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Questions and answers for your Property, Contracts and the law, get actions to avoid the legal Pitfalls part 2
By arlene | November 4, 2008
Question: What is the difference between freehold and leasehold? Answer: The former effectively means you own a property registered in your name in a Deeds Registry; the latter means you own a lease granting you the rights to the property for a specified period of time and at a specified rental.
Question: Is there any major difference in the legal implications of a long lease and a short one?
Answer: The legal lease contract in both cases must clearly state the identity of the property, the length of time it is being rented for, the amount of the rent, and how it is to be paid. A long lease is one capable of being extended over ten years or more by the tenant and it must be endorsed against the owner’s title deed at the Deeds Registry, thus ensuring full protection for the tenant. A long lease is also capable of being mortgaged.
A registered leasehold for a period of 99 years is often granted when, for various reasons including state ownership, land cannot be transferred. However, the 99-year lease does give a person the right to occupation of the property and he may sell this right or bequeath it in his will. He may also erect and alter buildings on the property provided they comply with local regulations. The lease may be negotiated on a monthly or annual basis, or be paid in a lump sum, in which case bond finance can be arranged.
Question: I intend buying a house at an auction. How do I go about arranging payment and who draws up the contract?
Answer: The auctioneering agent will probably request you to sign a contract used by his firm which will set out the relevant details much as with any other property transaction, the exception being that you rather than the seller will have to pay the auctioneer’s commission and there will probably be no suspensive conditions since the normal rules of the auction, read out prior to the start of bidding, would stipulate that offers must be for cash. How you arrange the cash is up to you. If you require a bond, arrangements must be made with the building society prior to the auction. If your bid is accepted the deposit and commission will become due almost immediately and you can expect to have to make the remainder of the payment against transfer of the property as would normally be the case. Again, it would be wise to consult an attorney beforehand.
Question: I signed an Offer to Purchase but the building society inspector found the building to be unsound. Does this mean that the contract is no longer valid?
Answer: If the Offer was conditional on that building society granting a bond, it would obviously fall away if the society declined to advance funds because of the poor state of the property. On the other hand, the Offer would stand if it was not made subject to the granting of a bond.
Question: We want to restore a dilapidated old cottage, but the building society has refused to give us a bond. Where should we go for the necessary funds?
Answer: To any of the traditional places from which one would hope to be able to raise a loan. The bank is probably the best bet, although it will of course have to be satisfied that you will be able to pay the money back. You must expect the interest rates to be slightly higher than those the building society offer.
Question: Apart from the various fees and expenses paid along the way, when do I actually have to hand over the money for the house? Answer: When the transferring attorneys request you to do so, usually just before the property is due to be transferred into your name on the Deeds Registry.
Question: Is bridging finance expensive?
Answer: Since a bridging loan is for a short term only it should come from your bank and the interest charged will depend upon prevailing overdraft rates which are usually slightly higher than bond interest rates.
Question: What happens if I die before the bond is fully paid up or if I fall behind in my payments?
Answer: Building societies normally require anyone taking out a bond with them to take out life insurance to the value of the bond. Should you fall behind in your payments, see the society, but bear in mind that your house is collateral for the money the society has lent you and if you can’t pay the interest you can expect to eventually forfeit the collateral and you will lose your house.
Question: Are there special bond rates for first-time buyers? Answer: A mortgage bond subsidy scheme offering substantial interest savings to assist in the purchase of an inexpensive first home is being developed by the Government. See your building society or bank for details.
Question: I have found that I can afford to pay more off my mortgage bond. Should I increase my monthly contribution or pay in a lump sum?
Answer: It depends on the nature of your surplus funds. If you receive a lump sum it would be better to pay off the bond amount by as much as you can afford since it is unlikely that you would be able to earn an equally high tax-free rate of interest elsewhere. Likewise, if you are earning more than you spend, it would be a good idea to boost your bond repayments for the same reason.
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Topics: Agent, Auction, Contract, Course, Land, Property, Rental |
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