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Explanation of Conveyancing
Although we try not to use legal jargon, sometimes it is very difficult to eschew! In order to assist you, therefore, we have set out below a list of commonly used words and phrases.
BUILDING REGULATIONS APPROVAL
Work of a structural nature will usually need approval from the local authority. However, sight of Building Regulations Approval does not necessarily mean that the work carried out complies with the plans, as the local authority should re-inspect the work and issue a Completion Certificate. It may also be necessary to obtain Planning Permission.
CAVEAT EMPTOR
Literally, buyer beware – you should have a survey carried out before you exchange contracts. You must rely on your own survey of the property so far as its physical state is concerned and not upon any information given by the seller. You cannot take action against the seller for any problems related to the physical state of the property, unless you can prove that the seller fraudulently concealed known defects or replied dishonestly to enquiries. Where enquiries have been answered in the terms "Not so far as the seller is aware", this will imply that the seller has made investigations and has no actual knowledge of a defect.
CHAIN
Most people moving house will have a property to sell and one to buy, and will want to exchange contracts and then complete both the sale and purchase on the same day. If there are several people in this situation, a chain of transactions will be formed. Generally, the longer the chain the longer it takes to reach exchange of contracts. Everyone has to wait for the last person to be ready and a completion date has to be agreed by all in the chain.
CHARGE
Typically a charge registered against the property will be a mortgage or secured loan, but the term also includes covenants, easements, cautions etc. The owner of the property is responsible for all charges no matter when they were registered.
CHATTELS
Items not fixed to the house. A seller will prepare a list showing what is included in or excluded from the sale. This is commonly referred to as the Fixtures, Fittings & Contents List.
COMMONHOLD
A new way of owning and managing buildings such as blocks of flats or offices and mixed use premises. The title for the building and land will be jointly owned by the individual owners of the units. A community statement will determine how the land in question is to be managed, but all lessees will have a say in the way maintenance is carried out.
COMPLETION
This is the actual moving day, not to be confused with exchange of contracts. On the day of completion, funds will be transferred and keys handed over.
COMPLETION CERTIFICATE
This confirms that work has been carried out in accordance with building regulations. This can be overlooked, as it is up to the owner of the property to contact the local authority to arrange a re-inspection of the work and to ask for the Certificate to be issued.
CONTRACT
This is the agreement between the buyer and the seller. It sets out the main terms of what has been agreed such as a description of the property, the price and the names of the parties. It also deals with the process if something goes wrong.
CONVEYANCING
Dealing with the legal side of buying, selling, re-mortgaging or otherwise transferring ownership of a property- for example - checking title, carrying out searches, etc. and ensuring that the buyer gets good title on completion.
COVENANTS
The title deeds will usually contain several “covenants”; these are a promise to do or not to do certain things on the land e.g. that the property must not be used for any trade or business.
DEPOSIT
This is the money paid by the buyer to the seller when contracts are exchanged. The amount of the deposit should be 10% of the purchase price, but can be subject to negotiation. If the buyer pulls out after contracts are exchanged, they will forfeit the deposit to the seller and, if less than a 10% deposit has been paid, then they will also be liable to the seller for the balance of the 10%. The deposit is normally held by the seller's conveyancer until completion, unless it is being used in conjunction with a related purchase by the seller.
DISBURSEMENTS
Costs payable to other companies/authorities such as stamp duty land tax, Land Registry fees, search fees etc.
EASEMENT
A right you have over another person’s property, or a right that they have over your property. This could, for example, be a right of way or right for services to run under or over land etc.
EXCHANGE OF CONTRACTS
This is the point when both parties commit themselves to move on a certain date. Up to this point either party can withdraw from the transaction without any liability to the other side. You should not, therefore, make any firm commitments such as giving notice on a job, arranging removals or making holiday bookings until contracts have been exchanged and the completion date fixed.
FREEHOLD TITLE
If you own a freehold interest in land you will have outright ownership of the land subject, of course, to any charges on the land.
GAZUMPING
Where a seller receives a higher offer from another buyer often just before exchanging contracts with you and, therefore, asks for more money.
GAZUNDERING
Where a buyer reduces their offer just before exchange of Contracts.
LAND REGISTRY
A government institution set up in 1925 which records dealings with all properties bought and sold. A copy of the title is kept on the register, which is open to the public. The register records details of the proprietor(s)of the property, all covenants, easements and charges on the property, and the price paid for the property. The Land Registry imposes a fee for registering all transfers and mortgages. Not all land in England and Wales is registered at the Land Registry at the moment, as it was not always compulsory to do so.
LEASEHOLD TITLE
This typically relates to flats and maisonettes which must have a lease which sets out the responsibilities for maintenance etc. although individual houses can also be leasehold. All leasehold properties must have a period when the lease ends and it reverts back to the freeholder, however, provided there is adequate time left to run on the Lease this should not be a concern. Most lenders require an unexpired term of lease of around 60 or 70 years.
LESSOR
The person or persons granting the Lease.
MORTGAGE
A loan which is secured on a property. If you fail to keep up the payments the lender can evict you and sell the property to get their money back. If you still owe money after the property is sold, the lender can pursue you until you pay it all off.
MORTGAGE OFFER
This is a formal offer in writing setting out the amount to be borrowed, the length of the repayment term, the basis upon which repayments will be made and how interest will be calculated, along with any other specific conditions imposed by the lender. It is not enough to simply have a statement from the lender or broker stating that the mortgage is agreed. You must have a formal offer in writing before contracts are exchanged and any specific conditions on the mortgage must have been complied with.
OFFICE COPY ENTRIES
These are up-to-date copies of documents from the Land Registry showing mortgages, covenants, etc. It is essential to show a copy of these to the buyer's solicitors. These are obtained from the Land Registry by the seller’s solicitor at the outset of a sale, but can also be obtained at any time by the general public.
PLANNING PERMISSION
This is usually required for works of engineering or a change of use of property e.g. conversion from a private dwelling to a business or erection of an extension to a property. Not to be confused with building regulations approval, which is a separate matter.
PROPERTY INFORMATION FORM
This is a form completed by the seller at the outset of the transaction giving information about the property such as guarantees, any disputes with neighbours, boundaries, etc. If you are the seller and a query is raised which you do not wish to answer for whatever reason, you need to discuss it with us. Failure to disclose information could give the buyer grounds to take legal action against you.
RETENTION
Sometimes the lender will not release the full amount on completion. They will want to retain a proportion of the loan until certain work is done. You would have to make up the shortfall in the meantime and the money necessary to carry out the work. The lender will want to re-inspect the property and will release the retention to you if the work is satisfactory.
SEARCHES
A Local Authority search will give information on planning permissions granted in respect of the property, any compulsory purchase orders, plans for new roads in the vicinity of the property, whether the property is a listed building or in a conservation area, etc. Note that the Local Authority search is specific to the property itself and will not give any information on adjoining properties, so you might want to make additional enquiries.
A search with the water authority will give drainage information, such as whether the property is connected to mains drains and a mains water supply and whether charges are on a metered or unmetered basis.
An environmental search will give details of the previous use of the land and whether it is affected by flooding, subsidence, radon, contamination or pollution.
A chancel search will indicate whether there could be liability to meet, solely or collectively, the cost of repairing the chancel to one of over 5,000 churches in England and Wales.
A coal mining search is made when dealing with land in coal mining areas, as to the risk of subsidence. Such a search is only necessary if the property is within an area which may be affected by previous, current or proposed working of coal.
SEARCH INDEMNITY INSURANCE
Where a mortgage (including a further mortgage or remortgage) is being taken over a property which is currently occupied by the borrower, this Policy removes the need for a fresh search by offering protection for the exclusive benefit of the lender. Such a Policy must be with the consent of the lender.
STAMP DUTY LAND TAX
Payable to HM Revenue & Customs and calculated on the purchase price of the property. It is not payable on chattels (e.g. carpets and curtains) which can be apportioned separately in the contract; this can make a saving if it moves the price into a lower tax band, but the valuation of the chattels must be genuine i.e. based on the second hand value of the item.
SURVEY
A report on the physical state of the house, not to be confused with a valuation carried out by the lender which only gives an indication of the market price of the property and is for the lender’s benefit. Our advice is that you should at least have an RICS Homebuyer Report prepared by a qualified surveyor. This will cost more than a mortgage valuation but is advisable. It is possible to go a step further and have a full structural survey, but in normal circumstances this option would not be taken unless the surveyor carrying out the Homebuyer Report thinks any matter should be investigated further.
Contact Jobling & Knape with your Conveyancing Terms question: