Five top tips for international buyers of UK Residential Property

Buying a property in the UK can be an overwhelming process, made more stressful if the purchaser is based overseas. In order to ensure the process runs as smoothly as possible it is crucial to understand the additional complexities of a cross-border purchase and the particular nuances of buying property in the UK.

We share our top five tips when purchasing a UK property that all international buyers should be aware of.

Choose your lawyer carefully and early in the process

• On-boarding international clients can take longer, and proof/source of funds regulations are very tight. Estate agents often need similar information, so be organised with both address/identity proofs and statements of funds.
• At Forsters, our dedicated team carry out all checks remotely and identity checks are carried out via a mobile phone link, ensuring the process is as efficient as possible. One issue that can delay the transaction is if the funds are in a third party/ company account. 1 In these circumstances further checks would be required to understand the identity of that company/third party. This process is simplified if funds for the purchase are in the purchaser’s own personal account at the point of engagement.
• Estate agents often work regularly with particular solicitors or law firms – instructing one of these may help encourage a seller to accept your offer, as agents will want to know that the transaction will progress swiftly and diligently. We work with many of the well-recognised estate agents both in and out of London, which has helped our clients’ offers be successful in a bidding process.
• Many lawyers do not deal regularly with leasehold properties (very common in Central London), or new build developments. These are part of our core work. We also have a team who are dedicated to rural estates, with expertise in agricultural matters too.

Consider the wider tax and estate planning implications

Stamp duty land tax (SDLT) is a large initial cost. If you are non-UK resident and/or if your UK purchase is not a replacement of your main residence (which you must have sold previously) or it is not your only property anywhere in the world, you could be charged considerably more SDLT. Your property may also be subject to taxes on sale, and inheritance tax on death. Our private wealth team can assist with the correct tax structuring and inheritance planning.

Consider a buying agent

This is a relatively under used concept in the UK – note that the estate agent acts for the seller, and so will not necessarily be acting in your best interests. Buying agents have invaluable market knowledge, understand every type of property offering and often have access to off market properties, helpful at a time when good stock is low. They understand your specific demands and needs to ensure that you are only viewing suitable properties. We work closely with selling and buying agents and can suggest a list of contacts.

Have a survey

A seller is not obliged to disclose any physical defects in the property. We work closely with a selection of surveyors who will be able to inspect the property and check there are no material issues – we would then raise these as points for the seller to address before you complete, or you may be able to reduce your offer price by reference to them.

Familiarise yourself with the different ownership types

There are two types of property in England & Wales: freehold and leasehold.

• Freehold properties are usually houses. The owner of a freehold property owns the property, the land it sits on and usually the space above it. While no ground rent or service charge is payable for a freehold property, the maintenance of the building is up to the owner.
• Leasehold properties are very often flats. A leasehold property is held under a lease which is for a finite period of time and which details the terms of ownership.
• While the owner of the leasehold owns the flat for the duration of the lease term, the landlord (freeholder) owns the land and building. You cannot have a freehold flat, but you can have a lease of a flat which has a share in the freehold of the building (owned collectively with all/ some of the other tenants in the building). Flats will be subject to a service charge, which may include contributions to a sinking fund, and they may also be subject to an annual ground rent charge. The legislation around ground rents is currently under review and it is crucial to get legal advice on this in order to understand the nature of the property you are buying.
• Ground rent and service charge are usually collected by the landlord in order to pay for the maintenance of the building and land.
• Leases also generally restrict an owner’s ability to carry out works (for example opening up walls, moving bathrooms and kitchens, fitting air conditioning or subletting the property). In some cases, the landlord does not have to provide consent. As part of the legal process we would provide you with a report which would include an explanation as to what you can or cannot do.
• You may have a statutory right to extend your lease or to club together with other tenants to acquire the freehold of the building.
• You may be required to provide personal, professional and/or financial references when buying a leasehold flat, and sometimes a rent deposit (which might typically equate to 1 or 2 years’ service charge). It is important to be organised with these references so that they do not hold up the buying process.

The process of buying a property is predominantly the same irrespective of the property type, but the conveyancing process for leasehold transactions can carry an extra layer of complexity. Your conveyancer must review (amongst other things) the length of the lease (80 + years is preferable), any unfair ground rent or service charge provisions and any supplemental documents required to register you as the legal owner of the flat with the landlord.

Our Residential Property and Private Client teams regularly work together for our international clients purchasing property in the UK, advising them on both the transaction process and the long-term wealth planning requirements of owning UK property.

For further details on the tax considerations for international buyers please do read our recent article for Bloomberg here.

Please do get in touch with any member of the team to find out more about how we can help.