Property Buying & Selling

If your property has three bedrooms or more, then from 1 August until 31 December, you must commission a HIP before you can market the property. During this period the Energy Performance Certificate (EPC) must be provided before contracts are exchanged, although there is no set time limit on when the rest of the HIP should be provided.

After 1 January 2008, a HIP (including the EPC) must be available to anyone interested in the property from the time it's first placed on the market.

HIPs are only required in England and Wales.

If the property is marketed continuously from before the commencement date (10 September for properties with three bedrooms or more, or 1 August for four-bedroom properties), then a HIP isn't required. But a HIP is needed for properties if there is a break in marketing which results in the property being put back on the market on or after these dates (e.g. a break in marketing might occur by switching agents). If the reason there is a break in marketing is because a sale has fallen through - provided that the property is placed back on the market within 28 days - a HIP isn't required.

The following documents must be included in a HIP:

• Home Information Pack Index
• Energy Performance Certificate
• Sale statement
• Standard searches
• Evidence of title
• Additional information for leasehold and commonhold sales, where appropriate

If you want to include any other documents which would be of interest to a potential buyer, such as a Home Condition Report or an environmental or flood risk search, then you can do so.

Packs cost up to £1,000. A snapshot of leading estate agents shows that most offer a HIP for around £300 to £350 plus VAT.

1. Is the property freehold? If it isn't, what is the ground rent and how long has the lease to run?
2. Does the owner have to pay any maintenance charges to anyone apart from builders, decorators, etc., to whom he or she has given specific orders?
3. Is the road and main drain taken over by the council or do the frontagers have to club up every now and then to have them repaired?
4. If you are in a business or profession, can you put up your brass plate and can your spouse hang out the washing or are there any restrictions?
5. Has anyone got the right to traipse across any part of your property? Ever?
6. If there is any evidence (extra cookers, sinks, etc.) of more than one family living in the property, what guarantee is there that they will all move out, thus ensuring that you get full vacant possession on completion?
7. Has the property ever been flooded or faced serious risk of flooding?
   

A sure sign of wiring that has had its day is the plug with round pins. In older houses, during your inspections of the roof space and cellar, look out for any wires that pass across the joists. If you see two element wires twisted together and festooned along, you can be pretty sure some re-wiring is necessary to bring the electrical system up to modern standards of efficiency, and, above all, safety.

The area electricity board will be only too glad to make a visual inspection without charge and they will give a free quotation for any work required. If for any reason the supply is cut off, as it no doubt will be, if there is to be any gap between the time when the vendor leaves and you move in, no reconnection will be made if the whole system is not up to standard.

Yes, ask to see last year's receipts for the fuel used. If it's a system such as gas, ask if it has been regularly serviced. Find a radiator at the highest point in the house and as you turn the air-release screw hold a lighted match to it. If you set up a lighted gas jet it isn't because gas has got into the system, it is the product of some corrosion that has started. It might only need some anti-corrosion fluid putting in the system - on the other hand that might not be sufficient. In any case, all the more reason to have a careful look round for leaks particularly at joints. Leaks also tend to make nasty stains on carpets.

Custom seems to say that fixtures are permanencies and semi-permanencies that one can't simply pick up and walk away with. Basically, it includes things which are attached to the property. One way of looking at it is whether removal of the thing in question would damage the property. Television aerials, for example, are fixtures. You can put the lamp shade under your arm and walk away with it but the light switch is a different matter. It's the bits and pieces other than what are obvious parts of the house (such as the doors) and what are obviously not part of the house (such as a heavy plant pot in the garden that's too heavy to lift) which cause the trouble. Situations where it's not strictly breach of contract to remove an item but would be a breach of good faith to do so should be avoided.

When buying, you must always carry out a local land charges search. The search is a series of standard questions designed to give any potential buyer as much information as possible about the property and is undertaken by your local authority.

Searches have two parts submitted using LLCI and CON29 forms. The LLCI search is a search of the Local Land Charges Register. Examples of what it would tell you are if the property is a listed building, if it's in a conservation or smoke control area. It also tells you if any trees on the property are protected by tree preservation orders.

The CON29 enquiries consist of standard information on local plans for the area, planning decisions affecting the property and if the roads by the property are maintained at the public expense or are private roads. It also tells you any environmental information.

In addition to this local authority search, an environmental search and a separate water drainage search are now required by lenders.

Many flats are advertised as having a 'share of freehold'. This doesn't generally mean that the flat itself has freehold title; there will still be a lease and the covenants contained in it will have to be adhered to. What it will probably mean is that the freehold on which the block stands is owned by a limited company and the shareholders of that limited company are the owners of the flats in the block. If this is the case, and it's fairly common, the purchaser must ensure that the vendor transfers his share in the limited company to the purchaser on completion of the sale of the property. 

Leaseholders who own the freehold of the block through the means of a limited company have more freedom to deal with the flat because if they don't like the lease, they can change it. However, even if the flat you are thinking of buying does come with share of freehold, changing the lease might not be so easy, as you are not able to act alone and agreement with your new neighbours would still be required.

Because leasehold is a tenancy, it's subject to a rent on the land which is paid to the freeholder. This is paid by the leaseholder in the form of ground rent. The amount of ground rent payable must always be identified in the lease. In some cases, the ground rent will be set at a specific and unchanging amount. In other instances, the lease will identify the initial ground rent and increased amounts payable after specific periods of time.

The leaseholder normally has to pay the ground rent on an annual basis or every six months. The landlord or the managing agent company employed by the landlord to run the building usually sends the leaseholder an invoice covering both ground rent and service charge.

Many buildings that operate under leases dating back to the mid-1900s operate on the inefficient basis of charging leaseholders for any major works that are done, when they are done. This can result in a leaseholder paying, for instance, an annual £4,000 in service charges within five years of buying the flat, only to be hit by a staggering £10,000 bill in the sixth and seventh years when major works are done. The remedy for this type of spiky cost is to smooth out leaseholders' annual payments by creating a sinking fund or reserve fund. This is used to save up money over a period of several years, in order then to spend it on major works when needed. In order for a sinking fund to be created, the lease must allow for this. Many older leases have no clause or provision for a sinking fund.

When a landlord collects money from leaseholders for a sinking fund, he or she is essentially holding this money and the interest that it earns on trust for the leaseholders. The law says that sinking fund money must be held in a trust account for the building that is separate from the account in which regular service charges are held. If and when the building freehold is sold, the money in the sinking fund must be returned to the leaseholders.

Yes, it's consumer best-practice, when considering whether to buy a leasehold property, to obtain a copy of the lease and examine it carefully before making a decision. The lease describes all the rights and obligations of the landlord and the leaseholder. Unfortunately, in too many instances, leaseholders are prepared to buy a flat without first seeing the lease. Many estate agents claim that it's too difficult for them to obtain copies of leases for every would-be buyer and many sellers don't hold the original lease themselves, because they have asked their solicitor to keep it, or their mortgagee has it.

If the owner of a property says that he or she doesn't have a copy of the lease or is slow in providing it, you should write to the Official Copy Deeds Section of the relevant HM Land Registry office explaining why the lease is required and enclosing the relevant Land Registry form and payment. It usually costs less than £10 to get a copy.

Ask the vendor about the level of service charges and if the sum appears very high for the services that the freeholder seems to provide, ask why. It may be that the building in inefficiently managed which might herald problems later on. You should also ask for copies of the service charge accounts over the last few years, to give you some indication of the consistency and level of charges. Vendors should dig out the service charge accounts over the past few years and have copies ready to give to you or your solicitor in response to the inevitable question!

You should also ask the vendor and his landlord whether there are any proposed 'major works'. These are works which will cost over £1,000 and must be notified to the leaseholders before they can be carried out. It's best to ask this question before you buy so that you don't find yourself landed with a hefty bill for new windows and all the disruption that will inevitably be involved in the work shortly after you move in. The vendor may also be able to give you some idea about how often the freeholder carries out major decorating work (unless it's prescribed in the lease) so you should be able to work out how often you will be faced with a bills for external redecorations and all the paraphernalia which goes with it. 

You need to complete an Application Form S27A Landlord and Tenant Act 1985, which is available from the Residential Property Tribunal Service's website at www.rpts.gov.uk. The RPTS, which settles disputes between landlords and tenants about service charges and other issues, has five regional Leasehold Valuation Tribunals (LVTs) in England.

You must send the completed form, along with a copy of the lease and a cheque in payment of the application fee to the nearest Leasehold Valuation Tribunal or Rent Assessment Panel. The Rent Assessment Panel is another part of the RPTS. The amount of the application fee depends on the amount of service charge being challenged.

There are three possible tracks by which a service charge dispute can be handled by the LVT. When you are completing the form, you will have to state the track which you consider to be most suitable. The three tracks, from the simplest and fastest to the slowest and most complex, are:

• on paper, without a hearing;
• fast track, with a hearing;
• standard track, with a hearing and possibly a pre-trial review.

1. Compare the information given in the preliminary enquiries with what the solicitor has written concerning the items, referred to as 'chattels' in the Agreement, which the vendor said he was including in the price agreed?
2. Is the amount of deposit stated correctly?
3. Check to whom and under what conditions the deposit is to be paid. You should insist that whosoever receives the deposit does so as stakeholder, because a stakeholder cannot part with the money unless he or she has been satisfied that completion has taken place.
4. There should be a clause stating the capacity in which the vendor sells, called 'Title Guarantee Full/Limited'. If such a clause doesn't appear in the draft contract, ask for one to be inserted.
5. Check that the address and/or description of the property to be sold is correct. If the property being sold is part of an existing registered title, then you should also be provided with a plan, for more detailed inspection.
6. If you were told that you are buying a freehold, check that it says so in the description.
7. If your vendor agreed to include items such as carpets in the sale price, they should be in the contract, but if the price you are paying is just over the level at which stamp duty becomes payable, fix a price for the item (£x) and ask that the clause has added to it 'and £x of the purchase price shall be apportioned to these items'.
8. Look at the rate of interest (contract rate) in the contract. This is usually four per cent above bank base rate. If it specifies the Law Society's rate, that is four per cent over the base rate of Barclays Bank. You will be expected to pay interest at that rate if you delay completion beyond the date which eventually gets inserted in the contract.
9. Check the covenants clause so that you know everything there is to know about the property, because you buy property warts and all, and once you are the owner, you will be responsible for seeing that the covenants (if any) are adhered to.

1. The draft contract has been agreed and one of your copies has been returned unsigned to the vendor.
2. Satisfactory replies have been received in the Seller's Property Information Forms or Enquiries before Contract.
3. You are satisfied with the replies you received to the forms you sent to the council, what you learned on your fact-finding tour and to your water company and enviromental search.
4. If the Office Copies revealed anything such as a caution or a Matrimonial Home charge, the vendor has obtained cancellation of the registration of such a charge or notice.
5. You have got a firm offer of a mortgage.
6. If it applies, you have your own sale tied up. If a deposit cheque bounces, the contract is automatically washed out.
7. You have checked that everyone over the age of 18 who lives in the house is prepared to move, whether their names appear on the register or not, by getting them to sign a statement to this effect in the contract.
8. There are no problems with the survey of the property.
   

It's possible to borrow everything you need by taking out an unsecured personal loan and using it as a deposit on your new property. However, this is a risky way of investing, and you should probably only do it if your income is much higher than your spending.

Another option is to arrange a 100 per cent mortgage. Some offer several times your salary, plus your partner's salary, and you can find a list of providers in Lawpack's book, 'The Buy-to-Let Bible'.

If you do have enough money for a deposit on your new property, it's often easier to get a buy-to-let mortgage than a normal one, because the property rental income - not your income - will fund the repayments.

According to The Buy-to-Let Bible's author, a good buy-to-let property will give you around 12 per cent of the purchase price each year in income, so if your new property costs £45,000, you would hope to get around £450 per month in rental.

If similar properties in the area are rented out at £350 per month, you know your property will struggle to bring in the rent you need and maybe you should consider investing somewhere else.

Kitchen
Is the kitchen big enough to accommodate a small dining table? This is attractive if there is only one reception room and it turns the kitchen into a kitchen-diner.

Smallest bedroom
If the smallest bedroom is smaller than 6' 6" in any direction, then it's not a bedroom! You need to be able to get a bed in a bedroom, so this room can only be considered as a study or a baby's room. You need to think about this when deciding what type of tenant you are looking for. If you're looking for two professional people to share a two-bedroom flat, then the second bedroom must be bigger than 6' 6".

Bathroom
Is there a fitted shower? A bathroom is a lot more desirable if there is a power shower. If there are two bathrooms then the property is very desirable, even if one is only a shower room.

Heating
An old heating system can be expensive to replace. If possible, get it checked before you buy the house. It's your legal duty to provide heating and to issue a gas safety record.

Electrics
Are the electric sockets old? This will tell you that at some point the whole electric system will need rewiring.

If you are new to the property game, it's probably best not to. It's time-consuming, stressful and you lose money while the property is not being let out.

If you are experienced, have the time and can afford to do without the incoming rent, then it could be worth your while. Always remember to double the amount you think you'll spend because unforeseen costs almost always emerge.

Properties that are difficult to sell
The auction route has often proved more successful than private selling for properties that are hard to sell. This might be because some people at auctions are willing to take a chance on a property, particularly if they think it looks like a bargain.

Repossessed houses
Unfortunately for their previous owners, these properties are very common at auction. Whilst feeling for the people who have lost their houses, there is no doubt that buyers benefit from these situations.

Investment properties
Properties that are owned for the income they produce (such as offices or shops) are often included in auction catalogues. Investors cover a range of buyers from large pension funds right down to individual investors looking for a return on their money.

1. Auction rooms welcome anyone who swells the crowd, who is dressed reasonably whether they're going to bid or not, and who will keep fairly quiet during the auction.
   
2. There is always a constant to-ing and fro-ing of people. You can arrive and leave whenever you like, but try not to distract people while bidding on a lot is taking place.
   
3. It's not unusual to arrive late or leave after the lot you're interested in, but you should try not to miss the auctioneer's opening speech and announcements.
   
4. Auctioneers often seem to comment on vacant seats available at the front of the auction room, even though lots are no more expensive whether you are sitting at the front or the back. Use the empty seats if you want to, but it's also good to stand where you can see any other bidders.
   
5. You can choose whether to sit or stand but if you want to bid, you need to be in a position where you can see the auctioneer and he can see you easily.
   
6. Auction rooms usually open about one hour before the auction starts. Most of the audience turns up in the 20 minutes before proceedings start. Auctions often start about five minutes late, but don't rely on this. If you have questions to ask the auctioneer's staff or solicitors before the auction, try to arrive half an hour before the auction starts.
   
7. When you arrive, always check:
   if there have been any additions or amendments to the lots and lot details;
   if the lot in which you are interested has already been sold or withdrawn;
   if the lots are to be offered in alphabetical or numerical order.
   
8. If you want to bid, don't be shy about getting the auctioneer's attention by waving or calling out.
   

You need to collect information on two points: how much similar properties have actually fetched, and what opposition there is in the market on this very day. Don't let anyone flatter you into wishing for the moon. There are plenty of agencies who, to get a job, will raise your hopes unduly.

Start comparing by collecting details of properties of a similar age and type from your local paper's property column. If an agent to whom you apply for particulars asks for your name and address give it. When you have found some properties which you think will make useful comparisons, go and do the viewing bit. Ask the vendors how they decided on their price. If the way they shape the reply is persuasive, note it for future use; if not, make a note not to say such silly things yourself when the time comes.

Tradition says that purchasers always want something knocked off, so when you have worked out the going rate for a house such as yours, add about two per cent on to that figure to arrive at your asking price, thus leaving yourself a little room for negotiation.

If you don't know whether or not your house is registered with the Land Registry, you can find out by applying for an 'Index Map Search'. You fill in form SIM including a description of the property, enclose the relevant fee and the Land Registry will tell you whether your house is registered, and the title number. If it's registered, you can then prove title of ownership by obtaining an official copy of the register. This is done by sending off Form OC1 to the Land Registry, which will then send you a photocopy.

• Property Information Forms
• Fixtures, Fittings and Contents Form
• Office Copy entries in the Land Registry registers, and a filed plan
• Copy of lease (if leasehold)
• Copy of any relevant Consents (to modernisation, etc.)

It's also advisable to get local water and environmental searches completed.

Every year there is an annual exemption from Capital Gains Tax and in the year 2007/08 your first £9,200 of gains is exempt. In the case of trusts, it's £4,600.

The rate of Capital Gains Tax is, for individuals, either 10, 20 or 40 per cent and for trustees and personal representatives it's 40 per cent.

Apart from the annual exemption, you are entitled to set the costs of acquisition of the asset, including purchase price, and the sale costs against the gain.

In addition, if you bought an asset on which you have incurred enhancement or improvement expenditure, then that too will be allowed as a cost. Certain costs such as accountant's fees are not allowed, but if you are looking for allowable costs, and because this subject can be so wide-ranging, we suggest that you talk either to a professional accountant or to HM Revenue & Customs.

Normally, the house or flat in which you live is exempt from Capital Gains Tax when you sell it. The property must have been your only or main residence during the period of ownership. During the last 36 months of ownership, the property is always regarded as your main residence even if you don't live there. You can also be absent for periods totalling three years and for any period throughout which you worked abroad. In addition, if you had any work which required you to live in job-related accommodation, that also does not stand against you for Capital Gains Tax purposes. Any periods of absence in excess of the periods allowed result in the relevant proportion of your sale profit being charged to Capital Gains Tax.

If a specific part of your house is set aside for business purposes, then that proportion of your profits on the sale of the house will be taxable. However, if you don't have any rooms used exclusively for business purposes, you will not normally be liable to any Capital Gains Tax if you sell your house.

Special consideration needs to be given to houses with a lot of land alongside them. If land is sold in excess of what HM Revenue & Customs regards to be a normal area of garden in character for the house that is being sold, then part of any gain on the sale of such extra land will be subject to Capital Gains Tax.

If you owned two properties, within two years of buying the second one you should have sent in a letter (called an 'election') in which you disclosed to the taxman which you were treating as your private residence for Capital Gains Tax purposes. Otherwise, the taxman will decide for you.

Stamp Duty Land Tax was introduced on 1 December 2003 and replaces the 'old' Stamp Duty on land. In the case of freehold property, the Stamp Duty Land Tax payable by the purchaser is as follows:

• up to £125,000 - Nil
• over £125,000 and up to £250,000 - 1 per cent
• over £250,000 and up to £500,000 - 3 per cent
• over £500,000 - 4 per cent