Once the offer on a property is accepted, both sides would instruct solicitors and the due diligence process with begin for both.
For the seller’s solicitors, this includes identity check of the seller as well as ensuring that the seller indeed is the owner of the property, that they have the right to sell it and whether there are any other owners (by a will, inheritance, debt or trust) as well as ensuring that there are no other outstanding financial charges other than the mortgage (if there is one).
For the buyer’s solicitor, this process is a lot more complex as they have undertaken to find any defects and discrepancies in the paperwork and to deal with them as well as to guarantee to the bank and the buyer that the property is with a “good and marketable title”. This is done by carefully inspecting all title deeds, official searches, standard forms provided by the seller as well as raising the necessary enquiries with the seller’s solicitor.
There are five standard searches which are put in place as part of the due diligence process for every property purchase – Local Authority search, Drainage and Water search, Chancel Repair Liability search , Highways search and Environmental search. Depending on the location of the property, other searches may need to be ordered as well such as Flood report or Mining report.
The Local Authority search is ordered with the local council. The report contains information about planned and previous building work at the address of the property, previous major repair work which required planning permissions, the council’s plans for new roads and railways, whether the nearest road is public or private, whether there are any protected trees at the address as well as whether there are any natural parks nearby. The most important check is to confirm whether the results of the search match the information the seller has provided in relation to planning permissions and building control regulations. If any planning permissions are missing for works done at the property, if the works were done more than 10 years ago, this is not such a problem however the requirement to have building regulation approvals for any work done at the property does not expire. Therefore, regardless of when the works were done, the seller needs to produce the relevant approvals. If these cannot be located or do not exist then it is best to require an indemnity policy from the seller. This would cover the risk of any enforcement action the council may take such as additional works required to meet the standards and issue the approval retrospectively or complete restoration of any alterations to the property.
Water and Drainage search – this shows whether foul and surface water from the property drain into the public sewers, whether the property is connected to mains water supply, whether there are any manholes or sewers within the boundaries of the property and so on. The report usually contains maps of the area which indicate the location of all shafts, pipes, areas with great flood risk, historical flood incidents, water treatment plants and so on. There is also information about what companies supply the clean water, maintain the pipes, look after the sewers and charges the bills, as these may be different companies. Finally, this search would confirm whether the property has a water meter or whether the charges are on a measured basis.
Environmental search – this shows, again with the help of maps, the location of any business with potentially contaminative activities around the property such as petrol stations, dry cleaners. industrial and productions sites, landfill areas. The reports also contains information about the ground stability in the area and the potential risk of landslip and subsidence. The search also provides information about the area and whether it is affected by radon gas, mining, high voltage powerlines, solar panel farms and the like.
Chancel Check – this is the check which confirms whether the property sits on a land which was previously church land and therefore liable to contribute towards the maintenance of the local church chancel. The risk of this is very low as all such interests had to be registered at the Land Registry before 2009 however there may still be a risk of claims and it is still a requirement of most lenders to conduct this check. Usually any potential liability revealed by this search is remedied by way of an indemnity insurance policy, usually at the seller’s cost. Depending on the price of the property, these policies are about £20-£30 as a one off payment, last in perpetuity, and go with the property so any future buyers will also benefit from the policy.
Highways Search – it shows the extent of the nearest public road and whether it abuts the property boundary. This is a very important check which not many solicitors choose to undertake as they perhaps consider the risk in residential areas to be too low however if there is a strip of land between your property and the public road then it would be a very expensive and lengthy process to obtain rights over it in order to be able to access the property.