Could legal defects threaten your home sale? Here’s what to do.

14th July 2020 posted in Property News Sellers Landlords

Chris Salmon, co-founder of Quittance.

Pent-up demand has flooded the market with motivated buyers and sellers, eager to get their move underway. The conveyancing process can be lengthy at the best of times, but as the national lockdown ends and companies grapple with furloughed workers and socially-distanced workplaces, delays are likely.

A property’s legal issues, or “defects”, can often be the cause of weeks of avoidable delay. Fortunately, sellers can address many legal issues upfront, reducing the risk of defects causing delays or the transaction to fall through.

What are property legal defects?

Tackling a property’s legal issues is one of the biggest causes of delay during the conveyancing process. Solicitors on both sides can get bogged down in debating technicalities, and buyers can get wary in the face of obstacles.

Examples of legal issues include:

  • missing electrical and gas safety certificates,
  • neighbours’ rights of way over your property, or
  • missing building regs or planning approval.

Luckily, most legal issues affecting a property are solvable. Most can even be addressed before a buyer is found, saving considerable time and stress once you do accept an offer.

Address legal issues proactively and prevent delays

There’s no one-size-fits-all solution to avoiding delays during the sale conveyancing process. Every property will have a different profile of potential issues for a seller and their solicitor to address.

That said, there are several things you can do to give your home sale the best chance of completing promptly.

Instruct your solicitor ASAP

In general, step one is always the same - instruct your conveyancing solicitor as early as possible.

Many sellers still wait until after finding a buyer to instruct their solicitor. There’s no real upside to this approach, as most law firms now offer “no move, no fee” conveyancing.

No move, no fee means there’s no financial risk to you if the sale falls through. With fixed fees, you also get better value for money if you instruct earlier. You will have the benefit of your solicitor’s expertise for longer, even helping to shape the property’s “legal kerb appeal” (the strengths of the property from a legal perspective) at no extra cost.

Complete the property forms ASAP

After you have instructed, your solicitor will ask you to complete various formalities including identity verification. During lockdown, some law firms developed 100% compliant solutions for ID verification using tools like Equifax and Zoom to confirm the identity of clients remotely. There’s no reason why this approach can’t still be used.

You will then have to complete the property information forms. These forms are lengthy, but you must return these to enable the solicitor to build a legal profile of your property and start the conveyancing process.

Try to do these steps online or by email if you can.

You should also proactively send your solicitor a copy of the sales particulars so these can be compared to the other documents.

Agree a strategy

Once your solicitor has had a chance to look through the property forms, they’ll have an idea of what issues could arise. You may still be able to remember the legal defects that your solicitor raised when you bought the property.

For each of the property’s legal defects and potential issues, you should agree a strategy with your solicitor for addressing them once a buyer is found. You should also make sure your agent is up to speed, as they will have valuable practical insight.

Examples of solutions to property legal issues include:

  • If you are missing electrical completion certificates after building work, you could chase these up, or arrange for an Electrical Installation Condition Report (EICR).
  • If you are selling a property with an unofficial roof terrace or unapproved extension, you could take out an indemnity policy (see below)

Be willing to pay

In some cases, it is not possible to “fix” a legal defect so that the defect no longer exists. In these situations, your solicitor will generally recommend an indemnity policy. These policies exist to protect homeowners from financial loss in a wide variety of circumstances, from fines for missing planning permissions to a loss in value of the property.

Indemnity policies are usually inexpensive, and you should be prepared to offer to pay for a policy if one is required. Policies are attached to the property, so the buyer will inherit the benefit of the policy when the sale completes.

In the majority of cases, the buyer’s solicitor will agree that an indemnity policy is the best solution. If you have agreed with your lawyer that you’re willing to pay, your solicitor can present the defect, the indemnity solution, and your offer to pay for a policy all at once. This “packaged” strategy should avoid delays and give the buyer confidence.

If any legal issues are raised by your solicitor and dealt with early on, it also sidesteps any opportunity for the buyer to use the defects as an excuse for renegotiation later.

Common leasehold delays

Even before lockdown, leasehold transactions could take weeks longer to complete than freehold sales. Now that the market is returning to a version of “normal”, leasehold-related delays are likely to worsen.

When the buyer’s solicitor is investigating a leasehold property, they’ll need to look at information relating to the management of the freehold, including maintenance of common parts like entryways, garages and gardens. The buyer’s lawyer will also need to review the state of service charges and accounts. To do all this, the seller must provide this information, sometimes called the “managing agent’s pack”.

Some managing agents and freeholders are faster than others, but with the combined pressures of furloughed and socially distanced staff and a rush on property interest, managing agents will be very busy and delays in supplying these packs are likely.

When you instruct your solicitor, ask them to order the managing agents pack as soon as possible. You will usually need to pay for this pack upfront, but the significant time saving is worth the investment.

Avoiding post-lockdown delays

Most of the advice above was true even before coronavirus hit. Although the market has surged as the national lockdown ends, some quarters are anxious about a second peak of the virus, and about the risk of a recession.

All parties will be eager to complete sales as fast as possible, but often fail to take the preemptive measures that can help avoid delays.

Above all, the most important step you can take to minimise the risk of legal issues causing delay is to instruct a solicitor as soon as you can. The more time you and your solicitor have to work through issues before a buyer is found, the smoother and less stressful the whole conveyancing process will be once you accept an offer.