First time buyer guide
Anticipated Completion Date
If you are purchasing a home before the building is ready, this is the date by which the developer expects the building to be ready for occupation and for you to be able to complete.
If you purchase a flat, this will be arranged by the managing agent or freeholder and covers the structure of the property against events such as flood. You will pay for it via your service charge. If you purchase a house, you will arrange your own buildings insurance.
The day of completion is the day you get your keys! On this day your solicitor sends your completion funds (which will mainly consist of your deposit plus your mortgage funds, which they will have drawn down from your lender in advance) to the seller’s solicitor. Once these funds reach the seller’s solicitor, the keys can be released to you.
This sets out how much money you will need to transfer to your solicitor (and from your solicitor this will be transferred to the seller’s solicitor) to allow you to complete. It is prepared by the seller’s solicitor and includes figures such as the purchase price, service charge and mortgage funds.
The contract sets the terms of your purchase and you will sign this and return it to your solicitor just prior to exchange of contracts. The seller will also sign an identical contract prior to exchange of contracts.
Recommended whether you purchase a flat or a house, this protects your possessions within your home.
Your deposit is sent to your solicitor upon exchange of contracts and will be 10% of the purchase price as standard. If your deposit is going to be more than 10%, you’ll send the remaining balance to your solicitor in time for completion.
If you are buying a new-build home, you will have a two-year defects period from the date of your completion. During this period, the developer or contractor will arrange for any defects (items which are not working as they should) to be rectified.
Energy Performance Certificate (EPC)
An EPC rates a property according to its energy efficiency and contains recommendations about how to improve efficiency. If you are purchasing a home which isn’t built yet, this will be available at completion (prior to completion, a Predicted Energy Assessment (PEA) will usually be available).
An engrossed document (this might be the contract or the lease) contains your details and is the version which is signed, as opposed to a draft version.
Detailed questions and requests for information about the property which are requested by your solicitor and answered by the seller’s solicitor before exchange of contracts. These may include questions which you have asked your solicitor to answer.
Exchange of contracts (also just known as exchange) takes place when your solicitor holds your signed contract and your exchange deposit, and the seller’s solicitor holds the seller’s signed contract. The two solicitors will speak on the phone and agree the exchange and after this point, both sides are legally bound to the sale.
If you own a freehold property, you own the property and the land on which it stands. As a general rule, houses are freehold and flats are leasehold in England.
If you purchase a leasehold property, this is a rent payable annually to the freeholder (the freeholder owns the building and the land on which it stands). As flats are usually leasehold, ground rent is usually payable on flats. The amount payable should be made clear when you agree your purchase.
If you are buying a new build home, it will come with a 10-year Home Warranty. This usually continues to protect the home by insurance cover until 10 years after completion, and will usually include items such as foundations, walls and roofs.
Independent Mortgage Adviser (IMA) / Independent Financial Adviser (IFA)
An independent IMA or IFA has access to the whole mortgage market and so can recommend the best product for you (as opposed to if you were to visit a bank branch, you vwould only be offered products by that bank) and progresses your mortgage application through to the issuing of your mortgage offer.
A registry of the ownership of land and property in England and Wales. Once you have completed on your property, your solicitor will register it in your name at the Land Registry.
The lease sets the terms for living in your home and this will be for a set number of years. It also sets out the rights you are entitled to as a leaseholder and what you can expect from the freeholder and your neighbours (as they will also have signed a lease). If anything is unclear to you in your lease, you should ask your solicitor to explain it. Lease extensions can be agreed with the freeholder for a premium, after you have owned your home for two years.
If you own a leasehold home, you own the right to occupy the home for the number of years set out by the lease, but you don’t own the land your property occupies. In England, flats are usually leasehold as a number of flats occupy one piece of land. There will be a freeholder who owns the building itself and the land it is built on.
Long stop date
If you are buying your home before it is built and have exchanged contracts, this is the date after which if the home is not ready for occupation, you can walk away from your purchase and have your exchange deposit returned to you.
Loan to Value (LTV)
Your LTV is the percentage of mortgage you are taking out in relation to how much the property is worth. The percentage of your property which is not covered by your mortgage will need to be covered by your deposit. For example, if you were to purchase a property valued at £300,000 and did so with a mortgage of £255,000 and deposit of £45,000, your LTV would be 85%. The maximum LTV available will vary between property types and mortgage lenders.
If you are purchasing a flat, the managing agent is appointed to manage the building and communal areas day to day. The managing agent usually arranges the buildings insurance, and you will pay your service charge to them.
Residents’ Management Company (RMC)
As part of your purchase, you may also become a member of the Residents’ Management Company, particularly if you are purchasing a flat. This is a non-profit company which gives members more say in the way in which the building is run. Some members may volunteer to become directors of the RMC. A managing agent will usually be appointed to carry out the day-to-day running of the building.
Memorandum of sale (MOS)
The MOS will be issued by the seller or their appointed agent once you have agreed your purchase and outlines the details of the sale including details of all parties, figures, and any conditions of sale. If you are purchasing a new build property, this might be in the form of a reservation form instead, which both you and the seller will sign.
The loan you take out to purchase your new home, which will come from a bank or building society and be secured against your home.
Mortgage valuation / survey
A mortgage valuation or survey is undertaken by your lender to check that the property is not being sold for more than it’s worth. Arrangements for this to take place will usually be made by the seller or their agent, and your mortgage offer will not be issued until it has taken place.
Practical Completion (PC)
PC is a legal stage in the building process, at which point the building is ready for occupation and all of the paperwork is in place to allow you to complete your purchase (if you are buying a new build home). If you have exchanged contracts, once PC is achieved then notice to complete will be served to your solicitor, which will set your completion date.
Reserve fund / Sinking fund
An amount of money from your service charge payments is sometimes set aside by the managing agent to build up a fund to cover the cost of unusual and/or expensive works to the building such as external decorating or repairs. This aims to prevent leaseholders having to pay for significant one-off expenses in the future.
Your solicitor will carry out a local search and a flood search on your behalf: the local authority search covers any charges or restrictions relating to the land or the property, road/railway issues and environmental factors, whilst the flood search assesses the risk to the property from all the main types of flooding. If you are buying a new build home, the developer may provide these searches to all purchasers as this helps to speed the process up.
Your service charge will cover the day-to day management, repair, and ongoing maintenance of your building and communal areas. It will also cover your buildings insurance if you are buying a flat, and a portion of it may be set aside to build a reserve fund / sinking fund.
You should appoint a solicitor to act for you in the purchase of your home. Your solicitor will deal with all the legal aspects of your transaction including reviewing the legal pack, reviewing searches, reporting to you, liaising with your mortgage lender, handling Stamp Duty Land Tax, and registering your property in your name at the Land Registry.
Stamp Duty Land Tax (SDLT)
A tax payable by the buyer of a property, although first time buyers receive some exemptions. Your solicitor will handle your SDLT payment for you.
The title register is registered at the Land Registry and shows important information about the property, such as the names of the legal owners, whether it is leasehold or freehold and whether there are any mortgages or rights of way which affect it. It will usually also include a title plan.