Conveyancing Explained

Whether contained in the Home Information Pack or whether undertaken independently, the Local Land Charge Search will reveal any planning permissions and building regulation approvals granted in relation to the property. Your solicitor needs to check that there have been no breaches of any permissions or approvals that might leave you open to enforcement action in the future

If the permissions are dated within the last four years, then the terms of them are still enforceable by the Council if a breach has taken place; however, if a period of four years has elapsed, then breach of planning permission is no longer enforceable. This is because after this period of time, any action by the Council is statute barred.

So, if you’re buying a property and you’re asked to pay for copy planning permissions to be obtained, they only need to be provided if they’re dated less than four years ago and usually, they would be provided by the seller. That’s assuming of course that the seller hasn’t refused to pay for them, which does happen.

The time period may not apply in relation to building regulation approvals and completion certificates however. Due to the findings of a case called Cottingham v Attey Bower & Jones (2000), solicitors should always ask for and obtain copies of the building regulation approvals and completion certificates (if cc’s were granted by that Council at that time). Breaches of building regulations can be enforced via an injunction under Section 36(6) of the Building Act 1984 and therefore, the Council can take action at any time, (although usually a period in excess of ten years expired is seen as satisfactory by mortgage lenders if no action has been taken), for works undertaken since 1985.  Prior to that, building regulation breaches cannot be enforced.

If the building regulation approvals cannot be provided by the seller, then they should be obtained through the local Council. Depending on the age of the documents, you might be able to get copies via the Planning Portal, which now enables people to access planning permissions and building regulation approvals relating to any property, online. You can’t always get them if they’re older documents though.

Please note that a building regulation approval is issued at the start of the building works when plans etc have been checked. A completion certificate is a more recent document that is issued by the building control officer once the work has been completed satisfactorily following his inspection.

If the documents cannot be provided, then indemnity insurance should be obtained by the solicitor to protect both you and if relevant, your mortgage lender.

If your solicitor has told you that you need one of these policies, it’s either because;-

1) He is protecting your interests if you are buying without a mortgage.

2) He is protecting both the interests of you and your mortgage lender, if you are buying with a mortgage.

If option 2) is relevant to you, then it’s unlikely that you have any choice in the matter. The mortgage lender will not allow the conveyancing solicitor to proceed to get your mortgage monies without the relevant policy is in place, protecting the mortgage lender’s security.

It is unlikely that your conveyancing solicitor benefits in any way by recommending policies to you. To my knowledge, it’s not something that the solicitor makes any money from, the money is just a third party fee (known as a disbursement) paid direct to the insurance company on completion.  Solicitors usually use the cheapest insurers offering the best cover, or they should do if they want to offer a good service to their clients.  Some I suppose may receive an incentive from the insurer for passing clients to them but if this is the case, then the solicitor is duty bound to inform you, so check the small print.  If this is the case, then ask for alternative quotes, because you may find a cheaper supplier.

If your seller refuses to provide a policy for something that’s wrong at the property, then you can either pull out of the transaction, threaten to do so and see what the result is, or bite the bullet and pay for the policy yourself. Unfortunately, some sellers point blank refuse to pay for policies, even though those policies are required due to something that the seller has done. In my view, this is completely unreasonable but as explained above, your conveyancing solicitor can’t actually proceed if you’re getting a mortgage without the policy is in place. It’s therefore up to you as to how you want to proceed.

It’s worth asking your conveyancing solicitor whether or not they obtain their indemnity insurance policies online. I get mine through a company called Legal & Contingency Limited. Their online policies are actually quite a bit cheaper than the paper ones, I recently managed to save my client over £50.00 on two policies by getting them online. Otherwise, the conveyancing solicitor basically has a file of sample policies, called “instant issue policies” which they just write out, and then send the cheque to the insurance company.

Before issuing the policy however, you should see a copy of the proposed policy, its terms and the quotation as to cost.  I always provide these documents to my clients for them to look through before we go ahead and instruct Legal & Contingency.  GCS and Norwich Union also offer such policies; however in my experience, they are more expensive, even when obtained online.

The Solicitors’ Disciplinary Tribunal recently found in a case brought to them that solicitors must specify clearly to you when preparing your bill, what they are actually paying out on your behalf for a bank charge and what they are charging for “organising the transfer”. In my view, no admin charge should be made, seeing as the work required is minimal and should form part of the conveyancing process.

If a solicitor is charging you more than the direct cost to them, plus VAT, they must make it clear to you that the excess is a charge by the solicitor and not an expense.

The recent decision by the SDT involved a case in which a firm of solicitors charged clients £30 plus VAT for telegraphic transfers. The actual cost in bank charges to the solicitors was £10 for each TT (a TT or telegraphic transfer is just a same day electronic payment from account to account). The remaining £20 represented profit for the solicitors, to reflect the work they did in organising the transfer; they billed their clients for a “disbursement” of £30, without making it clear how that figure was calculated. It is my view on speaking to clients that many other solicitors, certainly in my area, have done the same.

The SDT found that the solicitors had attempted to deceive their clients. This was a breach of their obligation to act with integrity (under rule 1 of the Code of Conduct to which all solicitors must comply) and of their duty to give clear information about costs (rule 2 C of C). The partners of the firm were fined £1500 each.

The same principle applies to fees for undertaking Money Laundering electronic identification check (EID). Some firms charge their clients more than the EID costs the firm. They cannot do so without making this clear to the client.

If you find yourself in any way unclear regarding disbursements, always bear in mind that you have the right to ask how the figure is calculated and whether it represents exactly the fee charged to the firm by the relevant third party.

Any breach of the Solicitors’ Regulation Authority Code of Conduct is treated very seriously and you would be entitled to make a complaint if you find yourself being deceived in the way described above.

Yet another thing to be aware of regarding solicitors’ costs!

As you may be aware, due to the current market difficulties, the Government announced on 3rd September 2008 that for one year, the stamp duty land tax threshold would be increased from £125,000.00 to £175,000.00.

This means that if you are buying a property for £175,000.00 or less and you complete the transaction before 2nd September 2009, you will be exempt from the requirement to pay stamp duty land tax.

On current information, it appears that on 2nd September 2009, the SDLT bands will revert to the usual thresholds i.e. £125,000.00 or less = no duty, £125,001.00 to £250,000.00 = 1%, £250,001.00 to £500,000.00 = 3%, £500,000.00 plus = 4%.

Obviously every transaction is different, but this article gives you an idea of what your conveyancing solicitor has to check to protect you and the mortgage lender;-

1. That the sellers are the legal owners of the property and as such, they have the right to sell it to you. If for any reason the sellers’ details are different in the contract supplied by the sellers’ solicitors from those contained in the actual deeds to the property, then your conveyancing solicitor will need to see proof that the sellers are actually entitled to sell it to you. For example, if the owner registered in the deeds is now deceased and the Personal Representatives of the Estate (i.e. the deceased person’s Executors under the terms of the Will or if no Will was written, the family member entitled to inherit the Estate) are the persons selling the property, then a copy of the Grant of Probate (where there is a Will) or Letters of Administration (where there is no Will) must be produced to your conveyancing solicitor. If this is not already in place, then it can be a very time consuming process.

2. You may have certain rights or obligations (”covenants”) to which you will be bound because they are attached to the property by means of the contents of the deeds and these rights or obligations will be explained by your conveyancing solicitor. The solicitor will check that rights, such as of way or access exist where necessary. Any defect in the title will have to be put right before you proceed and the seller is usually the one who must pay for this.

3. The Land Registry do not usually define the precise boundaries of the property on the plan which they provide and in all cases, your conveyancing solicitor should provide you with a copy of the plan so that you can visit the property and check as far as you are able, that the plan supplied corresponds with the land that you believe you are buying as part of the transaction. If it does not, then you must let your conveyancing solicitor know straight away so that he can take this up with the seller’s solicitor.

Make sure you keep the following items handy;-

Kettle
Milk
Tea/Coffee
Sugar
Cups
Snacks
Bedding/Towels
Scissors
Toiletries
Money
Toilet roll
Light bulbs
Small tool kit
Lighter
Pen & Paper
Items of cutlery/crockery e.g. plates, tin opener, corkscrew, knife, fork, spoon
Keys, car etc.
First Aid Kit
Pet Food
Bottle of Champagne & glasses!

Final Preparations before you leave;-

Defrost the fridge/freezer
Last minute clean-up
Remove all rubbish from the property
Have all personal possessions to hand
Make arrangements for your pets
Get directions to your new property
Check with neighbours that they agree to large removal vans parking outside the properties
Find all keys for doors/window locks etc
Ensure meter readings have been taken
Ensure that all keys have been returned by friends/relatives holding them on your behalf.
Ensure that you leave any instruction/operating manuals

Use the checklist below to ensure that all organisations are aware of your new address;-

Who to Inform;-

Employer

School

Doctor

Dentist

Bank

Electoral Register

Building Society

Credit Card companies

Home/contents insurance company

Mobile phone insurance company

Life insurance company

Pet insurance company

Petlog (if your pet is microchipped)
08706066751

Car insurance company

Share registrars

Rental companies

TV Licensing Authority
08705 246 246

Post Office – mail redirection

Gas company

Water company

Electricity company

Phone company

Satellite/Cable provider

Internet service provider

Inland Revenue

National Insurance Office
0191 213 5000

Council Tax office

Driving Licence Centre (DVLA)
Car registration and driving licence
0870 240 0009

Breakdown assistance

Opticians

Subscriptions (magazines, charities etc)

Mail Order companies

Sports & Social clubs

Pension Companies

Savings/Bonds

Club cards – Boots/Tescos/Sainsburys etc.

Private Healthcare

Library

Milk delivery/Newspapers

Unions

Solicitor holding any deeds/wills

Accountant

Vet

I use this document to send to my clients to explain some of the terms that they might hear during a conveyancing transaction. I hope it will be of help to readers too.

Agreement – Another word for Contract (see below).

Bankruptcy Search – A search made by us to check whether a buyer or a borrower has been, is or is about to be declared bankrupt. This search is always required by the mortgage lender.

Borrower – The person taking out a loan or mortgage on a property that they own, also known as the Mortgagor.

Boundaries – The boundaries define the extent of the property and are usually marked out on the ground by fencing or hedging.  Boundaries are often, although not always, shown on the Land Registry plan.

Chain – These are the property buyers and sellers that link together to make the chain for your particular sale or purchase.  The chain may consist of only two people i.e. you as buyer and the person you are buying from as seller or it may consist of several buyers and sellers.  The beginning of the chain usually starts with a first time buyer or a buyer with nothing to sell and the end of the chain usually ends with a seller who is buying a brand new home or who is not buying another property.  Your sale or purchase can only proceed at the same pace as everyone in the chain, unless someone agrees to break the chain and usually move in with friends or family whilst the rest of the chain catches up. 

Completion Date – This is the date when the purchase becomes final and the Purchase Price is paid by the buyer’s Solicitor to the seller’s Solicitor.  The seller must move out of the property on this date. The keys are released to the buyer and they may move into the property.

Conditions of Sale – The conditions of the sale are detailed in the Contract that the seller’s Solicitor prepares and sends to the buyer’s Solicitor.  There are standard conditions set out by the Law Society, to which the seller’s Solicitor may add any Special Conditions.

Contract – The legal document that confirms the sale/purchase of the property. This is prepared in draft by the seller’s Solicitor and sent to the buyer’s Solicitor.  The buyer’s Solicitor then approves the contract and an identical copy is signed by each of the parties. It is then held by each Solicitor until their client is ready to proceed to exchange contracts.

Conveyancing – The legal description for the work that is done to transfer ownership of a property from one person to another. 

Conveyance – This is the old fashioned name for the document that transfers a property from one person to another.  Conveyances are rarely used nowadays and property is usually transferred by a Transfer Deed.

Covenants/Restrictive Covenants – These are obligations/restrictions that are attached to the property and would be legally binding upon the purchaser of the property, should they decide to proceed.  Think of it as a legally binding promise either to do or not do something. For instance there may be an obligation to maintain a fence or boundary which is a positive covenant. A restrictive covenant would be not to make any alterations or additions to the property without the prior consent of the original developer.

Defective title insurance – A defective title means that there is a problem with the deeds relating to the property. For example they could be missing, destroyed, lost or simply inadequate in terms that rights or restrictions that should appear are missing. A buyer will not usually buy a property with a defective title unless the seller provides him with an indemnity insurance policy to protect him and the mortgage lender against possible financial loss as a result of the defect.

Deposit – There are two types of deposit that you may be asked to produce.  Sometimes the estate agent will ask for a “Goodwill” Deposit to secure the property. You should not pay this deposit without first consulting with your Solicitor.  The second type of deposit is the one which the purchaser will pay to the Solicitor to hand over with the Contract. Traditionally this is 10% of the purchase price but often less than this is accepted and nil deposits can sometimes be agreed.

Disbursements – This means fees that the conveyancing solicitor must pay to other companies on your behalf.  Typically these are indemnity insurance policies, Stamp Duty Land Tax, Land Registry fees and searches. Obviously these payments are separate to fees for dealing with the transaction on your behalf.

Easement – This term means a right given to the property owner over adjoining property or land i.e. a right of way or access, a right to drainage etc. Sellers must disclose all “Latent” Easements but not “Patent” Easements to the buyers.  Latent Easements are those that cannot not be discovered by search or survey, in other words they are not easily found out.  Patent Easements are easements that can be discovered upon inspection or investigation of the property.

Equity – This is the value of the property that is left over taking into account its current worth and deducting from that any mortgages or financial charges outstanding on the property.

Exchange of Contracts – The buyer’s Solicitor and the seller’s Solicitor “Exchange Contracts” on the telephone.  If there is a chain, the solicitors for everybody in the whole chain “exchange contracts” at the same time using a Law Society formula.  Basically this means that they agree verbally that they have a contract signed by their clients and that the terms of each contract are the same. Once contracts are exchanged, the sale/purchase is legally binding on each party to the transaction and the completion date is fixed. At this stage, the deposit is also paid.

Financial Advisor – The Financial Advisor is usually responsible for arranging the mortgage or finance to purchase the property and will often arrange any life insurance, mortgage protection insurance etc.

Freehold – This is the legal term for the way that an owner holds the property.  The other terms are Leasehold and Commonhold.  With freehold land, the owner owns the property/land outright, subject to any mortgages, charges, easements, covenants etc. shown by the deeds.

Gazumping – This is where the seller sells to another buyer for a higher price.  This can only happen before exchange of contracts.

Gazundering – This is where the buyer lowers his offer on the property after agreeing a price.  This can only happen before exchange of contracts.

Ground Rent – This is the annual rent paid to the Landlord, usually on a Leasehold property where there is a long lease.  It can be as little as a peppercorn, the legal equivalent of “nil”. Ground Rents are payable on some freeholds, although this is now rare.

Joint Tenants – Where two or more persons buy a property, they are called joint tenants or tenants in common, whether the property is freehold, commonhold or leasehold. Where a property is held as a joint tenancy, if one owner dies the property passes to the other owner automatically without a Will.  If the property is held as Tenants in Common, each buyer owns their own share of the property which can only be passed on by sale or by a Will. (See my separate article on this for more information.)

Leasehold – A Leasehold property means that the owner does not own the property or land outright.  There is a lease which for a term of years grants the owner the right to occupy the property/land.  There may be a rent or a ground rent to pay to the Landlord.

Lender – The Bank or Building Society who lend money to property owners, sometimes also known as the Mortgagee.

Listed Buildings – Listed Buildings are protected by the Local Authority. Properties that are listed are subject to planning/development restrictions and you will have to obtain special consent to make alterations or additions to the property from the Council.

Management Company – If the property is leasehold, there will often be a management company set up to deal with the day to day running of the property and repairs and renewals.  The management company collect the service charge to pay for their services and for the upkeep and maintenance of the building.

Mortgage Deed – This is the document the borrower signs to agree to the terms set out in the Mortgage Offer.  This document is sent to the Land Registry who register the Mortgage as a Financial Charge on the property which is shown in the Charges Register.

Mortgage Offer – A written offer to lend money on a property.  The Mortgage Offer will contain all the terms of the Loan and the conditions upon which the money is loaned.

Mortgage Valuation Fee – The borrower generally pays a fee to the Lender to have the property valued for mortgage purposes.  This enables the Lender to take a commercial view on whether the property is worth what the borrower says it is and whether it is suitable security for the Mortgage.  The Mortgage Valuer will not necessarily inspect the physical condition of the property and you should always consider at least paying for a Home Buyer’s Report. The valuation report is not undertaken for or to protect you, only the lender’s security.

New Build – Where a property is being purchased for the first time from the Builder or Developer.

Off Plan – Where a property is being bought at the planning stage and is yet to be built. A detailed site map often available for viewing at a site office.

Overriding Interests – Not all matters affecting property are registered or capable of being registered at the Land Registry.  Nonetheless the property is still subject to such matters.

Pre Contract Enquiries – This is a set of questions that is sent to the seller’s Solicitor by the buyer’s Solicitor relating to the property. Typically these questions will consist of enquiries relating to boundaries, easements, persons living at the property etc.

Property Information Forms – These are standard forms completed by the seller giving details about the property.  The form is legally binding on the seller and you should be very careful when completing it. If any of your answers change before exchange of contracts, you must let your conveyancing solicitor know straight away or the buyer could sue you for breach of contract (the replies given in the form effectively are part of the contract).

Redeeming Your Mortgage – When a property owner pays back the mortgage on the property, it is known as “redeeming the mortgage”.  You will first need to get a statement of what is owed which is called a Redemption Statement.  If you are paying the loan back early you may be charged a Early Repayment Fee.

Seller – This is the person selling the property sometimes also known as the Vendor.

Stamp Duty – This is the tax payable on the purchase of a property, based on the purchase price and the annual rent, if applicable.

Stamp Duty Exempt/Disadvantaged area relief – Some types of purchase or transfer of land are exempt from Stamp Duty Land Tax.  The Government has designated certain areas as exempt. 

Subject to Contract – Before Exchange of Contracts (see above) all negotiations relating to the property are subject to contract. This means they are not binding unless contracts are actually exchanged. Your conveyancing solicitor will not exchange contracts on your behalf without your express confirmation that you wish him to do so.

Surveyor – The person who is responsible for surveying the property, who will usually be a member of the Royal Institute of Chartered Surveyors (RICS).

Tenants in Common – See Joint Tenants above.

Transfer Deed – This is the legal document that transfers the legal ownership of the property from the seller to the buyer.

If you’ve bought a property as tenants in common (see my separate article) then in addition to a Declaration of Trust signed by both parties, you should also both consider making a Will. This is because the rule of survivorship does not apply to a tenancy in common i.e. your share in the property will not automatically pass to the other owner if you do pass away and vice versa.

Your conveyancing solicitor can advise you on the individual cost of making a Will, expect to pay between 50-150 pounds depending upon where you live. Generally speaking, the further North you are, the cheaper the costs will be!

New regulations apply to replacement windows and doors installed since 1st April 2002. Basically, all replacement windows, rooflights, roof windows and glazed doors (more than 50% glass) will have to comply with the FENSA Regulations/new Building Regulations.

Either a FENSA Certificate or Building Regulation Approval/Completion Certificate should be available.

If you’re buying, you need to ask the seller whether there are any such replacements. If so, do they have a FENSA Certificate/Building Regulation Approval? Whatever their answer, tell your conveyancing solicitor, as this document is now required by law. The solicitor can ensure that it is available and that you will get the original Certificate on completion. If it is not available, then remedies such as indemnity insurance or retrospective building regulation aproval can be obtained.

If you’re selling a property and you’ve recently had replacements made, then find your Certificate, because the buyer’s solicitor is bound to ask for it. If you had a FENSA Certificate and you’ve lost it, a replacement can be obtained from the FENSA website at a cost of 10 pounds. Obtaining this sooner rather than later will avoid delays in exchange of contracts. If you didn’t get a FENSA Certificate or Building Regulation Approval, then you need to make sure that you tell your conveyancing solicitor. As indicated above, it is usually possible for you to either pay for an insurance policy to cover the buyer or to contact the Council for retrospective building regulation approval. If you use the latter option though, be aware that if retrospective approval is refused, you cannot then get insurance, because the insurance company will consider the Council as being notified of the breach and therefore likely to take enforcement action against you.

You can find more information from the Building Control Department of your local Council or by visiting www.fensa.co.uk.