Rules And Principles In UK Property Buying And Selling

When you buy or sell property, make use of an estate agent, or enter into a mortgage, the principles of contract and agency come into play.

Surely it is understood by everyone the mortgage loan process involves two sides - you, as the borrower, and the lender, usually a bank or perhaps a building society. No difficulties there.

No difficulties there. But the process of buying a property and obtaining a mortgage both involve contracts. Yes they do. You, my friend, and the seller of the property. You and the lender providing the mortgage loan.

At its simplest, a contract requires two sides, with each side bound by a number of legal checks and balances to function.

And underpinning the legalities and rules are the principles of contract and the principles of agency. It is worth understanding both.

The principles of contract are quite easy to understand. In essence, a contract is a legal arrangement which two or more people agree to enter into.

A contract implies something is given by one party and accepted by the other side. Doing so places legal obligations on both parties.

The 'something' given is known in legal circles as a consideration. Sort of old fashioned? In terms of property, the buyer's consideration is cash, which he or she hands over. The seller's consideration is, surprise surprise, the property.

You would be right in assuming, of course, there's so much more to all of this than the number of parties involved and the handing over of a consideration.

For one, both sides must have the capacity to enter into the contract in the first place.

To enter into a contract in the UK, both parties must be 18 or older. They must also both be legally able to sell property, or buy property. And either side must be of sound mind.

Then there's honesty. Both sides have to be honest and sincere in the dealings with each another. It's known as utmost good faith.

In other words, truthful answers when either side asks any question.

Yes, telling the truth is extremely important when it comes to buying and selling of property. If you are selling a property then why would you not expect some in depth questions or queries from the buyer's solicitor, for example? There are many areas, such as disputes, environmental and other issues which can easily have an impact on property.

Replies that turn out to be less than economical with the truth might result in all sorts of legal consequences at some date in the future. Surely worth avoiding at all costs!

Having looked at the principles of contract, it is now time to consider the principles of agency, something you should at least think about and understand, too, if at all possible. That's because, in all likelihood, you are going to have to grab the expertise of an estate agent, whose purpose is to bring together buyer and seller.

In simple terms, an agent is someone who acts on behalf of someone else, who is called the principal. The estate agent is the agent. And the seller is the principal.

Thus in law, whatever is done by the agent is deemed to have been done by the principal.

In reality, the estate agent's job is usually little more than passing on offers for the property to the seller, who then may decide whether to accept or not.

Compare this to other more complex types of agency where the agent may perhaps be given more authority to act on behalf of the principal, within, of course, certain agreed and predefined parameters.

This is often the case when it comes to IFAs (independent financial advisers), for example, who may make a number of investment decisions without consulting the client on every single occassion.

Thus, whether simple, or more complex, all conditions of an agency should be first set out in writing before any action is taken - independently or otherwise - by the agent.

That way, both agent and principal know where the lines are in the relationship right from the word go.

But things can go more than a little wrong, even with the best laid plans.

Sadly, such can be the situation when actions by the principal appear to give the agent authority above and beyond the agreed limits.

This apparent authority only serves to legitimise the agent's actions, despite the actions being far outside the parameters agreed at the beginning of the relationship.

Agents are human and sometimes they can go just a bit too far, acting well outside their remit either intentionally or by accident. The principal might then take legal course of action.

Or the principal can retrospectively agree the action taken by the agent was indeed acceptable. Commonly known as ratification, the principal ratifies the action of the agent after the event.

In this article, we've looked at some of the legal issues surrounding the buying and selling of property in the UK. In particular, we've considered the principles of contract and the principles of agency, hopefully throwing just a little bit of light on the somewhat complex area of contract and agency law.

Article Source: http://www.propertymagnate.com/articles

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