Understanding the Legal Jargon of Conveyancing…Part 1
When I meet with clients they often tell me that they struggle to understand the legal jargon they hear when they’re moving house. To help, I’ve created a jargon buster of conveyancing…
A
Agreement (or Contract)
This is a document which sets out the agreement reached between the seller and the buyer. It confirms details of seller and buyer such as: the property address, sale price, any fittings/ contents and the completion date.
Assent
A document which is prepared following the death of the property owner. This transfers the property into the name of the beneficiary (the person entitled to receive the property under the deceased owner’s Will or Intestacy).
B
Beneficial Interest
The term ‘owner’ in relation to property is generally understood to mean the legal owner. It is the legal owner that is recorded on the Land Registry records (Title Deeds). The beneficial interest refers to who is entitled to the benefit from the income, arising from a property (rent); or the sale proceeds (the money). The legal owner and the beneficial owner can be different people, and the beneficial interest in the money can be split into equal or unequal shares.
Breach of Contract (or default)
This happens when contracts have exchanged, and the seller or buyer is unable to/ refuses to complete on the completion date. The person in default will be in breach of contract and the non-defaulting party is entitled to seek compensation or rescind the contract. The standard conditions of sale deal with default and the contract will also set out the contract rate which is the daily rate of interest payable by the defaulting party.
Broker (mortgage broker/financial adviser)
This is the person who advises you and arranges your mortgage. They will arrange for your lender to forward the mortgage offer to yourself and your Conveyancer.
Building Insurance
This is the policy that will cover you against the risk of the property being damaged by fire, storm, flood etc. The contract obliges the buyer to insure the “building” from exchange of contracts. Although, if you are buying a leasehold property, insurance is usually arranged by the landlord or managing agent and they will provide a copy of the policy to your Conveyancer.
Buy to Let Purchase
This is when you are buying a property which you do not intend to live in but intend to rent it out to an unrelated person. For instance, private tenants usually on an Assured Shorthold Tenancy(AST).
C
Caveat Emptor (or “Buyer Beware”)
As a buyer it is your responsibility to make all reasonable enquiries and investigations to satisfy yourself as to the condition of the property before Exchange of Contracts . This may include surveys, specialist reports or further inspections. For example, you may wish to have the gas, electrics and drainage checked to ensure that these are satisfactory with no costly remedial works.
Client Care Letter
This is the initial letter sent by your Conveyancer which sets out their terms and conditions of business. It will detail what services will be provided, what is not included, a breakdown of the costs and other important details such as their insurance details and complaints procedure etc.
Completion Date
The date when ownership of the property passes from the seller to the buyer. On the completion date, the seller is obliged to move out of the property and the buyer gets the keys.
Contract Rate
The contract rate is specified in the contract. This is the daily rate of interest payable by the defaulting party in the event of a breach of contract. It usually refers to the Law Society Interest Rate, but can also refer to a rate which is a percentage above the base rate of a particular high street bank.
Covenants (restrictive or personal covenants)
A covenant is a promise or a legal obligation in a deed. It will often mean a restriction on the way you can use your home. For example “no trade or business”, or not to cause a nuisance to neighbours. Sometimes covenants can relate to obligations such as the repair of drains and fences. These obligations, restrictions, or rules pass with the property. Therefore, we must make sure that a seller has complied with their obligations and if you are a buyer, you will need to know what the covenants are so that you can follow them from completion.
Conveyancing
Conveyancing is the name for the legal process of transferring property title from one party to another. A Conveyancer is the name for a property lawyer that is carrying out the Conveyancing transaction.
E
Exchange of Contracts/Exchanged
When the sale and purchase are ready and a completion date agreed exchange of contracts will take place which will ensure the transaction becomes legally binding. Both the seller and buyer are legally committed into selling and buying to one another. If either party do not complete after contracts have been exchanged then this is a Breach of Contract.
F
Freehold
This is one type of way a property can be owned. When buying a freehold property, you are buying the whole house and the land the property sits on.
L
Leasehold
This is a second type of way a property can be owned. When buying a leasehold property, the freeholder will own the land on which the building sits. They will grant a lease to you and this will be for a set amount of years (known as a ‘term’). Therefore, you are granted a right to occupy the property for a certain amount of time with set regulations (see ‘lease’). As the lease term decreases, the valuation of the property may decrease. However, the lease term can be extended by way of a ‘lease extension’.
Lease
This is the agreement between the freeholder and the leaseholder. This sets out rights that the freeholder is granting to the leaseholder over the property. It includes what costs the leaseholder is to pay (such as ground rent/service charge) and what covenants the freeholder wishes the leaseholder to comply with. This is an extremely detailed document and your Conveyancer will advise you on the terms.
Leasehold Pack
A leasehold information pack contains all of the relevant information related to a property that is being purchased on a leasehold basis and is obtained from the managing agents/management company. This includes information about ground rents and management companies involved with managing the communal areas. It includes details of the Service Charge, Ground Rent, Insurance Policy, previous years’ Accounts etc. You Conveyancer will peruse this information and advise you what you are to pay for the property post Completion.
M
Management Pack
Similar to a Leasehold Pack but this is information obtained where a Freehold property is being sold that has a service charge/management charge attached. This is usual in new build properties where there are service charges collected for the communal areas.
How Can Timms Help?
If you would like further information or are unsure about the legal jargon used, please contact your conveyancer.
To obtain a conveyancing quote, please contact myself or one of the team on freephone 0800 011 6666. Alternatively, you can use our online conveyancing calculator at https://www.timms-law.com/conveyancing/.
January 2024