Buying a property: The legal process

Prerequisites to buy a property

• To register as a co-operative
• A business plan with cashflow projections
• A bank account
• a potential mortgage and other possible loans - you need to have spoken to some lenders and had a positive response
• loan stock or co-op capital to make up the rest of the purchase price and other expenses
• A conveyancing solicitor to help you with the legal transfer in ownership.
• An architect if your group is planning quite significant renovations.

Once you've found somewhere that works for your group, or part of your group who is being housed at the property (if you are not housing everyone together), make sure you decide amongst yourselves who will talk to whom (the bank/other lenders, owners, solicitor, architect, planning department, builders, etc.) and then start the process.

What to look for in a property

Energy Performance Certificate

Look at the Energy Performance Certificate. This should be available from whoever is selling the property, and are also free to look up online on the national EPC register.  

What is an Energy Performance Certificate?

Energy Performance Certificates (EPCs) are needed whenever a property is built, sold or rented. When you buy a property it will be provided by the vendor or estate agent and when you get a new member you must provide it to them. In Scotland, you must display the certificate somewhere in the property, e.g. in the meter cupboard or next to the boiler.

An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient). It contains: information about a property’s energy use and typical energy costs recommendations about how to reduce energy use and save money An EPC is valid for 10 years. So, if you've recently bought your property, you can provide your members with the EPC you just got for quite a while before needing to get a new one. You don't need to get a new EPC if you've improved your property, though you might decide that it's a good idea to do so. You also don't need to get a new one unless you're advertising for new tenants.

www.gov.uk has a list of accredited assessors, who can assess your property and produce the certificate. They will include your EPC on the national register unless you opt out. You can be fined if you don’t get an EPC when you need one.

Floor plans

Find out if there are floor plans available for the building that you can go through with an architect, a building project manager, or someone else with some experience. Things you might want to look out for are - the size of the rooms and whether proposed bedrooms meet local and national space standards, the number of steps in your property, size of shared areas in the house etc.

Planning: Use Class

Check what the building’s ‘use class’ is, and if you will need planning permission for a ‘change of use’, by looking at the national Planning Portal.

Talk to your local planning department to see whether they would be open to a ‘change of use’. A planning application may take a long time to come through, but you shouldn’t risk completing the purchase until you have the permission.

What is a use class?

All buildings in the UK are categorised by ‘use class’ ranging from B-F or sui generis (meaning ‘anything else’), for example, residential buildings are either C1, C2, C3 or C4. Generally, if it is proposed to change from one use class to another, you will need planning permission. Housing co-operatives are sometimes counted as ‘residential’ (C3), but if there are over 6 tenants then ‘sui generis’ might be more applicable.This varies depending on the location, size and type of building. Every local authority in the UK has its own planning application system so it is a good idea to speak to your local council’s planning department.

Negotiate and Survey the Property

Put in an offer to the owners

This is usually lower than the asking price but don't go too much lower or they may not take you seriously. You are in the same boat as any other buyer here so as well as talking to other co-ops, it might be helpful to talk to friends and family about their experiences putting offers in. It depends on the owners (do you know them, will you offend them, do you think you can get away with it, are there reasons the building should be valued lower?). They will then reply, either accepting or asking for more. Negotiate - it depends on the market, the state of the building and how much the owners want to get rid of it. However, be aware of the maximum offer you can afford and never go above it, no matter how much you want the building – that would just be saving a crisis for later.

Get a building survey and valuation

If the owners are responding positively, and you think the purchase could potentially go ahead, get a building survey and valuation. In Scotland it is the sellers’ responsibility to arrange a Home Report (similar to a RICS Level 2 house survey) to show to buyers before they can market their property.

What is the difference between a building survey and valuation, and which one should you get?

A building survey involves a visit by a surveyor, who will produce a report explaining what improvements they think need to be done. Before commissioning a survey, you should check that the surveyor is a member of one of the two main accrediting bodies:

1. RICS (Royal Institution of Chartered Surveyors), or
2. RPSA (Residential Property Surveyors Association).

A building survey will cost between £500 and £1500, depending on the size of the building and the area of the country (Brighton will cost more than Macclesfield).

A surveyor can carry out a building survey, a valuation or both.

A valuation is an estimate of how much the surveyor thinks the building is currently worth – this will be cheaper, typically between £200 and £500.

Estate agents will also do a much more basic appraisal, for free, to estimate the value of a property - this is not as accurate as a valuation.

Mortgage lenders will require at least a valuation, as they will lend you a certain percentage (usually 70%) of the property’s value, not of what you actually will pay! However a more in depth report is a good idea, especially if you intend building work to change the use of the building, or to get it ready for you to move in. This could either be

1. a RICS Level 2 Home Survey (previously called a HomeBuyer Report) which is non-intrusive, meaning the surveyor won't look behind furniture or under floorboards, so they’ll only be able to identify ‘surface-level’ issues, or
2. a RICS Level 3 (previously called a Building Survey) which is the most thorough type of survey and provides a comprehensive analysis of both the property's structure and condition.

Draw up a works schedule

If the building needs work before you can make it your home, it will very useful to draw up a works schedule, with a list of jobs in order, listing how long each job will take. This will help you estimate how much time will pass between buying the property, and getting it ready to move in. You need to know this to plan cash flow through the first year, and some mortgage lenders will require you to make a plan of these works.

Go through the surveyors report with someone who has some idea of building works. Start getting quotes for the works needed (e.g. Replace all front windows, with wooden frames and sealed units – quote from joiners and glaziers; Rewire throughout – quote from electricians; Painting and decorating – done by ourselves – estimate of costs of materials). 

You may need to employ an architect if alterations are substantial, if so you will need to factor their fees into the business plan.

Talk to your lenders

Submit the reports along with your business plan to the bank, or any other organisations you want to borrow money from and arrange to talk to them.

Legal Transfer of property ownership to the coop

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