Understanding how delays may occur in your transaction
Understanding how delays may occur in your transaction
One: Title Issues
Titles are the legal documents which disclose who owns a property, the location of the boundaries of a property, and the rights and responsibilities (also known as burdens) which regulate how the property can be used.
In the majority of cases there are no issues.
What do we mean by “Title Issue”?
A “title issue” can mean a variety of different things and is not necessarily a cause for concern. The reality is that almost all “issues” can be resolved but some require more time and work than others.
Some examples of the more common title issues include:
Generally speaking this issue involves a mismatch between the plan or description of the property and the actual boundary extent of the property. There are a number of reasons for such an issue. Typical examples of boundary issues are (a) where the method by which the title was originally set out does not reflect the current day actuality and (b) where there is difficulty in establishing the boundaries from old deeds which may originate in the 19th century.
It may be that in order to access your property or a part of your property you have to enter and exit over an area of ground which is owned by a neighbour and the titles do not provide for these rights adequately.
This is more common where the property is a flat and includes situations such as the existence of a common garden area used by the whole block but your title does not extend to a right to use the garden.
Ownership of the property
A common example would be where the Seller is an executor and therefore not the registered owner of the property. In these situations additional documentation is required to allow the executor to sell and this paperwork may not yet be available. The problem here is that the timescales for obtaining the additional documentation can vary.
Will a title issue delay settlement?
The frustrating answer is that it very much depends on a number of factors, particularly how quickly missing documents can be located, the severity/complexity of the issue and the work required to resolve it.
It is helpful to understand that title deeds will come in different forms depending on the age of the property. Newer properties are registered in the “Land Register” which consists of one document (Land Certificate) split into neat sections which helpfully can be downloaded electronically allowing us to obtain copies of the deeds at a very early stage. However many older properties are registered in the “Sasine Register” and consist of a bundle of paper documents which are pieced together to complete the title – almost like a jigsaw puzzle. Unfortunately, many sasine deeds only come in paper form which means we are at the mercy of third parties and have to rely on others to send us the deeds be that a lender, another solicitor or perhaps yourself.
These issues over the availability of the titles can severely impact upon the time scales in which a transaction may be completed.
How do we resolve a title issue?
The resolution will of course depend on the actual issue and will vary on a case by case basis. Much will also depend on the views of the other parties involved in the transaction and how cooperative they are.
It may be that we only need to have a new plan drawn for the property or perhaps we have to contact Registers of Scotland for assistance or to ask for amendments to the title. Alternatively, it may be that the neighbouring owners have to be approached to sign documentation. Your conveyancer will advise you of the steps required and will endeavour to give you a realistic indication of the likely time scales involved.
The important point to bear in mind is that there are no “rules” in resolving these issues. That means that while a matter may appear straightforward to resolve if it involves expenditure by the other side of the transaction disagreements can easily arise. And most importantly it takes two to tango and if the other side are difficult there is no law obliging them to be reasonable.
Two: Mortgage Offer
If you are purchasing a property with the assistance of a mortgage or if you are selling to a person who requires a mortgage in order to fund the transaction, the official offer of loan (Mortgage Offer) is an essential requirement and the transaction cannot settle until a purchaser’s solicitor has their copy and can request the funds required.
Why do Mortgage Offers cause delays?
The reality is that in order to settle a transaction a Purchaser needs funds and those funds have to reach the Seller’s solicitor on the date of settlement. In order to obtain the funds a Purchaser’s solicitor must fulfil various obligations which are contained within the mortgage offer which means that receipt of the mortgage offer is not the end of the work involved.
In an ideal world the mortgage offer will be received no later than 10 working days prior to the agreed date of settlement. However, as we all unfortunately know, we do not live in an ideal world and Lenders work to their own time scales and with the best will in the world are very much out with the control of the purchaser or the solicitor.
Each Lender also tends to have their own individual requirements which must be met before they will release the funds to a solicitor and most of these requirements will be detailed on the mortgage offer. This means that an offer must be checked thoroughly before a request for funds is made. Many Lenders will also insist that the funds request document is received within a certain time frame. For example, they may require 5 working days from receiving the request to actually releasing the funds. Therefore, the earlier a Lender finalises an offer the better it is for the transaction.
Why has the mortgage offer not been received?
There could be a number of reasons but the most common are:
The Home Report is out of date. As far as Lender’s are concerned, if the Home Report is more than 12 weeks old it is out of date and a new report is required.
Additional documents are required from the Purchaser. The documents a Lender requires from a Purchaser will vary from person to person and will depend on their personal circumstances and may also vary between Lenders.
Additional issues which may cause delays with the Lender
On some rare occasions the Lender may have to be made aware of a property or title issue which can affect the lending and they will require time to review such issues before deciding whether they are willing to accept matters or whether they are concerned requiring further investigation.
Other more common delays can arise from gifted deposits which must be approved by the Lender before funds will be released.
What can a Seller do to help avoid delays?
The best way to avoid delays is to ensure the Home Report is up to date at the beginning of a transaction or instruct a new report as quickly as possible when one is requested. This can be frustrating as the likelihood is that little will change in 12 weeks but it is a rule and cannot really be avoided.
What can a Purchaser do to avoid delays?
Apply for your mortgage as quickly as possible
Provide the lender with all documentation they request as soon as you can
Regularly keep in contact with the Lender or the mortgage broker and ask for updates on the progression of your application
Keep us updated and let us know if there are any issues to enable us to keep the Seller updated
Three: The Other Side
With the absolute best intensions in the world no matter how sensibly we approach a transaction or how quickly we deal with matters on your behalf, whether you are buying or selling, there are always two sides to a transaction and much will depend on the other side in terms of delays and settlement.
There are a wide variety of reasons for delays by the other side. The length of the delay will vary depending on the reason but a delay by the other side is not always a cause for concern and does not mean that the other party has changed their mind or is having second thoughts.
Why might a Purchaser be delaying?
Some common reasons include:
The mortgage offer has not yet been received or has been received but there is not enough time to obtain the funds.
A refreshed Home Report is required by the Lender.
There is a gifted deposit pending approval of the Lender.
There is a property or title issue and the other side are considering or investigating the issues.
Delays with their own sale settlement.
Why might a Seller be delaying?
Some common reasons include:
Delays/issues with their onward purchase transaction.
There is a property issue and they are awaiting a resolution or assistance from a third party.
Changed circumstances such as work commitments which prevent them from having the property empty in time for settlement.
What can you do to assist?
Many matters will be out with your control or our control particularly if the delay is a result of a Lender. However, there are some general top tips for assisting:
As soon as we alert you to an issue which requires you to take action, act as quickly as possible.
If you become aware of an issue with the property let us know as quickly as possible.
If you have a connected sale or purchase let us know as quickly as possible.
How long will the transaction be delayed?
Each transaction is different and the reason for the delay and also the position of the other side will all impact the time scales. However, generally speaking most delays are a matter of a couple of weeks and we will always keep you updated and endeavour to provide you with realistic time scales according to the information available to us.
If delays persist it may be that you will have to consider whether or not you want to continue but this is something we will discuss with you.
A great number of transactions tend to be part of a larger chain of purchases and sales; we are reliant on these being ready to settle and there being no issues. In an ideal world this would always be the case. However, again as we know the world is not ideal and the unexpected can happen.
The greater the chain the more complex matters will be as you are relying on an increased number of people all meeting the necessary requirements for each transaction. As you will imagine this can prove very difficult and is predominantly outside of our control.
What happens when you have a simultaneous sale and purchase?
Where you are purchasing a property and require funding from the sale of a current property we cannot conclude the contract and bind you to the purchase until the sale is first concluded. We do not wish you to take the risk of not having sufficient funds for settlement if your sale is later delayed. Therefore, if there are issues delaying your sale then your Purchase will also be delayed unless you have alternative means of funding and instruct us otherwise.
Four: Gifted Deposit
Our economic climate unfortunately means that mortgages for the full purchase price of a property are extremely rare and the vast majority of purchasers will need to pay the remaining funds required (the deposit) from an alternative source.
Many purchasers will use personal savings or will use the funds from a sale; however it is also becoming common for purchasers to receive a gift from a family member to help with the purchase funds, which is creatively called a “Gifted Deposit”.
Understanding Gifted Deposits
You may be asking “if I’m getting the funds what is the problem?”
There are two main reasons why we require information about a gift of funds:
There are extensive regulations imposed on us by our regulators, and other bodies which require us to ask about – and verify – the source of any funds used in transactions which makes it essential that you inform us of your funding circumstances.
If you are obtaining a mortgage, we are required to advise the Lender of the gift and will need their approval before we can continue to settle the transaction.
How can a Gifted Deposit cause a delay?
We are only able to intimate the gift to your Lender if we are (i) aware of it and (ii) in receipt of your Mortgage Offer. Therefore, if we are not advised that there is a gift or we do not receive your Mortgage Offer until nearer the settlement date it may be that there is not enough time for the Lender to approve the gift and release the funds ultimately delaying settlement.
How can you help avoid a delay?
As a purchaser there a few ways in which you can assist us and reduce the risk of a delay:
Complete the information links as soon as you can.
Provide the requested information or advise us of any issues at an early stage
Keep in touch with your Lender and ask for regular updates on your mortgage offer
Keep us updated of any issues with your Lender
Five: Property Issue
What is a “Property Issue”?
Some examples of the more common property issues include:
This is covered in depth in another article but essentially where there has been an alteration to a property requiring documentation a delay can occur if this documentation is not provided or obtained until a late stage.
This is a fairly common issue and will be noted in the Home Report for the property. In most cases the dampness is not serious however in other cases a specialist report and treatment works may be required which can ultimately cause delays.
Outstanding repairs and common repairs
Much will depend on the nature of the repair and can be complicated if we are dealing with a flat and the repair is to a common area, such as the close or roof area, where a number of other parties are potentially involved.
How do we resolve a property issue?
The resolution will depend on the actual issue and will vary on a case by case basis, be dependent on the views of the other parties involved in the transaction and how cooperative they are.
It may be that we require additional reports and investigations into the issue and a quote for any works required. Your conveyancer will advise you of the steps required and will endeavour to give you a realistic indication of the likely time scales involved.
Often where the issue requires works to be carried out we can come to agreements to settle while the works are ongoing. Most such agreements will involve retaining funds or reducing the price and will require additional negotiation on your behalf.
What can a Seller do to help avoid delays?
Make us aware of any issues affecting the property – if it is affecting you then the likelihood is it will affect the purchaser and the quicker you inform us the better.
Review your Home Report – issues with the property tend to be noted here and will alert you to potential issues
If you become aware of necessary repairs during the transaction let us know
At the viewing with the purchaser make them aware of issues known to you
What can a Purchaser do to help avoid delays?
Review the Home Report and make us aware of any matters causing you concern so we can raise these at an early stage
If you noted anything at the viewing which caused concern let us know and we can look to raise this
In some situations a Seller may not be prepared to fully co-operate and as a purchaser you may have to consider instructing your own reports and investigations into the issues before deciding whether or not to continue.