We all know that some of the terminology involved in the process of buying and selling a property can be confusing. Here at Cardigan Bay Properties we always try to keep our communications simple and clear, so we thought we’d give you a bit of insight into some of the key terminology used in conveyancing. Here’s our A to Z of the main words and phrases used, but if you’re ever unsure please ask us!
The A to Z of Conveyancing
A –
Anti-money laundering
This focuses on ensuring criminals can’t hide illegally obtained money as legitimate income for a house purchase. There is strict legislation to prevent this and all companies must comply with the laws and regulations. As part of this you will need to provide official ID and show proof of how your buying funds have been obtained.
Approved in Principle
Sometimes called a ‘decision in principle’ or ‘agreement in principle’, this is where a bank or building society (the mortgage lender) has given an idea of how much they can lend the buyer. This tends to be subject to additional checks.
B –
Buildings Insurance
If you’re the property buyer then once you exchange contracts you assume the risk and must organise buildings insurance from the point of exchange. If you have a mortgage to fund your property purchase then your lawyer should check that the insurance policy meets the conditions of your mortgage offer. In addition, it is advised that the seller continues their insurance cover until final completion to be sure they are also protected.
C –
Chain – This term refers to the various people/parties involved in and linked to the sale and purchase of their individual properties.
Chancel Repair Liability
Not seen with every property, this is a historical charge where homeowners have been required to contribute to any repairs needed to the chancel of the local church. Most lawyers will arrange an indemnity policy so that if you are asked to contribute by the church you will be covered by this.
Completion
Perhaps the most exciting day – when you collect the keys to your new property! This date is agreed when you exchange contracts, or for new property sales your lawyer will confirm when you can collect the keys from the estate agent. For sellers your lawyer will let you know once the sale has completed and will instruct the estate agent to release the keys to the buyer.
Contract
This is the important legal document that sets out all of the specific details of the property being bought or sold, the agreed price, details of the buyer and seller, as well as any individual terms agreed for that particular sale. There is a standard, Law Society approved contract that conveyancers use for the sale and purchase of a property.
Contract Pack
This includes a range of documents and has to be sent to the buyer’s solicitor. It includes the title documents, a draft of the contract, the property information form, the fittings and contents form, energy performance certificate and more – anything that is relevant to the property.
Covenants
For some properties you can have ‘positive’ and ‘restrictive’ covenants attached to them. These are obligations and restrictions that as a purchaser you should be aware of when you buy a property. In general, a positive covenant is an obligation to do something, for example maintaining a garden wall, while restrictive covenants prevent you from doing something, for example extending a property or building a new structure on the land.
D –
Deposit
A deposit of 10% of the purchase price is normally required when the contract is ready to be signed and exchanged. A lawyer cannot complete the exchange of contracts until they have your deposit funds. They are then held by solicitors and not released to the seller until completion of the sale/purchase. The deposit is non-refundable.
Disbursements
These are the costs incurred by your lawyer on your behalf during the process of their work on your purchase. They are for things such as Local Searches, Land Searches, Land Registry Search and the Land Registration Fee. Normally they will ask for funds upfront and will hold them until needed, with any funds not used returned to you on completion.
E –
Early Repayment Fee
This is the fee that your mortgage provider demands if you choose to repay your mortgage early.
Easement
This is the legal right to do something over someone else’s land – for example, an easement might ensure you have right of way over some land or the right to lay pipes for infrastructure for your property.
Energy Performance Certificate (EPC)
You’ve probably heard about these a lot but they are very important. An EPC outlines the energy efficiency of the property and must be obtained for the sale.
Equity
This is the difference in value between the property value if it were to be sold and the amount owed to the mortgage lender. For example, if you were to sell your property for £300,000, but you still owed the bank £200,000 on your mortgage, you would have £100,000 equity in the property.
Exchange of Contracts
This is where the contract becomes legally binding, with your signed contract dated and passed to the other party’s solicitor. Once you’ve exchanged contracts, if you want to withdraw from the agreement you would forfeit your deposit to the seller.
F –
Fixtures, Fittings and Contents Form
This form is completed by the seller and then provided by their lawyer to the buyer. It specifies what parts of the property are included in the sale – for example, is the washing machine or fridge staying. The buyer must then agree to it or agree changes before the purchase.
Freehold (Absolute)
If you are buying a property with the title of Freehold (Absolute) then it gives you outright ownership of both the property and the land it has, with no landlord.
G –
Ground Rent
If your property is leasehold then this is the rent paid to the landlord. It usually applies to flats, but there are also some houses that have leasehold status. It is usually paid yearly or every six months.
H –
HM Land Registry
A Government organisation that maintains a register of all property and land ownership in England and Wales. They have to be advised of anything that alters a property title and will register the new owner once your sale/purchase is complete.
J –
Joint Tenancy
This is a legal arrangement where two or more people own a property together. Each of these owners will have equal rights and obligations.
L –
Leasehold
Some properties in the UK are what is known as leasehold properties, which give you rights of ownership for a specified number of years. It’s most common with flats, but some houses are also leasehold. The lease should ensure the common parts of the building, for example the roof, are properly maintained and insured.
Land Registry Official Copies
Available from the Land Registry, these include the information held within the title deeds of a property. The Title Register confirms the address, title number, owner and it can also outline any charges or restrictions on the property. The Title Plan shows the physical extent of the registered property. These documents provide the latest information on every property registered in the UK.
Land Transaction Tax
Paid by the buyer upon completion, the amount of tax is based on the purchase price. The buyer’s lawyer will do all of the paperwork and arrange to pay the tax to HMRC upon completion.
Legal Ombudsman
This is an independent complaint handling service for anyone unhappy with their legal professional. Initially you should complain directly to your solicitor if you are unhappy with the service. If you are unhappy with the outcome then you can contact the Legal Ombudsman.
Limited Title
If the seller has no personal knowledge of the property, for example if a representative is selling a property following the death of the registered owner, then the property is sold with limited title guarantee.
M –
Mortgage Deed
This is the document that charges the property you buy to the lender (bank or building society) as security for their loan. It must be signed by the buyer/borrower and is provided to the Land Registry upon completion in order to register the bank’s charge over the property.
Mortgage Offer
Most property purchasers will be buying with a mortgage. Always check the details of your mortgage offer carefully to ensure you can meet their requirements – the contracts cannot be exchanged until that mortgage offer has been received and accepted.
P –
Property Information Form
All sellers must complete the property information form and submit it to their lawyer. It requests a wide range of important information such as any disputes, legal rights, restrictions, boundaries and so on. You must provide this accurately – failure to do so is misrepresentation and could end up in action being taken against you.
Probate
If you are granted probate then you are given the legal right to deal with someone’s property, money and possessions when they die. If you are the executor of someone’s estate then you’ll need to apply for a grant of probate – you can do this by post or online and it’s advisable to use a solicitor to do this for you. A property can be marketed for sale while you wait for probate to be granted, but it can not exchange or complete until probate is received.
R –
Redemption Statement
This shows the amount that you will need to pay back to your mortgage provider when you sell or re-mortgage your property. Always remember that there may be a charge for early repayment.
Registered Land
This is land that has been registered at the District Land Registry.
S –
Searches
If you’re buying a property your solicitor will request a range of searches to ensure all relevant information about the property is acquired. The searches usually include a local authority search, drainage search and environmental search to understand everything that may impact on the property – from any proposals for new roads to the risk of flooding. Once complete you will be sent a report highlighting the main points to be aware of.
Survey
If you’re buying a property then you should arrange for a surveyor to complete a survey report into the condition of the property. If this highlights any issues then you can arrange for a builder or other tradesperson to assess the problem. Your lawyer can also highlight the issues to the seller’s solicitor if you need to negotiate around them.
T –
Tenants in Common
A property can be owned as tenants in common, meaning that each owner owns a share of the property – these shares can be equal or unequal.
Title
A title to a property is always checked to ensure the seller genuinely owns the property and no problems are associated with it. A Title Absolute is the strongest form of ownership.
Transfer Deed
This document legally transfers the property from the seller to the buyer and when you complete on your sale/purchase it is sent to the buyer’s lawyer along with all of the other paperwork. They will then provide the transfer deed to the Land Registry to ensure the title is updated.
U –
Unregistered Land
This land has not yet been registered with the District Land Registry – often because it hasn’t been sold since it was required to register land in the area. If this is the case with your purchase then your solicitor should register it after you’ve completed.
V –
Vacant Possession
When sold with vacant possession – which most properties are – the seller must have vacated the property before (or on) completion. Nobody can be occupying the property and the seller must clear the property of everything not included in the sale.
W –
Witnessing of Documents
Some documents need an independent person to witness your signature. Normally this should be someone who is not related to you.
We hope this guide has helped. Please feel free to contact us if you’re unsure about the buying or selling process, we’re always happy to help.