Rebecca Leeman, Legal Executive at Spire Solicitors LLP, explains the terminology and legal jargon that Conveyancers use.
Exchange of Contracts and Completion
In England and Wales, a property transaction is not legally binding until exchange of contracts takes place. This gives a purchaser time to undertake the necessary checks, such as searches and surveys, before being legally bound to purchase the property. Once you and your Conveyancer are satisfied, your Conveyancer will be ready to exchange contracts i.e. commit you to the purchase. At this point, a completion date is agreed with all parties in the chain. Completion is the day where you actually get the keys and get to move in!
What is an indemnity policy?
An indemnity policy is an insurance policy and they are designed to insure a buyer (and their lender and future purchasers) against a defect in title. A defect may be something like a failure to get planning permission for an extension. The indemnity policy will insure against your financial losses should anyone be able to enforce the defect. For example, if the Local Authority decided to enforce a failure to get planning permission, the indemnity policy should cover the financial losses incurred. Each indemnity policy is different and it is very important that you fully read the terms and conditions so you do not invalidate them.
What is a covenant?
A covenant is a promise in relation to the property. Covenants can either be positive – to do something – or restrictive – not to do something. For example, a positive covenant may be to maintain the boundary wall which is marked with a “T” on a plan and a restrictive covenant could say that you will not build an extension to your property without the consent of another party. Covenants which were imposed many years ago may still be enforceable though it may be extremely difficult to identify who has the benefit of a covenant. If you are buying a property and think there may be a breach of covenant, you should tell your Conveyancer who can advise further.
