Sometimes the terminology used in the property buying and selling process can be confusing.
Whilst your conveyancer should try and explain everything in plain English, below are a few common legal phrases which you will come across. David Percival, a chartered legal executive from Spire solicitors in Norwich, attempts to help you break the code...
Exchange of Contracts
In England and Wales, a property transaction is not legally binding until exchange of contracts takes place. This uncertainty is one key reason why everyone is keen to exchange contracts as quickly as possible, as until this point, any party can withdraw from the transaction without penalty. Your conveyancer will only be able to exchange contracts once the vast majority of the legal work has been completed and all finances are in place. Once exchange of contracts has taken place, you will be legally committed to the purchase and your deposit will be transferred to the seller's conveyancer.
Completion
Completion is the final step in the property buying and selling process. The completion day will be a fixed date which will have been agreed prior to exchange of contracts. On this day, your conveyancer will send the remaining balance to the seller's conveyancer, and once the amount has been received you will be able to collect the keys to your new home.
An Indemnity Policy
An indemnity policy is an insurance policy which is designed to insure a buyer, their lender and future purchasers against a defect relating to the property. A defect may include missing legal documents, breaches of restrictive covenants and a lack of planning and building documents. If anyone decided to serve an enforcement notice, your indemnity policy will cover any financial losses incurred. As each indemnity policy is different, it is very important that you read the terms and conditions to ensure you do not invalidate them.
A Covenant
A covenant is a promise in relation to the property and there are two different types- positive and restrictive. A positive covenant requires some form of action to be taken, for example, to maintain a boundary wall. A restrictive covenant limits or prevents what you can legally do with the property, for example, not using it for business purposes. Covenants which were imposed many years ago may still be enforceable though it may be extremely difficult to identify who has the benefit and can enforce it. If you are buying a property and think there may be a breach of covenant, you should tell your conveyancer who can advise further.
If you would like to discuss any points in this article further, please contact Spire Solicitors LLP on 01603 677077 for all your legal needs.
This column, sponsored by Spire solicitors, is not a legal statement of the law. Always seek legal advice if you have a dilemma.
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