Please see an interview with Caroline McDonnell, a lawyer based in Barnsley that we have had the pleasure of working with for some years now. As many investors appreciate the fact that a fast completion is essential to securing a deal, we have focused this interview on how to maximise the ability to benefit from a quick yet, more importantly, safe property transfer.
1) Can you give our readers an outline of your experience as property lawyer? I am qualified lawyer with over 18 years experience in dealing with all aspects of residential and commercial property transactions (and other law) and I have a large client base of buy to let investors with portfolios from 2-100 properties and have assisted clients who are starting out in the investor market or are building their portfolios. The majority have been clients of mine for more than 8 years.
2) From a legal perspective, what are the preliminary steps that a property investor can take to ensure a smooth property transaction? In order for a property investor to enable a smooth property transaction, they need to choose an experienced lawyer who knows how a property investor thinks and understands the promises which they make to the sellers to “secure” the deal. I would also advise that the seller chooses their solicitor wisely to ensure that they understand the needs of the seller and work proactively. I would recommend that an investor is open and honest with the seller as to how the transaction is to proceed and what they can expect.
3) Can you outline the essential searches that need to be done on a property and why an investor should ensure that they are all in place? Since 20th June 2010 the Government decided to abolish Home Information Packs with immediate effect and therefore any new properties advertised for sale will not come with the benefit of a HIP – only an Energy Performance Certificate. There will still be a huge amount of properties out there that have the benefit of a HIP and it depends on the the searches contained therein as to whether they can be used. If the searches are over six months old (but under 12 months old) then validity insurance can be put in place. If the searches are over 12 months old then new searches will need to be carried out. If the sale is a private sale and not advertised on the open market then there will be no HIP available. The minimum which I recommend to any client is that a local search is carried out but we also advise that a drainage search is carried out, particularly to check whether there are any public sewers within the boundaries of the property to ensure that these are not built over. Depending on the area which the property is located, we also recommend that a mining search and/or a brine search is carried out. We do not carry out environmental searches as a matter of course and only do so upon the clients specific request. The client needs to give careful consideration as to whether or not there is any likelihood that the land the subject of the purchase might at some stage in the past have been contaminated e.g. if the property was on the site of an old gas works, tannery or forms part of a former industrial or landfill site. The current regime in dealing with contamination is extremely onerous on an owner of property. Searches can however be undertaken to check whether there is any possibility of contamination which would then be forwarded to the clients surveyor or valuer for his comments. We will not however carry out such searches, we are solicitors and not surveyors and are therefore unable to advise as to whether there is any potential risk and it is for this reason that we would propose sending the results of such searches to your surveyor or valuer. We do not carry out chancel check searches as a matter of course and only do so upon the clients specific request. The client will therefore need to give careful consideration as to whether or not the property which they are purchasing is near a church, or is on land formerly owned by some of the older universities, there may be an obligation to contribute towards repairs to the chancel of the local parish church. This was laid down in the Chancel Repairs Act 1932. Such liability is enforceable in the County Court, and can apply to properties falling within a Church of England parish which has a vicar or a vicarage and has a church dating from the medieval period or earlier. However this may only reveal a potential liability which will not be specific to the property only the area itself. If the search reveals a potential liability then we would ask the sellers solicitors to put in force and pay for an indemnity policy to protect you. However, they may refuse if this is only a potential liability. If this is the case then you the client will need to consider whether they would like to pay for this policy themselves. We will make no enquiries in relation to the potential liability unless the client formerly request us to carry out a chancel check search.
If the client is a cash purchaser, then the choice of searches is down to them. If however they purchase a property with the benefit of a mortgage then the lender normally requires a minimum of a local and mining searches to be carried out.
4) Should any of the above searches come up with problems, are issues easily resovable and, if so, how? In all of my years of experience, I have never encountered a problem on the searches which cannot be resolved. It is down to experience of the lawyer acting for the client as to how quickly these issues can be resolved and how they are dealt with. There are issues which do arise which need to be dealt with but these can be resolved by further research, searches and enquiries. Indemnity polices are used in some circumstances which can be put in force quickly.
5) Why is it always a good idea to work with a solicitor that specialises in working with property investors as opposed to a ‘high street’ one? Many investors believe that in order to receive the level of service they expect they should go to a large firm of lawyers who state that they “specialise” in buy to let investor work. This is not always the case as, from my experience, they charge over and above what a normal buyer would pay in legal fees. I would, nevertheless, always recommend an investor chooses a solicitor who is experienced in buy to let work as opposed to a “high street” one. However some high street solicitors do have specialist teams working for investors. The legal fees which I charge to investors are, the majority of the time, cheaper than the average “one of purchaser” because of the continuous instructions, even if they are only buy 2 properties a year as this builds the client relationship. I do not see why investors should be charged higher legal fees because it is classed as a “specialist market”. When you work with an investor you know what their requirements are, what they promise to the sellers and what expectations they have of their Lawyer. I build personal relationships with our clients that are long lasting, and the investors feel that they can call on your advice and assistance, even if we are not formerly instructed on a specific matter. I have turned around cash purchasers within 3 days of receiving contract papers. If an investor is using a mortgage to aid the purchase then, as long as the mortgage offer is available quickly, within a couple of weeks of instruction.
6) Many investors are often working against the clock to ensure completion – what can be done to speed if the process, if anything? Working with a good solicitor acting for a seller is a must. If they can deal with the issuing of contract documentation quickly and turn around any replies to enquiries then this assists with a speedy completion. Working with a mortgage lender who is prompt at arranging a Valuation and going to offer is the sticking point. Normally it is the mortgage offer which will hold up completion. If any issues arise, then the use of indemnity policies can be used i.e if the searches are not back then we can use search delay insurance to cover this.
7) How are you finding working with lenders at the moment – are they doing extra checks than they used to? It is getting better! They are better than they were a year ago. From my experience they are doing extra checks i.e they are wanting proof of deposit from the mortgage broker and are still down valuing properties, but they are a little less strict then they were throughout the credit crunch.
Caroline McDonnell is a lawyer at Milners Law based in Barnsley and can be contacted during normal office hours on 01226-383587.