An Introduction to Conveyancing
With Pam O'Brien
In these videos, we will be looking at conveyancing with Pam O'Brien, a conveyancing solicitor, working in Greater Manchester. We'll be looking at exactly what conveyancing involves, at what an investor needs to know, regarding ownership and finance and to speed the process up. Furthermore, through years of experience, Pam recalls anecdotes on the mistakes and triumphs of her investor clients.
Please note, these videos are a couple of years old, which we have compiled now to make things a little easier for our audience. However, the information contained within is still relevant today.
Introducing Pam O’Brien from Redbird Conveyancing
Today, we are pleased to introduce Pamela O’Brien who is the managing director of Redbird Conveyancing, a solicitor’s firm based in Ramsbottom. Pam is a Specialist Property Lawyer who, in this series and in this series of videos, talks to Amy Varle about the legal side of investing in property.
By way of an introduction, Pamela O’Brien is the managing director of Redbird Conveyancing; a company of specialist property lawyers based in Ramsbottom, a town to the north of Manchester.
As specialists, they deal exclusively with property; helping people buy and sell residential and commercial property, conveyancing and dealing with leases and lease options.
Originally from Boston, Massachusetts, Pam started her legal career in property, focussing on litigation in zoning and commercial leases but on moving to the UK in 2004, turned to the more transactional side of the industry, re-training as a solicitor in 2005 and forming Redbird Conveyancing in 2010.
What is Conveyancing?
Whether you are buying or selling or even if you are doing something like leasing a shop, conveyancing is the process through which you will secure your legal interest in a given property.
In its simplest form, conveyancing comes down to securing a legal interest in a property. Whether you are selling or buying a house or leasing a shop securing that interest is something that needs to be done.
Conveyancing is important because of the amount of money that is involved in most property transactions. When there are hundreds of thousands involved in a transaction it’s important to secure that transaction with a charge (more on this in the next video).
What's The Difference Between a First and Second Charge?
Charges are about control over an asset and very much linked to finance. A mortgage lender will only lend if they can maintain control over the asset (the house) that they are lending on.
So, when a first charge is registered with the Land Registry, it creates a hold on the property in question; a legal interest with terms that must be met before anything can happen to that property.
A second charge also registers a legal interest in the property but a second charge holder has fewer rights than a first charge holder and it's much less secure.
A first charge takes the form of a piece of paper (yes, still paper), registered with the Land Registry.
No one has more rights over the property than a first charge holder and the property cannot be sold, inherited or transferred to another person without the first charge holder being paid what is owed to them.
A second charge is less secure and more complicated.
Let's take an example. Say, you have credit card debt and have defaulted on your minimum payments.
In this situation, the credit card company can come after you through the courts and register a second charge on your home. This would mean, when you come to sell, you would have to pay off the money you owe, at the same time.
But let's say you wanted to get around paying your debt. You could transfer the property into someone else's name, such as a husband or a wife. If you did this, you wouldn't necessarily have to pay.
And you could also grant a lease, which again, would not be in the power of the credit card company to block.
The point is, that a second charge owner, doesn't really have a very secure hold on the property at all.
For property investors who need to raise finance for their business, it is worth bearing in mind that one of the ways of doing this would be in exchange for a second charge on a property.
However, the second charge holder will need to be made aware that though they would have a registered interest as a security on the loan, they would not be able to force a sale or repossess the property.
The Impact of Proptech on Conveyancing Solicitors
Proptech is something of a buzzword in the property investment industry but for conveyancers, it means it is the simple things, such as electronic payments, the ability to email contracts and centralised, record databases that are really making a difference. But, to streamline the process, a lot more work is needed.
Ten years ago, everything in conveyancing would have been done on pen and paper. These days it has become much more electronic, with communication between solicitors and with banks all done electronically and likewise with bank transfers.
Similarly, the Land Registry has its documents online with members of the public able to download documents for a small fee.
But there is still a long way to go when it comes to modernising the process. Electronic signatures on legal documents is still an issue and centralisation of information in this sector lags a long way behind how other industries are currently operating.
Advice for Property Investors
When it comes to purchasing a property the best advice for investors is to do as much in advance of putting in your offer as possible. This means you want your team together, have your finance in-place, your legal side covered. If you are fully prepared, it is possible to complete on a property in only fourteen days.
As we've always advised on this blog, you should never go into the property business, without a strategy. There is money to be made but there is money to be lost, as well. So, you need to spend some time educating yourself, doing your research and when it comes to taking action, make sure your due diligence is done.
Here are 4 pointers from Pam, that every property investor needs to bear in mind.
- You're Swimming in Red Water
Unlike blue water, red water is where the sharks are and you don't want to go swimming unless you are cautious and prepared. Property is a great business but there are, unquestionably, sharks around.
- Research the Local Market
You don't want to enter a market that is 'tapped-out' either through lack of demand or local regulation.
- Put Together a Finance Pitch
Let's say you want to do something a little different such as converting a pub into residential housing, then you are going to have to raise some finance either as development finance or from a bridging loan. For this, you are going to have to be able to make an effective pitch.
- Getting Your Team Together
If you have your team pre-assembled and ready to go before the project starts, then everything will move faster. This is as true for your solicitor as with your builders. Contact your solicitor before you even find a property and you will complete much, much faster.
What Should an Investor Expect from their Conveyancing Solicitor?
If your conveyancing solicitor is giving you lots of advice about your property investment, including investment advice or guidance on tax, then maybe they are not focussing so much on what they should be doing which is work around the legal title and ultimately the future marketability of that title.
Conveyancing involves ‘titles’ and the marketability of those titles and your conveyancing solicitor should not be advising an investor on their investments, taxes or portfolio. There are other experts for that.
They are there to help with the difference between leasehold and freehold, to advise on grounds rents or rent charges; on encumbrances or restrictive covenants. Or in instances where you want to achieve something legally complex, such as converting a house to flats, where you need a freehold title split into apartment leases, this is where a solicitor can help.
But all of these things are aspects of the legal title and if your conveyancing solicitor is going beyond those things, it can be a sign that they are not properly focussed on the role they should be playing.
How an Investor can Help Move the Conveyancing Process Along
It is more than possible to buy property very quickly but there are risks in doing so. To manage to buy a property quickly you need to have everything in place before approaching your solicitor. This means having your finance in place, knowing who actually owns the property and getting the title from the Land Registry.
The trick to achieving a speedy purchase is to do as much as possible, up front. So, if you want to buy a house in a 14-day timescale it is best to download the title from the Land Registry (£3) and look at it before you go to your solicitor and you need to make sure that the person who is selling the property is the person who actually owns it.
Register with your solicitor in advance and make sure that they have copies of your ID and everything needed to safeguard against money laundering. Bear in mind that if you are already registered with a solicitor, they may still need update IDs.
And of course have the finance you need organised, well in advance.
If you do these three things, then your solicitor will be in a position to act quickly. 14 days is possible, it can sometimes be completed in 3. And if you are a cash-buyer it can even be done in 48 hours but there are risks attached to moving this quickly.
The Dos and Don'ts of Investing in Property
In the final video, calling from personal experience and anecdotes, Pam looks at some of dos and don'ts, of investing in property and working in the industry, more generally.
Don’t Put All Your Eggs in One Basket
Buying 5 houses on one street can be a big mistake if something happens in the local area, buying only one property type can cause a headache should the market change and working with just one particular supplier or partner can be a problem should something suddenly change. Diversification, in property, is key.
Anything is Possible
Whether it’s securing finance in unusual circumstances or finding yourself over-invested in a tapped-out market all objectives in the property business have countless solutions and anything is possible. The trick is to keep pushing forward, keep learning and don’t give up.