BUYING AND SELLING REAL ESTATE IN ENGLAND AND WALES 103
KEY FACTS OF REAL ESTATE ACQUISITIONS UNDER BRITISH LAW
1. Introduction Historically, there has been significant investment by overseas individuals and corporations in real estate in England and Wales and in particular in central London, which is perceived as a safe haven for overseas investors. Much of the recent overseas investment has been focused on residential real estate, but there has also been substantial investment in commercial real estate. This guide applies to real estate in England and Wales, but it is not applicable to other parts of the United Kingdom, namely Scotland and Northern Ireland; or to dependencies such as the Channel Islands or the Isle of Man, which have their own separate legal systems. 2. Tenure Real estate in England and Wales may be any of the following: Freehold Freehold real estate is the absolute property of its owner, subject to any rights and title covenants in favour of third parties. These may affect how the real estate is used. Leasehold Leasehold real estate is held under a lease for a fixed period, usually subject to the payment of rent and the performance of obligations or covenants contained in the lease. The terms of the lease will dictate whether or not the leaseholder is entitled to transfer its interest to a third party or whether it can sublet either the whole or part of the real estate. Commonhold This is a relatively new type of real estate ownership. It allows perpetual “strata” ownership of a multi-occupied residential
property by the individual unitholders, with joint responsibility over common areas and facilities. However, commonhold has, for various reasons, failed to gain traction in the marketplace and is rarely used (although the UK government hopes to revitalise commonhold in the near future). Residential apartments are, therefore, almost always
owned under a long lease. 3. Know your client (KYC)
It is necessary to carry out due diligence on the purchasing entity to comply with UK Anti- Money Laundering Regulations. The documents which are required will vary depending on the purchasing entity, but they need to establish the identity of the purchaser and its ultimate beneficial owner. 4. Individual stages in a real estate purchase It is customary for real estate to be sold by a two-stage process. Firstly, the parties enter into a contract in which the seller agrees to sell the property to the buyer. This process, known as “exchange of contracts”, has the effect of passing the beneficial interest in the property to the buyer. In the second stage, typically about 28 days later, the seller transfers the legal title to the buyer. This is known as “completion”. It is possible, however, for the parties to proceed straight to completion and this is sometimes done when timing is critical. Before signing the purchase contract After the buyer’s offer has been accepted, but before the purchase contract is “exchanged” (i.e., becomes legally binding), the buyer’s solicitors will negotiate with the solicitors acting for the seller and conduct investigations relating to various matters, such as:
the form of the purchase contract;
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ILN Real Estate Group – Buying and Selling Real Estate Series
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