Buying a House in England

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Chains

A chain is where you wish to buy a house from Mr A, but Mr A is waiting to buy a house from Mr B, and Mr B is waiting to buy a house from Mr C etc. In view of the late stage of fixing a completion date chains occur all too frequently in English real estate transactions.

The only way to avoid getting caught in a chain is to limit your search to properties listed as “no chain” or “vacant possession” (unoccupied). It is also worth getting your lawyer to confirm this as part of the conveyancing process.

Gazumping and Gazundering

As we’ve already said the English real estate system is fraught with frustration as buyers and sellers may change minds or walk away right up to the last minute. Two common reasons for doing so are “gazumping” and “gazundering”. Though it’s hopes that readers will never encounter them it’s worth defining them here.

Gazumping is where a seller accepts one offer but keeps marketing the property and eventually accepts a higher offer. The maker of the first offer is left out of pocket to the tune of inspections, legal fees, and mortgage fees incurred to date.

Gazundering is where a buyer, having had one offer accepted, subsequently makes a lower offer. This may be genuine, in the light of faults identified on inspection, or may be based upon pure greed arising from the seller’s need to sell quickly.

Home Information Packs

In an attempt to partially address the inefficiencies of the English real estate system the U.K. government introducing “Home Information Packs” (HIPs) from August 2007 for properties with 4 or more bedrooms and from September 2007 for those with 3 bedrooms. Potential sellers have to compile a set of documents providing certain information about the property.

HIPs include an energy performance certificate, sale statement, title documents and local authority searches. Certain other documents relating to the lease are also required for leasehold properties.

There is currently widespread scepticism about the value HIPs for buyers and whether they actually benefit the transaction process. You should certainly ask to see the HIP for any property that requires one, but in no way should it be accepted as a substitute for having a survey and other checks you feel are necessary.

Costs of Ownership

As well as the costs of purchase it is also necessary to consider the ongoing costs of ownership in assessing the affordability / profitability of a property.

Every property in the U.K. is liable for Council Tax. Each property is allocated to a band (A-H) according to its value in 1991 (this is estimated for newer properties). The amount of council tax is set by each local authority for each band each year. Reductions are available for certain categories of people, eg a 25% discount for single householders, and benefits for those on low incomes.

Flat owners usually have to pay some kind of maintenance / management / service costs. These cover shared expenses eg buildings insurance, communal lighting, gardening etc. These should be identified before agreeing to buy.

Although freehold properties do not attract maintenance changes, the prudent owner will put a sum aside weekly or monthly to cover repairs and maintenance as necessary.

A mortgage lender will generally insist the building is adequately insured to protect their security. Depending on the loan and lender they may also insist upon life insurance, payment protection insurance etc. It is usually advisable to take out contents insurance alongside buildings insurance.