Frequently Asked Questions (FAQ) / A-Z Jargon Buster

Communication is key to in reducing normal stress caused by conveyancing. Lack of communication adds to delays, which is the single biggest reason why 112,000 sales a year fail to complete. Find a conveyancer who has a specialist team, call surgeries at set times, as well as automatic updates at all key stages. AVRillo has won awards for its communication.

Why the Government imposes financial and criminal penalties if not complied with?

The government introduced stringent money laundering regulations in the UK with the aim to prevent the risk of terrorism and illegal activity within the UK, where billions of pounds are laundering every year through buying and selling of property. The UK has become the money laundering capital of the world!

The burden of identity and tracing the source of money is strict and these apply in all UK conveyancing transactions as these involve the use of money to purchase property. Lawyers are prevented from acting for any seller or buyer unless their client can pass these UK Money Laundering Regulations. Talk to your solicitor about this at your quote stage in case you have any risk of difficulties such if your passport is missing, or you don’t have sufficient ID evidence or your purchase money is coming from an external source, such as a family member etc, as this can slow you down and risk you not being able to move in time or at all.

Why do I need to provide you with ID documents if have already supplied these to my estate agent? 
The UK government rules and regulations require you to also send these to your lawyer, failing which there is a risk of a financial penalty of upto £5000, and in serious cases a term of imprisonment.  Only certain documents are valid as proof of address and these include copy passport/ driving licence/ utility bills/ council tax bill less than 3 months old (as listed in our ID3 form) in order to sell or buy property in the UK.
Can I email by ID documents or do I have to send them by post? 

No. All documents must be posted to reduce your risk of fraud and cyber fraud. Some lawyers will even ask for your original passport and driving licence to be seen in person or sent by post, but AVRillo are happy with your copies of these, providing they are posted and accompanied by your completed ID3 identity sign off form.

When do you need to arrange building insurance to be in place for?
Prior to, or on the day of exchange to protect the buyer, in case the property burns down, etc, in between exchange and completion date because from exchange the buyer takes liability in the event of fire or damage to the property.

Your lender will not allow you to exchange contracts without you: –
Firstly, purchasing building insurance before exchange of contracts; and
Secondly that it covers their own interest in your property as well yours,
Thirdly, that it covers numerous conditions contained in their mortgage offer to you and in their CML parts 1 and 2 conditions
Fourthly, sending to us a copy of both your insurance schedule before you exchange.

Where to purchase your building insurance from?
Easiest and safest is to purchase building insurance from your lender because:
a  If you buy your own insurance, and it is wrong (i.e., does not meet your lender’s mortgage conditions or those of the Council of Mortgage Lenders) then you risk losing your 10% deposit and being sued for other losses such as hotel bills if the seller does not move in time and cost of their removals). This is because the lender may delay sending you the deposit unless all of these conditions are met.
b But if you buy building insurance from your lender you are safe: Because if your lender gets the insurance wrong, then they are liable not you. It means you will not lose your 10% deposit for lack of suitable insurance.

When applicable? Building insurance usually is purchased by the buyer on a freehold only (but can sometimes apply in leasehold-check with your lawyer).

At Completion the buyer’s solicitor sends the balance of the purchase money (less any deposit) to the seller’s solicitor and once the seller receipts this the keys are released to you and you can finally relax and move in.

This is the agreement between seller and the buyer and sets out the terms of what has been agreed such as the property, the price and the names of the parties. It also deals with the process if something goes wrong. It is no longer necessary for the parties to meet to sign the same contract. The seller’s solicitor prepares two copies of the same contract with each party signing their own copy of the document and at exchange, the contracts are literally exchanged between the solicitors at which point legally binding both buyer and seller.

 

A): As a buyer, you normally send a 10% deposit, but what about unusual circumstances?

i). I do not have a 10% deposit for my purchase but I have a related sale, so can the deposit funds come from my sale? As your deposit is coming solely from your sale, then you will not need to provide the 10% deposit in cash. We will take care of transferring the full deposit from your sale to your purchase on exchange.

ii). Can I send a 5% deposit. Only if your seller agrees it. E.g. where you have a related sale and your buyer on your sale as only provided a 5% deposit.

iii). I have a 15% deposit, why do I have to only send a 10% deposit? Whilst you may have agreed with your lender to provide a 15% deposit, for exchange you just need to put down 10% of the purchase price. Once exchanged we will send you a completion statement advising on the remaining amount to send us.

B): As a seller am I at risk if I only obtain a 5% deposit? Sometimes your buyer will not always be able to provide a full 10% deposit, this may be because they are obtaining a 95% mortgage, or they are receiving less money coming up the chain. What this means for you is that on exchange less than the usual 10% deposit will be put down. For yourself, the contract provides that if anything goes wrong and the buyers cannot complete then after a process is followed, you are able to keep the buyers 10% deposit. If the buyer doesn’t put the 10% deposit down, then this doesn’t mean you aren’t entitled to it, it just means that you would have to pursue it via litigation. The chance of a failed completion is slim, but still a risk for you to be aware about.

 

C): As a buyer, when and where do I need to send the deposit?        

i). When to send Deposit? As soon as your lawyer requests it because your seller solicitors will not allow you to exchange contracts without knowing that you have transferred to deposit to your own lawyer, as cleared deposit funds.  So, in readiness for exchange of contracts you should send 10% of the purchase price immediately (unless you have a related simultaneous sale, in which just send the difference).

ii). When will your lawyer request your deposit? Once your lawyer sends you their ‘report title’ they will ask you to send them your deposit, which your seller solicitors will need as cleared funds in your own lawyers account before they will allow exchange of contracts.

iii). Where to send Deposit? By Bank CHAPS/ TT (telegraphic Transfer) and not by BACS and cheque (to avoid clearance delays) to your lawyer account details as set out in their first written letter to you. CYBERCRIME Warning: Never ever send your money to any other account even if requested by email, as this is likely to be cyberfraud attempt on you, in which case you will lose the money your transfer to a fraudulent criminal and you not get it back.

 

D) Loss of Deposit, if you fail to complete as the buyer. If that happens then in the event of the buyer failing to complete the purchase through no fault of the seller, the contract will provide that you still make the deposit up to the full 10%. You may also have to pay compensation to the seller if the seller loses out through your failure to complete.

 

From 1st June 2007, each home will have to be inspected and an Energy Performance Certificate prepared, before a property is marketed for sale. The Energy Performance Certificate is similar to the certificates now provided with domestic appliances such as refrigerators and washing machines. Its purpose is to record how energy-efficient a property is as a building. The certificate will provide a rating of the property from A to G, where A is very efficient and G is very inefficient.

Additional Enquiries. Example questions raised by the buyer solicitors if seller has missing information/ defective title

Additional enquiries are really the technical term for additional questions. They are only raised by the buyer solicitors if there they feel there is insufficient information or documentation produced by the seller. They are additional because for example:- The seller’s previous lawyers carried out incorrect ct conveyancing and failed to provide full documents. Alternatively, possibly, they did, but the seller has carried out work on the property since their purchase that would have needed certain documents failing the title is defective, and they need to remedy this before the buyer can purchase. Most common is where the seller has carried out works to their home without sufficient building or planning documents. This is just an example. When these additional questions are asked it is essential that the seller replies as soon as possible, and either needs to provide the buyer with the missing documentation or provides indemnity insurance to cover the buyer against possible loss due to lack of the seller’s documentation.

Examples of additional enquiries:

a) What are restrictive covenants?
A restrictive covenant is a private agreement between land owners where one party will restrict the use of its land in some way for the benefit of another’s land. Restrictive covenants, once agreed between the parties, are placed in the title deeds to the property. They bind the land and not the parties personally. Your buyer is asking you to confirm that these have not been breached. Once we receive the Buyer’s Solicitor’s enquiries, we will highlight the relevant sections on the title for you to read.

 

Lack of planning documents and why its better to purchase indemnity insurance than risk contacting your Local Authority?
The local authority search is a search of the local authority’s records, including planning, building control, highways department etc. It is a search of the subject property only. You should hold documents from when you carried out the works or if the works are prior to your time of ownership your previous solicitor (from when you purchased) should have obtained these for you. If you do not hold these your buyer’s solicitors are asking that copies be obtained from the Local Authority.

You have the choice normally of buying an indemnity insurance policy from a specialist broker, to cover the buyer against their losses for the sellers lack of documents.

Be warned, that that before you contact the local authority please think whether you obtained the correct permissions in the first place. If not, then as soon as you contact them, you are no longer eligible to buy an indemnity insurance policy which will cover losses if you failed to obtain those documents in the first place.

if you really want to contact the local authority, then you will need to visit their website for details on how to order copies. Once we receive the Buyer’s Solicitors enquiries, we will highlight the relevant references on the extract from the local authority search which will assist you in obtaining these documents.

What is an indemnity Insurance – why is this needed and what does it cover?

Legal indemnity insurance is obtained in order to offer protection to a buyer (and a lender) where there is a defect in the title which cannot be resolved. It often provides a quick and low-cost alternative to the work required to correct a defect which will usually cost several hundred pounds in legal fees and will take several weeks. The premium for a legal indemnity insurance policy is paid only once, and in most cases is automatically transferred to successors in title and lasts for the life of the property. If you are purchasing: It should be remembered, and be pointed out, that legal indemnity insurance does not remedy the insured defect, but merely offers financial compensation. You should also check each policy individually to see what actions might invalidate the cover. For all indemnity policies however, it is a condition that their existence must not be revealed to third parties. How much will an indemnity insurance policy cost? The premiums for indemnity insurance policies are charged on a sliding scale, depending on the value of the property, and they also vary depending on the risk insured. The cost will range from as little as £20 to as much as £300, or occasionally more for a nonstandard policy. What will an indemnity insurance policy cover? The answer to this question depends on the particular risk you are intending to insure, but basically indemnity insurance covers loss of value to the property and legal costs.

What is a retention/Allowance?
The buyer solicitor has asked you to deduct money from your sale price to cover a ‘Retention’. This is not a legal issue but a commercial decision only you can take. What is a retention? A sum of money deducted by the buyer to cover the risk of a shortfall in ‘service charge underpayments’ covering your period of ownership but only revealed often up to a year after you move out (simply because it takes that time for the Management Company accounts to be completed, sent to their accountant, audited and certified and returned to the Management Company to issue). What is an allowance? You simply agree to deduct the retention figure from your sale price and forget about it. Most clients choose this because it is cheaper in the long run, faster and cleaner. If you choose to give with a one-off allowance and not a retention I will, as goodwill, carry out the extra work for free, to amend the contract to add this extra deduction clause (called a legal ‘allowance’).

This is when a legally binding contract is made. Once we exchange you can no longer be “Gazumped”. It is also at this point when you fix the day the move in-completion date takes place. This is a very important date as from the minute your contract is exchanged the transaction becomes binding. From that moment on, the seller must sell and the buyer must buy at the agreed price. Until contracts are exchanged NOTHING is binding – either party can walk away from the transaction with no penalty. Prior to exchange the seller and buyer will agree dates between themselves and then notify their respective solicitors who will try to fit in with the suggested date. If there are unforeseen delays, for example, if the buyer does not receive a search or mortgage offer in time, or any other complication then the completion date may have to be revised. For this reason you should not make any firm commitments such as giving notice on a job, arranging removals or arranging to go away without first contacting us.

 

What happens if you ask your lawyer to go to the additional steps of asking them to shorten (expedite) the Law Society Standard Conditions of Sale 5th Edition (which provides for 20 working days to be left in between exchange to completion)?

The Law Society Contract asks for 20 working days between exchange and completion date for a reason, because it takes that time to prepare thoroughly and deal with steps during that time. A shorter time (expedited) risks issues such as errors, late receipt of documentation or even delays which risk late completion, which in turn risk compensation and loss of deposit.

If you wish to amend this to a shorter period then you ask your lawyer as soon as possible to allow them to try to fit you in their completion diaries and reduce the potential for errors and losses.

In any event, any expedited time request will involve your lawyer squeezing in 20 days work into fewer days; for which they will  charge an expedited fee. This extra work could take in the region of up to two additional hours. Lawyers charges vary, but ours is limited to no more than a one-off discounted fee of £149 plus vat (depending on how many days you leave and how busy we are). I hope this helps you.

This is a list of the items at the property which the seller must complete stating if they are either included or excluded from the agreed price. This form is completed at an early stage by the seller and sent to the buyer, so that both parties understand what is included in the selling price. If you are the seller, when you let us have the form we will send you a copy back so that you know what you have agreed to. If you are the buyer we send you a copy of the form as soon as it is received by ourselves from the seller’s solicitors so that any difficulties can be resolved at an early stage.

This describes how the land is owned. Land is either freehold (usually houses) or leasehold (usually flats).

Where you are a buyer and another buyer outbids you or increases their offer and is accepted pre exchange of contract. You will have lost the purchase to that other party. The government currently does not prevent this.

Below are just some common questions that clients ask their lawyers:-

Why do I need to complete the gift paperwork? Why does the donor have to provide the government’s Anti-Money Laundering source of funds evidence and ID documents? I have already informed my mortgage broker and/or lender that I am receiving a gift, so why do I need to complete the gift paperwork?

The government has stringent regulations with what they require all buyers to do. One of the main requirements is that the government needs you to show where all of the purchase money is coming from. It means they require your lawyer to ensure your Donor complies with this. Also, if you are getting a mortgage to help you buy the property your lender needs both you and your donor to provide both ID and Source of Funds documents together with signed declarations confirm that the money is a gift. If the requirements are not fully satisfied your lender won’t release the mortgage funds and the government wouldn’t let you purchase as all buyers have to comply with these.

To help you make sure that you comply with both government and lender requirements, AVRillo will prepare that additional paperwork for you. They will produce Donor statements to say the money is a gift and not loan (not allowed) and for love and affection (and not for an interest in the property-not allowed by a lender). There are risks of lender’s objecting to the gift, but we know that our documents have always been accepted if you follow our gift procedure. It will also need for you to purchase a bankruptcy insurance policy which we will use for your lender to protect them against their risk and concern that your donor may go bankrupt within 5 years of the gift (and thereby the administrator attacking the gift and asking for it to be returned). Our process ensures the transaction proceeds quicker, more efficiently and cheaper in the long run as our process is usually accepted by your lender in regards to the gift paperwork, so they do not reject your loan.

What you need to do if you are obtaining a gift? 

Ensure you notify your lawyer immediately, at the very start of your case. Some lawyers don’t ask, but we do in our very first letter because this procedure take time, and unless tackled early, it can not only risk delays but also the work not being done properly and your loan being pulled by your lender (if you have one). Also note this is an additional services so please check with your own lawyer how much time they think this will take, how full that procedure will be (ensure its full and not partly done, risking your loan) and their charge. Our own fee is limited to £149 plus vat, plus disbursements such as ID checks for your donor and bankruptcy insurance to protect a lender.

When buying the buyer solicitors may spot defects in the title of the property, such as breach of covenants, lack of easements or missing planning or building regulations for example. In such cases, in order for the buyer to proceed to purchase, they will either need for the defect to be fixed, or in some cases, they can have access to what is called an indemnity insurance policy to cover the loss for that risk. It is not a cure but an insurance policy to cover financial loss. This has now become acceptable in most conveyancing transactions as a way to move. The cost can vary from less than a hundred pounds to up to £1000 for more problematic defects. The higher the risk the more the insurance company will charge for covering that risk. Your solicitor will be able to help you obtain this quote for you.

This is the Central Government organisation in England and Wales which retains records of who owns every piece of land, and under what conditions. This was set up in 1925 to simplify the conveyancing process and register all land. Whilst the majority of land is now registered to date not all land in England and Wales is registered today and this is partly due to the fact that land can only be registered following certain “triggering events”. The Land Registry has their own website which provides useful information. See our Useful Links page for a link to this site.

Temporary ownership of the property. When the lease expires ownership of the property belongs to the freeholder. This normally applies to flats.

This is a cost for the time that by your solicitor on a normal straightforward conveyancing transaction. All solicitors regulated by the Law Society are required to set out their basic fees for this in their quote estimate but also set out a method to calculate additional charges for additional work if required by your case once it has started. Some solicitors will apply an hourly rate to all additional time spent. Each is different. AV Rillo for example, adopt a more modern approach, and try to limit our additional charges by setting out a costs menu of discounted fixed rate costs for possible additional work. Whoever you choose to instruct, before you do so, you must look at their terms of business. If they don’t send this with their quote estimate then you are missing valuable costs information which risk you paying additional fees you did not know about when you started. You must therefore ask to see all terms with your email quote. After it may be too late.

This is a document which the buyer solicitor prepares and sends to the seller’s local authority and which raises questions regarding the property. It covers such items such as, whether the road serving the property should be maintained by the council (i.e. adopted by them rather than the buyer having to contribute privately), whether there have been any planning applications on the property, and a number of other things. The search is against the property only and does not cover the surrounding area. A word of warning – the search will not show any Planning Permissions or matters affecting land or buildings outside the boundaries of the property. You must therefore let us know at the start of the transaction if you require information on any particular point or if you wish us to ask any particular questions of the local authority.

The Government has introduced stringent money laundering regulations in the UK with the aim to prevent the risk of terrorism and illegal activity within the UK. The burden of identity and tracing the source of money is strict and these apply in all UK conveyancing transactions as these involve the use of money to purchase property. Solicitors are prevented from acting for any seller or buyer unless their client can pass these UK Money Laundering Regulations. Talk to your solicitor about this at your quote stage in case you have any risk of difficulties such if your passport is missing, or you don’t have sufficient ID evidence or your purchase money is coming from an external source, such as a family member etc, as this can slow you down and risk you not being able to move in time or at all.

The legal charge of the property to the mortgage lender.

This is a loan taken out and charged against your property to assist you in buying your property. You cannot sell the property without paying the mortgage off. For the buyer contracts should not be exchanged until an acceptable written mortgage offer has been received and approved by the buyer. A verbal confirmation of a mortgage offer will leave you at risk. If you are selling we will contact your mortgage lender for a redemption figure to ask how much it will cost to pay off your mortgage – we will send you the initial copy of this figure. A final redemption figure is then released by the lender prior to completion and the lender will then evidence the discharge of the mortgage by endorsing the formal receipt in the form of an END or DS1. Also you should consider whether your existing mortgage has any penalties on completion.

These fees are separate fees normally charged for acting on behalf of your bank or building society if you have or are taking out an mortgage.

Ensure that you have planned sufficiently to make payments towards your mortgage and that you have sufficient cover in place should your circumstances change. As we specialise in conveyancing we do not provide financial advice. We recommend you always seek advice from an independent financial advisor before you embark on this. You can contact the IFA for an independent financial advisor.

This is a questionnaire about the seller’s property which the sellers are duty bound to complete which we will then send to the buyer’s solicitor. It covers such items as guarantees, neighbour disputes and boundaries, planning permissions, occupation and other matters. Failure to disclose information may give rise to the risk for the buyer to take action against you. To help speed up the transaction we send you these out at an early stage in the transaction. This will speed up our ability to send out an early contract.

The Law Society has introduced it’s ‘Gold Standard’ for solicitors to achieve if they deal with conveyancing called the ‘Quality’ accreditation (CQS). To protect buyers and sellers (and ensure they receive a safer transaction from an conveyancing expert) The Law Society recommend that you only instruct a solicitor who has this Quality mark. It will give you peace of mind and ensure you receive a Law Society professional service to the highest ethical standards.

 What is a report on title?

This is a report sent to you from your lawyer just before exchange of contracts and to get ready for exchange of contracts. It sets out the lawyer’s review of the seller’s paperwork and documents received from them as well as any third  parties such as searches. Attached to it will be relevant documents your lawyer will have received.  The report will set out what you are buying, on what basis. Essentially it shows that you are able to buy legal title, but asks you to ensure that the documents allow you to use the property for your any specific purposes you may want to use in the future. Essentially you only get reported to by AVRillo if they believe there is nothing legally you cannot take a view on to exchange. Namely, that it meets the CML – Council of Mortgage Lenders –Handbook as at the date of completion (which means it is mortgageable  in the future and hence no negligence when you sell).

Do you need to read everything in the Report on Title and documents attached?

Yes, of course. From a legal point of view, we have covered everything to ensure that the property is legally sound, which is why we are able to report to you. It is now for you to check whether there is anything within this report, which will affect your personal circumstance, which your lawyer cannot be aware as what is in your own mind, as each buyer may have very different plans for the property, which your lawyer cannot be aware of.

What documents do you need to return?

Keep the report on title but ensure you sign all documents requested to be signed (providing you understand agree their contents)

Ensure you return these signed documents

Ensure you return all original paperwork as without it your lawyer cannot exchange.

Stamp Duty is a government tax charged to the buyer only. Unless an exemption applies you are liable to pay for this tax as a buyer at completion. Ask your solicitor to work out the Stamp Duty tax you need to pay. They should be able to work this out when they send you their quote estimate. It is based on your purchase price. This is a tax form and if you instruct your solicitor to complete this for you then they will have the expertise to do this. Most will charge a fee for completing this form. it should be contained in their terms, if not you must ask them. The benefit of they doing this for you is firstly, they take the time to do this and not you (it has some 70 questions listed); secondly, it does have penalty implications if it is incorrectly completed (so by paying your solicitor to do this for you, they, and not you, face the government penalty if they get it wrong.

What is a survey report?

This is a report carried out by a surveyor on the physical state of the property you are buying and is different from a mortgage valuation if you are obtaining a mortgage. As the valuation merely satisfies the lender that the property is of a sufficient value to protect their interest we recommend that the buyer should invest in the best survey available by a qualified surveyor. As in law when buying a property it is always “sold as seen”. It is for you, as the buyer, to discover any physical defects by inspecting the property and via a survey. At the very least we believe an RICS Home Buyer’s Report should be commissioned in the first instance. You have some safeguards if the survey reveals a problem which requires further investigation as pre exchange you are not bound to purchase the property and you can decide whether to continue with your purchase at all.

Can your lawyer help you with your surveyor’s survey results?
No, because your lawyer is a specialist in legal title and not the physical aspect of the property, which is down to your surveyor’s expertise who will consider such things as a structural elements of the property. If your surveyor refers to a legal question for us to ask the seller, but the majority of the survey refers to non-legal, which you must discuss with your surveyor directly.

 

What survey should you purchase?

The most expensive as that will protect you more. This is because there are various types of surveys. We always advise our client to go for a full structural survey as the lender’s survey (which the buyer pays for and thinks is a full survey, is not full at all). It’s limited to valuation purposes, and in any event it belongs to your lender, which means you may find limitations on you relying on it.

We are solicitors and are regulated by the Law Society. We agree to adhere to a strict code of practice giving you the added peace of mind that you are dealing with solicitors who owe you a strict duty of care and are bonded by the ethics and professional code of the Law Society. If you are unsatisfied with a service you have the peace of mind of knowing that you can refer such matters should they ever arise to the Law Society. Rest assured, with A.V. Rillo you will not need to do this.

Our policy is to speed up your transaction. We request Title Deeds at a very early stage as they are the documents which evidence that the seller actually owns their property. Further it sets out any rights or obligations that affect the property. Both of these will be required to issue a contract on your behalf and both are required by the buyer before they proceed further. If we act as your seller’s solicitors our policy is to ask you at a very early stage (so that we can save valuable time) for your title deeds. If you have a mortgage then your bank or building society will normally be holding your title deeds. We will need to know your mortgage account number and the name and address of the lender.

As the buyer’s solicitors this is a document which we prepare and send to the seller. If we are the seller’s solicitor we ensure that the transfer deed has been properly prepared by the buyer. This is a vital document as it passes the ownership of the property from the seller to the buyer. It is dated with the completion date and will be sent to the Land Registry after completion. The Land Registry will use this Transfer deed to change their records and show the buyer as the new owner of the propert

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