Buying a property can seem like a daunting prospect but understanding how each part of the process works can immensely help, especially if the property in question is a Leasehold property. To help buyers, especially investors understand the process, The Property Lifeline has put together the step by step leasehold conveyancing process. There is a handy summary at the end of the article, but we recommend you read the whole article to get a great understanding of the process.
Sale Agreed and Instructing a Solicitor
When the property has a sale agreed, the seller must instruct a solicitor to act on their behalf. They should send a completed instruction to the Solicitor and ask them to confirm that they will act on behalf of the Seller and send the necessary documentation out to them.
The Solicitor should acknowledge the instruction and confirm that their Client Care Pack will be sent to the Seller. The Client Care Pack will include a Client Care Letter setting out the Solicitors Terms of Business, request for the Sellers identification both photo ID and address ID, and schedule of the costs involved in the transaction. It will also ask the Seller to provide contact details including phone number and e-mail addresses, and confirmation of their current Mortgage Account Number and Lender information.
After contact has been made by the seller the Solicitor will send to them the Sellers Property Information Form, Leasehold Property Information Form, Fixtures Fittings and Contents List and possibly an authority to request a redemption figure on their behalf. (These are known as Protocol Documents). It is important on a Leasehold transaction to try to obtain the Management Company Address as soon as possible as they do tend to take a long time to reply to enquiries. The Seller should have this information as they will have been paying a Ground Rent and Service Charge.
The vendor will receive the pack and complete and return this to their Solicitor including their original identification and all completed documentation, together with one copy of the signed Client Care Letter. Some Solicitors may wait for the signed Client Care Letter as this letter authorises them to proceed on their sale.
Starting the Work
The Solicitor will request a copy of the up to date Office Copy Entries on the Property, a copy of the Title Plan, and a copy of any documents that are referred to in the property register such as Leases, Conveyances or Transfers. These are usually requested and downloaded from HM Land Registry direct. (These are known as Title Documents).
Once the Solicitor has received and checked that this information is correct (ie that the Seller is entitled to sell the property and is the registered owner of it,) the Solicitor will draft a contract. The contract is then sent to the Buyers Solicitors together with Office Copy Entries, Filed Plan, Sellers Replies to Property Information Form, Leasehold Property Information Form and Fixtures Fittings and Contents List, and any supporting documentation that they have obtained from H M Land Registry including the lease. Sometimes a solicitor cannot obtain the Lease immediately and have to request that this is posted to you by H M Land Registry.
The Next Steps for Both Solicitors
At the same time, the Solicitor will send a Contract out to the Seller with a covering letter explaining the implications of signing the Contract, and where they need to sign. The letter will advise the Seller to return the signed document to them as soon as possible. Once the Solicitor receives the signed Contract from the Client it will be held on their file “to their Clients order pending exchange of contracts”.
The Solicitor will then apply to the Clients current mortgage lender for the Title Deeds and Documents to the property, and will at that time, request a redemption figure to cover all and any charges on the property. If there are any second charges on the property and the Seller has provided the account number in respect of this, the Solicitor will apply for a settlement figure for that account also.
Once the Redemption Figure has been received the Solicitor will check that the sale can proceed and that there will be sufficient proceeds of sale on completion to repay the secured debts associated with the property. A copy of the redemption figure will be sent to the Seller and they will be asked to confirm that the figure is correct.
When the Buyers Solicitor has received the Contract and supporting title documents, together with the protocol documents from the Sellers Solicitor, they will at that time raise their enquiries in respect of the property. They will usually send at this stage Leasehold Enquiries and Management Company Information. (These are known as Additional Enquiries). At the same time as they raise their enquiries, they should forward a draft Transfer to the Sellers Solicitor for their approval. If the Sellers Solicitor approves the draft Transfer they will advise the Buyers Solicitor of this, and confirm that they have posted it to the Seller for their signature and return. (This is referred to as the TR1 document). They will at this stage send Replies to Requisitions On Title to the Buyers Solicitor which advises them of their Client Account Bank Details and gives them an undertaking that all financial charges secured on the property will be repaid by them on completion.
At this stage the Buyers Solicitor should advise the Sellers Solicitor of their Clients current position.
The Sellers Solicitor may telephone the Seller to go through the additional enquiries over the phone, or if there was plenty of time they would post them to the Seller and ask them to complete and return these to them. The Leasehold Enquiries will need to be sent either to the Freeholder of the property or the Management Company. These are usually very slow to respond to enquiries and will usually charge a fee for replying.
Either at the same letter, or by a separate letter, the Sellers Solicitor would send the Seller the Transfer for them to sign and send back. The letter should explain where to sign the Transfer Form and that it must be witnessed by an independent adult witness, who is not related to them, who must sign adding his or her name address and occupation.
Once the Sellers Solicitor has the signed Contract and Signed Transfer back from the Seller, they have all the legal documents that the Seller needs to sign held on their file.
At this point the replies to standard enquiries should be back from the Seller if they have been posted to them, and these will be sent to the Buyers Solicitor who will consider them and raise any further points with the Sellers Solicitor as is necessary. The replies to Leasehold Enquiries when received need to be sent to the Buyers Solicitors who may raise further questions once they have received the replies.
Once the Buyers Solicitors have their clients signed documents, mortgage offer and search results, and they are happy with all of the information they have received from the Sellers Solicitor, completion dates can be suggested. Apportionments of Ground Rent and Service Charge will need to be agreed at this stage.
Once the Seller has agreed to a specific completion date their Solicitor will apply for an up to date redemption figure on all secured charges and will ask for that to be calculated to the completion date. They usually ask for a daily rate of interest to be noted that if the completion date is not met, they know how much per day they need to add on to the redemption figure.
Ready to Exchange
Once all parties have agreed that they are ready to exchange contracts the Sellers Solicitor will call the Seller, advise that all parties are ready and seek their permission to exchange contracts and complete on their sale. They will also at that time discuss what funds are being repaid from the proceeds of sale and to whom and ask the Seller to confirm that this is agreed and make a note on their file.
Contracts are then exchanged with the Buyers Solicitors under a Formula B and both the Seller and the Buyer are then committed to the transaction.
The Buyers Solicitor will forward to the Sellers Solicitor the full funds required to purchase the house. The Sellers Solicitors may have made an allowance to the Buyers for the Sellers outstanding Ground Rent and Service Charge, if this is the case this will be deducted from the funds sent to the Sellers Solicitor on completion and the Buyers Solicitor will pay this directly to the Management Company when they send their clients details to them.
Alternatively, the Buyers Solicitor may pay the Buyers amount owing and the Sellers Solicitor would then pay this to the Management Company so that Ground Rent and Service Charge are then paid in full up to the Management Companies year end date. The Sellers Solicitor will then pay off their clients mortgage and any other secured lending on the property or associated debts, and send the balance to the Client together with a copy of their bill.
The Sellers Solicitor will then send the Contract, signed Transfer Form and any other associated documents to the Buyers Solicitor. The Buyers Solicitor will send their part contract to the Sellers Solicitor to complete the exchange.
They will repay any amount due to the Management Company and advise them of the new Buyers details.
They will also send an END 1 or DS1 Form to the lender and advise that redemption funds have been sent by telegraphic transfer and can the lender please confirm receipt and release their charge from the property. Once the Solicitor has received the END 1 or sealed DS1 Form from the lender, they will send that the Buyers Solicitor and ask them to confirm receipt, and confirm that their undertaking given on completion is discharged. The Buyers Solicitor will discharge the Sellers Solicitors undertaking. This transaction is now complete.
The Sellers Solicitor will write to their client and advise that the matter is now fully concluded and they will be closing their file of papers.
Summary of the Leasehold Conveyancing Process
- Solicitors Instructed advising of Client and full property details
- Solicitor will send out Client Care Pack and Protocol Documents to Client including Leasehold questionnaires
- Solicitor receives signed Client Care Letter, identification, protocol documents and mortgage account information from Client and hopefully provide at this time Management Company Information ready for when the request for this information come in from the Buyers Solicitor
- Solicitor will obtain Title Information and supporting documentation from HM Land Registry Direct and a copy of the Lease. This may follow in the post and may not be obtainable from HMLR direct
- Solicitor to check Title Information to ensure that the Seller is entitled to sell the property and will then issue a draft contract for approval, title information and protocol documents to the Buyers Solicitor
- Solicitor will issue a Contract to the Seller to sign where indicated and return
- Solicitor will apply to Clients lender for title deeds and documents and a redemption figure for information purposes at this stage, on each and every secured charge on the property
- Once the redemption figure has been received it will be sent to the Client for confirmation that the figure/s is/are correct
- Buyers Solicitor will raise additional enquiries with the Sellers Solicitor and send leasehold enquiries which will need to be send to the Management Company with a fee. Sometimes the Buyer will pay this fee, if not the Seller will have to pay it and occasionally the Management Co will allow it to be repaid from the proceeds of sale on completion.
- The Buyers Solicitor will send a draft transfer for approval. If the Sellers Solicitor approves this they will send it to the Seller for signature and return. They will also send the enquiries raised by the Buyers Solicitors for answering and returning to them. The Sellers Solicitor will respond to Requisitions on Title to the Buyers Solicitors and give them their bank details and the appropriate undertaking.
- Once replies to enquiries are back from the Seller they are sent to the Buyers Solicitors and enquiries are made as to their position and if they have any completion dates in mind. Hopefully the leasehold management company information is included.
- Once a completion date has been agreed the Sellers Solicitor will get up to date redemption figures on all secured charges and run through the financial statement with the client to ensure its agreed and can be repaid on completion. The Solicitor will also discuss apportionments on Ground Rent and Service Charge, these will be made on completion.
- Completion date agreed. Seller contacted to confirm authorises solicitor to exchange and complete. Exchange of contracts takes place, completion takes place and the Buyers Solicitor sends funds to the Sellers Solicitor.
- Sellers Solicitor receives funds and repays all secured lending on the property and sends any balance back to client with completion statement and letter.
- Any monies due for outstanding Ground Rent and Service Charge together will be paid to the Management Company together with the new Buyers information
- Letter sent to the Lenders with END 1 or DS1 and confirmation mortgages have been repaid in full.
- Completion letters sent to client and to the Buyers Solicitors with signed Contract Transfer and any sundry docs.
- END1 or DS1 received from lender and sent to Buyers Solicitors with request that undertaking given on completion is discharged. Once this has been received a letter is sent to Seller to confirm that file is now to be closed and all matters have been concluded
Should you require any further advice on the above or need to speak to anyone regarding repossession worries or need to sell your house quickly please feel free to contact The Property Lifeline for a free consultation.