Legal terms can sometimes be confusing – here’s a glossary of conveyancing terms to help you when buying or selling a house.
Anti-money laundering (AML)
Law firms must comply with current anti-money laundering legislation (AML), meaning the laws, regulations, and procedures put in place with the aim of preventing criminals from disguising illegally obtained funds as legitimate income.
Law firms are required to comply with these laws and regulations, which is why they need to verify your ID, and if you are purchasing a property, why they ask for proof of how your funds have been obtained.
Buildings Insurance
The buyer assumes risk from the exchange of contracts, therefore, should arrange to insure the property from the point of exchange onwards. The insurance must (where a mortgage is taken out) be checked by your lawyer before exchange to ensure it complies with your mortgage offer conditions.
The seller should continue their insurance cover until completion to ensure that they are fully protected should a claim arise.
Chancel Repair Liability
Historically, homeowners were obliged to contribute towards the cost of repairs to the chancel of the local parish church. We obtain an indemnity policy on all purchases so that in the unlikely event you are asked by a church to contribute to any costs, they will be covered by the indemnity policy.
Completion
This is when you can collect the keys to the property. The completion date is agreed when contracts are exchanged. If you are buying a new property, your lawyer will advise you when you are able to pick up the keys from the estate agent.
If you are selling, your lawyer will advise you when the sale has completed, and will instruct the estate agent to release the keys to the buyer.
Contract
The legal document setting out details of the property to be bought or sold, the parties involved, the agreed sale/purchase price and any special terms and conditions previously agreed. Conveyancers use a standard form of contract that is approved by the Law Society and contains standard conditions of sale that are incorporated into all contracts for the sale and purchase of a property.
Contract pack
This is sent to the buyer’s solicitor and will contain:
- the draft contract
- title documents
- property information form
- fittings and contents form
- leasehold information form (if applicable)
- energy performance certificate (EPC)
- any other relevant forms and documents.
Covenants
Obligations and restrictions, known as ‘positive’ and ‘restrictive’ covenants can be attached to a property. Positive covenants are generally an obligation to do something. An example could be an obligation to keep the fences in good repair. Restrictive covenants generally prevent you from doing something. For example, you may be prevented from building any additional structures on the land.
Deposit
If you are purchasing a property, you are required to provide a deposit of 10% of the purchase price (although smaller deposits can be accepted in some circumstances if agreed between the parties).
A lawyer cannot exchange contracts until they are holding your deposit funds (if you are also selling a property, they can use the money available from that transaction towards the deposit on your onward purchase). The deposit monies will be held by solicitors following the exchange of contracts and will not be released to the seller until completion. There are exceptions to this in the case of new build properties, however, at Tees, if this applies to you, your lawyer will discuss this with you.
Disbursements
Disbursements are costs incurred by a law firm on your behalf. The firm will ask for associated funds upfront which they use to pay these disbursements and other administrative charges. Examples of disbursements include the management pack on leasehold sales, or the searches, such as a local authority search.
This money will be held in the law firm’s client account until it is needed. Any money they hold on account that is not used will be refunded to you on completion.
Easement
An easement is the legal right to exercise privileges over another person’s land. For example, an easement might provide a right of way across a piece of land, or a right to lay pipes or cables.
Enquiries
Enquiries are simply questions raised by the buyer’s solicitor. These questions come to light as they receive information and documentation throughout the course of the transaction. They may include questions that have arisen from the documentation provided by the seller’s solicitor, the results of the searches, survey, mortgage offer or any additional questions the buyer may wish to raise.
Some of these questions can be answered by the lawyer, others may need your input. However, your lawyer will show you the answers they have given to all enquiries raised.
Energy performance certificate (EPC)
An EPC sets out the energy efficiency of the property on a traffic light system of A to G, with A being the most efficient. The EPC needs to be obtained upon any sale of a property and will usually be sourced by your lawyer.
Equity
The difference between the value of a property and the figure owed to the mortgage Lender.
Exchange of Contracts
This is the point where the contract becomes legally binding, and a completion date is agreed. Once exchanged, if you wanted to withdraw from the contract, you would be in breach of contract and forfeiture of your 10% deposit to the seller.
The lawyer will need to have an original, hard copy of the contract signed by you in before they can exchange contracts.
Fixture, fittings and contents form
Provided by the seller’s lawyer, this form is filled out by the seller and sets out what parts of the property are included in the sale and must be agreed by the buyer before purchase.
Freehold (Absolute)
This is a class of property title which gives outright ownership of the property and land on which it stands.
Ground rent
This is a payment specified in a lease that the leaseholder is required to make to the landlord. This is usually paid in yearly or half yearly instalments.
HM Land Registry
The government body that deals with ownership of property and land throughout England and Wales. HM Land Registry must be notified of all matters which affect/alter a property title. They will update the title documents accordingly.
Joint Tenancy
The term ‘joint tenancy’ refers to a legal arrangement in which two or more people own a property together, each with equal rights and obligations. Joint tenancies can be created by anyone owning a property with more than one other person.
If two people own a property as Joint Tenants they benefit from the right of survivorship, meaning, that if one owner dies, their interest in the property automatically transfers to the remaining owner.
Land Registry official copies
These encompass the information within the title deeds to a property – they are downloaded from the Land Registry and provide the most up to date information on every property that is registered in the UK.
The Title Register confirms the property address, title number, owner(s) and can also detail any restrictions or charges over the property.
The Title plan shows the physical extent of a registered property.
If a property is unregistered, a lawyer would use the title deeds to apply for first registration. Once completed, the Land Registry would then issue Official Copies of the title.
The Law Society is the representative body for solicitors in England and Wales.
Leasehold
Leasehold interests are created by the grant of a lease over a property, allowing the owner of the leasehold interest exclusive possession of the property for the term of the lease.
The owner of a leasehold title is registered as the legal owner on the associated leasehold official copy documents. The freehold ownership is retained by the landlord.
Leasehold property information form
This form is used when dealing with leasehold properties. It provides additional information to the buyer that is relevant only to leasehold properties, for example details of the management company.
The Legal Ombudsman offers an independent and impartial complaint handling service to all those who are not happy with their legal professional. If you have complained to your own solicitor, they have eight weeks to deal with your complaint. If you are not satisfied by the outcome of the complaint, then you may escalate your complaint to the Legal Ombudsman.
Limited title
Properties are sold with limited title guarantee when the seller has no personal knowledge of the property, for example when personal representatives are selling a property when the registered owner has passed away.
Managing agents
A managing agent is a company employed by the landlord in the case of leasehold properties (usually flats) who are responsible for looking after the maintenance and repair of the building as well as the buildings insurance.
Mortgage deed
The Mortgage deed is the document by which you charge the property to the lender as security for the loan. The deed must be signed by the borrower and is sent to the Land Registry on completion to register the bank’s charge over the property.
Mortgage Offer
If you need a mortgage, contracts cannot be exchanged until the mortgage offer has been received. Usually, you will receive your mortgage offer copy a few days before your lawyers receive their copy.
It is important to check the terms and conditions of the mortgage offer to ensure you are able to comply with them, and that the amount you are borrowing and the associated terms are correct.
Property information form
Sellers are required to fill this form in and return it to their lawyer. It asks questions regarding boundaries, disputes, services, legal rights, restrictions and other important information about the property. Failure to provide correct information could result in action being taken against you for misrepresentation; in cases where you’re unsure your lawyer should be able to help.
Redemption Statement
This document confirms the amount payable to your mortgage lender on completion of a sale or re-mortgage. There may be a penalty associated with redemption if a fixed rate mortgage is being repaid early.
Searches
The buyer’s solicitor will request several searches which reveal additional information about the property. Your lawyer will send you a report on the search results identifying the main points that you need to be aware of.
The searches that Tees generally request are:
- local authority search: this reveals any applications for planning permissions that have been made in connection with the property; information on the roads serving the property including any proposals for new roads or railways; any restrictions on the property (such as if the property is in a smoke-controlled zone); and any other relevant information.
- Drainage search: this reveals whether the property is connected to mains water, drainage and sewage systems and shows the location of the mains in conjunction with the property boundaries.
- Environmental Search: this is a desktop search which reports on any environmental concerns such as risk of flooding; ground stability and radon gas.
Service charge
A sum paid in the case of leasehold properties (usually flats) to the landlord or management company/agent to cover the cost of items such as any repairs, maintenance or improvements that need to be made to common areas of a property, insurance premiums or administration costs.
The independent regulating body of the Law Society of England and Wales. The SRA can be called upon to deal with disputes if you have received an unsatisfactory service from your solicitor.
Stamp Duty Land Tax (SDLT)
This is a tax which is payable by the purchaser upon completion of the purchase of a property. Generally, the amount of tax due is based upon the purchase price. There are some reliefs and exemptions available in certain circumstances.
Your lawyer will complete the necessary forms and arrange to pay the stamp duty to HMRC (Her Majesty’s Revenue and Customs) on completion. The lawyer will send you a copy of these forms for approval prior to completion of the purchase so that you may sign the same to confirm the details are correct. You are required to transfer us the necessary funds to cover the Stamp Duty after exchange, but prior to completion of the purchase.
Survey
This is a report carried out for the buyer by a surveyor to provide an insight into the physical condition of a property. If there are any concerns that arise from your survey of the property, your lawyer can raise these with the seller’s solicitor, however lawyers are not qualified to give professional advice on the results of a survey – you should consult the relevant professionals for example those in the building trade.
Tenants in Common
Where a property is owned as tenants in common, this means that each owner owns a distinct share of the property (shares can be equal or unequal), the proceeds of which they are entitled to on sale of the property.
With this type of ownership, there is no right of survivorship, so if one owner were to pass away, the property does NOT automatically pass to the surviving owner but instead will pass according to the deceased owner’s Will or probate rules.
Title absolute
This is the strongest form of property ownership and there is very little possibility that ownership could be challenged.
Transfer Deed (TR1)
The document that legally transfers the property from the seller(s) to the buyer(s). It must be signed in the presence of an independent witness (i.e. not a relative, spouse, or someone that currently resides at the same address as you).
Upon completion, this together with any other deeds and documents are sent to the buyer’s lawyers who will arrange for the transfer to be submitted to the Land Registry for the title to be updated.
Vacant Possession
Most properties are sold with vacant possession which means the seller must have vacated on or before completion. There must be no one remaining in occupation and the seller must, as a rule, clear the property of all goods and rubbish except those included in the sale.
