Demystifying home buying terms

Lots of technical terms are banded around in the house buying process. In this blog we will explain some of the common ones.

What are Exchange and Completion?

When you buy a house there are two stages to the contract; first you exchange and then you complete.

What is exchange?

With most contracts you and the other party sign the same piece of paper. When buying a house you sign one copy and the seller signs another. It’s called exchange as you literally exchange copies. At the same time your solicitor will transfer your deposit to the seller.

The contract you exchange will have a date for when completion will take place.

Once you have exchanged you are legally bound to buy the property and the seller is bound to sell. If you pull out you will lose your deposit. If the seller pulls out you can get the courts to force them to sell.

You should also make sure that you have insured the building from the point of exchange.

What is completion?

Completion is the moment when you take possession of the house. The seller will have moved out of the property (usually that morning). Your solicitor will transfer the rest of the money to the buyer and the buyer will hand you the keys.

You can now move in your furniture.

It is possible to exchange and complete on the same day, but this can be stressful as you have to pack in advance and hope there are no problems. After all the seller can pull out until you have exchanged.

It is most common to have a week in between exchange and completion.

What is a covenant?

A covenant just means that you promise to do or not do something. In most situations the person making the covenant is the one bound but the covenants on a house bind the owner regardless of if a new person buys the house.

Covenants on houses are usually set up when the house is built. They set out how the house may be used. They are designed to make sure that you can enjoy your home without impacting other people. An example covenant might ban you from turning your home into a factory… Most covenants will not make a big difference to your life, but some can be restrictive e.g. limiting where you can park or even what colour your front door has to be!

Your solicitor will send you a copy of the covenants on the house you are buying. Make sure you read and understand them.

What is a charge?

A charge is an interest recorded on the title deeds by someone other than the owner. There are two main types of charges: Covenants and Financial charges.

Covenants are a charge as the original house builder is recording an interest in how you use your home.

Financial charges are used to record that someone has a financial interest in your property. The most common financial charges is your mortgage lender. They are recording their interest as your house is used to secure your loan.

Charges remain on the property until the person registering it removes it. If a charge is not removed before you buy, the person that registers the charge still has a right to your home! Your solicitor will make sure that all financial charges are removed, by the seller, before you buy.

What are deeds?

The title deeds of a house set out who owns the house and include any charges. In the past they were paper documents that passed from seller to buyer. Now this is all done electronically through the land registry.

The deeds contain two parts.

·        The Title Register which sets out who owns the property, the type of title (freehold or leasehold) and any charges.

·        The Title Plan which is a map showing the property’s location, and boundaries.

What is the land registry?

The Land Registry is owned by the government and records the ownership of land and property in the UK. It keeps a record of the deeds. When you buy a house, the register will be updated to show that you own the home. This ensures your legal right of ownership and stops someone claiming that they own the land.

Land doesn’t have to be registered but currently over 88% of the land in the UK is currently registered. Most houses are on the register.

What are searches?

When you look at house you decide if the house fits your needs. But you don’t know much about the local area. If the house in a flood plain? Are their plans to build a new train line through your garden? Was your house built on top of an old mine?

To answer these questions your solicitor will search a range of databases an produce you a report. they focus on local environmental issues, planning applications, and utilities (is it a private road, are their sewage pipes under the house…)

What are Chancery repairs?

In the past the church had rectors, who lived in rectory’s) that were responsible for maintaining the church, in return for some of the church’s income. The duty to maintain the church fell on who ever owned the rectory. If your house is built on land that used to be part of the rectory you may have a legal duty to pay for church repairs.

This has received a lot of attention but is actually quite rare.

As part of your searches, you will be told if you house is built on old rectory land. If it is you can buy a cheap insurance policy that will cover any costs you are ever sent.

What is listed buildings consent?

Buildings are listed if they are deemed to be of historical importance. it may be important due to its historical importance, because it is old, or it has unusual features.

If your home is listed, you must preserve the items that lead to it being listed. before you are allowed to do any work on the property you have to receive consent from your local council, regardless of if you need planning permission.

If you don’t get permission, the council can force you to put back the changes you have made, at your own expense.

Listed buildings are often beautiful, lovely homes to live in, but you need to be aware of the added responsibility.

What is planning permission?

No one wants their neighbour to tear down their house and build a factory, and this is why we have planning permission.

If you want to do building work on your land you will need permission from the council. The council will give neighbours the chance to object to the work. the council will weigh up what benefit the owner will receive from the work against how the work will affect eh local area. If they are happy, they will give permission.

Some work, e.g. small one story extensions on the rear of your home can often be done without permission, but the rules are different under each council. This is called a permitted development.

If you do not get permission, the council can force you to return the building to its original design, at your own cost.

If the house is sold before the council notice the work has been done, the new owner is responsible for undoing the work.

When buying a house your solicitor will make sure that the sellers had permission for any work they undertook. This will remove the risk that you have to take down the extension.

What are buildings regulations?

Buildings regulations are there to make sure that buildings are properly built and are safe. They cover every aspect of a building from how deep the foundations must be, how the roof is made. They also include things like electrics, plumbing and insulation.

Before you do building work, you have to submit plans to the council. As the work is progressing the council will visit to make sure that what is being done is what you submitted. Once the project is complete the council will issue a certificate.

Buildings regulations are not retroactive and so work done before the regulations change will not be covered.

If you seller has had any work done, they will provide you with a copy of the completion certificate.

What is a survey?

Most of us aren’t structural engineers or builders. If we see cracks on the wall we have no idea if these are from the plaster drying or from subsidence. During a survey, a qualified surveyor will assess the building and report back any issues. They will also value the property, which is needed if you are getting a mortgage.

There are three types of survey you can chose from:

·        Condition or snagging report. The cheapest and most basic survey, it tends to be used on conventional homes or new builds. It doesn’t include a valuation or investigate possible future repairs.

·        Homebuyer report. More expensive and thorough, this examines both the inside and outside of the property.  You can usual request this is done at the same time as the mortgage valuation.

·        Building or structural survey. The most comprehensive option, this is more suited to older or unusual properties like converted barns.

You can usually request that the survey to be done at the same time as your mortgage valuation.  If the survey throws up any problems the surveyor will usually give you an idea of how much they would cost to fix.  You might decide to renegotiate the price with the seller or pull out of the deal altogether.

Just remember it is better to pull out and lose the money you have currently spent, than to buy a house that costs thousands to get right!

What’s the difference between Joint Tenants and Tenants in Common?

When two people decide to buy a property together they need to decide how they share the property. In England and Wales there are two ways they can do this.

·        Tenants in common – you can specify which share of the property is owned by each person e.g. 50:50 or 70:30. When you sell the property, you will get back a share of the profits based on how much you own. If you die, you can decide who inherits your share.

·        Joint Tenancy – you each own 100% of the building. When you sell the proceeds will be split equally. If you die, your co-owner will own the full building.

It is usual for tenants in common to have a separate agreement that covers questions such as: what happens if people divorce, die, want to sell…

In England and Wales, most married people are Joint Tenants. Whereas most friends would be tenants in common.

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What to do now

As this series continues, we will be giving you more tips on buying a house including understanding mortgages, how to review the market and how to negotiate the price.

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Mortgages:

Batsrock Limited, trading as Stag Protect, acts as an intermediary for the purposes of introducing its customers to Yes Mortgage Services Limited, part of the H L Partnership.

YES Mortgage Services Limited is an appointed representative of H L Partnership Limited which is authorised and regulated by the Financial Conduct Authority. YES Mortgages Services Limited is a company registered in England and Wales with company number 08872874. The registered office address is Yes Mortgage Services Limited, Four Winds, 22 Windmill Lane, Avon Castle, Ringwood, Hampshire, BH24 2DQ.

You will not receive advice or any recommendation from Batsrock Financial. Such services will be provided by Yes Mortgage Services Limited.