Memorandum of Sale Explained

‘Memorandum of sale’ is a term that will come up a lot during the process of buying or selling a house, but what exactly is a memorandum of sale? Is it a contract or other legally binding document? In this blog I will detail everything you need to know about a memorandum of sale, why it is necessary, what details it includes, and more.

Table of Contents

What is a Memorandum of Sale?
What Information is Included in a Memorandum of Sale?
Why is a Memorandum of Sale Important?
Is a Memorandum of Sale Legally Binding?
What Happens After a Memorandum of Sale is Issued?

What is a Memorandum of Sale?

A memorandum of sale, sometimes referred to as the notification of sale or memo of sale, is an important document that records all the details of the sale of a property. It is created by the estate agents who are responsible for selling the property. The memorandum of sale is the first step in the process of selling a property and is created after an offer has been accepted, but before contracts have been exchanged and the sale is final. It is forwarded to both the buyers’ and sellers’ solicitors and contains all the key information they need to proceed with the conveyancing process. Ideally, the memorandum of sale should be drawn up quite quickly, within a few days of the sale being confirmed.

What Information is Included in a Memorandum of Sale?

All relevant information about the property sale is included in the memorandum of sale, allowing the solicitors to make all necessary arrangements to complete the sale. The buyer or seller themselves do not see the memorandum of sale, as it contains confidential data about both the buyer and seller that is subject to data protection regulations. This is not a problem – the conveyancing solicitor will act on your behalf and ensure all the information provided is correct.

The memorandum of sale includes:

The full names and addresses of both buyer and seller
The address of the property
The contact details of both solicitors
The expected dates for the exchange of contracts and completion of the sale
Property information such as the HMRC Land Registry number or UPRN number
Whether the property is a freehold or leasehold, and how many years are left on the lease
Any special conditions of the sale, e.g. certain repairs that will be made before the sale is complete
The selling price of the property
Proof of funds for the sale, usually proof of a mortgage decision in principle
Proof of deposit and the amount
If the seller is buying another property, the details of the onward purchase
What fixtures and fittings will be included in the sale, e.g. built-in appliances like ovens
Any other relevant information relating to the property that could affect the sale

FAQ: Who creates the memorandum of sale?

The memorandum of sale is drawn up by the seller’s estate agent, who will send it to the buyers and sellers solicitors as soon as possible.

Why is a Memorandum of Sale Important?

The memorandum of sale shows that the sale is ready to move into the conveyancing process. It acts as written evidence that the offer by the buyer has been accepted by the seller, and how much money will be paid. It helps by providing all the necessary information in one place and can be easily referred to by both parties’ solicitors.

Is a Memorandum of Sale Legally Binding?

No, a memorandum of sale is not legally binding. Both the buyer and seller can still pull out of the sale at any time before the contracts have been exchanged for the sale of the property. It is a legal document that states the terms of the sale agreement but neither party has legally committed to them at this stage. The sale can break down at this stage, often due to problems with the property chain, funding issues, or the results of the property survey.

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What Happens After a Memorandum of Sale is Issued?

Once the memorandum of sale has been sent to both parties’ solicitors, the property is now sold subject to contract (SSTC) and the conveyancing process can begin. This takes some time and could be up to 3 months before the sale is completed, even when the sale is straightforward with no problems. Here are the main stages of the conveyancing process following the memorandum of sale:

Buyer Checks

Checks on the buyer will be performed, such as checking their ID, proof of deposit, a mortgage offer from the last two months, or another source of funds.

Searches

The buyer’s solicitor will conduct property searches with the local authority, water company and the Environmental Agency to find out about any flood risks, access rights, plans for future developments, and other potential issues like easements, encumbrances, or restrictive covenants that could affect the sale of the property.

Survey

Most buyers will want a property survey to take place, both as a condition of their mortgage offer and to make sure the property is in good shape before buying it. Different levels of surveys are available depending on the age of the property and other factors from RICS, aka the Royal Institute of Property Surveyors.

Exchange of Contracts

If all the previous steps go smoothly, then the solicitors will agree on a date for completion and the exchange of contracts. A title transfer (TR1) form will be needed to transfer the ownership from one party to another with the Land Registry, which needs to be signed by the seller, witnessed by someone unrelated to them, and in some circumstances, signed by the buyer too.

Understanding the significance of the memorandum of sale and its importance in the property sale process is essential for property investors, as it can help them navigate the often complex process of property transactions. With this knowledge, you can approach your property investment journey with more confidence, knowing what to expect each step of the way.

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