UK properties can be owned either leasehold or freehold.
Freehold title gives you the right to fully own the property. As a freeholder, you will have full responsibility for the maintenance and repairs of the property and also bear the risk of damage and destruction.
Leasehold ownership means that the land is owned by a freeholder but the lease allows the leaseholder to
occupy the property on the land for as long as it is specified on the lease. Once the lease terminates
the property once again is possessed by the freeholder. The right of possession is granted for up to 999
years but usually the leases on properties are much shorter.
In general flats are usually leasehold and flats are freehold.
Making an Offer
Once you identify a property that you are interested in an offer can be made to the seller. Depending on the current market situation the price you offer can be a full market price, estate agent’s asking price or a lower price. Once the price is settled with the seller the case will be redirected to solicitors who will then conduct the conveyancing procedure.
It would be beneficial to conduct a structural survey when purchasing a property. This will ensure that you are aware of any faults in the property and the amount of work that needs to be undertaken to get it in a good condition.
Your solicitor will receive a contract from the sellers’ solicitor. At this stage searches will be conducted with the local authority if development is proposed. Additionally, your solicitor will receive information about the boundaries, services and any disputes concerning the property. Additionally, a list of all the fixtures and fitting alongside anything else sold with the property (Furniture, lights, blinds etc.) will be attached to the contract.
If everything is satisfactory to both parties at this stage signed contracts will be exchanged. The buyer will usually pay 5%-10% of the price upon exchange and the contracts will become legally binding. Upon exchange a completion date will also be included in the contract. The sale must complete on the specified date, otherwise there are financial penalties that will need to be paid.
After the exchange process a draft transfer document, certifying that the property has been transferred to the new owner will be sent to the Land Registry for them to change the ownership in their records. Once all the documentation is in place and the money is transferred in full to the seller the deal is considered done.
Current UK stamp duty follows a progressive system:
- No tax on first £125k
- 2% on portion up to £250k
- 5% up to £925K
- 10% up to 1.5m
- 12% on everything over that
CGT on Property
If any capital gain is made on a property sale it is subject to Capital Gain Tax (CGT). However, if the person owns the property and lives in it as his main residence the gain is exempt from tax.