The legal side of the house buying process, known as conveyancing, is full of words that ordinary people may not know. Stephen Ward, director of strategy and external relations at the Council for Licensed Conveyancers, explains what some of these words and terms mean
In April, we gave a plain English guide to the most common terms used by professionals involved in the home-moving process. You can read the full article by clicking here.
They use these words so often in their working lives that they may forget to tell you what they mean. Unfortunately, there are plenty more where they came from, so here are some of the other terms you may come across.
Boundaries
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.
Building insurance
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.
CHAPS transfer
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.
Conservation area
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 over 10,000 conservation areas in England.
Contaminated land
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 https://www.whatmortgage.co.uk/news/first-time-buyers/know-searches/ 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.
Easement
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.
Encumbrance
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.
Equity
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.
Management company
This is a company set up to handle a landlord’s obligation under a lease, or to maintain a private road. It makes a service charge on the tenants or property owners to cover the cost of maintenance, such as gardening and decorating common areas.
Planning controls
Planning control is the process of managing the development of land and buildings. The purposes 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 giving an overview of how the planning system works in England.
Priority searches
These are searches carried out shortly before completion to ensure that nothing has changed since the initial searches were done.
Private road
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.
Redemption
This is the official terms 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.
Stamp duty
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).
Vacant possession
This means that the buyer is buying an empty property with no other people having any right to stay there, or any possessions left behind that could interfere with the new owner’s use of the property.
Remember!
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.
Stephen Ward is director of strategy at the Council for Licensed Conveyancers. For more information, please visit: https://www.clc-uk.org/consumers/
