The UK Property Market

The UK presently has a population of around 58 million people, Greater London alone has a population of around 12 million. London is a popular choice for foreign investors as there are always new properties on the market and plenty of properties still less than 10 years old. A lot of high income individuals have to live in London to conduct their business in the City and West End and there is an active service industry catering to the needs of the individuals who live, work and enjoy themselves there. Even during the property recession from 1989 to 1995, the domestic rental market was firm. When people couldn’t afford to buy properties, because the interest rates were too high, they preferred to rent.

The London Docks

An area where there is a concentration of newly built properties, places of work of many high-income individuals and where there are properties readily available, is the London Docklands.

A Bit of History

The West India Dock Company, created by an act of Parliament in 1799, raised capital of £1,380,000 by private subscription and a licence to enclose 295 acres between Limehouse and Blackwall in the Isle of Dogs the peninsular formed by a great southward loop of the river opposite Greenwich. Here the company offered accommodation for six hundred vessels in two parallel wet docks, each half a mile long and connected with the river by basins at either end flanked by nine huge warehouses capable of accommodating the entire annual sugar import of the Port. In 1800 the London Dock Company raised four million pounds and developed a smaller but more costly dock in the already built-up area of Wapping, immediately to the East of the Tower. The London Dock, with its huge warehouses for the storage of such commodities as rice and tobacco and its extensive underground vaults of twenty acres for the storage of wines and spirits was opened in the year of Trafalgar; 1805. The East India Docks opened at Blackwall in 1806. The Commercial Dock Company formed in 1807 enlarged the old Greenland Dock on the south bank of the river at Rotherhithe for the import of timber and grain. Other docks on the Surrey shore were made by the Grand Surrey Canal Company, incorporated by the Baltic Dock Company formed to store timber in bond in 1809. The East Country Dock Company was formed in 1811. St Katharine Docks, the last, was opened by another private dock company in 1828 whose warehouses were specially designed to house and safeguard such valuable cargoes as indigo, opium, marble, tortoise-shell and scent.

The London Docks continued to be developed and to increase the volume of their trade until the start of the Second World War in 1939. Hitler tried to knock out Britain by preventing her from trading with her empire first by placing magnetic mines in the Thames estuary and from September 1940 by aerial bombardments of which the docks took the full brunt. For fifty-seven consecutive nights the docks and the river were under bombardment. All of the London Docks with the exception of Tilbury suffered immense damage and the timber storage yard of Surrey Commercial Docks were setablaze for nearly a week. During the war, shipping was diverted to other ports and by the end of the war commerce had reduced to a quarter of its peacetime volume. After the war the docks were rebuilt and handled an increased volume of trade with "modern" forklift machinery up until the 1960. With the advent of the container, the London Docks became obsolete and the shipping preferred the more convenient container ports of Southampton and Felixstowe.

The landmark Canary Wharf building is in the heart of the Docklands development. Surrounding it on the Isle of Dogs, are acres of new property developments. The services available in the area where property is located are important. Roads, railways, busses, airports, shopping centres, schools, parks and restaurants are all services that can add to the value of a property.

Conveyancing

The legal process of buying and selling non commercial flats and houses is known as domestic or residential conveyancing. In England and Wales , a person who finds a property through an estate agent will approach  the agent and make an offer to the owner to buy the property  If the offer is accepted, the property is generally taken off the market by the  agents and the buyer and the seller each instruct solicitors. The seller’s solicitors send to the buyers’ solicitors a draft contract to buy the property. The "contract" at that stage is not yet created and all correspondence is normally marked "subject to contract" as it allows the buyer to call for the relevant documentation concerning the property to ensure that the property is a safe investment for the buyer and any mortgagees.

Documents

In relation to leasehold flats, the buyers solicitors call on the sellers solicitors for copies of the lease, the lease plan, office copies of the leasehold title and the plan of the property filed with the Land Registry, a copy of the building insurance policy, a copy of the schedule of the insurance policy for the current year issued by the insurance company evidencing that the policy is on risk, copies of recent town planning decisions showing the conditions upon which the planning decision permitting the development have been made, copies of the last three years management accounts for the block of flats and the last three years service charge demands for that particular flat, a copy receipt evidencing that the seller has paid the service charge for the current period, a copy receipt from the landlord evidencing that the seller has paid the ground rent if the ground rent is paid to the landlord separately to service charges paid to managing agents.

Local Search

At present the buyers solicitor carries out a "local search". A new conveyancing protocol is being introduced in 2005 requiring the seller to speed up the property selling process by supplying an up to date local search with a “Property Pack”. The local search is a standard enquiry of the local authority in which the departments of the local authority answer several lists of enquiries concerning the property, relating to utilities such as roads, footpaths  and if the local authority has any peculiar plan for the area, such as changing the street into a busy road or permitting the building of something unpleasant near to the property which might depreciate the value of the property, this should be revealed in a standard local search. Water searches or the applicable private water company may be conducted to ascertain the situation of water and sewage connections and facilities. Mining and commons searches may be carried outin appropriate circumstances.

Survey

A buyer is normally well advised to have a structural survey carried out in a property even if it is new or nearly new. If the structural survey reveals defects in the property such as blocked sewers on the boundary, they may be the responsibility of the local authority. The position of the conduits in the development are normally available. If a defect is found more detailed enquiry can be made of the foundations, structural walls, pipes and roof of the property. The prospective purchaser can allow the surveyor to report on whether the defect will affect the value of the property and how much the defect might cost to repair.

Deed of Covenant

Some management associations (whose authority is derived from the lease or deeds binding a freeholder) and landlords require that the buyer of a leasehold property enter into a deed of direct covenant. Some management associations prohibit a flat owner from selling a flat until the prospective buyer has provided references from their bank and others to say that they are financially able to meet the cost of the annual service charges. When this has been confirmed, a deed of direct covenant will be prepared by the landlord’s or managing agentssolicitors, at the sellers expense which the seller may seek to pass onto the buyer.This should be resisted as the seller should pay the expense of proving good title to the property

Exchange of Contracts

The solicitors, having exchanged all of the relevant documentation and the buyers solicitors having received replies to all of their enquiries about the property , and  having received a formal mortgage offer from the buyers building society, agree the wording of the contract. The contract normally provides for the buyer to pay a deposit of 5-10%. This sum is normally paid by the buyer to the buyers solicitor . Contracts are then "exchanged" and the buyer and the seller are then in binding legal relations and their respective solicitors bound by a set of mutual undertakings governed by Law Society formula. The buyers solicitors deliver to the sellers solicitors the signed contract the  deposit in the form of a client account cheque and a form of asking a further set of questions to the sellers solicitors directly known as requisitions on title. The sellers solicitors deliver to the buyers solicitors the part of the contract signed by the sellers. The buyers solicitor reports to the buyers building society that the property is satisfactory as security for the mortgage and requests the funds be paid into their client account in readiness for the completion date.

Requisitions on title

When answering the requisitions on title the sellers solicitors will deliver a completion statement to the buyers solicitors and in the case of a lease which attracts service charges and ground rent these items will be apportioned. If the service charges have been paid in advance, the seller will add the sum paid in advance on to the purchase price on a daily basis; hence the need to obtain a proper receipt for the current period’s charges and a statement of the position of the seller to establish if any arrears exist. If there are arrears of service charges, the sellers solicitors may either apportion as though the current period’s service charges are paid and undertake to the buyers solicitors to pay the arrears from the proceeds of the sale money or apportion the sale price down and leave it to the buyers solicitors to pay the arrears from the funds left over as a result of the purchase price having been discounted.

Transfer

The Buyers solicitors submit a draft form of Land Transfer to the sellers solicitors for approval. The terms of the Transfer are normally dictated by the terms of the contract and the entries registered as restrictive covenants on the title to the property.  In leaseholod transactions a seller will normally  stipulate that the Transfer contains an indemnity from the buyer that he will comply with the terms of the lease so as not to cause the landlord to seek compensation from the seller for breaches of the lease by the buyer. The seller will also normally seek a term of the Transfer that the seller’s statutory implied covenant that the property is in good order is modified so that the seller does not covenant that the property is in good order and condition.

Completion

The sellers solicitor prepares a  completion statement  showing the sum required by the seller which will include (in leases) rent or service charge paid in advance by the sellerand sends it to the buyers solicitor. In turn he prepares a completion statement for his client adding costs such as Stamp Duty land  reg. fees and his own costs. The resulting figure is the net  balance of the funds required from the buyer to complete the purchase. This sum is paid into the buyers solicitors client account in time for completion  and  on the day fixed for completion the sum required to complete is telegraphically transferred to the sellers solicitors. It must reach the sellers solicitors by 2.00pm on completion day. The contract normally provides that funds arriving after that time will be treated as arriving on the next working day with penalty interest being payable for the late days in between. The practical reason for the 2.00pm deadline is that a seller must be able to have the funds in time to discharge his clients mortgage on completion day otherwise the seller will be charged three more days interest on the mortgage. If the time limit is broken by the buyer he will be obliged to pay for it. To enforce the obligation, the seller, although having released the keys to the buyer after the arrival of the funds, and after the buyer’s solicitors have undertaken that they will pay the penalty interest, will generally not release the executed Transfer and title documents until they receive the extra interest monies from the buyers solicitors. The absence of the Transfer and the deeds means that legal title to the property remains registered in the name of the seller and the buyer is unable to transfer the legal ownership of the property into his name although in the interval the buyer will  usually be allowed possession of the property.

Stamp Duty Land Tax

After completion, the buyer takes possession of the property and from his point of view the matter is completed. The buyer’s solicitor, having received it from the sellers solicitor sends the transfer deed  to the HM Revenue and Customs Stamp Duty Department within 28 days of completion.

Land Transactions with an effective date on or after 17th March 2005 Transfers of land and buildings (consideration paid) Rate   Land in disadvantaged areas All other land in the UK Residential Non-residential Residential Non-residential Zero £0 - £150,000 £0 - £150,000 £0 - £125,000 £0 - £150,000 1% Over £150,000 - £250,000 Over £150,000 - £250,000 Over £125,000 - £250,000 Over £150,000 - £250,000 3% Over £250,000 - £500,000 Over £250,000 - £500,000 Over £250,000 - £500,000 Over £250,000 - £500,000 4% Over £500,000 Over £500,000 Over £500,000 Over £500,000

Registration