The type of ownership and the legal rights over a property can significantly affect its value. Property will usually be either freehold or leasehold property. A freehold interest is an interest in land that is not limited by time. However, ownership may be restricted by the rights of others for example a third party may have a right of access over the property.
With leasehold property, the interest is contractually time limited to the length of the lease. Generally, flats and much of central London property are held on a leasehold basis. The lease is the principal document which sets out the details of the contractual relationship between the owner of a property the Landlord and the occupier the Tenant.
The content of the lease will vary depending on the property type and the relationship between the landlord and the tenant. However, some commercial property tenants may have a statutory legal right to extend the contractual term of the lease. Depending upon the nature of the property and the transaction, long leasehold interests with a lease length of up to years may also be available. Such leases are normally granted on payment of a premium with only low or nominal rents payable.
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Most property in England and Wales is registered on a public register at the Land Registry. It is referred to as Registered Land. Registration provides conclusive evidence as to the identity of the owner and the owner's title to the property. The register also provides details of the extent of the land and the rights benefiting and affecting it. If property is registered, there is a state guarantee of title that guarantees the accuracy of the public register.
If a defect or error is found in a registered title, compensation is payable by the Land Registry in certain circumstances. In addition to having legal advisors to assist you with your property transaction, other property consultants may include a property agent, surveyor and a valuer.
6. Sale agreed.
Owners wishing to sell or let their property typically employ a property agent to market their property. They advertise the property in a variety of online and offline publications and media and contact parties who have registered with them. Buyers can register with these agents and ask for details of available properties. Agents also negotiate the key terms of the transaction.
Their job is to report on the condition and structure of the property in which you are interested. There are two main reasons for appointing a surveyor:. The valuation will be based upon expert knowledge of the market, market evidence and relevant previous transactions. You may also want to obtain valuation advice to understand the state of the market and guide you on the value of property so that you are well informed when it comes to negotiating the price and other commercial terms of the transaction.
Note that some of the stages overlap. For example, due diligence and negotiation of the transaction documents will take place at the same time.
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You will need to consider the most suitable structure for your property investment. UK property can be held in a number of ways either directly or indirectly including via a limited liability company, a traditional partnership, a limited liability partnership and unit trusts. It is important to consider the tax implications when deciding what structure is most appropriate.
The tax consequences will depend upon a number of factors including your tax residence and domicile and the investment vehicle you choose. We always advise that you seek tax advice based on your particular circumstances. If you intend to borrow monies to finance your property transaction, the funding arrangements will need to be in place before the property contracts are exchanged. As your legal advisors, we will need to liaise with your lenders to ensure that:.
The party providing finance for the transaction and your legal advisors will need to comply with UK Money Laundering Regulations and will require documentary evidence of identity. If you are an individual, this is likely to be your passport or driving licence and a utility bill. It depends on the type of transaction. As your legal advisors, we will need evidence that you have funds to pay this.
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The remainder of the purchase price is then paid on completion of the transaction. A deposit is not normally paid on the exchange of contracts for the grant of a new lease known as an agreement for lease and sometimes there is no need for an agreement for lease, with the parties proceeding direct to completion of the lease after the due diligence stage. In addition to the purchase price, there are a number of other costs associated with the acquisition of property. As a general rule you should budget for:. You should also budget for the cost of any works that may be required to the property, either for your own occupation or if you propose to let to a third party to ensure the property is in a lettable condition.
If you are acquiring a leasehold interest, the landlord or the tenant if you are acquiring an existing lease will need to be satisfied about your financial strength sometimes referred to as covenant strength i.
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This could be in the form of a guarantee from a parent company or the company directors or a cash deposit known as a rent deposit. It is essential, therefore, that proper checks are undertaken on your behalf to ensure you are satisfied that the property you propose to acquire is suitable for your purpose. There are three strands to this due diligence:. Environment laws in England and Wales can operate to make you liable for contamination that is already present at the property when you acquire it.
It is advisable to carry out a desk top environmental survey to assess any potential environmental risk. If considered necessary depending on the outcome of initial investigations or the nature of the property , you may need to engage an environmental consultant to carry out a full environmental survey. We also advise that steps are taken to identify potential environmental problems early in the transaction so that such matters can be factored into negotiations on price and other contractual terms.
There is no typical time period for completing a property transaction. This can vary enormously depending on the structure and complexity of the deal and the nature of the property. As your legal advisors, we will need instructions as to the deadline and timescale that you wish to work towards.