What do you need to know before getting onto the property ladder

For first time buyers, preparing to buy your first home is exciting but understanding some of the vital laws relating to house buying can help prepare you for navigating the conveyancing process.

Jane Bohill, residential property law expert at Warners Solicitors in Kent considers some basic issues to help you step onto the property ladder.

Money issues

Perhaps the most important issue to consider is financing your purchase and the legal implications. You may have been saving for your house deposit for a long time but might not know how much deposit you actually need before making an offer. At the exchange of contracts stage, you will probably be expected to pay a deposit of 10 percent of the purchase price. This deposit makes the contract legally binding.  

If you are having a mortgage, speaking to your mortgage lender and getting a ‘mortgage in principle’ before you start house hunting can help you set a realistic budget for your search. Once you have found your dream home, the mortgage offer could be revised to include a cash retention clause meaning that the lender may withhold some of the advance until certain works have been carried out. It is important to do your sums again to make sure you will have enough money to complete the purchase.

You will also need to factor in stamp duty land tax if the purchase price is more than £125,000. The current rate is two per cent of the amount of the purchase price exceeding £125,000 up to £250,000, and then five per cent any amount exceeding £250,001 and up to £925,000.

Buyer beware

Buying your first property will probably be the biggest and most expensive purchase you will have made, so be very careful before deciding to put in an offer. A fundamental legal principle is ‘buyer beware’ which means when you buy, you are responsible for checking whether there are any problems with the property before you go ahead.

The seller is legally required to disclose anything they know would reduce the property value as well as provide you with detailed information as requested in the Seller’s Property Information Form. However, as the buyer, it is your ultimate responsibility to check the property thoroughly.

When are you legally bound to the purchase?

When you and the seller are ready to commit to the transaction, contracts will be exchanged and the agreed completion date fixed. You will both then be legally bound to go through with the transaction on the contract terms. If you change your mind and withdraw after contracts have been exchanged, you risk losing your deposit and being liable to pay compensation to the seller. In some cases, the seller can even ask the court to force you to complete.

However, your solicitor will not exchange contracts on your behalf until they are absolutely sure there are no outstanding issues to be resolved and that you are ready to go ahead.

Buying with someone else

If you are purchasing a property with another person such as your partner, there are some important co-ownership considerations. How you decide to own the property could impact on the size of your share in the property, what will happen to it when you die, and have inheritance tax implications. Your solicitor can advise you on the full implications according to your situation.

You can own a property jointly in two different ways:

  • as beneficial joint tenants: this means you each own the whole property and you have no distinct share that you can give to someone else. The right of survivorship also applies, which means that when one of you dies the survivor automatically owns the whole property; or
  • as tenants in common: this is preferable if you and the other joint owner have contributed different amounts of money to fund the purchase. For example, a cohabiting couple buys a property for £400,000 with a £250,000 mortgage. Y puts in £50,000 and Z puts in the remaining £100,000. They agree to own the property in the ratio of a third to Y and two thirds to Z. Each can sell or transfer their share and can leave their share to someone under their will.

Legal registration

After completion, your solicitor will arrange to register you and any joint owners as the new legal owner of the property at HM Land Registry.

We hope that this article has given you a deeper understanding of the laws relating to house buying. For further information, please contact Jane Bohill in the Residential Property team on 01732 747905 or email [email protected]. Warners Solicitors has offices in Sevenoaks and Tonbridge, Kent.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

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