There Are Important Principles And More If You Are Selling Or Buying A Property

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The principles of contract and principles of agency - what? OK, sounds a real snooze but don't click off! You should know about both of these if you are into buying or selling a property in the UK, or have used or maybe intend to use the services of an estate agent, or are looking at taking out a mortgage loan.

Yup, you understand what a mortgage loan is, right? A mortgage has at least two sides to it - you, the borrower looking for money to purchase a property, and the lender, providing the money by which you can buy the place of your dreams.

However, buying a house and getting a mortgage are in actual fact contracts, involving you and the seller and lender.

Hence, the contract in its simplest form requires at least two, with each of the parties bound by legal requirements.

So enter the principles of contract and principles of agency. Do not fall fast asleep now.

Right, let's get down to the basics of what a contract is. In its very simplest form, it can be described as a legal arrangement, agreed by two or more people. The principles of contract flesh this out.

One half offers something and the other accepts it, offer and acceptance placing legal obligations on both sides.

Something must be given - a consideration. In property terms, a buyer hands over cash and the seller hands over property.

However there are several other aspects to a legally binding contract.

There are a couple more rules that must be complied with - even before each of the sides gets involved. It's called the capacity to enter into a contract in the first instance.

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

Then there's honesty. Both parties to any deal have to be honest in the dealings with one another. It is called utmost good faith.

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

Yes, telling the truth is extremely important when it comes to the buying and selling of property. If you are selling a property then why wouldn't you expect some searching questions from the buyer's solicitor, for example? There are so many areas, such as disputes, environmental and other issues which can impact on property.

A less-than-honest answer may, at a date in the future, result in some sort of legal ramifications. Honesty truly is the best way to go.

Now let's take a peek at the principles of agency because usually an estate agent is employed by the property seller. The job of the estate agent is to advertise the property and hopefully bring in a stream of interested buyers.

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

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

Of course, that is a rather simplisitc explanation and in the real world the situation is likely to be a little more complex. However, in terms of our estate agent, his or her role may be nothing more than passing on any offers to the seller.

Compare this to other types of agency where the agent may be given greater authority to act on the principal's behalf, within certain agreed and predefined margins.

A good example is the relationship that often exists between IFAs (independent financial advisers) and their clients. Sometimes IFAs will make independent investment decisions, within agreed parameters, but without obtaining permission of the client.

However, no matter what the depth of the relationship between agent and principal, conditions of the agency should without exception be set down in writing prior to any action is taken by the agent.

Thus, when an agent takes action on behalf of a client, the agent knows precisely what the limits are right from the beginning.

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

For example, actions taken by the principal may appear to give the agent authority far beyond what has been already agreed.

This is called aparent authority. The agents actions have become ligitimised because of the actions of the principal.

Agents sometimes do step over the boundaries laid down. In such circumstances, legal action often may be taken by the principal if required.

Or the client might just simply ratify the actions of the agent instead, agreeing after the event the actions are indeed acceptable.

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

Information about the Author: Why not take a look at Mortgage Advice 4 Free, a website set up by John Donaldson. There you will discover reviews of other mortgage loan sites in the UK. It's a first class starting point for anybody looking for a mortgage loan. Mortgage Articles: http://www.article-buzz.com

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