Mortgage advisers have an important role to play in the housebuying process. However, the syllabuses of all the mortgage advice qualifications are not confined to the role of mortgage advisers but include the whole housebuying process. The process in Scotland is different from that in England and Wales and this week I concentrate on the situation in England and Wales. However, it should be noted that the study materials produced by the institutes that offer the mortgage qualifications do provide specific information for those sitting the examinations on the basis of Scottish law and practice.
The sale of a property can be by private treaty or by auction. The majority of sales are effected by the former and usually involve an estate agent appointed by the vendor. Consequently the estate agent is the agent of the vendor, not the purchaser, although he may give advice to both parties where there is not a conflict of interests. The role of the estate agent is in general well understood by mortgage advisers but students should ensure that they do not skip any part of the material relating to this area. This includes, for example, the fact that it is the Property Misdescriptions Act 1991 that makes selling agents liable for extravagant or fanciful sales particulars which are subsequently found to be far-fetched. In addition to bringing a property to market and hopefully effecting a sale, estate agents may offer a range of additional services including property management and letting services; insurance services; relocation services; auctioneering services; and survey and valuation services.
As part of its plans to improve the housebuying process the government is proposing that vendors have a Home Information Pack (formerly known as a seller's pack) prepared and available at the time a property is put on the market. This proposal is contained in the current Housing Bill. It is suggested that the pack include, for example, a draft contract; replies to standard preliminary enquiries; copies of any building regulations, planning consents and approvals; and a home condition report based on a professional survey of the property including an energy efficiency rating. As far as leasehold properties are concerned the packs will contain further information including a copy of the lease; the most recent service charge accounts and receipts; and details of the buildings insurance policy.
There is, of course, much debate about the value of the proposed HIPs. Issues include whether purchasers and lenders will be happy to rely on the home condition report and whether there will be a sufficient number of surveyors to cope with the increased workload. Indeed it has been argued that it is the development of conveyancing via the internet that will have the most significant impact on the speed of the buying process.
It is not essential for a solicitor to act in a property purchase or sale. In practice, however, lenders will not agree to a mortgage advance unless the legal formalities have been completed by a suitably qualified person. In the majority of cases a solicitor is appointed although an increasing number of lenders are willing to permit licensed conveyancers to act. It is the role of the conveyancer to investigate title. This involves thorough enquiries being made in order to ascertain whether the property is what it purports to be and that it is free from restrictions that would inhibit the sale process.
The report on title also confirms that the person who is selling the property has the right to do so. Investigation of title requires the conveyancer to make searches of various registers. Once these have been carried out satisfactorily and assuming that there are no outstanding problems the conveyancer confirms to the purchaser and the lender that there is a 'good root of title'. These investigations are important to both the purchaser and the lender. Any defect in title which is not uncovered could have serious consequences. In recent years, insurance products have been developed to protect lenders against defective title. They cover the lender against a failure on the part of the investigating conveyancer to identify a title defect and certain policies covering defective leasehold titles can also extend to the protection of not only the lender but also the borrower or tenant.