Conveyancing Explained

In a bid to reduce property fraud, the Land Registry has introduced “Protect your Property”. The idea is that homeowners, particularly those with no mortgage, are at greater risk of property fraud if the Land Registry can’t contact them when someone makes an application (fraudulently) to register a financial charge against the property. It is also particularly relevant to buy-to-let landlords for the same reason.

You can contact the Land Registry or download the update form from their website at www.landregistry.gov.uk. The service is free of charge.

Do you think your conveyancing solicitor has been negligent? You think that he’s missed something or has given you incorrect information?

Before going any further, you need to contact your conveyancing solicitor and ask that he explain why. There might be issues that you’re not aware of because they are complex legal issues or standard practice. You need to give the person time to explain before you make a complaint.

If after hearing the full explanation, you’re still not satisfied, then you need to find out who the firm’s Complaints Partner is. Ask for a copy of the firm’s Complaints Procedure and follow it. Unless you do this, you cannot proceed any further and it may be that negotiations can resolve this issue before things become unpleasant.

If the Complaints Partner still doesn’t deal with the issue satisfactorily, then you can contact the Legal Complaints Service for advice. They deal with solicitors’ negligence and will listen to what you and your conveyancing solicitor have to say. If they believe that your solicitor was negligent, then they will order the solicitor to resolve it.

You can contact the Legal Complaints Service (and not the Law Society, who no longer deal with client complaints) at http://www.legalcomplaints.org.uk/home.page.

The most common complaints relate to “poor service” i.e. that you were either given incorrect information or not told something that you should have been, or that you were charged much more than you originally expected without being told in advance. All such issues can be investigated fairly by the Legal Complaints Service, but you must go through the Complaints Procedure first.

Don’t be too quick to make an accusation of solicitor negligence – make sure you have the fullest information first.

As I said in my article, “Want a low cost conveyancing service? Are you sure?“, it’s not necessarily just about finding the lowest conveyancing quote. Conveyancing is an important transaction in your life and you need to make sure it’s done properly. You want someone who gives you a good service, is knowledgeable, keeps you updated and explains things in a way you understand.

Are you going to get this from the cheapest conveyancing company? You might, but on balance of probability, it’s not likely. I would be more inclined to see what I thought of the conveyancing firm when I rang them. Did they seem knowledgeable when you asked them questions? Would they explain what the disbursements were and what the process was? Did they offer to let you have the conveyancing quote in writing so that you can see the breakdown of what they are including for you? If the answer to all these questions is yes, then I think you’ve found your conveyancer, provided the price isn’t astronomical!

Don’t be afraid to ask questions. Do they have online case tracking so you can see how far things have progressed when you want to and not just when they’re open? Do they write to clients via email, speeding up the rate at which you can get information about what’s happening? Can they explain a basic outline of what the process is? How quickly can you see or talk to your conveyancing solicitor direct once you’ve instructed them? All these issues can help you make your decision. Don’t just go on price. If you ring a conveyancing firm and they’re unhelpful when they’re trying to get your business, what will they be like when they’ve actually got it?

Make a considered choice with more information than just the cost!

I know when you read my next sentence, you’re unlikely to be impressed. The old maxim “You get what you pay for” applies to a conveyancing service, just like any other.

I know everyone nowadays wants the cheapest deal and that people think solicitors are grossly overpriced in what they charge for fees. That may be true of some solicitors, I’m sure, but if you actually saw the amount of work that your conveyancing solicitor actually does, then I believe you’d be more agreeable to paying a proper fee and not just using a cheap conveyancing service.

I would expect to pay from £300.00 upwards for a conveyancing solicitor’s fees alone. That being said, for a single transaction freehold purchase, I would not expect to pay more than £500.00 for the solicitors’ fees.

Remember that your conveyancing solicitor’s total quotation will also include third party fees, known as “disbursements”. You need to ask when getting a quote what the solicitor’s actual fee is.

On average, I would estimate that a conveyancing solicitor on a freehold purchase transaction, is likely to send and receive at least 40 letters and telephone calls and would spend at least 2 ½ hours working on your file throughout the whole of the transaction. When you look at the amount of work that should be done, you can see that really, conveyancing solicitors don’t actually charge that much in terms of their fee!

I do understand that people want to save money, I’m no different, but if you want a proper job to be done, then you need to pay a reasonable fee to your conveyancing solicitor and not just pick the cheap conveyancing quote. If your solicitor reduces his price too much, then it’s simply not cost effective for him to spend time on your file making sure everything is done properly and you’re more likely to be passed to an unqualified unsupervised fee earner. Corners can be cut, and you could simply end up with more problems in the future.

Obviously there is nothing wrong with wanting to get a good deal but cheap conveyancing companies are not likely to give you all the information you need about your new house because it takes too much time. Ring around your local solicitors by all means but see my separate article on “What to look for when getting a conveyancing quote” before you decide who to go with.

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!

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.

Step 1

Get quotations/estimates from at least three different solicitors, preferably in writing, so that you can compare like for like. If you can, have a chat to the remortgage solicitor, conveyancer or secretary in each firm to get a feel of whether or not you feel confident in instructing them. They should be knowledgeable and interested in your case. A willingness to explain and clarify any queries you have bodes well for the future!

Step 2

Confirm to the remortgage solicitor you want to act on your behalf that you are instructing them. The remortgage solicitor will then open a file and write to you, confirming the terms upon which they will act on your behalf. At the same time, you should get a written breakdown of their costs. They will probably also send you some forms to fill in, to give more information about the transaction. Be aware that at some point, they will need to undertake an identity check on all parties involved in the transaction. The solicitor might do this electronically with your passport number etc. or they might need you to make an appointment to have the ID checked in person. The earlier you arrange this, the earlier your remortgage solicitor can get on with their work!

Step 3

The next stage is really just to wait for your mortgage offer to come through from the new lender. If it seems to be taking a long time, don’t be afraid to pick up the phone and contact your lender or your financial advisor to ask when it’s likely to be available. Your remortgage solicitor can’t get any further with your remortgage without they have received a letter from the mortgage lender confirming that the lender wants them to also act on their behalf in the transaction (this is usual practice). At the same time, the remortgage solicitor will receive a copy of your mortgage offer.

Be aware that the instructions that the new mortgage lender gives to the remortgage solicitor mean that the solicitor is liable for negligence if they do not properly meet the lender’s requirements. This means that the remortgaging solicitor will need to undertake searches (or have you pay for indemnity insurance search policies instead) and investigate the title deeds to make sure that everything is in order. If not, then the new mortgage lender might not be able to sell the property on in the event of a repossession. Although in most cases, you might think “Well I’m not going to be in a repossession position”, that doesn’t matter to the lender or the remortgage solicitor, it still has to be thoroughly checked.

Mortgage instructions might for example contain the following;-

a) “Our valuer has indicated that an extension has been built at the rear of the property and the conveyancer should ensure that all necessary planning consents, building regulation approvals and covenant consents have been obtained.”
b) “The conveyancer is required to ensure that the property will be covered by adequate buildings insurance on completion and should require the borrower to provide a copy of the policy to ensure that it complies with our requirements.”
c) “The conveyancer must ensure that the borrower’s existing mortgage with e.g. Halifax Plc under account number 111111111 is paid off in full on completion.”

This gives you an idea of the sort of enquiries and instructions a remortgage solicitor might be required to deal with. He cannot allow the mortgage to proceed until everything has been checked.

Step 4

Your remortgage solicitor will apply for an up to date copy of your deeds from the Land Registry. Since the Land Registration Act was implemented in 2002, paper deeds are no longer held by the Land Registry, they are all held electronically. That being said, it is worth making sure that you pass to your remortgage solicitor any of the following that you might have in your possession;-

a) Paper title deeds and searches.
b) Planning consents, building regulation approvals and any plans.
c) Shale report.
d) Indemnity insurance policies that may have been taken out when you bought the property.
e) CORGI/FENSA/Electrical Certificates
f) Marriage certificate if the property was bought under a maiden name.

Any documents that your remortgage solicitor asks you to provide or anything that he asks you to sign should be dealt with straightaway if you don’t want to risk unduly delaying your conveyancing remortgage.

Once he has a copy of the up to date deeds, together with any extra documents that might be referred to in them, he will check that there is nothing that might cause him concern. He may ask you to read through a schedule of restrictive covenants to confirm that you have complied with the terms of them. Basically, covenants are in effect, legally binding promises and a restrictive covenant is something that you are not allowed to do, although sometimes consent can be obtained. Examples are that you must not make any alterations or additions to the property without first obtaining the consent of the builder who first erected it, or that you must not keep poultry or more than two animals for breeding purposes on the property. If you have breached any of the restrictive covenants, then all is not lost. You can usually either obtain indemnity insurance or retrospective consent. Your remortgage solicitor can advise you on this.

Step 5

Your remortgage solicitor will obtain a redemption statement from your existing mortgage lender. This is different to the monthly statement stating how much you owe, because it takes into account extra fees such as early redemption fees or administration fees. The remortgage solicitor needs to make sure that the loan that you are getting is sufficient to pay off the existing mortgage. If it’s not, he is going to need money from you to make up the balance before completion can go ahead.

Step 6

You will need to at this stage, sign the Mortgage Deed. This is completely separate to any acceptance form for the loan that you might have sent off to the lender. The remortgage solicitor will prepare the Deed and either send it to you or ask you to make an appointment to come in and sign it. If the remortgage solicitor does not have the signed Mortgage Deed, then he cannot send off for the remortgage loan monies so it’s in your interest to ensure that you do this quickly! At the same time, you should sign a document in respect of Stamp Duty Land Tax, confirming that no payment is due to the Inland Revenue because this is a conveyancing remortgage and not a purchase.

Step 7

Once he is happy with everything, your remortgage solicitor then sends a Certificate of Title to your new mortgage lender. Basically, this confirms that he has checked everything, is happy and is requesting the remortgage monies. A completion date can be set, an up to date redemption figure for the existing mortgage obtained dated at the completion date and a statement sent to you. This should set out what will be paid to you after completion, once the existing mortgage is paid off and the remortgage solicitor’s fees paid.

Bear in mind that different mortgage lenders take different amounts of time to send over the mortgage loan. Some can do so overnight, others require 5-7 working days’ notice. The reasons why it varies so much are unclear, even to me and I deal with lenders every day. It’s worth checking with your remortgage solicitor how much notice your particular lender will need, because this will affect the proposed completion date.

At this stage, the remortgage solicitor will undertake a Bankruptcy Search (required by the new mortgage lender) to make sure that no parties (i.e. you) in the transaction have been made bankrupt. He will also send a Land Charge Search to the Land Registry, which makes sure that you have not had any further financial charges added to the property in favour of any other financial institution since the date that the remortgage solicitor obtained a copy of the Land Registry’s electronic register showing your deeds.

Step 8

On the day of completion, the remortgage loan monies will be transferred into the remortgage solicitor’s client account. He will then use it to pay off your existing mortgage. Once the old mortgage lender has confirmed that they have received the money and the account is clear, (and this could be the next day, or a couple of days later), the remortgage solicitor should then account to you for any remaining monies. There’s nothing really for you to do at this stage, except ensure that you receive your money and any interest due to you – see my separate article on “Solicitors holding clients money – is interest due?”

Step 9

The remortgage solicitor will receive written notification from your old mortgage lender that they accept that they have received the money due to them and that their legal charge registered on the deeds against your property can be removed. The remortgage solicitor can then make an application to the Land Registry, requesting that the old mortgage charge is removed and the new one registered.

The remortgage solicitor will then receive a new copy of the electronic register held by the Land Registry, showing the new mortgage lender as having a legal charge registered against the property. He will then provide a copy of this to you and to the new mortgage lender. The remortgage solicitor can then close his file and send any leftover documentation back to you.