Glossary of terms
Your helpful conveyancing A-Z
At JS Law, we believe in making the conveyancing process as straightforward as possible. We always try where possible to avoid using any sort of jargon. However, there will be times when you come across certain terms that may not be immediately clear. That’s why we’ve put together this A-Z glossary. We hope you find it helpful.
The date on which the sale or purchase of a property is finalised. This is when the buyer obtains the keys and is allowed to move in, and is the date on which the seller is required to move out.
The contract legally binds the seller and buyer into the transaction on exchange of contracts. It contains all the terms and conditions for the property sale.
This is the down payment which we will collect from you as a buyer prior to exchange of contracts. It is held by the seller’s conveyancer between exchange of contracts and completion.
These are questions asked to the seller, landlord or to a conveyancer. Exchange of contracts cannot take place until all the answers to the enquiries are received.
This is the point at which the contract between the seller and the buyer becomes legally binding and the completion date is fixed. At this stage the parties involved will be able to start taking steps to organise their move, such as booking removals companies.
A form of loan secured to a property. It is most often used to purchase the property itself. A property cannot be sold until the loan is fully repaid.
Mortgage types
Your lender or mortgage broker will give you a full explanation of the mortgage you have applied for. The following is a brief guide to the two main types.
Repayment mortgage
Under a repayment mortgage you will make monthly payments consisting of a payment towards the lump sum you have borrowed and a payment towards the interest charged on that lump sum. Under a repayment mortgage the amount you owe to the lender will gradually decrease over the term of the mortgage, so that at the end of the term the whole sum is repaid.
Interest only mortgage
With an interest only mortgage, you make no payment towards the capital sum. Instead you just pay the interest element each month. Interest only mortgages may also be known as endowment or pension mortgages.
The principle behind interest only mortgages is that the capital sum due at the end of the mortgage is repaid from the proceeds of an investment made by you (such as an endowment) or, if you die before the mortgage runs its full term, from the proceeds of a life policy to be paid out on your death.
You must be aware that the figures indicated by an insurance company or any investment company as the eventual benefit or payment from the policy or investment are only estimates and cannot be guaranteed, because they depend very much upon the success of large scale financial investments made by the company involved.
If you have any doubts or questions in respect of life insurance or the requirements in respect of a mortgage then we would recommend you take the advice of a qualified financial adviser. We are not able to give financial advice however re recommend you seek independent financial advice.
Mortgage arrears
Whilst we cannot provide anything other than a brief idea of the workings of a mortgage, we feel it is important to point out that if you do get into arrears, or if you are in breach of any of the other conditions of the mortgage, then the lender will have the right to repossess the property.
If the property is repossessed then the lender will sell the property and use the sale proceeds to repay the loan, any further interest due and the costs of repossessing the property. You will also remain liable to the lender for any shortfall.
Mortgage insurance
If you are obtaining a high percentage mortgage then you may find that the lender will require an insurance guarantee (sometimes called a ‘high loan to value’ policy). This is a policy paid by a one-off premium. It will cover the top-up portion of the loan, so that if you default on your repayments, the insurer will pay the lender an amount equivalent to the top-up portion of the loan.
For example: your mortgage lender would only normally be willing to lend 75% of the value of the property, but you are borrowing 95%. If when the property is sold by the lender after repossession it only receives 80% of the original value of the property, the insurance company will top-up the amount to the full 95% of the original value of the original loan. The insurance company can then look to you for the loss it has suffered.
Mortgage related policies
If your mortgage is to be in conjunction with a new endowment or life insurance policy, we will ask you for details of the policies involved, or the contact details of your broker if you have one, so we can request the information we need. If you are to use a policy that is already in existence, we will ask you for those details.
Buildings insurance
Most mortgage lenders now allow you to arrange your own buildings insurance. If this is the case, we will ask you for full details of the buildings insurance you are arranging, because we will have to pass this information on to your lender before they will release the funds for your purchase. If you find it helpful, we can obtain a free quotation on your behalf using local insurance brokers, which may assist you in obtaining a competitive quote.
We would appreciate it if, when we request your information regarding buildings insurance, you provide it as quickly as possible. In our experience, lack of insurance details can cause delays in moving towards completion, which will often lead to financial penalties.
If you are purchasing a leasehold property then it will usually be the case that the landlord will be responsible for the buildings insurance. Rest assured we will discuss these issues with you personally.
Confirmation of earnings
We have found that a large proportion of delays in the issue of mortgages arise from the time it takes for the lender to receive confirmation of earnings. If your application involves providing confirmation of earnings then we recommend you do whatever you can to ensure your employers reply to the lender as quickly as possible.
Consent
Mortgage lenders usually require that any proposed adult occupiers of the property who will not be party to the mortgage must sign a form of consent. If there are any such persons aged 17 years or over who will share the property with you, we will need their full names on completion so we can prepare the appropriate consent forms. If only the mortgagees are to reside at the property, we would appreciate it if you could advise us in writing on completion, so that we can let the lender know.
Mortgage advice
When we receive a copy of your formal mortgage offer we will carefully review the individual terms and check for any special conditions, and report back to you with advice on any action we believe you should take.
If you are unclear on any aspect of your mortgage at any time during your purchase, please do not hesitate to get in touch. Your dedicated case handler will be only too happy to discuss it with you.
After completion, any mortgages on the property will be repaid, any Stamp Duty Land Tax due will be paid to HM Revenue & Customs and the change in ownership will be registered at the Land Registry. A copy of the updated title will be sent to the buyer a few weeks after completion.
These are questions posed to the relevant authorities to find out if there is anything which might affect the use and enjoyment of the property, or anything that might prevent you from obtaining a mortgage on it.
There are various searches that may be deemed necessary to ensure the property you are buying will not present you with any unexpected issues, cause problems with obtaining a mortgage or insuring the property, or selling it on in the future.
With DC Law working for you, you can enjoy total peace of mind that the relevant searches will be obtained, and that anything that needs to be followed up or investigated further will be. Once the searches are returned, you will receive a report from your conveyancer. If there is anything that concerns them, they will discuss it with you and provide you with the advice you need to make decisions on how to proceed.
You will be kept fully informed of the searches we deem necessary, and the costs involved.
Local Authority searches
Your local authority will provide answers to questions about planning, roads, enforcement notices, drainage and lots more. Each local authority has its own fee for answering the basic search. Sometimes we will need to ask extra questions, for example if there’s a public footpath crossing adjoining property, in which case we will let you know and advise you about any additional charges the local authority will make to answer the extra questions.
Environmental search
An environmental search provides additional information regarding the property up to an area of 500 metres around it. The search reveals any registered landfill sites, water features, waste disposal treatment or disposal sites, industrial process or discharge of radioactive substance sites. The search also indicates whether the property is within 500 metres of a flood plain, within an area of natural subsidence or coal mining, or within an area where Radon Protection Measures are required.
It is only a compulsory search when you are purchasing with a mortgage, but it is a search we recommend is undertaken in all circumstances, or that we obtain insurance for you against contaminated land.
Water drainage enquiries
This search is compulsory if you are using a mortgage to purchase a property, although we do highly recommend it in any circumstances. It comprises a set of questions submitted to the local Water Authority and will confirm whether it has responsibility for the sewers and the route of the drains leading to the property.
Chancel Repair Liability and Chancel Repair Searches
This search confirms whether the property may be affected by a potential Chancel Repair obligation to the local parish church. Such obligations stem from mediaeval times where land previously owned by the church to fund the local rector had been sold and the new owner took on the repairing obligation attached to that land. Basically, any property located within the boundaries of a parish where such liability exists could be caught. The penalty involves having to pay for the upkeep of the Chancel of the local mediaeval parish church.
There was a famous case in 2003 (Aston Cantlow v Wallbank) where the church sought payment from the owners of the rectorial land, part of a property called Glebe Farm, to repair the chancel of the local mediaeval church. The owners of the rectorial land (known as lay rectors) refused to pay and what was originally a £6,000 bill increased to £96,000 as the structure slowly disintegrated. The church won, leaving the Wallbanks with an estimated bill of £500,000.
On 13 October 2013, the law changed and the right to demand repair costs is now only enforceable against a landowner if that land has been protected by registration of a notice against the registered title. Whilst it was expected that buyers would not be subject to chancel repair liability from 13 October onwards if the land they were purchasing had not been protected by registration, in reality the system does not appear to be working as expected, and the potential for liability does not appear to have changed.
So it would seem that a search would still be necessary. However, as it will not show for certain whether the property is caught or not, we recommend taking out a specially designed indemnity insurance policy instead. The insurance costs the same as the search and provides you with the peace of mind you need, whatever the circumstances.
Land Registry search
This search is carried out at the Land Registry and confirms that no registrations against the title have taken place since the date of the seller’s copy of their title. The search also ‘locks’ the title so that no entries can be registered for 30 days which gives us time to register the change in ownership and will prevent any further registrations.
Bankruptcy search
When you are buying a property with a mortgage we have to do a search, on the lender’s behalf, against you. This search confirms whether there are bankruptcy proceedings against you. If anything is revealed then we must advise your lender so it is important that you let them know of any County Court Judgements or financial arrangements that affect you.
Plan search
This is usually an optional search but it will provide additional information to that provided by the local authority search. This is because it covers the land surrounding the property rather than just the property itself.
A plan search will provide information about any planning applications and decisions within the vicinity of the property that you are intending to purchase. However, the search will only detail applications and decisions registered up to the date of the search.
Neither DC Law nor our search providers can accept any responsibility for any adverse planning applications or planning decisions after the date upon which the search was conducted. You should also note that the information provided by the search results can also be obtained by you directly from the local authority.
Flood search
Again this is usually an optional search. It is designed to reveal any potential flood risk pertaining to the property that you are intending to purchase.
The results are usually available three working days following instruction. We would recommend this search to anyone buying property, as the arrangement between the government and the insurers whereby all properties in England and Wales can obtain flood insurance came to an end in 2013 and there is no guarantee that flood risk properties will be insurable on the open market form that time.
HS2 search
If the property you are purchasing is within a local authority affected by the proposed High Speed Rail 2 link then we must undertake a search. The search indicates how close the property may be to the proposed route and the potential impact on it. If the proposed railway line is within a certain number of kilometres of the property you are buying, then we will forward a copy of the search to your lender to ensure that their valuation is unaffected. Dependant on location other searches may be required such as coal, tin and mining.
Ahead of exchanging contracts, the point at which you are legally bound to complete on your purchase, we recommend you commission a survey on the property you are buying.
It is important that you are aware of the physical condition of the property, because once you commit to buying it and the purchase completes, you will take on full responsibility for any repairs that are needed, even though any issues may not have been disclosed to you by the seller or their conveyancer prior to exchange of contracts. This is particularly important if you are buying a listed building, because if it transpires that alterations have been made without the relevant consents, you will find yourself financially responsible for reverting those alterations.
Here we take a look at the different types of survey. If at any point you are unsure as to which type of survey to opt for, don’t hesitate to discuss the matter with your case handler, who will be happy to guide you. If you are using a mortgage to buy your property then you may also find the lender helpful in this respect. You should also discuss any particular concerns you have over the state of the property with us, so that we can raise these with the seller’s conveyancer.
Also don’t forget that a ‘valuation survey’ is just that: it exists only for your mortgage lender to verify that the property is worth the amount they are lending you. It won’t provide you with any feedback on the condition of the property, or any issues that need attention.
Types of survey
Homebuyer’s report
This is a survey set to a format laid down by the Royal Institution of Chartered Surveyors (RICS). It is suitable for modern properties of conventional build that are in reasonable condition. This type of survey may also be suitable for an older property, providing it is in a reasonable state of repair.
The survey provides condition ratings of each of the elements of the property, including permanent structures such as garages. The report will bring to attention any problems deemed important, and that could affect the value of the property.
A valuation will be included, together with insurance rebuild costs. Ongoing maintenance advice will also be provided. Services will not be tested but an overview of their condition based on visual inspection will be noted.
Building survey
Also known as a ‘full structural’ survey, this is a highly thorough investigation of a property, reporting on every part that is visible and safely accessible.
The Building Survey should be carried out by a RICS surveyor. It provides greater detail than a Homebuyer’s Report, analysing the construction and condition, and adaptable to particular requirements depending on the property.
Whilst it is suitable for any age or type of home, the Building Survey is particularly useful for older properties in disrepair, those that have been altered extensively, thatched houses and listed buildings. If you are planning to convert or renovate the property, you will find such a survey most useful. You will be provided with advice on repairs and defects as well as on future maintenance.
You can request a valuation with this survey, but it won’t come as standard.
As we said, we are on hand to help if there is anything you are unsure of concerning the survey of your property, so please do not hesitate to get in touch.
When the seller of a property accepts an offer, it is ‘Sold Subject to Contract’. This means that anyone can withdraw from the transaction until exchange of contracts, which is why we try to get everything ready for exchange as soon as possible in order to give you certainty at the earliest stage.