Buying someone out from your property ownership

Buying a property can often take longer than you would like and, until the exchange of contracts, there is always the risk that the seller can back out. This period, between acceptance of your offer and exchange of contracts, can leave you on tenterhooks, especially if your purchase depends on another event, such as the grant of planning permission. So, what are your options?

‘One possibility is the use of a conditional contract,’ says Patricia Hall, head of the  conveyancing team. ‘This can give you a degree of certainty, as it means the seller cannot simply walk away from the deal and you only have to proceed once a stipulated condition is satisfied.’

Here Patricia answers some of your questions, including when a conditional contract may be suitable.

What exactly is a conditional contract?

A conditional contract, like a conventional sale agreement, is binding from exchange and both you and your seller will have certain duties to perform. For example, the sellers must still prove their title to the property. The price is fixed as is the framework for completion.

This differs from a conventional sale agreement because your obligation to complete only kicks in once a particular condition is satisfied. This could, for example, be the grant of planning permission, landlord’s consent, or the acquisition of another property. Once that condition is met, notice is given, and the sale will proceed according to the timetable and terms set out in the contract, just as it would with a conventional sale.

When should I consider a conditional contract?

There is no legal restriction on when you can use a conditional contract. However, they are most suited to situations where proceeding depends on a particular event happening, one which can be clearly defined. For example, if you have plans to build on a development plot or to substantially renovate or extend a property, you are likely to require planning permission. Without the security of a contract, you risk losing the property if the seller changes their mind due to delays outside of your control. If that happens, you will have wasted time and expense applying for the permission.

Exchanging contracts without the permission in place will secure the property but is risky, as you may not get the permission and be able to develop it as you want. A conditional contract means you proceed only once you have the permission and know you can carry out your plans.

As well as with planning permission, conditional contracts can be used where any form of regulatory consent is required. For example, if you are buying a licensed premises, or need an environmental permit.

If your plans involve multiple purchases, you can use a conditional contract to ensure you secure all the necessary elements at the same time. This could be because you are buying a building plot and access land separately, or amenity land such as a pony paddock to go with your new home.

If you wish to buy a property with a short lease, you could make it conditional on the seller obtaining a lease extension.

Are there any pitfalls to look out for with a conditional contract?

The flip side of the relative certainty of a conditional contract is that you are committed for a set period, albeit provisionally. Whereas sometimes you may be better off cutting your losses and looking for another property.

Most conditional contracts include a longstop date. If the condition is not met by this date, then the contract comes to an end. Termination may be automatic or at the option of one of the parties. This avoids you having to wait indefinitely for something that is unlikely to happen. The date should be realistic considering the likely length of time needed to satisfy the condition.

In addition, the contract may set out who should do what and when. This lets you maximise the chances of satisfying the condition. For example, if your purchase depends on landlord’s consent for alterations, you may want to require the seller to actively pursue this.

It is important to get the right advice when negotiating a conditional contract. Your solicitor should understand your individual circumstances and what you are trying to achieve.

Are there any alternatives to a conditional contract?

Even where you require something to happen before proceeding, a conditional contract may not be your best option. If there is a title issue, then your solicitor may identify another viable solution. For example, if the Land Registry has yet to complete an associated application, it should be possible to get that application expedited. In other scenarios, you may be able to complete subject to a retention of money, the balance being released only when the relevant condition is satisfied.

An option agreement is another possibility. In this, the seller undertakes, if required, to sell you their property for an agreed price, although they may require a separate payment for this right. Unlike a conditional contract, you are not obliged to proceed unless you choose to exercise the option. This can work well, for example, if you are planning a development, where there are multiple dependencies or the lead-in time is significant.

How we can help

If you are buying a property subject to a condition, getting the right professional advisors on board is vital. You should look for someone who is not only a competent conveyancer, but who understands more complex transactions and who can advise you on the best structure for your aims.

Our residential property team have extensive experience of all types of transactions. They are well equipped to help whatever your circumstances.

For further information, please contact Patricia Hall in the conveyancing team on 0191 297 0011 or whitley.bay@kiddspoorlaw.com.

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.

For some, owning a second home is a dream, evoking thoughts of seaside cottages and impromptu getaways. The reality though can be rather different. Not only is there the issue of ongoing maintenance, but recent changes have made ownership more expensive, something which could account for the recent surge in sales of second homes.

Alternatively, a second home may be necessary for work, or you may find yourself with more than one property via an inheritance. In a slow-moving property market, some people occasionally complete the purchase of a new home before they are able to sell their old property. Over the course of your lifetime the way you use the properties may change, for example if a holiday home becomes your main residence when you retire, and this could have unintended consequences.

‘The burden on people who own more than one home has certainly increased in recent years,’ agrees Patricia Hall, head of conveyancing. ‘Selling up can make sense for some, but ultimately it is a very personal decision. It can also raise additional issues connected to the sale of your main home, particularly with tax. So, it is important to get the right advice when planning any future actions, or if your main residence has changed over the years.’

Patricia, highlights the key issues for anyone planning to switch, let or sell a second home (as opposed to an investment property).

How the regime for owners of second homes has changed

There have been several changes to the regulations which affect anyone owning a second home:

• purchase costs went up with the increase in stamp duty land tax on additional properties in 2016 and a further increase in 2024;
• recent changes allow local authorities to charge a council tax premium on second homes, which could see a council tax bill double, or even treble if the property is in Wales. Not all local authorities impose this additional tax, but many popular tourist hot spots are affected, for example, Cornwall and Pembrokeshire; and
• local authorities can also impose additional planning restrictions, and may, for example, require a person who wants to use a residential property as a second home to apply for planning permission, the grant of which is not automatic.

Main residence v second home

The council tax premium only applies to second properties and can vary depending on the local authority area. Some owners try to mitigate the cost by switching their main residence. However, the local authority will consider carefully whether any arrangement is genuine. So, this is usually only something worth considering if you find yourself spending most of your time now in your ‘second’ home.

It is a good idea to seek professional advice before making such a switch. Not only are the rules complicated, but they can also have unintended results. For example, if you are not careful, changing your main residence could save you council tax but increase your capital gains tax when you come to sell.

You should keep evidence of when your use of a property as a second home began. You can then show this to the council, or to prospective buyers who may want to use your property as a second home.

Second home v holiday let

Some homeowners offset the cost of a holiday home by letting their properties to other holiday makers. Holiday lets are treated differently from second homes in several ways. For example, business rates may apply instead of council tax and this can work out cheaper. To qualify as a holiday let, your property must meet certain criteria. In England, it would need to be available to let on the open market for at least 140 nights, and actually let for at least 70 nights, each year to qualify. In Wales, the requisite periods are longer.

If you, or your family, still use the property regularly for holidays, renting it out commercially for holiday lets could be an option. Alternatively, you may not use your property often but may intend to do so in the future, for example, when you retire. In that case, you could consider renting it out to a longer-term tenant. In either case, though, it is important to take independent expert advice.

Not only are the tax and legal requirements in this area complex, but they are also changing rapidly. For example, the last budget changed the special income tax treatment of furnished holiday lettings while the Renters’ Rights Bill, currently in Parliament, could affect your ability as a landlord to get your property back.

Gifting a property

Many second homes are enjoyed not only by their owners, but also by their extended families. You may, for example, use yours as somewhere to get together with your adult children for a break. You may even be thinking of passing the benefit of that property onto them. This can make good sense, relieving you of the day-to-day responsibilities of ownership. However, this will inevitably give rise to tax and legal issues. An early discussion with your solicitor will help you clarify these, and the best way forward to avoid any costly mistakes.

Is it time to sell?

In many ways, selling a second home is just like selling any residential property, but with some additional things to consider.

As part of the conveyancing process, you will be expected to give the buyer certain information about the property. There is a set form for this, TA6. This is a type of questionnaire, which your solicitor will pass on to the buyer’s solicitor. It includes questions about boundaries and whether any part of the property (including the garden and any outbuildings) has ever flooded. Sometimes answering these questions, and any follow-up ones, can be difficult when you do not live there. However, it is important to be transparent. Giving misleading replies could result in the buyer seeking damages or even rescinding your contract. Your solicitor can help you with the phrasing of your answers, or anything you are not sure about.

Selling a property remotely can be challenging practically. Choosing a reputable local agent, who can manage viewings, will help. However, you should also consider how to deal with routine maintenance issues, and your insurer’s requirements. Many policies will stipulate how often the property must be visited; you will need to comply with this to keep your property protected.

On a positive note, being chain-free, you should be well placed to aim for a relatively quick, smooth sale. Instructing the right estate agent and solicitor will be key to achieving this.

Pay special consideration to tax aspects

Your second home is treated differently from your main residence for tax purposes.

For a start, you are likely to have to pay capital gains tax when you sell or gift it. Capital gains tax is based on the increase in the property’s value over your period of ownership. The rate of tax, 18 or 24 per cent depending on your other income, can result in a considerable sum becoming payable. You should be able to deduct the cost of any renovations from the calculation and use any period during which the property was your main home to reduce your liability. In some cases, you may be able to reduce your overall tax bill by making your second home your main residence, for example if you intend to downsize. However, it is important to be aware of, and follow, the relevant rules so that HMRC do not argue the arrangement is not genuine.

A second home is also treated differently for inheritance tax. It will form part of your estate, and if your assets reach a certain threshold (£350,000 or £500,000, if you are leaving your main residence on to your children or grandchildren), a charge may arise. The current rate of inheritance tax is 40 per cent. So, depending on your assets, the liability can be considerable. Ideally, therefore, any disposal of your second home should form part of your overall estate planning. While you may be able to reduce your liability through a lifetime gift to your children, there are traps for the unwary. For example, should you die within seven years of your gift, then, subject to taper relief, a charge may still arise. Other difficulties can occur if you retain some benefit in the property, for example, if you continue to holiday there yourself. A solicitor, experienced in estate planning, can help find the best arrangement for your circumstances.

How we can help you

Decisions about a second home tend to be more complex than for a main residence, but talking things through with a trusted advisor, like your solicitor, can help you see things objectively.

Our team is experienced in all aspects of conveyancing and we will take the time to understand your unique circumstances and your objectives.

For further information, please contact Patricia Hall in the residential conveyancing team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com.

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.

Fraud is on the rise in all areas of our lives, and unfortunately property is no exception. Last year saw a 29 per cent increase in conveyancing scams, with homebuyers particularly vulnerable.

‘We like to feel secure in our homes,’ reflects Patricia Hall, head of the conveyancing team. ‘Our home is also often our biggest financial asset, which unfortunately can also attract professional scammers. Buying a home, or renting one, you will have many things to focus on. Keeping your money safe should be high on the list of priorities.’

Here Patricia looks at seven of the most common property scams and gives some advice on how you can avoid becoming a victim.

Fake conveyancers

This scam targets homebuyers, especially first-time buyers. A fraudster sets up a fake office or a fake branch office of a genuine law firm. Their website, emails and letterheads can look deceptively genuine. In some cases, they may even have cloned the original website. They then trick their ‘clients’ into sending money to a bogus account, which they empty before disappearing.

When choosing a conveyancer, it is important to know who you are dealing with. You can check a firm’s identity and addresses on the Solicitors Regulation Authority’s website, at SRA | Solicitors Register | Solicitors Regulation Authority. However, you should not rely on this alone as some fraudsters may impersonate genuine solicitors. Look out for any potential red flags, such as:

• the lack of a physical office; or
• a website that uses http instead of https.

If you do not know the conveyancer personally, ask your estate agent or somebody you trust with local or professional knowledge about them. Meet your solicitor in person or speak to them by telephone or online. You should be confident they are who they say they are.

Utilities scams

Fraudsters also pretend to be from utility companies. Someone may contact you in person, calling at your door, by phone, or via email or social media. They may claim you are behind on payments or say they can offer you a better deal; if you are moving home, you may well be receptive to switching suppliers. However, the person contacting you does not work for the utility company. Instead, they will pocket your money themselves or simply harvest your data to sell on.

You should treat any unsolicited offers with caution and do not share your personal details. Always ask for identification and verify this independently with the utility company, for example, by phoning the number on a bill or from their website.

Conveyancing deposit scams

This is a particularly cruel scam and typically happens just before exchange of contracts. With your attention focused on your impending move, you may not think twice about an email which appears to come from your solicitor asking you to transfer the deposit for your purchase. However, there is a small but significant risk the email is not from whom it says it is. A fraudster may have hacked your email account (or your solicitor’s).

Perhaps the fraudster says the account details have changed or gives you a bogus link. By following their instructions, you may send your purchase monies to them instead.

You can reduce the chances of this happening by choosing a conveyancing firm with robust anti-fraud measures in place. For example, when you first instruct us we will always set out in writing the method for transferring funds. We will ask you to check any proposed change to this using the phone number we have given you at the outset. If you are in any doubt about any instruction you receive from us, speak to your solicitor first.

Fake buyers

Sometimes a fraudster will pretend to be a potential buyer and make an offer for your property. The deal will fall through, but not before they have harvested details of the property and your personal data. They can then use this to try to fake a transfer of the property to themselves, which they would then register at the Land Registry, or to secure a loan against it.

Using a reputable estate agent, who will screen buyers and conduct financial checks before accepting an offer, reduces this risk. Being in close contact with your solicitor will help you pick up on any early warning signs that your transaction is not progressing as it should.

You can also sign up to the Land Registry’s free property alert service at HM Land Registry – Property Alert. You will then receive an email notification if someone applies to register a charge or transfer of your property. This gives you the opportunity to pre-empt the fraudster.

Buy-to-let scams

It is not just homebuyers who can fall foul of scammers. Investors, even seasoned ones, can become victims too.

In one ruse, the fraudster markets a pre-let investment property. They ask would-be buyers for a deposit. Only later does the buyer discover the property either does not exist or is not as described, but by this time the seller will have disappeared. Sophisticated schemes may involve the development of multi-unit buildings with ‘guaranteed’ income streams. The fraudster may even show you the development site. However, there is no intention to build out, no pre-lets agreed. Once the company has sold all the units off plan, it goes into administration. It never completes the development, leaving the investors unable to recover their funds.

So, if you are looking to invest in property, always do your research thoroughly. Only use reputable platforms and agents, and do not part with any money before an agreement is in place. And, most importantly, always take legal advice before committing yourself.

‘We buy any house’ scams

You may have seen companies advertising that they will buy any property, usually for cash. If you need to sell yours quickly, you may consider approaching one of these organisations.

Some of these companies are reputable, although the price they will offer is still likely to be well below market value. However, unfortunately, this is also an area rife with sharp practice and fraud. In some cases, the companies themselves are shams; an elaborate way of harvesting your data or stealing your identity. Others may fraudulently undervalue your property, add on hidden fees, or reduce the purchase price just before exchange of contracts.

Before selling to one of these companies, you should consider carefully other options, such as a conventional or auction sale. Research any company you are considering thoroughly and make sure you have a realistic idea of what your property is worth on the open market. Do not sign any agreement until you have discussed it with your own solicitor, not one ‘recommended’ or introduced by the house buying company but someone who is independent and who will put your interests first.

Rental deposit scams

If you are renting a property, perhaps in between your sale and purchase, you should be alert to the increase in fraudsters posing as landlords. Typically, the bogus landlord will offer you a property, which is already let or does not exist. A common ploy is to clone the details off Rightmove or another portal. They will try to pressure you into paying a holding deposit or rent upfront – before vanishing with your money.

Fraudsters can also target landlords. Posing as a genuine tenant, they pay the deposit, or first instalment of rent, but deliberately make an overpayment, usually by cheque. They ask for reimbursement. However, their original payment never clears. They then disappear having pocketed the reimbursement, leaving the landlord out of pocket.

Always trust your instincts and follow up on anything you find unusual. Using an accredited agent, who subscribes to the Property Ombudsman Scheme, should give you additional peace of mind.

How we can help

Fortunately, most property transactions proceed untroubled by any hint of fraud. For those affected though, the effects can be devastating. If you are a victim, you may be entitled to compensation, for example, through the Land Registry’s indemnity fund or the Authorised Push Payment Reimbursement Scheme. Even so, this may not address the emotional effect of fraud, nor the impact it could have on the timely progress of your transaction. So, it is important to do everything you can to protect yourself.

You can be confident that at [firm name], we have robust systems in place to minimise the risk of fraud. Just as importantly, we pride ourselves on our approachability. If you have any doubt about something you have been asked to do, or any aspect of your transaction, our advice is always to speak to us first.

For further information, please contact Patricia Hall in the residential  conveyancing team on 0191 297 0011 or whitley.bay@kiddspoorlaw.com

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.

One of the advantages of buying a new home is that it should come with a guarantee from the builder. Likewise, if you are buying a property which the seller has recently improved, it may benefit from a guarantee or warranty covering that work. These can provide peace of mind, but how valuable are they in practice and can you rely on them?

‘Guarantees and warranties can take some of the worry out of owning a home,’ acknowledges Neil Shearer, a conveyancer in the residential property team. ‘However, you should not let them lull you into a false sense of security. Not all guarantees and warranties provide the protection they appear to, and in some cases the benefit may not pass to you as the buyer.’

Here he answers some of your questions and guides you through this tricky topic.

What are warranties and guarantees?

In a guarantee, one party takes on responsibility for the default of another. Strictly speaking, a guarantee must be in writing and signed by the person giving it. For example, a parent company may guarantee the work of its house-building subsidiary. If, because of the latter’s poor workmanship, a house suffers damage during the guarantee period, the guarantor will step in to rectify it even if the builder no longer exists or has become insolvent.

A warranty is a written promise that something is of a certain specified quality. A guarantee may include warranties, but you often find warranties as separate independent documents. The person giving the warranty often does not have a direct contractual relationship with the recipient. For example, a developer asks a builder to construct a new home. The builder then employs an architect for the design input. There is no direct relationship between the developer and the architect, nor between the architect and the buyer of the new home. If the architect fails to do a good job, the developer, and subsequently the home buyer, may find it difficult to claim against them. A warranty helps overcome this difficulty. If there is a design problem, covered by the warranty, the architect is responsible for putting it right, and the person with the benefit of the warranty can enforce this.

Which is better, a guarantee or a warranty?

In practice, the two terms are used very loosely. Indeed, there is often a lot of confusion over them; the term ‘guarantee’ often being used to describe any promise about an item’s quality.

One is not better than the other. They are really just different ways of structuring third-party protection. Some arrangements may even combine elements of the two. For example, a structural warranty can be (and often is) underwritten by a third-party insurer. The most important thing is to understand how the guarantee or warranty works, which means considering its individual terms and conditions. Your solicitor will discuss this with you to enable you to assess the impact on your purchase and home ownership.

When should I expect a guarantee or warranty?

Every situation is different. However, if you are buying a brand-new home from a developer, or one built in the past ten years, you would ordinarily expect a new build warranty. The level of cover varies, depending on the provider, but typically it covers defects in the builder’s work for the first two years following construction. After that, cover is usually limited to major structural problems which arise during years three to ten.

If you are buying an individual architect-designed home, the situation is likely to be more complex. There should be an architect’s certificate or structural warranty. These provide different levels of protection, and it is important your advisor checks the terms carefully. Typically, if you are borrowing to finance your purchase, your lender will require an insurance-backed structural warranty. Your solicitor can advise you on your lender’s exact requirements.

You may also reasonably expect a guarantee or warranty where the property has had recent structural work or some major addition or change. This could, for example, include damp-proofing, new windows or doors, a heating system or solar panels, electrical work, timber treatment, a septic tank or sewage treatment plant, or insulation.

How do I find out about guarantees and warranties?

If you are considering a brand-new home, ask the developer about cover when you are viewing. Over 70 per cent of new builds are covered by the NHBC Buildmark Warranty. However, there is a wide range of options on the market, so it is a good idea to get as much information as you can. You can then assess the benefits and factor this into your decision-making process.

When you are viewing a resale property that has had recent improvements or additions, ask the seller or estate agent whether they are covered by a guarantee or warranty. If you decide to buy it, tell your solicitor. They can then follow up on the documentation.

In any case, as part of their pre-contract enquiries, your solicitor will ask the seller about guarantees and warranties. If you are aware of any work which you think should be covered, mention this to them as soon as possible. This will give them the opportunity to consider any issues early on, which may affect how you approach your transaction.

How good are the guarantees or warranties on offer?

Unfortunately, the existence of a warranty or guarantee does not mean you will automatically be covered if something goes wrong. You, and your professional advisors, will need to assess the protection offered. In doing so, you should consider the following:

• What are the terms and conditions of the warranty or guarantee? What are the exclusions?
• How long has the warranty or guarantee left to run?
• How reputable is the company giving the guarantee? Will it be around long enough to honour any claim?
• Is the warranty or guarantee insurance backed?
• Have any claims already been made under the warranty/guarantee, and what impact will that have on any future claim?
• Can the benefit of the warranty or guarantee be transferred? If so, what needs to happen?

The answers will let you assess the level of protection and whether it meets your needs. If you are borrowing to fund your purchase, your mortgage lender is also likely to have some minimum requirements.

Not all warranties or guarantees are equal. For example, a structural warranty from a reputable provider, underwritten by an ‘A’ rated insurer, should give more reassurance than a guarantee from a company with no track record. Even if the warranty or guarantee is backed by a well-known name, it is important to check it can be transferred to you. Some are not transferable, or are limited in the number of transfers, which could render their value nugatory.

The answers may also highlight further action you, or your advisors, need to take. The benefit of some warranties or guarantees transfers to a new owner automatically. Others, however, require some additional action, such as giving notice.

What should I do if there is no guarantee or warranty?

Knowing which guarantees or warranties cover the property is important for two reasons.

Firstly, it allows you to assess better the level of risk. In the absence of cover where you might expect it, you can consider how likely this is to be an issue in the future, and the cost of remediating if necessary. Take the example of a boiler that is outside its warranty period. Looking at its service history, you could take the view that it should continue to function well for some time. Alternatively, you could decide to factor in the cost of a replacement.

Secondly, it allows you to control that risk and to address any issues. For example, if you are concerned about the structure of the property, you could ask your surveyor for their opinion or seek the advice of a specialist, such as a structural engineer. It may also be possible to obtain a structural warranty retrospectively. You could consider reducing your price to reflect the cost of this or requiring the seller to get one as a condition of your purchase.

How we can help

We have a wide range of experience in all types of conveyancing transactions, including new build and custom-build. If you instruct us, we will confirm which warranties and guarantees cover your purchase and the protection they provide. Equally as important, where there is an issue, we will work with you to explore ways to reduce any associated risk, for example, through taking out a warranty retrospectively or negotiating a price reduction.

For further information, please contact Neil Shearer in the residential  conveyancing team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

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.

If you are buying a home, you will probably breathe a sigh of relief on completion as you pick up the keys to your new home and can finally move in. However, this is not the end of the conveyancing process, and there are several things your solicitor must still do to protect your interests.

‘As a homebuyer, your interest in the legal formalities is likely to diminish after completion and this is entirely understandable,’ Patricia Hall, head of the residential conveyancing team explains. ‘Nevertheless, the post-completion stages of conveyancing are important too, as they help to prevent problems arising in the future when you might wish to sell and move again.’

Philip outlines the key tasks which happen after completion, and why they are important.

Dealing with any mortgages

If your seller has a mortgage, your solicitor must ensure it is discharged. However, the seller may need the sale proceeds to pay it off. On completion your solicitor will usually obtain an undertaking from the seller’s solicitor, which is a binding promise, that any existing changes will be paid off from the sale proceeds. Sometimes this happens instantly, for example if the seller’s lender sends an electronic discharge direct to the Land Registry. Sometimes your solicitor will need to obtain a paper release from the seller’s solicitor.

It is vital your solicitor ensures the discharge is with the Land Registry. Failure to do so could mean the seller’s mortgage is still attached to your property. This would adversely affect your title, breach the terms of your mortgage, and cause problems when you come to sell or remortgage.

If you are taking out a mortgage, then your solicitor will also usually be acting for your lender. They will date your lender’s charge at the same time as the transfer to you and send both to the Land Registry.

Paying stamp duty land tax

Your solicitor will have told you how much stamp duty land tax (SDLT) is payable before completion, and should have ensured there are sufficient funds in place.  They must then complete the SDLT return and pay HMRC within 14 days of completion. Failure to do this could result in you having to pay a fine and interest to HMRC.

In addition, your solicitor will need a certificate of compliance from HMRC to send to the Land Registry. Without this certificate, the Land Registry will not register you as the new owner.

Registering your property at HM Land Registry

Your solicitor must register the transfer to you, and any mortgage, at the Land Registry.

It is the entry of your name in the register, rather than the handing over of the keys, which is evidence of your ownership, and failure to register would have serious repercussions. It could, for example, prevent you from selling your home in the future. Any buyer will need to know they are dealing with the legal owner, and registration of title is the requisite proof of this.

In theory, registration should be a straightforward and mechanical process. In practice though, this is not always so. Some applications may involve more than a simple transfer of ownership. For example, the creation of new rights, such as a right of way. The register should include these rights, and your solicitor should carefully check it accurately reflects the documentation submitted. Sometimes, the Land Registry may also ask questions or request clarification before completing the registration. These are called requisitions, and your solicitor must respond promptly to them to avoid the Land Registry cancelling the application.

Currently, the Land Registry has a significant backlog and often takes over a year to register a transfer. Unfortunately, this can cause complications if you want to sell or remortgage in the meantime. Submitting an application that is in perfect order, and dealing with any requisitions quickly, should help ensure it registers you as the owner as soon as possible.

Dealing with any title restrictions

A common reason for delay arises because the Land Registry raises a requisition about a restriction on the seller’s title. The application cannot proceed until this is resolved. Typically, a restriction will prevent the registration of a transfer unless the applicant complies with its terms. For example, it may require the consent of a named person or a certificate that the terms of a certain document have been complied with.

Your solicitor should ensure the terms of any restriction can be complied with before completion, and that evidence of compliance accompanies their application. Occasionally, though, issues can arise after completion. For example, a restriction may be obsolete, and it is no longer possible to comply with it. In this case, your solicitor may have to request its cancellation to allow registration of the transfer to you to proceed.

The Land Registry will cancel some types of restrictions automatically. For example, it should remove a restriction in favour of your seller’s lender at the same time it cancels its charge. However, your solicitor should check the register carefully after the Land Registry has completed the application. It is much better to address any errors or omissions then, rather than to discover them much later when you are in the middle of trying to sell or remortgage your property.

Leasehold properties and other issues

Just as each property transaction is unique, so are the issues which can arise after completion. For example, if the property has the benefit of a guarantee or warranty, your solicitor may need to give notice of the transfer. Similarly, if there is an existing title insurance policy, they will need to ensure the protection continues, or that a new policy is in place.

Leasehold properties will usually require additional attention. There may, for example, be service charge apportionments to finalise. In most cases, your solicitor will need to give the landlord notice of the transfer. They may also need to provide a deed in which you promise to comply with the lease terms. It is prudent to obtain a written acknowledgement from the landlord to avoid any disputes in the future.

How we can help

Choosing the right solicitor is important not only to ensure your purchase progresses smoothly but for reassurance all the relevant formalities have been correctly completed. As well as having vigorous processes in place, we pride ourselves on our personal approach and our diligence. Helping you move into your new home is our number one priority, but we will never lose sight of your long-term interests.

For further information, please contact Patricia Hall in the residential  conveyancing team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

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.

If you own a leasehold property, on a day-to-day basis you may not notice any differences from owning a freehold. However, leasehold means you do not own your property outright, only the right to occupy it for a set number of years. Your property is therefore a depreciating asset.

The difference between owning a leasehold property and a freehold one may be most apparent when you plan to sell it, especially if you have 90 years or less left on your lease. The fewer years left on your lease; the more difficult selling can become.

‘Selling a property with a short lease can be challenging,’ agrees Patricia Hall, head of the residential property team. ‘However, it should not prevent you moving home provided you get the right advice and plan ahead.’

Patricia outlines the key considerations.

What is a short lease and why does it matter?

There is no agreed definition of a short lease, and the point at which the number of years remaining becomes an issue can vary widely.

Usually, the effect is gradual. If your lease has a hundred years or more left to run, any impact is likely to be marginal. When there are 90 or fewer years left, you may start to find your property harder to sell. This is due to depreciation, and two additional factors which accelerate this effect:

• extending a lease costs significantly more once the remaining term falls below 80 years; and
• many mortgage lenders stipulate a lease must have a minimum term left to run, typically 70 years, for them to consider lending against it.

Although this is unlikely to affect you while you are living in your home, this could change when you come to sell. Most people expect to live in the property they are buying for several years. They will also want to be able to sell it on easily for a fair value.

As the remaining lease term gets shorter, your property is likely to appeal to fewer potential buyers, and inevitably this may affect the price you can achieve.

The issue with mortgage lenders

Mortgage lenders vary in their approach to short leases. A few will lend on leases with terms as short as 20 years. However, these tend to be niche and may charge a higher rate of interest.

Most mainstream lenders require a leasehold property to have a minimum term left, which can be anything from 55 years to 85 years. The shorter the lease term, the more potential buyers may struggle to find a suitable mortgage. This in turn may affect your property’s marketability. After a certain point, your property may only appeal to investors or cash buyers, which will impact the sale price.

The availability of mortgage finance is also something to consider when accepting an offer. A buyer who is relying on a mortgage to fund their purchase may run into problems. Being open about the lease term at the outset and ensuring your agent carries out due diligence on potential purchasers, can reduce the risk of a buyer pulling out of the purchase later.

Exercising your statutory right to extend your lease

As a leasehold owner you may have the legal right to extend your lease. Different rules apply depending on whether you own a flat or a house and, in either case, you will have to meet certain conditions. For example, as the law currently stands, you must have been a tenant for at least two years before applying. However, most leasehold owners will qualify. So, it could be worth discussing this option with your solicitor before you plan to sell.

The extension will be for an additional 50 years for a house, or 90 years for a flat. Legislation sets out the basis of valuation, which determines how much you must pay to your landlord for the extension. Valuation is a complex process, but generally it compensates the landlord for their loss. Consequently, it reflects both the ground rent payable (which as part of the process will be reduced to a nominal amount) and the impact on the landlord’s reversion. Generally, this means the shorter your lease term, the more you must pay to extend it.

In addition, if your lease has less than 80 years left, the valuation will also reflect ‘marriage value’ (the increase in value of your property because of the extension). This may increase the price you have to pay significantly.

There are online calculators which can give you an idea of how much you may have to pay. However, for a more reliable assessment, you should seek advice from an independent valuer. They will also need to be involved if you decide to proceed, as your landlord may not agree with your initial proposal. Overall, the process is complex, requiring the right notices to be given, and replied to, within a prescribed time schedule. So, it is also important to instruct a solicitor experienced in this area.

Extending your lease term – other considerations

If you rely on your legal right to extend your lease, the process could take anything between three months and a year. The actual time will depend on your landlord’s attitude and their solicitor. Using a solicitor who is proactive and who understands the issues involved will help ensure matters progress expeditiously. Even so, if you want to extend your lease before selling you should factor in additional time.

As an alternative, your landlord may agree to extend the lease voluntarily. This can be quicker, more straightforward, and sometimes less costly. However, it is important to ensure any agreement is correctly documented, otherwise you could still run into problems when you sell. Your solicitor’s input can be especially valuable here. It is known for some landlords to offer terms which are much less beneficial than those which you would be entitled to legally. A solicitor who fully understands this area of law can protect your interests.

Other options if you are selling with a short lease

Selling without an extension is an option. However, you may not achieve as high a price as you would like. The impact on price will depend on multiple factors, and you should take independent advice from a valuer who understands the local market. You can then get a realistic view of what you are likely to obtain and consider your options accordingly. You may also wish to consider different ways of selling. For example, if you have a very short lease, then selling through an auction may be appropriate.

If you do not want to renew your lease, but this is important to a buyer, you could agree to start the process and transfer your rights to your buyer. There will still be an element of uncertainty for the buyer, but they would not have to wait two years before applying for an extension, so this could be an acceptable compromise.

Leasehold law is changing

The Leasehold and Freehold Reform Act 2024 introduced some significant changes for leaseholders. These should make it easier and, in many cases, less expensive to extend a lease. For example, you will no longer need to show a two-year period of ownership before applying for a lease extension. In addition, marriage value will no longer form part of the valuation basis, so you may find it cheaper to extend.

Unfortunately, these provisions are not yet in force although they should be in late 2025 or early 2026. In some cases, you could be better off waiting until then to sell if you this would be an option. For example, if your lease already has less than 80 years to run, you may well find it significantly cheaper when the new law is in place. However, any benefit in waiting may be outweighed by other factors. Your valuer and solicitor can help you decide what is the right approach for you.

How we can help you

Selling a property with a short lease can be challenging, as the law relating to leases is complex and evolving. This makes it especially important to choose a solicitor who really understands this area, and how the law applies to your individual circumstances.

We welcome that challenge and would be happy to help you with your next move, whether you own a short lease or a more conventional property. For further information, please contact Patricia Hall in the residential property team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

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.