Avoiding common pitfalls in residential property transactions

Owning one’s own home has long been the aspiration of the majority of people and the allure of no longer having to pay rent and enjoying security is no less diminished today.

So prominent is the role played by home ownership in our society that, for the vast majority, their home is the by far the largest investment they will make in their lifetimes. For that reason alone, great care needs to be taken not just in the process of transferring ownership but, prior to that, in terms of due diligence and forward planning, for there are many pitfalls awaiting the unwary buyer.

Planned or potential developments in the area

As part of the conveyancing procedure your solicitor will carry out a local authority search. But the results are only specific to the property that you intend to buy and only cover a limited time period. You should, therefore, gather some local intelligence to ascertain whether or not there are any major developments planned for your area which could have a major impact on the value of and your enjoyment of your home. You wouldn’t want to find yourself living next to a branch of the HS2 or a new airport runway.

Be aware of potential tax charges

Property is a valuable asset. As such, it inevitably comes with tax implications. One of those taxes is known as CGT or capital gains tax, which is charged on the profits made from selling an asset. Your principal private dwelling home is exempt from CGT but, if you use your home as a business, then that exemption may not apply. You need to check this.

Moreover, if you are considering buying a second or holiday home, then expect to have to pay CGT if and when you sell it and assuming that you make a profit on that sale.

Planning permission and buildings regulation approvals

Planning permission is required to build any new property. Furthermore, some adaptations to existing properties, such as loft conversions, also require specific planning permission and also building regulations approval which ensures that the construction has been carried out in accordance with safety regulations. Planning permission for extensions is often required depending on the size of the extension.

If a property that you intend to buy does not have the requisite planning permission, the property could lose significant value. If building regulations approval was not obtained for any construction work, you could find that you have to pay to restore the property back to the way it was before the work was carried out.

Restrictions on alterations

If you’re buying a property with a mind to carry out material alterations, then you need to ascertain whether any restrictions or outright prohibitions may thwart your plans. For apartments, many leases contain covenants that require the lessee to obtain permission of the freeholder in advance in order to carry out any structural alterations to leasehold property. If you’re buying a freehold house, then there may be covenants or restrictions in the title deeds which restrict what you can do with the house.

You must ensure that you advise your solicitor of your intentions to make any such alterations so that they can check the lease or title deeds carefully and advise you accordingly.

Lease term extensions

A lease which has less than 90 years left to run will have a significant impact on the value of the property. If you’re in a position where you intend to buy such a lease, then you must ensure that you ask the existing holder to apply for a 90-year extension before you exchange contracts. If you plough ahead and buy it anyway, then you will have to wait a further two years before you can instigate the lease extension process. In that time, the value of the property will decline further still.

Service charge surprises

Some houses are leasehold and all flats and apartments are leasehold. The vast majority of leases require the lessee to contribute to the upkeep of the building and/or estate of which their property forms a part. The contribution is known as ‘service charges’.

Normal, run-of-the-mill service charges can be easily ascertained and easily figured into your calculations for the cost of owning the property. However, you need to be aware that major repairs can result in a huge increase in the service charges and, if you fail to pay these charges, your property could be at risk. Replacing an old, unsafe roof on an apartment building, for example, can run to tens or even hundreds of thousands of pounds and you will have to contribute a proportionate share.

So, you need to make enquiries as to whether or not any such major works are planned in the future. If there are, then you must try to get some idea of the cost and your likely contribution. That way, you can at least plan for it and, maybe, factor it into your negotiations regarding the price of the property.

Instructing an experienced property solicitor is essential but they need your input, too, in order to advise you fully and effectively. So, make sure you do your own homework and appraise your solicitor of all the information that they need to greatly reduce the risks of a property disaster.

For further information and trusted legal advice regarding buying a property, get in touch with us at Carlsons Solicitors.