The Pocket Property Guide

By Henry Williams

The essential guide to buying residential property.

All references to legal aspects described in this book are in respect of the law in England and Wales and are not to be taken as advice. The regulations for Scotland and Northern Ireland may differ.

The purpose of this guide is to help anyone interested in buying, renting, or selling a house or flat. It is designed for the ordinary person, who is either in the property market, or is thinking about getting into the property market, and a guide to the various aspects within that market. I have tried to succinctly explain how the various aspects work, in layman’s terms, including their advantages and disadvantages. For instance, although I have gone through buying and selling a property in one section, I have also devoted a section to the various types of property i.e. buy to let, self-build, freehold and leasehold.

I have also included sections on developers/development, valuation/valuers, dispute resolution and joint ventures, to give the reader some insight into how these areas work.

• Language: English
• Publisher: Henry Williams
• Release date: Nov 24, 2021
• ISBN: 9781005840204

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First Edition published 2020

© HENRY WILLIAMS

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Disclaimer

The Information contained in the book, is for general information purposes only.

The Author assumes no responsibility for errors or omissions in the contents. In no circumstances shall the Author be liable for special, direct, or indirect, consequential, or incidental damages or any damages whatsoever in an action of contract, negligence or tort, arising out of or in connection with the contents of this publication.

The Author reserves the right to make additions, deletions, or modifications to the contents of this publication at any time without prior notice.

Please note that the publication does not guarantee the accuracy, relevance, timeliness, or completeness of any information in this publication.

Contents

Introduction

Classes/Types of Home Ownership

Affordable Homes/Housing

Buy to Let

Leasehold/Freehold

New Build Housing

Self-build

Shared Ownership

Social Housing

Rent to Buy

Right to Buy/Acquire

Purchase and Sale of Property

Buying and Selling

Annual Percentage Rate (APR)

Back-to-Back Purchase or Sale

Conveyancing

Chain

Timing between exchange and completion

Energy Performance Certificate (EPC)

Equity Release

Ground Rent

Mortgages

Part Exchange

Searches

Stamp Duty

Surveying (see Surveyors)

Valuation

Comparable Valuation

Residual Valuation

Open Market Value (OMV)

Building Contracts/Regulations/Builders

Brownfield Sites

Building Contracts/Builders

Building Regulations

Piling

Snagging

Underpinning

Warranties

Residential Development Organisations

Development/Developers

Community Land Trusts (CLT)

Housing Associations

Planning Procedures

What is planning?

Planning Applications

Appeals – Planning Refusal

Planning Conditions

106 Agreement/Contributions

Call for Sites

Five Year Housing Plan

Permission in Principle (PIP)

Permitted Development Rights (PDR)

Local Authorities

Rural Exception Scheme

Secretary of State for Housing

Professional Services

Architects

Quantity Surveyors (QS)

Planning Consultants

Professional Indemnity Insurance (PII)

Project Manager

Royal Institution of Chartered Surveyors (RICS)

Structural Engineers

Surveyors

Legal Issues

Adverse Possession

Arbitration (see Dispute Resolution)

Breach of Contract

Boundaries (see Title Deeds)

Capital Gains Tax (CGT)

Cautions

Covenants

Dispute Resolution

Easements

Filum Rule

Joint Ventures (JV)

Litigation (see Dispute Resolution)

Options

Party Wall Agreement

Professional Indemnity Insurance (PII)

Ransom Payments

Royal Institution of Chartered Surveyors (RICS)

Rights of Way

Squatters’ Rights (see Adverse Possession)

Surveyors

Tenancies

Title Deeds and Plans Title Deeds

Uplift/Overage Clause

Vacant Possession

VAT

Epilogue

Introduction

In this guide we focus solely upon residential property.

All references to legal aspects described in this book are in respect of the law in England and Wales and are not to be taken as legal advice. The regulations for Scotland and Northern Ireland may differ.

The purpose of this guide is to help anyone interested in buying, renting, or selling a house or flat. It is designed for the ordinary person who is either in the property market, or is thinking about getting into the property market, and a guide to the various aspects within that market. Without going into a ridiculous amount of detail, I have tried to explain how the various aspects work in layman’s terms including their advantages and disadvantages. For instance, although I have gone through buying and selling a property in one section, I have also devoted a section to the various types of property i.e. buy to let, self-build, freehold and leasehold.

To cover all aspects, I have included sections on developers, development, valuation, valuers, dispute resolution and joint ventures to give the reader some insight into how these areas work.

I have also devoted a section to some of the more obscure aspects of property i.e. the filum rule, adverse possession, ransom payments, covenants, easements, uplift clauses, options, etc.

This guide is designed to equip the reader with the basic knowledge of how all these aspects work, as there is no doubt that if one wants to obtain a mortgage it must to have some idea of what is available, how it works, and both the advantages and disadvantages. This guide will also help when dealing with professionals such as architects, solicitors, surveyors, structural engineers, quantity surveyors, etc., even if one has a rough working knowledge of what these professionals do, or more importantly what they are supposed to do and achieve, it will give the reader the relevant knowledge to ask informed questions, query fees, etc. The same applies to warranties, builders, building contracts, how one deals with defective materials or workmanship, the list goes on.

The procedures, questions, and solutions provided in this guide are not to be taken as hard and fast rules or advice, but as general comments on what would normally be the situation and/or solution. However, most situations should be treated on an individual basis.

Therefore, it is always advisable to consult the relevant expert in whatever field the reader is dealing with, e.g. if it is a legal query, one should seek specific advice from a solicitor, if it is a funding query, a mortgage broker should be consulted. Having stated the above, the reader will find having some basic knowledge of certain aspects beneficial when dealing with the expert in question, as it will enable the reader to identify the queries, he/she wants clarifying or advising on and assist the reader in analysing the advice given.

Lastly, as you will see from the index, I have divided the guide up into various sections, this is the order in which they appear in the guide. As a general rule the topics are set out alphabetically in their various sections, unless there is a strong connection with one of the other sections, for example Boundaries will be found as a sub section of Title Deeds due to the obvious connection. However, there is a link mechanism, so if the reader wishes to go straight to, say, Boundaries they can click on it in the index and it will take them straight there. Where topics overlap, such as Social Housing and Affordable Housing, there are similar links provided. Where there are words used to describe an act or procedure that are similar such as Uplift and Overage, I have only described the procedure in uplift and made the reader aware that there is a similar term.

Classes/Types of Home Ownership

Affordable Homes/Housing

(Also see Social Housing)

Affordable housing includes social rented, affordable rented, and intermediate housing. This type of housing is provided to specific households whose needs cannot be met within the private property market. They can be a new build property, or a private property purchased for use as an affordable home. Shelter England publish annual statistics on affordable housing supply in England. They show the gross annual supply of affordable homes, which includes new build and acquisitions from the private sector. However, they do not show the number of losses through demolitions or sales.

There are several types of home ownership that go under the banners of affordable housing and the means of purchase

Social rented are properties provided by local authorities and some registered providers, normally Housing Associations. The rents for these properties are set at a level dictated by affordability in that area. Social rented properties are the most affordable rental properties and account for approximately 55% of private rentals.

Affordable rented properties are provided by local authorities and registered providers and are subject to a control that requires the level of rental charged, to be no more than 80% of local, private market rent. Some local authorities require rents to be capped at the local housing allowance to ensure the rent is covered where a tenant is claiming Housing Benefit or Universal Credit.

Build to rent and/or buy are properties usually built as blocks of flats. The property is rented for a set period, during which time the tenant saves enough for a deposit to purchase the property at the end of the rental term.

Affordable home ownership is a term covering different affordable purchase products. It is also sometimes referred to as low-cost home ownership and can be included under an intermediate housing definition.

Shared ownership normally through a housing association or a developer (see Shared Ownership). Help to buy (see Mortgages). Help to buy is now being phased out and replaced by the government’s 30% discount for first-time buyers. The scheme is designed for homes be sold to first-time buyers with a discount of 30% and will include both flats and houses. The main difference between this scheme and help to buy is that the discount will be passed on to future buyers when these houses/flats are resold, allowing the next generation of first-time buyers to get a foot onto the property ladder. Further information on the government’s 30% discount scheme will be available when it comes into force.

Help to buy ISA – this is where the prospective purchaser saves money in an ISA Help to buy ISAs are a tax-free savings product for prospective first-time buyers. The government will pay a 25% bonus on savings up to £12,000, capped at £3,000. Savings are limited to £200 a month, plus up to £1,000 lumpsum when the account is opened.

Shared equity – the applicant purchases a share in the property and rent is paid on the remaining share, but the purchaser can buy further shares in the property until it is owned outright.

Right to buy (see Social Housing).

Buy to Let

What is buy to let?

Buy to let is where a property is bought specifically to be rented out to tenants rather than lived in by the purchaser.

The purchaser/investors can make money by generating an income via the rental charged and/or by a capital gain when sold. However, if a mortgage is required to buy the property, the rental payments must cover more than the monthly buy to let mortgage repayments. However, when sold the gain will attract Capital Gains Tax (see Capital Gains Tax).

However, like all investments, there are risks attached to buy to let. For example, you could be hit by rising interest rates, stuck with difficult tenants, or unable to sell if the housing market changes.

Recent times have become tougher than ever for buy to let landlords, with the introduction of higher stamp duty taxes and less flexible rules on the tax relief that can be claimed against the income.

What is a buy to let mortgage?

If a purchaser cannot buy his/her investment property outright, they will need to apply for a mortgage, but this will need to be a specific buy to let mortgage. A standard or ‘residential’ mortgage/loan is only relevant when the purchaser intends to live in the property as their main residence. There are differences between a residential and buy to let mortgage and the way the affordability is calculated.

Instead of just a buyer’s salary being taken into consideration, the lender will view the potential rental income of the property as the primary source of income to fund the mortgage/loan. Many lenders will then take the buyers personal income into account as a secondary factor.

For further information on buy to let mortgages and associated costs see Mortgages.

What sort of buy to let property should be purchased?

As when searching for a personal residence, it is important to look at location. This is equally important when looking for a buy to let property. So, before a buyer starts their search, they should think about what kind of tenant they are targeting.

A student, for example, is likely to want to live in an affordable property close to the university and nightlife, while families will be interested in the proximity of good schools, plenty of storage space and a garden. Get the location or type of property wrong, and rents will be lower and tenants harder to come by.

Bear in mind that some properties are more difficult to secure a mortgage on. These can include former council houses, new developments, and flats above commercial premises, such as shops.

What type of tenant?

The type of tenant renting your property can really impact on the viability of a project. For instance, many lenders have restrictions on mortgages for student lets and Houses in Multiple Occupation (HMOs). HMOs are defined as having three tenants or more that share a toilet, bathroom, and kitchen facility.

Where to choose to buy?

When starting out in buy to let, buying a property close to home is a good idea as the buyer is familiar with the area and will be on hand should there be any problems.

However, if the buyer plans to use a letting agent to manage the property, buying somewhere further afield can present a wider choice of properties. The buyer also has the use of in-house local knowledge from their agent on returns on investment, purchase price and rental incomes.

The buyer should make sure they are getting a good deal by checking comparable average property values for the area on one of the larger websites and consider comparable rents for that area.

Does the buyer want capital growth or good rental returns?

Buy to let investors will either be relying on increase in value, known as capital growth, or rental income generated from the property. Rental income can be expressed as a percentage of the property value. The buyer will need to work out which of these has the greater financial advantage. In some cases, it will be a bit of both.

For example, if the buyer’s initial costs are so high, they are unlikely to attain a good rental yield, they will be dependent on property prices rising. If on the other hand an investor is buying a cheaper property to rent out to several students, they will be relying more on the rental yield.

A good rental yield is generally benchmarked at around 5% a year. However, some properties might reap yields as high as 7%+, while HMOs can achieve between 12% and 15%.

What are the responsibilities of a landlord?

There are certain legal responsibilities. Tenants must be assured that their right to live in your property is protected by a tenancy contract, and that their deposit is protected by a Deposit Protection Scheme. This is a legal requirement and the landlord, or their letting agent, will be fined if they do not provide them. There are two types of government backed deposit schemes; insurance and custodial.

Under the insurance scheme, the landlord or agent retains the deposit and pays interest to the insurer. They are available through the Deposit Protection Service, My Deposits, and Tenancy Deposit Scheme.

The custodial option, where the deposit is paid directly into the scheme, is free-of-charge to use. Each scheme comes with an independent resolution service to resolve problems between landlords and tenants, should they arise.

There are several types of tenancies, but the most popular is an assured shorthold tenancy (AST). These contracts give tenants a legal right to live in the property for a fixed duration, or on a rolling term.

ASTs normally last for a set period of either 6 or 12 months. They will detail how much the tenant must pay in rent during that time, responsibilities for repairs, notice of eviction, increases in rent, how long the tenancy lasts, and the