BUYING AND SELLING REAL ESTATE IN ENGLAND AND WALES 119
the buyer does not “complete” (i.e. close) the purchase. Completion of the actual transfer of the real estate follows a pre-agreed period following exchange of contracts, typically about 28 days. Once contracts have been exchanged, both parties, subject to the terms of the contract, become bound to continue with the transaction and neither party can withdraw. Where the buyer is borrowing all or part of the price, it is highly advisable that the lender’s financial commitment is in place before exchange of contracts. The buyer may also need to arrange insurance as from exchange of contracts. Registration of the buyer’s title Following completion, the buyer’s solicitor will pay any purchase tax (in England, SDLT and in Wales, LTT ) due on the purchase and apply to the Land Registry to have the change of ownership and any mortgage registered. If the buyer is a company, the mortgage will also need to be registered at Companies House. If the buyer is an overseas entity, details of the entity’s ultimate beneficial owners need to be registered at Companies House. 5. Lender’s requirements Each lender’s requirements will vary depending on the real estate, the identity of the borrower and the nature of the transaction but, generally, on investment real estate a lender will require the following: • a satisfactory valuation from the lender’s valuers; • a satisfactory certificate of title from the lender’s solicitors confirming that the lender will obtain a good and marketable title to the real estate; • full information about the proposed borrower, including company accounts (where applicable); and
• the title documents, including any leases and other matters subject to which the real estate is being sold; and • searches with various local authorities or statutory bodies to ascertain matters which may affect the real estate or its use, including environmental matters. It is important to note that, during this investigatory period, the seller of the real estate generally is not contractually bound to the buyer and is free to deal with other prospective buyers. It may be possible, however, to negotiate an exclusivity agreement that will prevent the seller from negotiating with a third party for a limited period. A prudent buyer should always commission a structural survey of the real estate, and this should be carried out prior to any exchange of contracts, as generally no warranties are given by the seller as to the state and condition of the real estate. It may also be advisable for the buyer to have soil or other technical investigations made, particularly where a development site is being acquired or where it is possible that the real estate has been used for purposes causing contamination. Environmental protection legislation may require the owner of a contaminated site to incur substantial clean-up costs in respect of waste left by a previous owner, and a tenant can sometimes be liable for such matters under the terms of the lease either directly or indirectly through the service charge. Exchange of contracts Once the contract has been negotiated and agreed and the buyer’s investigations have been completed, the parties will then proceed to “exchange” formal written contracts. It is usual for a buyer to pay a deposit, often but not always of 10% of the purchase price on exchange, which sum is liable to be forfeited if
ILN Real Estate Group – Buying and Selling Real Estate Series
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