Are you a first time purchaser or funder of real estate in the UK? Then this blog is for you.
5 good reasons to invest in the UK
- Stability: Political and economic stability make the UK a secure environment in which to invest
- Transparency: The majority of land in England and Wales is registered at the Land Registry. This government agency records the name and address of the owners and funders of each parcel of land registered with them and its records are open to the public, so you know exactly with whom you’re dealing. Registration is the definitive way of determining ownership of land in England and Wales
- Infrastructure: Local authorities throughout the UK are responsible for providing local services including the construction and maintenance of roads, the development of land and the enforcement of laws relating to the safety of buildings. Each local authority keeps a record of applications made and enforcement action taken in respect of properties within its area. Buyers and funders of land in the UK therefore have a clear picture of any such issues before investing
- Taxation and fees: The UK has a clear and transparent system of land taxation which means a buyer of land in the UK can determine the taxes and fees they will incur, prior to investing
- Growth: The UK is seeing record levels of population growth. The number of households in the UK is expected to increase by 5 million over the next 20 years. It is estimated that by 2016, 1 in 5 households in the UK will be living in rented accommodation, resulting in a requirement for a further 1.1 million rental properties. The UK is still being hailed as the fastest growing economy in Western Europe.
What am I investing in?
If you’re buying land in the UK, you will own either a freehold or leasehold interest. The main differences between these are:
- The parties: The owner of a freehold interest is the only person involved in ownership. The owner of a leasehold interest is known as the tenant and the tenant’s occupation of the land is regulated by a lease. This sets out all the obligations that the tenant has to the owner of the superior interest in the land (usually the owner of the freehold interest) – the landlord.
- Duration: A freehold interest is for an unlimited period until the owner sells the interest. A leasehold interest will usually be granted for a period of between 99 years and 999 years. In certain circumstances the landlord can bring the lease to an end early.
- Occupation: A freehold interest entitles the owner to occupy the land unless a lease has been granted out of that interest. If it has, the lease entitles the tenant to occupy the land to the exclusion of the owner of the freehold interest for the duration of the lease.
Because there can only be one freehold interest in a piece of land, it is sometimes only possible to purchase a leasehold interest (e.g only a leasehold interest can be acquired in an apartment where there is more than one apartment on the same area of land).
So how do I go about investing in land in the UK?
The UK has a clear system for transferring land from one party to another. The procedure is as follows:
- Searches: Buyer beware! If you’re the one buying, it’s your responsibility to find out if there are any problems with the property. Your solicitor will carry out recognised searches to find out if it’s affected by contamination or flooding and to see if the property is connected to a mains water supply, has sufficient drainage, has access to other utilities and so on.
- Enquiries: Some things can’t be discovered by searches alone! The buyer’s solicitor usually sends the seller’s solicitor a list of enquiries covering anything from confirmation of boundaries to disputes. You’ll also probably want to visit the property yourself.
- Reporting: Your solicitor reports to you as the buyer or funder on what those investigations have revealed.
- Contract: The buyer and the seller’s solicitor will agree a contract setting out the terms of the sale. This will cover price, whether any third parties have a right to occupy the property and a date for completion. Once the contract is dated, the parties are committed to the deal.
- Completion: Usually, although not always – depending on how much of a hurry you’re in – there will be a period of time between the contract being dated and the date you receive the keys. On the date of completion, the funder sends the loan monies to the buyer’s solicitor who then pays the purchase monies to the seller’s solicitor. On the same date, the seller signs a document known as a transfer in which he transfers his freehold / leasehold interest to the buyer – then it’s all yours (or if you’re a funder, your security is official).
- Registration: An application is made to the Land Registry to register the buyer as the owner of the land and the funder is registered as holding a legal charge over the land.
I’m keen to invest – what do I do next?