for example those where no money changes hands, property is left in a will or property transferred as a result of the dissolution of a marriage or civil partnership. However, if none of these circumstances apply, even of you are not paying any stamp duty, a filing must be made so as to declare the transaction to HMRC.

Currently, the SDLT filing and payment deadline is 30 days. This means you have 30 days from the ‘effective date’ of the transaction to file the required forms to HMRC and make the required payment to them. The effective date is usually the date the transfer is completed but it can be the date the contract is ‘substantially performed’ be this when the majority (at least 90%) of the purchase price is paid, the buyer becomes entitled to possession or the first payment of any rent due has been paid.

Should the filing and payment deadline of 30 days be missed, there are varying penalties that may be enforced. Inaccuracies in the filing and payment will be scrutinised by HMRC to determine to most suitable penalty. Fixed penalties are charged if the filing or payment is made after the current 30 day window but within 3 months it. This penalty is currently £100. In all other cases the penalty is a fixed £200. For late payment, interest is also charged.

In the Spring 2017 Budget it was announced that HMRC would reduce this filing and payment window to 14 days. It was then announced in the Autumn 2017 Budget that this change would be applied to transactions with an effective date on or after 1st March 2019.

Whilst SDLT is a self issuing tax, meaning it is the responsibility of the individual to ensure the correct amount is paid and filing is made, in most instances the solicitor or licensed conveyancer will undertake this as part of the usual conveyancing transaction having obtain authority on the file from the clients to do so.

The implications for conveyancers and solicitors moving forward is that we will have a shorter window to ensure the correct filing is made and payment is sent. Here at Brethertons, during the course of the transaction, and at the point of signing Contract Papers ahead of exchange of contracts, we ask the client to review, check and sign their approval of the required SDLT forms pertaining to their transaction, we also report to them with a draft completion statement so they can confirm their acceptance of the tax being paid on their behalf. This means that following completion we are able to promptly submit the filing using the HMRC SDLT Portal and instruct our accounts team to send out the payment to HMRC. Doing it this way not only negates the risk of late payment penalties and interest but also allows the very maximum amount of time should HMRC have any queries on the filing. Therefore, whilst we will be mindful of the reduced timescale when it comes to our clients tax obligations, it will not require any change in our day to day processes in the Conveyancing department.

 

 

 

 

What are the rules for letting your property to a family member

 

What are the rules for letting your property to a family member

Do you have a buy to let property and a family member who needs somewhere to live, and then this is the rules lenders have for letting your rent a property to a family member. You would think renting to a relative would be simple but is often more complicated than renting to a verified stranger.

Most lenders will not allow a family member to let the property from you if they are the owner of the mortgage on the buy to let . The reasons are as soon as a family member is allowed to live in the buy to let it then becomes under the roof of FCA regulations and the buy to let then becomes more difficult to pass lending criteria of the buy to let .

Some of the reasons it is difficult is when family is involved so are personal feelings and the property is often rented below the market rental amount the property can achieve, nearly all buy to let lenders lend on the market rent that the surveyor gives to the property when valuing the property it is a carefully thought out equation that gives enough rent to cover the mortgage payments and have some spare to give the landlord profit and enough to cover any rental voids. So if the property is rented below this amount it would put the lending at risk. Another issue is the issue off evicting the tenants if the family members could no longer afford the rent, this would be more difficult as you would have a personal relationship with the tenant and you would have the issue of causing a problem within the family , this could then lead to mortgage arrears and eventually repossession this is something the lender wants to avoid at all costs .

What happens if you don’t inform your lender about plans to let to family?

The consequences of not telling your lender that a close relative is also going to be your tenant could be severe. You would, in effect, be committing mortgage fraud, which could lead to a request for you to repay your mortgage in full – a considerable financial outlay that very few people would be able to afford at short notice.
 
Even if you have sought permission and your lender has allowed you to let to a family member, they may not be too pleased if the arrangement is on a ‘mates/family rates’ basis, where the rent is not at or close to market value.
 
If the rent doesn’t cover 125%-145% of the monthly mortgage payment – which is likely to have been one of the requirements when your mortgage application was approved – this could cause you issues with repaying your mortgage in the appropriate way.

Certain lenders do provide options 

Fear not, while the majority of lenders do not offer mortgages allowing you to let to close relatives, some do.
 
So, if you’re desperate to let to a family member, it is achievable if you look in the right places. Niche Advice, a mortgage broker which offers expert advice on buy-to-let mortgages, says there are lenders offering regulated or ‘family’ buy-to-let mortgages, even if these are very rare.