Property Purchase in London - Useful Information for Investors
Through this chapter Ellune Property Services gives you the opportunity of becoming familiar with certain basic aspects and concepts of the London real estate market.
A. Purchase process - Outline
The stages of a property purchase through Ellune Property Services are as follows:
- Ellune Property Services weighs your investment plans and goals and the amount of money you wish to invest for the purchase of a property in London.
- In case a loan is required, all the necessary contacts are made with the bank.
- Ellune Property Services thoroughly examines the London real estate market and identifies the most profitable option.
- Negotiate the price of the property and agreeing the purchase price.
- Upon concluding and accepting the relevant offer, the vendor’s solicitor sends the property’s file to the buyer's solicitor, for the necessary check of the title deeds, the inditement of the contracts etc.
- In case of a bank loan, the bank instructs the valuer for a property valuation.
- The contracts are exchanged, the buyer pays 10% of the price and the purchase completion date is set.
- The purchase is concluded and the keys are given to the new landlord.
B. Where can I appeal for reliable loan advice?
There are numerous types of loans and financial products available in the market. Selecting the proper type of financing is of very important. Ellune Property Services has many years of collaboration with Loan Consultants and excellent relations with several banks in London, thus contributing in essence to the simplification and acceleration of the loan issuing process.
C. Is loan issue for property purchase an easy case?
Probably not, or, at least, not as easy as it used to be. Bank criteria for loan issue are more stringent lately. Usually, foreign investors are expected to contribute to the purchase with an amount of at least 30%, which raises the chances of financing on favourable terms considerably, provided of course that satisfying economic data are presented.
D. What is the solicitor's role during property purchase?
The solicitors of both sides negotiate the terms of the contract, check the credence of the title deeds and conduct an investigation in the Municipal Archives in order to ensure if there is anything in the property's past, present or future that could adversely affect the decision for concluding its purchase. They also exchange contract copies, conclude the sale and take care of the money transfer.
E. What is the amount of the Stamp Duty Land Tax?
In England, Stamp Duty Land Tax is paid by the buyer and is depends on the property's price. Relevant rates are as follows:
- 1% for properties from £125.000 to £250.000;
- 3% for properties from £250.001 to £500.000;
- 4% for properties from £500.001 to £1.000.000;
- 5% for properties of greater value than £1.000.000;
F. What taxation is imposed for owning and exploiting a property?
Under income taxation, the landlord is taxed based on the received rent from property lease. Each owner has an Individual tax-free amount of £7.475; if the property belongs to two individuals then the tax-free amount reaches £14.950 (£7.475 Χ 2). The following are deducted from the total of rentals:
- agent expenses;
- loan interests;
- repair expenses and
- service charges
Finally, 10% of the rental is deducted, referring to possible usage damages (“wear and tear allowance”). After deducting the tax-free amount and all expenses, the net income is taxed at a 20% rate.
G. Is there tax for owning property in England?
No. Only the rental income is taxed. Given that the property is dwelled by the owner himself, there is no taxation imposed.
H. What is the amount of Capital Gain Tax in case of selling my property?
As long as you reside permanently abroad you don't have to pay Capital Gains Tax when selling your property.
I. What is the meaning of "Exchange" and "Completion"?
During "Exchange" both sides agree on the terms of the contracts and sign them. The buyer pays the deposit (traditionally, 10% of the price) and the Completion date is set.
After concluding the "Exchange" process the buyer is legally bound to complete the purchase of the property, while in case of breach of contract a fine is imposed. "Completion" takes place only after the completion of all pending legal purchase processes and (in case of bank financing) as soon as the money transfer from the creditor to the buyer's solicitor has been concluded. Next, the purchase is completed and the keys are given to the new owner.
J. What is the meaning of the terms "Freehold" and "Leasehold"?
In general, two types of rights are associated with each property, which are known in English Law as Leasehold and Freehold.
Freehold – The definition of freehold is the entitlement to hold a property with a perpetual right. There is no limit of time to hold the property like in the case of leasehold property. A freehold property lies with the title holder unless they transfer it of their own accord. Let it be noted that apartments cannot be Freehold
Leasehold – The definition of leasehold is the right to hold or use the property for a fixed period of time at a given price, without transfer of ownership, on the basis of a lease contract. A leasehold is a fixed asset. Leaseholds can be up to 999 years, but an acceptable time is at least 70 years. After two years of ownership, the vast majority of Leases can be renewed for another 90 years.