There are many advantages to buying a property at auction but failing to fully review the legal pack before purchase can cause a host of future problems. Here is a breakdown from one of our conveyancing experts, on what to expect when having your legal pack reviewed.
Special conditions
Special conditions of sale will highlight the conditions of the agreement and the responsibilities of the buyer. This could include, buildings insurance, time frames for completion and additional fees payable once contracts have been exchanged.
The Special Conditions usually detail additional fees that are payable on top of the purchase price of the property. These typically consist of re-imbursing the sellers of their legal fees, searches, auction admin fees and leasehold management packs, if applicable.
Sometimes these conditions within the agreement are not clear meaning the buyer can be stunned on completion and are having to pay thousands more than expected. To ensure you have all your finances in place you must make sure you are fully aware of the costs you are committing too.
Title deeds
The title deeds will be contained in the legal pack, this will determine the seller’s legal entitlement to sell and will show any rights, restrictions or covenants affecting the property. Certain covenants can restrict how you use the property and even any works you wish to have carried out. For example, if you were wanting to purchase a property to use as serviced accommodation, you would need to make sure there are no covenants contained in the title deeds to prevent you from doing this, as often there will be a covenant to state the property is to be used as a ‘single private dwelling house by one family’. We would therefore ensure within the report that you are aware of these restrictions and covenants so you know how you can you use the property if you chose to purchase, and if there are any restrictions you need to over-come and how you would do this.
Searches
An auction legal pack may include searches, these are typically the: Environmental, Drainage & Water and Local Authority. In place of this there may be a No Search Indemnity Policy.
The searches will provide you with further information about the property and the surrounding area. As part of the report, we review the search results and advise of any adverse entries that may affect the property and your purchase. For example, if the property has had an extension or works carried out that would have required building regulations this will be revealed in the local search.
Another example could be if the property is in an area subject to flooding or if there are any environmental constraints this would appear in the Environmental search. Depending on the results this can have a significant effect on buildings insurances and obtaining a mortgage offer
Exchange of contracts
If you are purchasing through a traditional auction, the exchange of contracts takes place on the day of the auction, once a successful bid has been made. Completion will then take place 28 days later. On exchange a deposit will be payable to the auction house which is usually 10% of the purchase price. Once contracts have been exchanged, the buyer is legally bound to purchase the property. Should any issues come to light after exchange the seller will not be responsible for correcting the issues. Due to this, if completion does not take place on the agreed completion date, or if the buyer is in breach of contract the deposit will be forfeited, meaning the sellers will keep this and they can pursue the buyer for further costs and interest.
By having your property legal pack reviewed, we can ensure you that any possible problems or restrictions are highlighted, allowing you to feel confident when buying at auction!
To enquire about our auction pack review, you can contact our experts via:
Call: 01302 986 504
Email: Office@smithbenedict.co.uk