Business, Legal & Accounting Glossary
Conveyancing is the act of transferring the legal title in a property from one person to another. The buyer must ensure that he or she obtains a good and marketable ‘title’ to the land; i.e., that the person selling the house actually has the right to sell it and there is no factor which would impede a mortgage or re-sale. A system of conveyancing is usually designed to ensure that the buyer secures title to the land together with all the rights that run with the land, and is notified of any restrictions in advance of purchase.
A typical conveyancing transaction, whether a sale or purchase, contains two major ‘landmarks’, which are exchange of contracts (whereby equitable title passes) and completion (whereby legal title passes), plus the three stages: before contract, before completion and after completion.
In most mature jurisdictions, conveyancing is facilitated by a system of land registration which, in the near future, is likely to lead to widespread (if not mandatory) use of electronic conveyancing.
Electronic or Digital Conveyancing can be defined as –
In England and Wales, this is usually done by a solicitor or a licensed conveyancer. Either may employ or supervise an unqualified conveyancer. The domestic conveyancing market is price competitive, with a high number of firms of solicitors and conveyancing companies offering a similar service. It is possible for someone to carry out their own conveyancing.
Under English and Welsh law agreements are not legally binding until contracts are exchanged. This affords both the advantage of freedom before contract, but also the disadvantage of wasted time and expense in the event the deal is not done. To try to address this, Home Information Packs were introduced from August 2007.
The normal practice is for the buyer to negotiate an agreed price with the seller then organise a survey and have the solicitor (or conveyancer) carry out their searches and pre-contract enquiries. The seller’s solicitor or conveyancer will prepare the draft contract to be approved by the buyer’s solicitor. The seller’s solicitor will also collect and prepare property information to be provided to the buyer’s solicitors, in line with the Law Society’s National Protocol for domestic conveyancing.
It takes on average 10-12 weeks to complete a conveyancing transaction, but some transactions are quicker, many take longer. The timescale is determined by a host of factors – legal, personal, social and financial. During this period prior to exchange of contracts (exchange being the point at which the transaction becomes legally-binding) either party can pull out of the transaction at any time and for any reason, with no legal or moral obligation to the other. This gives rise to a risk of gazumping and its converse, gazundering.
The position in Scotland under Scots law is that the contract is generally concluded at a much earlier stage, and the initial offer, once accepted by the seller, is legally binding. This results in a system of conveyancing where buyers get their survey done before making a bid through their solicitor to the seller’s solicitor. If there is competing interest for a property, sellers will normally set a closing date for the initial offers. The contract is normally formed by letters between the solicitors on behalf of each of the seller and purchaser, called missives. Once all the terms of the contract are agreed, the missives are said to be concluded, and there is then a binding contract for the sale of the property. Normally the contract is conditional upon matters such as the sellers being able, before completion of the transaction, to prove that they have good title to the property and to exhibit clear searches from the property registers and the local authority. The fact that there is a binding contract at a relatively early stage, compared with the normal practice in England and Wales, makes the problem of gazumping a rarity. The disadvantage for the buyer is that they usually have to bear the cost of the survey for unsuccessful bids, though trials have been made of a system where the seller arranges for one survey available to all bidders.
In Australia, much of the land which was first colonised by England is still Common Law (also known as Old System). However, since the introduction of Torrens title in 1858 most land is now under the new (and greatly improved) system of conveyance.
Conveyancing in Australia is usually completed by a solicitor or a licensed conveyancer. There are also kits available if the buyer wishes to complete the process themselves, but due to the complexity of varying state and council laws and processes, it’s usually not recommended.
A common conveyance by a solicitor or licensed conveyancer usually takes 4-6 weeks. Most firms offer fixed price services (around $1000) which usually includes costs of searches, legal advice and other outlays.
In most states and territories a typical conveyance includes, but is not bound or limited to, the following:
Searches tend to take up the bulk of the conveyance. Due to the three-level system of government in the country (federal, state and local), it must be made sure that all rights and title are properly awarded to the seller. Most information is retrieved from state or local (council) authorities.
A standard search package could include:
Requirements, searches and costs can vary from state to state, depending on local property legislation and safeguards.
The conveyancing process in the United States varies from state to state depending on local legal requirements and historical practice. In most situations, three attorneys will be involved in the process: one each to represent the buyer, seller, and mortgage holder; frequently all three will sit around a table with the buyer and seller and literally “pass papers” to effect the transaction. (Some states do not require all parties to be present simultaneously.) In order to protect themselves from defects in the title, buyers will frequently purchase title insurance at this time, either for themselves or for their lender.
In most states, a prospective buyer’s offer to purchase is made in the form of a written contract and bound with a deposit on the purchase price. The offer will set out conditions (such as appraisal, title clearance, inspection, occupancy, and financing) under which the buyer may withdraw the offer without forfeiting the deposit. Once the conditions have been met (or waived), the buyer has “equitable title” and conveyancing proceeds or may be compelled by court order. There may be other last-minute conditions to closing, such as “broom clean” premises, evictions, and repairs.
Typical papers at a conveyancing include: deed(s), certified checks, promissory note, mortgage, certificate of liens, pro-rata property taxes, title insurance binder, and fire insurance binder. There may also be side agreements (e.g., holdover tenants, delivery contracts, payment holdback for unacceptable repairs), seller’s right of first refusal for resale, declaration of trust, or other entity formation or consolidation (incorporation, limited partnership investors, etc). Where “time is of the essence,” there have been cases where the entire deposit is forfeited (as liquidated damages) if the conveyancing is delayed beyond the time limits of the buyer’s contingencies, even if the purchase is completed.
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This glossary post was last updated: 18th April, 2020 | 0 Views.