[B1140]Buy Property No Money Down

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

Most of us know borrowers are one half of the mortgage equation with lenders being the other side. Simple enough. Easy to understand.

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

Hence, the contract in its simplest form requires two sides, with each of the parties bound by legal requirements and rules.

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

Let us get to the basics of what a contract is. In its very simplest form, it can be best described as a legal arrangement, entered into by two or more people. The principles of contract flesh this relationship out.

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

The 'something' given is known in legal circles as a consideration. Kind of old fashioned, don't you think? In terms of property, the buyer's consideration is hard cash, which he or she hands over. The seller's consideration is, of course, the property.

But there's much more to a legally binding contract than simply the numbers involved and the exchange of a consideration.

There are several more stipulations that must be met - even before both of the parties gets involved. We are referring to the capacity to enter into a contract in the first instance.

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

Honesty is another consideration, hence the concept of utmost good faith.

So if one side asks a question of the other side a completely truthful answer is expected in return.

This is extremely important when it comes to property. The seller should expect questions from the buyer's solicitor, with regard to a whole number of areas, as a matter of course, such as disputes, for example, or factors in the surrounding area or environment which might impact the property.

Legal consequences could result if it is found out later that certain information provided was less than the truth.

Having dealt with the principles of contract, it is now time to look at the principles of agency, something you should at least think about and understand, too, if possible. That's because, in all probability, you are going to have to enlist the services of an estate agent, whose purpose is to bring together buyer and seller.

The principles of agency involves a relationship between an agent and a principal. An agent is a person who acts on behalf of someone else, the principal. In our property situation, the principal is normally the seller of the property and the agent the estate agent.

Now this next part is very important. It's at the heart of the principles of agency. The law says that the actions of the agent are actually the actions of the principal. No what ifs, buts or whatevers!

Naturally, it can be more complicated than that. However, as far as the relationship between the seller and the estate agent is concerned, which is what most of us have some experience of, the estate agent's role is essentially that of messenger, passing on offers on a property to the seller.

Other types of agency are often more complex in that the agent may be given more authority in which to act on the principal's behalf. This greater authority must be agreed before any action is taken.

This often happens with regard to IFAs (independent financial advisers), for example, who might make some investment decisions without consulting the client on every occassion.

However, no matter 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 by the agent.

So, when an agent takes action on behalf of a client, the agent knows exactly what the limits are right from the start.

Despite this, things can go more than a little wrong, even with the best of the best plans.

There may be situations where the action of the principal may appear to give the agent authority way beyond any agreed limits.

This apparent authority only serves to legitimise the agent's actions, despite the actions being way outside the limits agreed at the start of the relationship.

When it becomes very clear, however, an agent has really stepped over the mark, action can be taken against the agent by the principal.

Or if the actions taken by the agent are deemed acceptable, after the event has taken place, the principal may in fact ratify the actions. This is known as ratification.

In this extremely short article, we've highlighted some of the important areas surrounding the buying and selling of property. We have also considered the principles of contract and the principles of agency. Both of these are very important parts to understand.