Navigating the processes and landmarks involved in UK property purchase can be a challenge for the uninitiated. The documentation and paperwork that passes from vendor to buyer through legal representation and partners has its own distinct language and naming conventions that can sometimes appear inaccessible and restrictive to an overall understanding. As part of one’s due diligence to ensure that the correct steps are being followed by your property team, it often helps to build a firm footing for all of these terms.
A Brief Explanation
A Memorandum of Sale is a document prepared by the agent commissioned by the vendor to sell their property. It is only drafted once an agreement has been reached through the acceptance of an offer on the property. Importantly, one should always note that a Memorandum of Sale is not a legally binding contract of sale. Instead, it acts as the administrative trigger for the legal and logistical processes that must occur for the property to successfully change hands.
The Memorandum of Sale officially records the principal terms agreed between the vendor and the buyer to mobilise all professional advisers and teams in a fast and efficient manner. These terms will include the price of the accepted offer, the identity of all parties involved in the transaction, and key dates of the purchase journey and details for the solicitors representing both sides.
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When dealing with prime real estate, it can also contain the funding structure that will be employed for the sale to provide enhanced chain detail and a more precise timeline. This is crucial as any delays or ambiguous terms at this level can result in market movement, tax implications or currency exposure that could cost tens of thousands of pounds. Any wealth management teams or tax advisors will use the Memorandum of Sale to mitigate risks and dependencies for your existing portfolio, as they have a full view of anticipated financial events in a pencilled timeline.
Delivering the Details
The contents of a Memorandum of Sale may vary depending on several factors, including the price, location and status of the property involved. However, it is possible to create a checklist of key elements to look for.
Full Address & Title Details
This may include complications such as estate rights, long leases and additional information for ancillary buildings.
Agreed Sale Price & Fixtures
Any special terms or instructions to retain or remove fixtures within the property should be clearly noted.
Names of Parties
This must include any entities or trusts and contact information for associated conveyancers and solicitors. Naming the agents handling the transaction on both sides is a vital step within this.
Property Status
Establishing freehold or leasehold status is paramount. There may be mixed tenure or third-party involvement with service charges related to the property.
Land Registry Information
The Land Registry number or title reference verifies all current ownership and encumbrances. This relates to any restrictions, claims, burdens or liabilities it may have.
Funding Structure
This may be cash, mortgage or special financial vehicle of a trust. Any derailing surprises can be avoided with this information.
Dates
The dates earmarked for exchange of contracts and completion should be clearly stated.
An Overview of the Next Steps
Once a Memorandum of Sale has been drafted and shared, a number of steps are put in motion. Both sides of the transaction will undoubtedly have specialised teams and consultancy to take care of the details, but it does make sense to understand the sequence of these important landmarks.
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Opening The Transaction
The Memorandum of Sale begins a legal process towards the sale. Anti-money laundering checks for all parties are carried out. -
Due Diligence
The purchaser’s legal team can then order all of the relevant searches for title, planning, environmental and drainage. The Vendor’s legal team prepares and issues the contract pack simultaneously. -
Financial Verification
At this point, any proof of funds required is provided, or mortgage arrangements finalised. This may lead to a property valuation by the lender if appropriate. -
Surveys & Inspections
The building surveys and any specialist reports or heritage assessments are conducted on behalf of the buyer. -
Enquiries & Negotiations
If the previous steps have raised any new information or concerns, then enquiries are raised. A process of negotiation for new terms and inclusions may begin at this point. -
Exchange
The final contracts are drafted with all enquiries and searches resolved. An exchange date with all funding issues settled. -
Completion
The ultimate purchase of the property is arranged with the transfer of funds and scheduling of key handovers.
The Defining Document
A Memorandum of Sale can easily be viewed as the most important document in the entire chain of property purchase. It signals intent from both sides that a deal is there to be done, and all parties are willing to do their part to get it over the line. There will undoubtedly be plenty of work to do, and the occasional surprise or challenge may appear along the way, but once this is drafted, the purchase journey is well and truly begun in earnest.
