Conveyancing Information
1. Your Mortgage.
If you are taking out a mortgage your lender will normally instruct us to act on its behalf in connection with the mortgage. The arrangement means that you must comply with a number of obligations specified by your lender.
2. Your Obligations as Borrower.
By signing the mortgage deed you agree with the lender to undertake certain obligations. The most important of these is to repay the loan in accordance with the terms agreed between you and the lender. The loan is secured against the property so that, if you do not pay, the lender has various rights which include the right to compel you to leave the property and then to sell it. Sales by lenders often realise less than the borrower believes to be full value. If the debt owed to the lender (including interest and costs) is more than the proceeds of sale you will be liable for the shortfall. If there is more than one borrower the lender can claim against you all or any one of you. Your mortgage is a serious commitment which you should not take on without careful consideration.
3. Identification.
We are required by your lender to certify that we have checked your identity. Accordingly please provide your current passport, or other photographic identification. Alternatively please bring in a debit or credit card together with a bank statement and utility bill. Each borrower must bring forms of identification.
4. Valuation.
Your lender will probably have arranged for a valuation of your property. Even if you have paid a fee for this valuation and/or have received a copy of it you should not rely upon it in deciding whether to proceed with your purchase of the property. There may be defects in the property which are not revealed by the inspection carried out by the lender’s valuer, and there may be omissions or inaccuracies in the valuer’s report which do not matter to the lender but might matter to you. You may consider obtaining you own more detailed survey of the condition of the property and a separate valuation of it, based on a full inspection by a qualified surveyor, before deciding whether to proceed with your purchase.
5. High Percentage Borrowing.
If you are borrowing a high percentage of the value of the property the lender may require additional security to protect the lender if it has to sell the property at a price which does not cover the debt owed to the lender. Some lenders obtain an insurance guarantee against high percentage borrowing, for which a single premium is paid on completion of the mortgage. Other lenders carry the risk themselves but charge you an additional fee for doing so. An insurer who pays up under an insurance guarantee of this kind is entitled to recover the payment from you. Even if there is no insurance you will be liable for the shortfall if the proceeds of realisation of a property are not sufficient to repay the lender.
6. Investment Advice.
This office is not authorised to give investment advice concerning life policies, pensions, share entitlement etc. If you require advice concerning any such matter you should consider obtaining this advice from an Independent Financial Advisor.
7. Vacant Possession/Letting.
If you are buying for your own occupation it is a requirement of your lender that vacant possession is obtained on completion of the property purchase. If you subsequently wish to let the property you must not do so without the lender’s consent. Lenders are often willing to agree to lettings being made subject to conditions being met which protect their security. If you are buying the property for the express purpose of letting it, or subject to an existing letting, not only must the letting have been approved in principle by the lender but also we must examine the terms of the tenancy to check that they are not against the lender’s interests.
8. Title Indemnity Insurance.
Sometimes investigations of title to the property reveals that there is a defect, for instance the property may not be registered as absolute freehold. In these circumstances in the absence of any other remedy your lender requires that we obtain insurance against any risk. The cost of this insurance is met by a single premium which may have to be paid by you. We will not have allowed for this in any quotation or estimate previously given to you. If insurance of this kind is required we will explain it to you and notify you in advance whether you will be liable for the cost and if so, how much that cost will be.
9. Property Insurance.
It is a requirement of the mortgage that you keep the property adequately insured against the risks required by the lender. If you have arranged that the lender will organise this insurance for you no further action is needed on your part. However if the lender has agreed that you may arrange the insurance yourself, there are certain requirements to be met on which we will advise you. Furthermore, you must keep this insurance in force for so long as anything is owed to the lender and such insurance must either be index linked or adjusted annually to reflect the rebuilding cost of the property. In the case of flats or other developments the insurance of which is arranged collectively by a landlord or management company, we will be required to make certain checks and satisfy the lender that the lender’s interests are protected.
10. Independent Legal Advice.
If your mortgage is being guaranteed by someone else and in certain other circumstances the lender may require that the third party concerned be given independent legal advice. The person concerned is, of course, free to choose such solicitors as he or she chooses for this purpose but in the absence of such a choice we are required to make the necessary arrangements. The solicitors giving the independent legal advice will charge a separate fee for this purpose which has not been provided for in any quotation or estimate given by us. The person seeking the independent advice must pay the solicitor giving that advice directly. If, following completion of the mortgage, someone other than you who is over 17 will be occupying the property (e.g. a child of yours) your lender may require that this person sign a consent form and obtain independent advice on it. In such circumstances the same arrangements as described above may apply.
11. Payment of Purchase Price.
Your lender will instruct us to check how the balance of the purchase price is to be paid. Obviously, if the balance of the purchase money is being provided from a related sale with which we are dealing on your behalf, we will be able to satisfy this requirement without difficulty. In other circumstances we have to ask you where the money is coming from and in particular to satisfy ourselves that you do not intend to provide the balance of the money by any form of second mortgage or charge against the property. Your lender requires that all payments by you should be through us, and not directly to the seller. Please note that we are expressly forbidden by your lender to use the loan for your purchase unless we have in our possession sufficient funds to pay Stamp Duty and registration fees. We shall also require that any fees invoiced by us to you relating to the purchase or the mortgage are paid to us before completion of the transaction.
12. Fees and Expenses.
We will provide you at the outset with a realistic quotation or estimate not only in respect of the fees payable by you relating to the purchase but also the fees of our work on behalf of your lender. If you have not already received a quotation or estimate from us you should ask for one now. Please note that quotations and estimates already given do not take into account additional expenses which may be payable in accordance with your lenders requirements. If the transaction does not proceed to completion then we will only charge you for any expenses actually incurred.
13. Retentions.
Sometimes a lender holds back money from the loan because work remains to be carried out on the property, which will be released once the works have been satisfactorily completed. You must bear in mind that the lender will only release money held back if, at the time when payment of it is required, you have fully complied with your obligations under the mortgage and in particular are up-to-date with all payments.
14. Title Deeds.
The documents relating to your property will comprise a title certificate plus miscellaneous necessary or useful documents (e.g. a National House Builders Council guarantee or copy Planning Permissions). Some lenders do not wish to be burdened with storing all the documents relating to your property and therefore insist that we send them only the title certificate. The other documents, however, are still important and ought to be kept in a safe place to be available when the property is sold. If these documents are lost or accidentally destroyed you may be put to substantial expenses in confirming the information contained in the documents or obtaining duplicates. For this reason it is in your best interests and in the best interests of your lender that the documents are kept on a safe place where they will be readily available when needed. We offer a storage service free of charge. If separate storage of documents relating to your property is needed we will write to you on completion and ask whether you wish to avail yourself of this service.
15. Conflicts of Interest.
Although in many respects the interests of the buyer and the lender are the same (in particular they both want the property to be acquired with a good and marketable title) there are circumstances in which a conflict of interest may arise because information comes into our hands which you would prefer us not to tell the lender, such as:
(a) the price is lower than you told the lender (because this means that the property is worth less than the lender thought)
(b) you are receiving a Cash Back or other inducement from the seller (again because this suggests that the property is worth less than the purchase price)
(c) you have decided to let the property rather than occupy it personally
(d) your financial circumstances have changed – for instance you may have lost your job (because you may not be able to keep up the repayments on a reduced income).Because we owe a duty of complete confidence if a conflict of interest arises we will ask for your permission to disclose the circumstances to the lender. If you withhold permission we must cease to act any further in the transaction either for you or for the lender and return the lender’s papers advising the lender that a conflict of interest has arisen. This signifies that something unusual has occurred and the lender will probably withdraw the loan offer.
16. Leasehold Properties.
Properties can either be Freehold or Leasehold. Leasehold properties in Lancashire are often held for 900 or 999 years at a low rent (just a few pounds). There are many such properties in Lancashire however leasehold properties do present some particular problems.
17. Ground Rents.
Leasehold properties are subject to payment of ground rents to the freeholder. Often the rent is not collected because it is so low and in many such cases the identity of the freeholder is unknown. Arrears of rent up to six years can be demanded in future.
18. Leasehold Covenants.
Leases often have covenants (restrictions) such as prohibitions on alterations without consent. These restrictions may be intended to preserve the character of the area. In many cases alterations will have been carried out without consent (possibly because there was no-one to obtain consent from). There may be problems obtaining retrospective consent if it is required in future.
19. Original Leases.
The original lease will usually have covered a whole street or terrace. In the days before Copiers individual copies would not have been made available. It is possible that no-one is aware of the whereabouts of the original lease. In such cases no-one knows exactly what is in the original lease and indemnity insurance may be required.
DLC Solicitors Ltd, 38 Railway Road, Darwen, Lancashire, BB3 2RJ
Tel: 01254 761234 Fax: 01254 760929
Direct line: 0845 130 5428
Email: info@dlcsolicitors.co.uk or Contact Us Today
