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A typical conveyancing transaction has five stages:-
2) Exchange of Contracts
3) Post Exchange or Pre-Completion
5) Post Completion
Pre-Contract stage – Freehold Sale/Purchase
The estate agent will send to the seller's solicitor a memorandum of sale providing, amongst other things, details of the solicitors acting for the buyer. The seller's solicitor will then prepare the pre-contract package to be sent to the buyer's solicitor. This will comprise:
The draft contract, which states what property is being sold and the terms on which it is to be sold.
Evidence of the seller’s legal title to the property by way of office copies.
Seller’s replies to the Seller’s Property Information Form and Fixtures, Fittings and Contents form.
Copy planning permissions, if applicable.
Once the buyer's solicitor has received this documentation, the local, environmental and drainage searches will be carried out. These can take up to six weeks in the case of a Full Local Authority Search or approximately 10 days in the case of a personal search. Appropriate enquiries will be raised and the draft contract will be approved or amended. Once all enquiries have been resolved, the buyer's solicitor will report to the buyer with the contract for signature, request the deposit and, if applicable, check that all mortgage offer conditions have been satisfied.
At this stage, either party is still able to withdraw from the transaction, even if the contract has been signed.
Exchange of Contracts stage
The exchange of contracts marks the stage in the transaction at which a binding contract is formed and neither party can withdraw without incurring the financial liabilities stated within the terms of the contract. Normally a 10% deposit is paid to the seller’s solicitors, which is retained by them until completion. The deposit serves as a good faith statement that the buyer intends to proceed to purchase the property under the terms of the contract.
If the buyer withdraws from the purchase, the seller can forfeit the deposit and retain the money. There is no requirement in law for any deposit to be paid by the buyer at an earlier stage than exchange of contracts, although some estate agents may ask a buyer to lodge a nominal deposit with them pending formal exchange of contracts. If the seller withdraws, the buyer’s solicitor may apply to the court for an order forcing the seller to complete and bring court proceedings for breach of contract.
There is usually a period of 10-14 days in between exchange and completion to afford the purchaser’s solicitor sufficient time to obtain the necessary funds from the buyer and/or mortgage lender and for the seller’s solicitor to obtain a redemption figure from the seller’s lender.
The purchaser’s solicitor will raise what are known as ‘requisitions’ with the seller’s solicitor. These requisitions relate to the mechanics of the completion itself, e.g. how much money is required to complete the transaction and who holds the keys to the property.
At the same time as requistions are sent, the buyer’s solicitor will prepare and send the draft transfer deed for the seller’s solicitor’s approval. The seller will sign this transfer deed to enable legal ownership to be transferred to the buyer.
The purchaser’s solicitor will request the buyer’s mortgage advance from the buyer’s lender to be sent to them before completion.
The purchaser and seller’s solicitor will prepare completion statements. This will detail how much money is required from the buyer to complete the purchase and in the case of the seller, how much money is due to the seller on completion.
Just before completion, the buyer’s solicitor will carry out pre-completion searches to ensure that no last-minute problems have occurred with regard to the title to the property.
The seller’s solicitor will request an up-to-date mortgage repayment figure from the seller’s lender, as the seller’s mortgage must be redeemed on completion.
The buyer’s solicitor will telegraphically transfer to the seller’s solicitor the money required to complete the transaction. Once received, the seller’s solicitor will notify the buyer’s solicitor and estate agent to authorise the release of the keys to the buyer. The seller and buyer will then be notified that completion has taken place so they can make their respective moving out and moving in arrangements.
Completion usually takes place by early afternoon.
The seller’s solicitor must obtain a receipt from the seller’s mortgage lender and forward this to the buyer’s solicitor to prove to HM Land Registry that the mortgage has been redeemed and account to the seller with the sale proceeds.
The buyer’s solicitor will attend to the payment of Stamp Duty to the Inland Revenue. This must be paid within 30 days to avoid penalties being imposed. Once notification from the Inland Revenue has been received, the solicitor will proceed to register the property at HM Land Registry. Notification of registration is usually received after a few weeks.