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Legal definition

Don’t remain in the dark

Confused by the plethora of legal jargon in the mortgage industry or want to know what a legal term or practice means? Each month our panel of experts answer questions sent in by readers.

Eddie Goldsmith, partner at Goldsmith Williams

Q: One of my clients is thinking of buying a property with her friend as she can’t afford to buy on her own. What advice should I offer?

A:

Many people in their 20s and 30s are now considering teaming up with friends, relatives and, in some cases, complete strangers in order to take the first step on the housing ladder.

Websites are springing up which act as a kind of dating agency for potential co-buyers. These include www.buyingtogether.org.uk, www.cobuywithme.co.uk and www.smartsharedhomes.com.

Regarding the legalities of the agreement that should exist between the parties, the following checklist provides a good starting point for what it might include:

– The amount of money contributed by each party to the deposit.

– The conditions of future sale, including the stipulation of how much time should pass before either party can seriously broach the subject of the sale of the property.

– How big a stake each person owns in the property.

– The systems/policies that should be set up by each individual to cover the mortgage in the event of either party having financial difficulties.

– Agreement on the use of the property – such as, is it being bought for habitation solely by the co-buyers, as a rental property or is this flexible?

– Clauses regarding what will happen in the event of illness/death of one of the parties involved. This also means both parties would have to make a will, disclosing some of its contents to their co-buyer.

In addition to the stipulations of the contract, which are legally binding, there are other issues that should be considered carefully. Buyers should be aware of the implications of signing up to different types of mortgages and work out how they will affect the agreement – so, with an interest-only mortgage, there will need to be some reference to how the borrowers intend to pay off the loan.

As well as taking legal advice, each party should understand the expectations of the other and ensure all issues of concern are fully worked out – making a mistake could be very costly and extremely stressful.

Caroline Havers, partner at Salans

Q: Why have energy performance certificates suddenly hit the headlines?

A:

The home information pack has now undergone a variety of manifestations and alterations. Although the home condition report has been effectively removed from the HIP, the government maintains a commitment to key ecological issues as agreed in the Kyoto Protocol. The HIP has therefore evolved into something of an ecological Trojan Horse that will introduce a system to help the government hit its environmental objectives, in particular the targets and benefits to be derived from cutting carbon emissions.

Everyone in the mortgage market is familiar with key facts illustrations, which were designed to provide a practical and easy way of comparing mortgage deals. This upfront provision of information is seen as a way of empowering the decision maker and this is also the aim with energy efficiency ratings. The current proposals have the energy performance certificate as the leading document of the pack, which must also be attached to an estate agent’s particulars. Furthermore, there are proposals for an interim energy assessment to be made for those properties that are sold before an EPC can be prepared for them. Whether energy efficiency will make a huge impact in the property transaction process remains to be seen but the EPC is certainly taking centre stage.

Q. After years of talk about electronic signatures, will they actually become a reality?

A:

This has seemed like a pipe dream for some time now. But it is nice to be able to be positive about electronic signatures with regard to conveyancing. The conveyancing market is making tremendous strides to introduce a number of ‘e’ benefits, which can be seen in widespread moves towards using electronic communication. This is a positive move and will act as a catalyst for developments such as electronic signatures. One of the benefits of the ‘chain matrix’ now being developed, will be the introduction of the much requested electronic signatures, which will be applied to a variety of documents and contracts throughout the process and will be signed electronically by conveyancers. In a similar vein, there is also the move towards electronic funds transfer, which will improve electronic dealing. Money will effectively be ‘digitised’ and, with this in place, it is possible that the physical transfer of funds via the existing CHAPs system will become obsolete.

Send your questions to mortgage.distributor@centaur.co.uk

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