Conveyancing terms explained: From encumbrance to redemption
If you’re in the process of buying a property, you’re probably running into some terms used by industry professionals which you might not be familiar with.
Now, with the help of Stephen Ward, Director of Strategy at the Council for Licensed Conveyancers, we’ve come up with another selection to help you navigate the property buying process.
What are you buying?
The physical limits of your property, often defined by hedges, fences and walls. The exact boundary between properties is not laid down anywhere, but there are various presumptions in law as to where it is and who is responsible for it should a dispute between neighbours arise.
For example, the cost of putting up or repairing fences should normally be shared between both sides, but if it is supported by upright posts on one side, there is a presumption that it belongs to the owner on that side.
This is an area of special architectural or historic interest where the local authority imposes extra planning controls to ensure that the look and character is preserved. So, for example, you may need planning consent to change the windows. There are more than 10,000 conservation areas in England.
This is land that has been contaminated by hazardous material from its past use as, say, a factory or petrol station. This will show up on the environmental search that your conveyancer should carry out on the property. The question then is the extent to which the contamination has been dealt with.
Defect in title
A problem with the legal ownership of the property which means a third party may have some kind of claim on it and complicates its sale. You can insure against this risk.
A right that one person has over another person’s piece of land, such as a right of way. A right of way is a legal right to use a particular route to pass across that land.
This is some kind of burden on a property – such as an easement – that does not stop it being sold but may reduce its value.
Most roads are maintained by the local authority and everyone can use them. Private roads (also called unadopted roads) are maintained by the property owners along that road at their expense, through a management company or a residents’ association, giving them control over what happens with the road.
Public access can be limited too.
This means that the buyer is buying an empty property and that no other people have any right to stay there, or have any possessions left behind that could interfere with the new owner’s use of the property.
What do you need?
Once contracts have been exchanged, meaning both sides have made a legal commitment to the deal, the buyer needs to take out insurance cover for the property. Your mortgage lender may want to see proof of this.
On the day of completion, the outstanding money to buy the property is transferred electronically between the buyer’s conveyancer and the seller’s conveyancer’s bank accounts. The system used by the banks is called CHAPS: Clearing Houses Automated Payment System and you are usually charged a fee to use this service.
These are searches carried out shortly before completion to ensure that nothing has changed since the initial searches were done.
There is currently a stamp duty holiday on properties up to £500,000 until 31 March 2021. However, ordinarily you must pay Stamp Duty Land Tax if you buy a property or land over a certain price in England and Northern Ireland.
The current threshold is £125,000 for residential properties but there are different rules if you’re buying your first home and the rate of the duty is paid at different levels depending on the agreed sale price of the property.
There is a different tax in Scotland (Land and Buildings Transaction Tax) and Wales (Land Transaction Tax).
Anything else I should know?
This is the difference between the value of a property and the amount owed on the mortgage. Negative equity is when the amount owed exceeds the value of the property.
This is a company set up to handle a landlord’s obligation under a lease, or to maintain a private road. It takes a service charge from the tenants or property owners to cover the cost of maintenance, such as gardening and decorating common areas.
Planning control is the process of managing the development of land and buildings. The purpose of this process is to save what is best of our heritage and improve the infrastructure upon which we depend for a civilised existence.
Your local planning authority is responsible for deciding whether a development, anything from an extension on a house to a new shopping centre, should go ahead. The Government has published a plain English guide to how the planning system works in England.
This is the official term for repaying an existing mortgage. A redemption penalty is charged by the mortgage provider when it is repaid within a fixed or discounted rate period.
The important thing is that this is your purchase and you must make sure you understand what you are signing up for or are being told.
Your conveyancer’s role is to guide you through the process, so if you don’t understand, be sure to ask your conveyancer to explain it to you.
For more information, visit clc-uk.org/consumers/
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