Embarking on the legal processes involved in purchasing a site can seem daunting. The second instalment of our Property Development 101 series covers this process.
Making Your Offer
Before you even get a solicitor involved, you send an offer letter to the existing owner - either directly from yourself, or from an agent who represents you.
The landowner or their agent will choose to either accept or reject your offer - and if they accept it, they'll draw up heads of terms and send them to you for agreement. You can put your solicitor's details on the heads of terms when you sign and return them. At this point, your solicitor gets involved.
Your solicitor will contact the seller's solicitors and ask for an information pack about the site, containing:
- a copy of the title deeds, including easements, rights of way, etc
- a copy of the proposed contract
- any other relevant property or land information
Sometimes it takes a while for the solicitors to get hold of all this information, so be patient. In addition, your solicitor will need to carry out local authority, water, and possibly even mining searches, which they sent to the relevant authorities as a list of questions. As for what your solicitor will ask the existing landowner - they'll follow up on many of the issues raised in part 1 of this series, such as boundaries and rights of way. (They may wish to wait until after they've got copies of the contract and deeds.)
Some of the key things your solicitor will be looking out for on the title deeds are things like restrictive covenants that may limit the number of properties that you can build on the land, rights of way across the land, and making sure that the seller genuinely owns the site they're trying to sell to you.
After they've gone through all the above documents with you, and explained any problems there may be with the property, you can decide if you're satisfied there are no major problems with going ahead - at which point you can sign the contract and give your solicitor the deposit. You are then ready to exchange contracts.
Exchange & Completion
Before committing you to the purchase, you should consider having your solicitor visit the site to check if there are any issues with the property that you may not have previously noticed or considered. The necessity of such a visit does depend on the size and complexity of your development, so use your own discretion. It's not unusual for contracts to be exchanged conditionally upon receipt of satisfactory planning consent, so if consent is refused or unreasonable conditions are imposed, you can withdraw from the transaction even though contracts have been exchanged.
Once the buyer and the seller are ready, a completion date will be agreed. Your solicitors exchange contracts - a direct swap between the contract signed by the seller and one signed by the buyer - and you pay your deposit. Once this is done the contract is binding and neither party can withdraw without incurring serious expense, unless the exchange was conditional upon something, such as satisfactory planning consent as mentioned above.
On the completion date, your solicitor will transfer the remainder of the purchase funds, and they'll receive the transfer document and the title deeds on your behalf. Then your solicitor has up to 28 days to arrange for any payment of stamp duty if appropriate. Within two months of the completion date they must also apply to register your ownership at the Land Registry.
Getting Ready to Develop
We've already covered the importance of ensuring rights of way, drainage, etc are all considered - so make sure you document this well, as you'll need these records when it's time to sell. Depending on your timelines, you'll sometimes find that the Section 38 agreement for roads and the Section 104 agreement for sewers aren't completed by the time you come to sell, and under those circumstances you might have to accept a retention by the buyer's solicitors. When this happens, they will often hold back a nominal amount until the agreement is executed by the council.