Purchasing share transfer property in Jersey25 Feb 2010
When you buy a unit in or a whole property by share transfer, you are in fact purchasing shares in a company. If you are buying a unit, the articles of association of the company give you the right to occupy the unit.
Share transfer property
A share transfer transaction involves us having to check title, not only to the property but also to the shares, and to the good order of the company (which means that there are extra procedures to be carried out as the company records need to be checked). In particular, you will want to know whether the company has any debts or other actual or contingent obligations as these will remain in existence and could come to affect the value of the shares. The share certificate issued to you on completion of the purchase will be your document of title. It needs to be kept safe although, if you are borrowing part of the purchase price, your lender may require to hold it as security. Once you have found your property or unit, if it is residential, a form should be completed and submitted to the Population Office seeking permission to occupy it (if that is what you intend to do). No-one can occupy a share transfer residential property or unit normally unless they have such permission. More often than not, this application will be completed by the estate agent instructed on the sale of the property or unit.
Share vending agreement
The seller's lawyer will provide us with a draft share vending agreement which we will discuss with you along with any areas of concern relating to the property. This agreement will contain a number of warranties relating to the company's property, the unit (if any) and the company. A copy of the company's contract of purchase of the property, and the Jersey Digital Map identifying it and the company's articles of association are also usually supplied.
The share vending agreement is not signed until you are in a position to complete the purchase and all finance is in place. The timescale involved in completing share transfer transactions can vary enormously, depending on our findings in relation to the company records. Normally, a standard transaction without unforeseen issues will take between three to five weeks.
The company's memorandum sets out its name and number and its articles of association set out how it will be run, the rights of the shareholders and directors and details of the different units. The articles of association are effectively an agreement between the company, its directors and shareholders. We will review the articles of association to ensure that all is in order regarding the unit and any parking spaces for your exclusive use. Should there be any discrepancies, we will raise these with the seller's lawyers and require that they are rectified prior to completion. We also check that the company has a current insurance policy covering the buildings and third party liability in respect thereof. As the company will continue to be responsible for past liabilities, in the share vending agreement, the seller will warrant in respect thereof that the company has been adequately insured as regards property matters at all material times while the seller has owned the shares, but no further back and we do not undertake enquiries as to the correctness of this warranty.
The company must by law keep detailed records relating to the directors, secretary and shareholders. We will inspect the registers of directors, secretary and shareholders, the share register, share certificate book and the minute book. By law, the company must keep annual accounts and we will inspect the latest available and require more recent ones if necessary.
We will let you know the current service charge applicable to the unit and whether any extra levies are due to be made. A search will also be carried out at the Jersey Financial Services Commission to ensure that their records are consistent with the information provided to us and will require that they be brought up to date if necessary.
Survey and valuation
It is essential that a survey is carried out of the buildings owned by the company as a whole as opposed to just the unit itself because the company, and effectively you and the other shareholders (if any), will have liability in relation to the structure of the buildings, the common areas and any works which may be necessary. It is essential that the survey and, if you are borrowing money to assist your purchase, also a valuation of the unit (or property if you are acquiring all the company's shares), are carried out as soon as possible. Your lender will require that a valuation is carried out to ensure that the unit (or property if you are acquiring all the company shares) is worth the money you are intending to pay for the shares. Your lender will provide you with details of surveyors that meet their approval and you must instruct one of these to undertake the survey and valuation for you.
Once we are in possession of an extract from the Jersey Digital Map from the seller's lawyer identifying the company's property, we will carry out the necessary searches with the relevant bodies: Planning and Environment, Transport and Technical Services, Jersey Electricity, Jersey Water and the relevant parish. In some instances, searches are also carried out with the Rent Control Tribunal and the Health Department.
The reason for undertaking these searches is to reveal all relevant information about the proposed unit (or property if you are buying all the company's shares), including anything that may be disadvantageous to it.
We will carry out a title check in the Public Registry. However, as a title check will not reveal the existence of certain rights of previous owners' widows or widowers which automatically arise under Jersey law we, and therefore you, have to rely on information given to us by previous owners which may not be entirely accurate.
The company's property will have been conveyed to it by description and not by references to plans so far as its boundaries are concerned. The description of the individual units (if you are not buying all the company's shares) are contained in the articles of association and these often refer to plans included in the articles. We do not undertake the interpretation of plans at all. It is important to know that the company's property has been correctly conveyed and has sufficient rights for its operation, and that there are no restrictions in its title which could affect your enjoyment of your unit. For all these reasons, we will carry out a site visit at the property to ensure that the description of the company's property corresponds with the circumstances on the site. We will check whether the original construction and any later extensions and constructions have caused encroachments over boundaries with neighbouring properties and whether there have been infringements of restrictive covenants and whether other property owners have rights over the company's property which may affect you. We will also ensure that rights of way and for drainage and other services are contained in the contract of purchase of the company so that you will have reasonable enjoyment of the unit (or the property if you are buying all the company's shares).
If any discrepancies are found, we will report back to you to discuss these issues and revert to the seller's lawyers to have them rectified. Usually, the seller will bear the costs of rectifying any defects although this may have to be negotiated between the parties.
Funding the purchase
We will enquire as to how you intend to fund the purchase of the shares. Most buyers have to obtain a loan secured as a security interest against the shares. You will need to take the necessary steps with your chosen lender to ensure that a survey and valuation are carried out and, once they are accepted, that you return a signed facility letter to your chosen lender after which they will instruct their lawyers to provide us with the loan documentation. You may wish to instruct us not to proceed with the transaction until the results of the survey have been received so as not to run up any unnecessary legal costs.
Contact with you
It usually speeds matters up if you supply us with your email address and daytime telephone number at the outset. After we have resolved any issues, we will meet with you to explain the terms of the share vending agreement and any special points arising under the articles of association, and ask you to sign the share vending agreement and any applicable loan documentation. Once the loan documentation has been returned to the lender's lawyer, the loan funds will arrive here and be held to the lender's order until completion, i.e. the transfer of the shares. On completion, the keys can be collected by you from the estate agent.
Land transfer tax
Land transfer tax is payable to the Taxes Department and is applicable to every sale of shares in a company whose articles of association give rights to occupy residential units. It is calculated by reference to the purchase price and is also payable in respect of any loans secured against the shares. This tax is not payable where you buy all the shares in a company which does not have this type of articles of association.
Wholly residential units are free from Goods and Services Tax. If the unit whose applicable shares you are buying does not fall within that category, we will discuss GST with you further; it is payable by the buyer when applicable.
Possession should be arranged well in advance via the negotiating estate agent and should not be assumed or left to chance. Care should be taken when agreeing extended possession periods with regard to issues such as insurance and liability for damage or even destruction of the property during this period; it is not unheard of for a buyer to require from the seller some sort of compensation for this period.
If you have agreed to buy contents from the seller, it is essential that these are listed in an inventory and this should be drawn up by the estate agent as soon as possible after the offer has been accepted so that no nasty surprises or last minute price reductions arise on the eve of completion. Both parties should review the inventory to ensure that they are receiving (or selling) all the contents that they understood were part of the deal.
Utilities and insurance
You will need to ensure that all utility accounts are transferred into your name in readiness for the day of completion. It is usual for a buyer to communicate with the seller directly to ensure the smooth transfer of the various services supplied to the property and that no service is unnecessarily disconnected.
When you buy a share transfer unit, you will only have to insure the contents of your unit as the structure of the property will be insured by the company with a proportion of the premium being included in the service charges levied against you according to the provisions of the articles.
If you are buying all the company's shares, it is essential that you arrange to continue with the company's current insurance policy or otherwise that the company is covered for buildings and third party liability in respect thereof from the time of completion. You should provisionally arrange this well in advance with your insurer and call him to confirm and issue a cover note before completion if you are buying all the company's shares with the assistance of a loan. Your lender will require sight of the cover note before releasing funds.
Payment of consideration monies and legal fees
We will need to be in receipt of the monies being provided by you for the purchase, the land transfer tax (if any) and the legal fees and disbursements in cleared funds by the day before completion. This means that you need to arrange an electronic transfer of these funds from your bank two days before completion, usually before noon. The mortgage advance will be forwarded to us directly by the lender, less the lender's legal fees and disbursements. From the total of these monies, we will deduct our fees and disbursements and land transfer tax (if any), and forward the consideration monies to the seller's lawyers. In advance of completion, we will provide you with a detailed statement showing you a breakdown of these monies.