Conveyancing Jargon Translated

Chain

This describes where a person who is selling a property is also buying another one. There is a series of transactions dependent upon each other eg. A sells to B who is selling to C.

Cleared Funds

These are monies which have cleared in the Firm’s client account so they can be transferred on by way of telegraphic transfer through the banking system.

Completion Date

This is the date when legal title passes from seller to buyer and people move. It is not fixed until exchange of contracts. Purchase monies are paid over to the seller in return for the keys being released to the buyer.

Completion Statement

This is a financial breakdown of the costs involved in your property transaction

Contract

This is the agreement for sale drawn up the sellers’ solicitors which includes all the agreed terms for the sale. It gives details of the buyer and seller, the property address and the sale price. It is in two identical parts one of which is signed by the buyer and one by the seller

Deposit

This is the sum of money paid by the buyer to the seller’s solicitors on exchange of contracts. The Contract will usually state the deposit to be 10% of the purchase price but a smaller deposit may be accepted

Equity

The difference between the current value of the property and the outstanding mortgage loan secured on it

Exchange of Contracts

This is the point at which the matter becomes legally binding and neither party can pull out without financial penalties.

Freehold Title

This indicates ownership of both the land and the property standing on it. Not normally available for flats.

Ground Rent

Annual charge payable by the leaseholder to freeholder.

Indemnity Policy

This is an insurance policy which is taken out to protect the insured against some defect in the title. There is usually a one off payment to provide cover for a term (generally 25 years).

Land Registry

Government Department which deals with registration of property and holds records of ownership for every piece of land/property which has been registered.

Leasehold Title

This indicates ownership of the property but not the land it stands on, for a defined period of time, subject to payment of ground rent and compliance with covenants and regulations contained in the lease. This type of title applies to nearly all flats and some houses.

Management Company

There is generally a Management Company who deals with service charges and ground rent collection in blocks of flats. They will by appointed by the freeholder and will charge for their services.

Mortgage

This is a loan (sometimes called a “Legal Charge”) which is secured against the property. The effect of this is that the property cannot change ownership without the loan being repaid. The lender has the right to repossess and sell the property if the borrower fails to make loan repayments.

Mortgage Offer

This is the official document issued by the lender which confirms that it is prepared to lend money for the purchase of the particular property. It sets out the amount being borrowed to fund the purchase together with the terms such as how long the loan will be for and what interest will be charged by the lender.

Restrictive Covenants

These are legal rules which are binding on the property and the owners. If they are broken then the owner could be held liable for their breach and suffer loss as a consequence. Eg. A restriction which forbids any extension without the consent of a particular person would be breached if the property owner erected a conservatory without getting the necessary consent.

Redemption Penalty

Charge made by lender for paying off the mortgage before the expected end date.

Searches

The most common searches are detailed below:

  • Local – requests information from the local authority about the property being bought such as planning entries or whether there are any financial charges – it does not reveal information about the surrounding area
  • Mining – request to the Coal Board for details of any underground workings which might cause damage to the property – it will reveal whether there are mine shafts nearby or whether any subsidence claims have been made
  • Environmental – checks to see if contaminated land or whether the property is at risk of environmental issues eg flooding
  • Drainage – reveals whether the property is on mains water and drains
  • Land Registry – checks to see nothing has been changed on the register since the official copies were obtained and freezes the register for a priority period to allow the buyer to submit their registration application
  • Bankruptcy – search against buyer’s name when a mortgage is involved as it is an offence for a bankrupt to obtain credit

Stamp Duty Land Tax

This is a government tax on transfers of land and property and is calculated as a percentage of the purchase price paid. It is payable by the buyer on completion of their purchase. Properties sold for less than £125,000 do not attract this tax. Those costing between £125,000 and £250,000 attract a 1% tax. Houses bought for between £250,000 and £500,000 attract 3% and all properties over £500,000 will be subject to 4% tax and 5% payable on purchases over £1,000,000. In each case the tax is payable on the whole purchase price (not just the part over the previous band limit). There is also a stamp duty holiday for qualifying first time buyers purchasing under £250,000.

There are some properties which are exempt up to a purchase price of £150,000 where they are located in an area designated by the Government as “disadvantaged”.

Stamp Duty Land Transaction Return

This is required for all property transactions regardless of whether any Stamp Duty Land Tax is due. There is a multi page tax return which must be submitted to the Inland Revenue within 30 days of completion of a purchase otherwise penalties are payable.

Survey

This is an inspection of the property made by a surveyor which will reveal information about the structure and condition of the property. There are different levels of survey such as Home Buyer and Full Structural which will differ in the extent of detail they reveal about a property.

Transfer Deed

This is the deed which actually changes the ownership of the property from seller to buyer when it is lodged at the Land Registry.

Valuation

This is a superficial check made by the mortgage lender to see whether the property is worth the sum they are intending to lend on it.

Vendor

This is another term for the seller of the property.

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