11 June, 2019
A guide to the jargon used in the legal process of buying and selling property
Moving home is stressful enough without having to spend time deciphering what exactly your lawyer is telling you.
However well they communicate with you, there are certain terms that all professionals involved in the process will use so frequently that they may forget to tell you what they mean. Here is a guide to the most common terms and what they mean.
Conveyancing: The legal and administrative process of buying or selling land or property.
Conveyance: A name often given to the document by which the property is formally transferred (also known as a transfer or deed of transfer).
Freehold: Complete ownership of the land with no time limitation on that ownership.
Leasehold: The land is owned by the freeholder and the buyer buys the right to occupy it for a certain period of time – often decades or even hundreds of years – in a lease.
Ground rent: A usually annual regular payment that the leaseholder must make to the freeholder. The amount of the payment and when it must be paid (and to whom) will be set out in the lease. Be sure that you understand how any ground rent might increase over time so that you know you will be able to afford it in future.
(Title) Deeds: The formal documents that show who owns the land.
Registered/Unregistered land: Most land in England and Wales is registered electronically with the HM Land Registry, a government body. Its electronic register is definitive evidence of who owns a piece of land, its extent (through the title plan) and anyone else with an interest in it, such as a mortgage lender.
Around 15% of land is not yet registered (because it has not been sold for a long time), but there is still usually evidence available via the title deeds as to who owns it. Unregistered land will have paper title deeds and is usually more complicated to buy, so the process can take a little longer and it will usually need to be registered.
Covenant: A legally binding obligation attached to the title to do or not do an action – a positive covenant may require you to contribute to the maintenance of a shared driveway, for example, while a negative covenant prevents you from doing something such as running a business from it or building another structure.
Caveat emptor: Latin for ‘Let the buyer beware’ – essentially, whilst the seller cannot lie about the property, it’s up to the buyer to check what they are buying by making their own investigations, e.g. through a survey, searches or physical inspection.
Property information form: A form the seller must complete with information about the property, such as boundaries, neighbours, work done, services and guarantees.
Chattels: Individual, moveable items – such as beds and tables – that are not part of the sale price unless otherwise agreed.
Fixtures and fittings: Items that have been fixed or fitted to the property – such as lights and bathroom suites – which are included in the sale.
Searches: The buyer’s conveyancer should organise a series of searches with organisations that have information about the property you are buying, such as the local council, local water authority or coal mining authority. These are vital to ensure the buyer knows what exactly it is they are buying.
Subject to contract: Negotiations are ongoing, but nothing has been legally agreed.
Exchange of contracts: This is the moment the buyer and seller legally agree the sale of the property and a deposit is paid. After this date neither party can back out of the agreement without consequences. A completion date is agreed as part of this process.
Completion: The moment when the transfer of ownership and remaining payment for the property are formally completed. This is the day that keys are exchanged and the purchaser moves into the property.
Disbursement: A cost that your conveyancer incurs as part of the process, such as Land Registry and search fees, which are passed on to the buyer.
Joint tenants/Tenants in common: If two or more people are going to be the legal owners of the property, there are two ways they can own it. As joint tenants, they all own it indivisibly; if one dies, then the other(s) continue to own it and there is no transfer of ownership that would be subject to inheritance tax.
Tenants in common (despite the name, it has nothing to do with being a tenant) means that each person owns a specific agreed proportion of the property, meaning they can sell their interest in the property if they wish; on death, that proportion forms part of their estate. Where one person contributes a lot more of the purchase price than the other(s), being tenants in common is a way to reflect that.
The important thing in any property transaction is to make sure you understand what you are signing for or being told. If you don’t understand, be sure to ask your conveyancer to explain it for you, it is their job to help you through the purchase of your property.
This article first appeared in What Mortgage