Legal issues around buying a house

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Health Assured team

16 September 2022

For people who are in the process of buying a home, it can be both an exciting and daunting time given the high level of time, money and effort committed in acquiring a desired property. As a home buyer or seller, it is important to be aware of the potential areas for consideration before taking this next step.

 

Affordability

Prospective home buyers should ensure they can afford to pay for a property before considering climbing on the property ladder. You will need to ensure you have enough equity to pay for the deposit and to cover the legal costs around purchasing a home. Careful research and constant liaisons with a mortgage advisor and mortgage providers will be required to ensure that affordable terms can be negotiated for a mortgage to finance a property purchase. Prospective buyers should carefully read any terms and conditions attached to alternative forms of finance such as a Help to Buy equity loan to ensure they can afford the payments. If these are not paid there could be a risk of a breach of contract and having a county court judgement being sought.

Once you have located a suitable property, it is best practice to contact a mortgage provider and agree a mortgage in principle. This is a mortgage that will be agreed with you on the basis that you are able to pay the deposit agreed and are successful in obtaining the contract of the property.

 

Conveyancing

Should a suitable property be located and a mortgage in principle acquired, buyers will need to ensure they instruct a competent conveyancing solicitor to act on their behalf.

This is to ensure that the instructed solicitor carries out all the necessary tasks involved in conveyancing such as searches of the Land Registry for any restrictive covenants that bind the property (and any prospective buyer) as well as instruct surveys of any negative physical aspects of the property. To protect themselves against any missed caveats not found in searches, prospective buyers may also wish to purchase indemnity insurance.

 

Buying Process

Towards the conclusion of a property purchase, the exchange of contracts with the selling party will ensure the property is legally in the buyer’s name. At this point the buyer legally commits themselves to the property. If the buyer wishes to withdraw their offer at this point, there would be a risk of losing the deposit and paying for the other parties’ legal costs. Prior to the exchange of contracts, the buyer can withdraw their offer from the seller.

 

Future Legal implications

Buyers of shared properties may wish to consider potential future legal implications of purchasing a property jointly. If the other party chooses to terminate their interest in the property it could lead to the property being sold by mutual agreement. If two people are contributing to the same property it would be beneficial to purchase the property as tenants in common rather than as joint owners as this can protect the individual deposits that have been made. The effects of not putting any protection in place can be costly and time consuming.

Individuals should consider using a solicitor to draft a “declaration of trust” not only to prove a beneficial interest by recording financial contributions made by a party, but also noting specific instructions on how to sell or transfer a property and how sale proceeds are divided.

If individuals are in a relationship but are not married, you may wish to consider a “cohabitation agreement” which is an agreement detailing the separation of the assets should the individuals choose to end the relationship. This is not legally binding but if drafted with a solicitor it can hold some weight in a court should a disagreement form.

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