How to conduct proper due diligence for your property in the UK

Last updated on December 18, 2023

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risks pitfalls buying real estate The United Kingdom

Everything you need to know is included in our The United Kingdom Property Pack

Embarking on the journey of buying a property in the United Kingdom is a substantial and potentially life-altering decision.

Whether you are on the hunt for a new home, an investment opportunity, or a serene vacation retreat, delving into the world of British real estate can be an exhilarating experience.

However, it is imperative to approach this process with caution and meticulous consideration. Conducting thorough due diligence is a pivotal step in the property acquisition journey that should never be underestimated.

In this article, we will delve into the significance of due diligence when it comes to purchasing a property in the United Kingdom. We will highlight the key factors and considerations that every prospective buyer should be well-versed in. From navigating legal regulations to conducting comprehensive property inspections, our aim is to provide you with invaluable insights to ensure that your real estate investment in the UK is not only exciting but also secure.

Finally, please know that the full due diligence cheklist is included in our property pack for the UK.

What is a due diligence when you buy a property in the UK?

Due diligence in the context of a residential real estate transaction in the UK is a critical process, particularly from the buyer's perspective.

It's essentially about doing your homework before you commit to buying a property. This means thoroughly investigating the property and all the legal aspects surrounding it to ensure you know exactly what you're getting into.

The reason due diligence is so important is that it helps you avoid unpleasant surprises after the purchase.

For example, you wouldn't want to find out that the house you just bought is actually built on a flood plain or has unresolved legal disputes attached to it. This process involves checking property titles, planning permissions, local area information, and structural surveys.

It's not legally mandatory to conduct due diligence, but skipping it can lead to significant risks. Without it, you might end up with a property that has hidden legal issues, structural problems, or other unexpected challenges that can be costly and stressful to resolve.

Typically, due diligence is handled by professionals. This usually involves a solicitor or conveyancer who specializes in property law. They'll conduct legal searches and liaise with the seller's representatives to gather all the necessary information.

Additionally, you might hire a surveyor to check the physical condition of the property.

The timing of due diligence is crucial.

It should start as soon as you have a serious interest in a property and certainly before you make a formal offer or exchange contracts.

The process needs to be thorough, so it can take several weeks, sometimes longer depending on the complexity of the property and the efficiency of the parties involved.

And ... yes, due diligence does cost money.

The fees for your solicitor or conveyancer, as well as the cost of any surveys, are borne by the buyer. These costs vary depending on the property and the professionals involved but consider them as an essential investment in making a well-informed decision.

Get the full checklist for your due diligence in The United Kingdom

Don't repeat the same mistakes others have made before you. Make sure everything is in order before signing your sales contract.

What to check during a due diligence in the UK?

We'll give here a very brief overview of the elements you have to check when you conduct a due diligence in the UK ; if you want a full checklist, please check the "Due Diligence" document in our property pack for the UK.

In the UK, when you're buying a house, there's a bunch of checks and research you need to do to make sure everything's in order.

This is what we call due diligence. Let's break it down into simpler parts.

Firstly, you've got to make sure the person selling the house actually owns it and can legally sell it. This is done by checking the property title, which your solicitor will handle by looking up records at the Land Registry. They'll also check if there are any debts or legal issues tied to the house.

Then, you need to look into local rules and regulations. This is about making sure any work done on the house, like extensions or big changes, had the right permissions. If they didn't, you might have to fix that later, which can be a hassle and expensive.

Now, let's talk money.

You need to be clear on all the costs involved – not just the price of the house but also ongoing costs like council tax and any service charges, especially if it's a leasehold property. This helps you figure out if you can really afford the house and if it's a good deal.

Environmental checks are pretty important too.

In the event that the house is in an area known for flooding or used to be industrial, you might want an environmental search done. This can tell you if there are any risks like contamination or flood danger.

Getting the house inspected is a smart move. It's not a must, but it's recommended.

A surveyor can check the condition of the house and tell you if there are any major problems, like with the structure or dampness. This can save you from nasty surprises later on.

You'll also want to make sure the house has proper access to utilities – water, gas, electricity, and so on. Your solicitor will check if these services are properly hooked up and if there are any shared services with neighbors, which can sometimes get complicated.

Understanding the neighborhood is more on you.

Visit the area, chat with locals, see what's around like shops, schools, and how good the transport links are. This gives you a feel for what living there would really be like.

Now, easements and rights of way can be tricky. These are legal rights for others to use parts of the property or limitations on what you can do with it. Your solicitor will find out if there are any and explain how they might affect you.

Future development plans in the area are also worth looking into.

Contact the local council to find out if there are any big construction projects planned nearby. This can affect your enjoyment of the property and its future value.

Lastly, you want to check if the house is listed or in a conservation area, as this can limit changes you can make to it.

Also, find out if there have been any disputes or legal issues with the property in the past. Again, your solicitor will help with this.

Everything you need to know is included in our United Kingdom Property Pack

What's the process and who are the professionals involved in a property due diligence in the UK?

In a UK residential real estate transaction, several professionals play key roles in the due diligence process.

First up, you've got your solicitor or conveyancer. These legal pros handle all the legal aspects of buying a house. They check the property's title, sort out contracts, and conduct necessary searches, like checking for any planning permissions or local authority issues.

In the UK, solicitors are regulated by the Solicitors Regulation Authority, and conveyancers by the Council for Licensed Conveyancers. This means they must follow strict rules and standards, ensuring they provide a reliable service.

Surveyors are another important part of the team. They inspect the property to identify any structural problems or repairs needed. This can range from a basic survey for newer homes to a more detailed structural survey for older or unique properties.

Surveyors in the UK are typically regulated by the Royal Institution of Chartered Surveyors (RICS), ensuring they maintain high professional standards.

If you're a foreigner, language and communication barriers can make the process more challenging.

It's crucial to have clear communication with your solicitor, surveyor, and estate agent. If English isn’t your first language, consider getting a translator or choosing professionals with multilingual staff. This ensures you fully understand all the details and legalities involved.

Regarding the contract, once it's signed by both buyer and seller, it's legally binding.

Making amendments after signing is not straightforward. If both parties agree to a change, a formal amendment can be made, but this is rare and can be complex. It’s better to ensure everything is correct and agreed upon before signing.

After signing the contract, the timeframe to complete all the paperwork and approvals can vary.

Typically, it takes around two weeks to a month, but it can be longer depending on the complexity of the transaction and any issues that arise during the due diligence process. This period is when your solicitor will finalize the legal work, the mortgage (if you have one) will be finalized, and any remaining checks will be completed.

A mistake in your due diligence could cost you thousands of dollars

Make sure you don't overlook critical checks when assessing the condition of your prospective property purchase. Avoid legal complications. Stay prepared, get our comprehensive guide.

What are the common pitfalls happening during a property due diligence in the UK?

After our research and the feedback collected from our local real estate partners, we have written an article about the risks and pitfalls when buying a property in the UK.

When buying a house in the UK, there are some risks and pitfalls in the due diligence process that you might not find in other countries, especially if you're a foreigner.

A unique aspect of the UK property market is the concept of 'gazumping'. This happens when a seller accepts a higher offer from another buyer after already accepting yours but before the contract is legally binding.

It's a frustrating experience and more common in a hot market. Foreign buyers, unfamiliar with this practice, might be particularly vulnerable.

Foreigners also face challenges with understanding the complexity of leasehold properties, a common concept in the UK.

Unlike freehold properties, leaseholds involve owning the property for a set period, not the land it stands on. Issues like ground rent, service charges, and lease renewals can be confusing and costly if not understood properly.

There have been instances where buyers, unaware of the lease terms, face unexpected costs or issues selling the property later.

Cultural and historical considerations also play a part. For example, listed buildings, common in the UK, have restrictions on alterations due to their historical significance.

Foreign buyers might not realize the implications of buying such a property, leading to complications if they plan renovations.

The UK's property laws also have specificities, like the 'right to light', a less known aspect that can affect properties. This law can sometimes restrict building or extension plans if they block a neighbor's light.

Contracts in the UK can have pitfalls too.

One common issue is not thoroughly understanding the terms, especially clauses related to property condition or clauses that allow sellers to back out under certain conditions.

Buyers should carefully review the contract and negotiate any unfavorable terms before signing.

To mitigate these risks, it's crucial to work with a knowledgeable solicitor or conveyancer. They can guide you through the complexities of UK property law and help you understand the contract terms.

Also, getting a comprehensive survey, especially for older or unique properties, can prevent surprises related to the property's condition.

Property insurance is another important consideration.

Building insurance is usually required, especially if you have a mortgage. It covers damage to the structure of the property. Contents insurance, while not mandatory, is recommended to protect your belongings.

For leasehold properties, check if the freeholder's insurance covers the building and what exactly it covers.

In case of a dispute, legal avenues are available. For example, if there's a dispute over property boundaries or rights of way, you might need to consult with a solicitor specializing in property disputes. These issues can sometimes be resolved through mediation, but more complex cases may require court proceedings.

For dispute resolution, the relevant authorities in the UK include the Property Ombudsman and the Royal Institution of Chartered Surveyors (RICS) for issues with estate agents or surveyors. These bodies can provide guidance and help resolve disputes in a more formal setting.

-The United Kingdom: how to buy real estate as a foreigner

-How to understand the property purchase agreement in the UK