The country life – how to plan for a smooth escape

For the first time on record, the average age of someone moving to the countryside is now under 40. More of us, it seems, are cashing in on our city homes and using the sale proceeds to buy somewhere with more space and a greater sense of community. However, if you want to swap the buzz of the city for the slower pace of the countryside, there are some questions you need to answer first. Sarah Trickey, our head of residential conveyancing, looks at some issues that could affect you when buying a rural home.

How rural do you really want to be?
You may dream of being surrounded by green fields and rolling hills but life in the country can have its own challenges. Generally, there will be fewer amenities or accessing them will be more difficult than in a town. So, check out the practicalities of life in your preferred location carefully. For example, if you rely on public transport, or you may need to in the future, find out how good the local bus service is. If you work from home, or are a serious gamer, then research the actual broadband speeds. Not all rural communities are well served.

For many, the main attractions of living in the countryside are peace and tranquility. However, farm machinery and animals could make that rural retreat noisier than you first thought. Some rural and semi-rural locations may also be affected by heavy traffic from trunk roads or uses such as landfill or quarrying which need to locate outside urban areas.

It is important to research any area you are interested in thoroughly. Talk to people who live there and visit it during different times of the day. On balance you may find a larger village, with access to a GP and shop and which is on a regular bus route to town, more suitable than total rural seclusion.

Wherever you decide to buy a new home, discuss any issues that are important to you with your solicitor. They may not be able to guarantee your move to the country will fulfill all your expectations. However, tailoring their conveyancing searches and enquiries can help ensure you avoid some of the pitfalls.

Are you ready for living off grid?
Living truly off grid, generating all your own power needs, is not a realistic option for most of us, and your new rural home may not have all mains services. Always check what services it does have and the basis on which these are provided. Many rural properties rely on overhead power lines, which involve wayleave agreements or easements. These allow utility companies and others rights over land to maintain and repair their equipment. Your solicitor should ensure your home will have the legal right to connect into the necessary services, as well as checking what rights others may have over your property.

Drainage can be another issue. Rural properties often rely upon a septic tank or private sewerage system. These can be an effective alternative to mains drainage provided the system is well maintained. It is important to ensure you have any necessary rights over adjoining land, and that any discharges into the water course are authorised.

Are there any tax implications?
In most cases, the tax implications of buying a rural home are the same as for any other property. However, if your new home has a significant amount of land attached to it, you may benefit from taking specialist advice.

If the land is agricultural or used for equestrian purposes, HMRC may treat the property as mixed use, which may allow for some savings in stamp duty land tax. Conversely, owning a property with land attached could increase your potential liability to capital gains tax when you come to sell. This is because you usually do not have to pay capital gains tax on your main home, but this relief will not apply to land beyond your immediate garden and grounds.

Even if your new home is more modest, it is a good time to review your estate and tax planning. Your solicitor can help you ensure your arrangements are up to date and reflect your new priorities. 

Do any planning restrictions affect the property?
Your solicitor will check that your new home in the country has all the necessary planning permissions, just as they would with any property. Some rural properties have an agricultural user restriction which will limit occupancy to those engaged in farming.  This will affect a property’s value and suitability, so it is important to check whether any apply to your new home.

Properties in designated National Parks or Areas of Outstanding Natural Beauty will also be subject to more restraints on development than comparable homes elsewhere. These may make it harder for you to extend your new home and if you have any plans for an extension or other works you should discuss these with your solicitor before committing yourself.

Will your new home remain a rural haven?
Most local authorities will have some planning policies in place that aim to protect the unique character of the countryside and to ensure that any development is sustainable. However, although you may choose a new home because of its rural aspect, or views over the open countryside, there is no guarantee it will stay that way, unless, of course, you are also fortunate enough to be able to buy the surrounding land.

If a view or aspect is important to you, discuss this with your solicitor early on. While it is impossible to predict what may happen in the future, they will be able to consider the local authority’s development plan and whether there are any proposals in the pipeline for building nearby. They can also include some pertinent questions in the enquiries before contract, so your sellers will have to tell you what they know about any proposals.

For further information about buying a home in the countryside, or home buying in general, please contact Sarah Trickey via the KWW website www.kww.co.uk

The House Purchasing Process

So you’ve made an offer on a place and it has been accepted. Now it’s time to get the ball rolling on legally transferring the ownership to you. Anjum Khaliq of our conveyancing team sets out the process…

Purchase Pack
The purchase pack is the initial documentation, containing terms and conditions and the client information questionnaire. Once you have appointed us, we send this to you straight away. We ask you to return the completed pack to us together with your identification documentation. When it is all received, we start the legal work.

Memorandum of Sale
Your estate agents (if applicable) will send us a copy of the Memorandum of Sale, which provides the details of the property, the amount offered and the name of the sellers and buyers and their conveyancers.

Mortgage
We will need to know if you are purchasing with the aid of a mortgage and, if so, who the lender is and how much you are borrowing. We will want to check if there is any element of the purchase that we are legally bound to report to your lender, for example if you receiving funds as a gift or loan from a third party, typically a family member.

Contract Review
The seller will complete a fixtures, fittings and contents form and provide specific details about the property. You will need to check the details and inform us if there is anything that needs clarifying.

Arrange a Surveyor
We recommend carrying out a full structural survey for the property. You should not rely on the valuation report issued by the lender’s surveyor as it is very basic and is produced for your benefit.

Property Searches
We will request searches which will include Local Authority Search, Environmental Search, Planning and Water and Drainage Search which are standard searches. If there is a particular search you would like carried, for example Crossrail or HS2 or a specific infrastructure matter, we will do that for you. See the story opposite for more about searches.

Report
We will examine the documents provided and raise enquiries with the seller’s conveyancer before sending you a legal report. This will contain information about the title to the property and a preliminary draft of the contract and transfer for you to sign.

You should read the contract carefully, sign it and return it to us. The transfer is the legal document which both seller and buyer sign to transfer the ownership of the property. This must be signed in the presence of an independent adult (18+) witness. The original should be sent back to us. We will also report to you with the Mortgage Offer (if applicable) and will send you the Mortgage Deed for your signatures. The Mortgage Deed also should be signed in the presence of an independent adult witness.

Deposit
Once you are happy with the searches and enquiries, we will require the deposit funds to proceed to exchange of contracts. This is normally 10% of the purchase price. We will account to you after exchange of contracts with a financial statement that shows the funds you have paid, the mortgage funds, Stamp Duty and professional fees and disbursements.

If you are buying and selling simultaneously, we would normally use the deposit received from your purchaser to pass on to your seller and, if required, will request the additional funds from you.

Buildings Insurance
It’s important to have buildings insurance in place by the exchange date. This will be a condition of your mortgage lender and will protect your investment in the property and your mortgage lender’s interest as well.

Exchange of Contracts
When the contracts have been exchanged, both seller and buyer are contractually bound to complete on the agreed completion date. The conveyancers usually exchange contracts over the telephone and then send the completed signed contracts by post. Exchanging contracts by your conveyancer legally binds both parties to transferring the property, so you can rest assured the seller must vacate on the day of completion. Mortgage monies will be requested from your lender and the paperwork will be collated in readiness for completion.

Completion Day
On the agreed day of completion, we will send the outstanding balance of the purchase price which you have provided to us, including the money received from your mortgage lender, to the seller’s conveyancer by telegraphic transfer. As soon as they receive the monies, they will inform us and the estate agents and the keys can be released. The property will then be legally yours.

Application Land Registry
Once completion has been confirmed, we will pay stamp duty land tax on your behalf.  We will also make an application to Land Registry with the change of ownership form called the Transfer Document signed by the vendor.

Title Deeds
Once Land Registry has processed the application, you will receive a copy of the title information document showing you as owner. This usually takes a few weeks, slightly longer if the property is a new-build.

Indemnity policies explained

If you’re selling a property, you may find the buyer’s solicitors and the mortgage lenders insist on an indemnity policy being in place before the sale can go ahead. If you’re buying a property, your conveyancing solicitor may advise that a policy should be purchased before you proceed. In this article, property specialist Eve Crampsie looks at the different types of indemnity insurance policies and what they do.

A Legal Indemnity Policy protects the buyer when a problem in the title of the property cannot be resolved. Under this policy, the insured party is indemnified by the insurer against any specified costs or losses which may occur in the future. The premium for a legal insurance policy needs to be paid only once and is usually transferred to successors in title.

Indemnity policies basically cover valuable losses of any property and legal costs. Indemnity insurance will cover most title defects as well as some other issues.

Common types of indemnity policies

1) Absence of Easement Indemnity Insurance

The Absence of Easement Indemnity Insurance is an insurance policy used when part of the property or private land abutting the property does not have the necessary legal rights over private land abutting the property so the purchaser cannot enjoy the rights necessary to occupy the land. An example might be where there are no rights of access to get to the property over private land abutting the property, or where services which are private or cross private land serve the property.

For at least 12 months before the policy is put on risk, the right must have been exercised unchallenged. It may also be necessary to obtain a statutory declaration from the seller confirming the position throughout their period of ownership. Once the policy is put on risk, any financial losses which occur during the time that the use of right was being challenged, the policy provides compensation.

2) Adverse Possession Indemnity Insurance

In some cases, the owner of the property may have claimed ownership of some land but they are unable to provide required evidence to Land Registry to prove they are true owners. Here, the owner will only have possessory title. This is called adverse possession. In such situations, it is necessary for anyone purchasing the land to have indemnity insurance. The insurance will cover financial losses suffered by the purchases if someone tries to claim the land.

3) Breach of Covenant Indemnity Insurance (Freehold)

In cases where there is a breach of covenant relating to a freehold title, indemnity insurance can be of great help if the breach is less than 20 years old. The Breach of Covenant Indemnity Insurance can be offered as an alternative so the beneficiary’s consent can be obtained. The cover will have a condition that the breach should at least be 12 months old and that the person obtaining the insurance knows of no attempt by the beneficiary of the covenant to take action.

4) Flying Freehold Indemnity Insurance

When a part of the freehold property overhangs that of a different freehold property, a flying freehold is said to occur. This usually happens when a property is divided into many freeholds.

5) Good Leasehold Title Indemnity Insurance

If the Land Registry doesn’t receive necessary proof of the superior title for a given property, a good leasehold title is usually used to register the property. The Good Leasehold Title Indemnity Insurance will offer compensation if the claim to the title is successfully challenged. For this policy, the cover will have the condition that no challenge should have been made when indemnity policy was taken out.

6) Lack of Planning Permission or Building Regulations Approval Indemnity Insurance

At places where property has been built, altered or extended without proper permissions and approvals, this insurance comes into effect. If the owner loses money because the local authorities took action on breach of regulations, the policy will cover it. This insurance is usually available only for work that was carried out at least 12 months ago.

7) Unknown Easements, Rights and Covenants Indemnity Insurance

This indemnity policy might be used where there are documents which are either known to affect the title to a property or which might affect the title but the documents themselves, or details of their contents, cannot be produced. These documents may also contain covenants or restrictions which are in conflict with the current use of the land. Even though an indemnity policy cannot prevent enforcement of covenants, it can provide financial compensation if any.

COMMON QUESTIONS

What is building regulations indemnity insurance?

You’re most likely to come across indemnity insurance for building regulations during a house sale or purchase.It’s a type of policy that’s sometimes recommended by conveyancing solicitors because work has been done to the property – an extension has been built, for example – but there’s a concern from the local authority over lack of evidence that building regulation consent was granted.

Indemnity insurance for planning permission is available too if you lack the documents to prove planning permission was granted.

Do you need a ‘lack of building regulations approval’ indemnity policy?

While the paperwork is being checked for the house sale, if there’s no completion certificate showing the appropriate building regulations process has been followed, an indemnity insurance policy is often requested by the buyers’ solicitors. The indemnity insurance is designed to protect the new homeowners (and subsequent owners) against legal action if the local authority serves a building regulation enforcement notice. Basically, the local authority can force the owner to alter or remove any work that doesn’t comply with building regulations. The insurance can cover the legal costs or fees associated with this.

In practice, building regulations indemnity insurance is very rarely claimed on, and some people question how useful it really is (it wouldn’t, for example, cover the cost of putting any work right). But many people agree to buy a policy so the house sale can progress.

Depending on the insurer, indemnity policies can be arranged through the post or online. KWW has an account with a selection of insurance companies. The cost or premiums for indemnity policies depend on the value of the property as well as the risk insured. Accordingly, the premiums are charged on a sliding scale, ranging from as little as £20 to as much as £300. KWW charges a fee to negotiate and put on risk an indemnity policy.

You need to be aware the legal indemnity insurance merely offers financial compensation. It does not cure the insured defect. It is also a condition for indemnity policies that their existence not be divulged to a third party.

Help To Buy: Everything you need to know

The Help to Buy scheme was originally introduced in April 2013. Since then, it has helped nearly 170,000 households onto the property ladder. However, as with any such scheme, over time a few issues have started to emerge which buyers need to be aware of. Here, Sarah Trickey, our head of Residential Conveyancing, considers recent research about the Help to Buy scheme, its pros and cons, and what you should look out for.

How Help to Buy works
A Help to Buy equity loan from the Government could help you fund the purchase of your new home. To qualify for the current scheme, you do not need to be a first-time buyer. The home you are buying must be for your own use. It must be a new build and it must cost less than £600,000. You provide at least a 5% deposit, and the Government lends you up to 20% of the property’s value. The balance of the purchase price is then financed with a mortgage from an approved lender. Slightly different rules apply to properties in London.

You must repay the loan when you sell your home, or after 25 years if later. However, unlike a conventional mortgage, the amount you repay is not a fixed amount. Instead, it reflects the ratio of the loan to the value of the property when you first borrowed. So, if your Help to Buy loan was for 20% of the value of your home when you bought it, you must repay 20% of the price you sell it for.

For example, if you are buying a home for £200,000, you must provide at least a £10,000 deposit yourself. The Government will provide up to £40,000 by way of an equity loan, representing 20% of the property’s value, and you fund the balance of £150,000 with a mortgage. If in five years, you sell your home for £250,000, after repaying your mortgage, you are left with £100,000. However, you also have to repay your Help to Buy loan. Instead of repaying the original £40,000, you will have to repay £50,000. This represents 20% of the value of the property when you sell.

The loan is interest-free for the first five years, although there is a monthly management fee of £1. After five years, you pay an additional fee as interest of 1.75%, which will then rise annually by the Retail Price Index plus one per cent. 

Although the principle behind the scheme is very simple, the detail and processes involved can appear complicated. For example, you will need formal confirmation of your eligibility to proceed. Choosing a solicitor like KWW Solicitors which has lots of experience in these types of equity loan will help you avoid delays and potential pitfalls. 

Pros and cons
Almost £9 billion has been advanced under Help to Buy, and the Government considers it a great success. There are certainly several benefits to the scheme:

  • If you only have limited savings and a relatively small deposit, Help to Buy can make it easier to get a mortgage and to buy your own home
  • As you will be borrowing less of the property’s value from your mortgage lender, you may also be able to get a more competitive deal
  • The initial interest-free period can ease financial pressure in the early years of home ownership, when you most need help.

However, the scheme has its critics, and it is important to consider the possible disadvantages:

  • Help to Buy applies only to selected new build homes, which tend to sell for a premium over comparable pre-owned homes. In addition, recent research suggests first time buyers using Help to Buy pay on average 8% more than those buying new homes independently.
  • The amount you must repay depends on the value of your home when you come to sell. This could be good news if property prices go down but if prices go up then you may have to repay significantly more than you borrowed. This could mean having less cash to fund your next purchase.
  • After the initial interest-free period has expired, the cost of borrowing will increase. You may end up paying more than you would under a conventional mortgage. While remortgaging remains an option, you may find fewer lenders willing to provide finance if you are buying with a Help to Buy loan.

You should also be aware that the current Help to Buy scheme ends in March 2021. A replacement scheme will be limited to first time buyers and the properties they can buy will then be subject to regional caps.

Getting the right advice
Help to Buy is not right for everyone, and it is important you consider how suitable the scheme, and any particular property, is for you. Speak to your solicitor early on, as Help to Buy involves some additional steps in the conveyancing process and they can advise you on any risks.