Conveyancing
Encyclopedia
In law, conveyancing is the transfer of legal title
of property
from one person to another, or the granting of an encumbrance
such as a mortgage or a lien
.
The term conveyancing may also be used in the context of the movement of bulk commodities or other products such as water, sewerage, electricity, or gas.
A typical conveyancing transaction contains two major landmarks: the exchange of contracts (whereby equitable title passes) and completion (whereby legal title passes). Conveyancing occurs in three stages: before contract, before completion and after completion.
A buyer of real property must ensure that he or she obtains a good and marketable 'title' to the land; i.e., that the seller is the owner, has the right to sell the property, 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. In most mature jurisdictions, conveyancing is facilitated by a system of land registration
which is designed to encourage reliance on public records and assure purchasers of land that they are taking good title.
, 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.
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 while 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 obligation to the other. This gives rise to a risk of gazumping and its converse, gazundering
.
Conveyancing has been identified as one of the key targets for companies looking to take advantage of the changes in the law (originally planned to be introduced in October 2011, but which is likely to be delayed for several months), with the introduction of the Legal Services Act. This enables non-lawyers to own law firms, and is a significant threat to solicitors that today rely on income from conveyancing. The reason why this area of law has been targeted is because it is highly process-driven and therefore perceived as being more easily managed by non-lawyers. Recent trends indicate that instead of new firms that will actually carry out the work, instead, panel organisations are being created who take the instruction and pass the work to a panel of solicitors and take a fee from the client for this distribution service.
These new panels employ "progressors" whose role is to merely contact solicitors that are actually transacting the instruction to check on progress. This raises the issue of client-confidentiality and what information may be provided to such non-connected third parties. These progressors have received the moniker of Legal Naggers (or Laggers).
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. From 1 December 2008 properties for sale will have to be marketed with information, now branded as the 'Home Information Report'. This should consist of: a Single Survey, an Energy Report and a Property Questionnaire local authority searches and evidence of legal title. The Home Report will be made available on request to prospective buyers of the home. The date of final settlement is in Scotland known as the "date of entry".
fiefdoms heritable by an heir was that of "re-enfeoffment", involving the consecutive procedures of paying homage
, paying a feudal relief
and obtaining seisin
.
in 1858 most land is now under the new 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, this is usually not recommended.
A common conveyance by a solicitor
or licensed conveyancer
usually takes 4–6 weeks. Most firms offer fixed price services which usually includes costs of searches
, legal advice and other outlays.
In most states and territories a typical conveyance includes, but is not 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. It is important to note that conveyancing processes, legal documentation, contract requirements and search requirements vary between each state and territory.
A standard search package could include:
Requirements, searches and costs can vary from state to state, depending on local property legislation and safeguards.
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 check
s, 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.
Words used to indicate conveyance, or words of conveyance include grant, devise, give, and sell.
Title (property)
Title is a legal term for a bundle of rights in a piece of property in which a party may own either a legal interest or an equitable interest. The rights in the bundle may be separated and held by different parties. It may also refer to a formal document that serves as evidence of ownership...
of property
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
from one person to another, or the granting of an encumbrance
Encumbrance
Encumbrance is legal technical terminology for anything that affects or limits the title of a property, such as mortgages, leases, easements, liens, or restrictions. Also, those considered as potentially making the title defeasible are encumbrances...
such as a mortgage or a lien
Lien
In law, a lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation...
.
The term conveyancing may also be used in the context of the movement of bulk commodities or other products such as water, sewerage, electricity, or gas.
A typical conveyancing transaction contains two major landmarks: the exchange of contracts (whereby equitable title passes) and completion (whereby legal title passes). Conveyancing occurs in three stages: before contract, before completion and after completion.
A buyer of real property must ensure that he or she obtains a good and marketable 'title' to the land; i.e., that the seller is the owner, has the right to sell the property, 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. In most mature jurisdictions, conveyancing is facilitated by a system of land registration
Land registration
Land registration generally describes systems by which matters concerning ownership, possession or other rights in land can be recorded to provide evidence of title, facilitate transactions and to prevent unlawful disposal...
which is designed to encourage reliance on public records and assure purchasers of land that they are taking good title.
United Kingdom
In England and WalesEngland and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...
, this is usually done by a solicitor
Solicitor
Solicitors are lawyers who traditionally deal with any legal matter including conducting proceedings in courts. In the United Kingdom, a few Australian states and the Republic of Ireland, the legal profession is split between solicitors and barristers , and a lawyer will usually only hold one title...
or a licensed conveyancer
Licensed Conveyancer
A Licensed Conveyancer is a specialist legal professional in the United Kingdom, New Zealand, Australia or South Africa who has been trained to deal with all aspects of property law.Typically, their tasks might include:...
. Either may employ or supervise an unqualified conveyancer
Conveyancer
In Commonwealth countries, a conveyancer is a specialist lawyer who specialises in the legal aspects of buying and selling real property, or conveyancing. A conveyancer can also be a solicitor, licensed conveyancer, or a fellow of the Institute of Legal Executives.In the United Kingdom,...
. 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.
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
Law society
A Law Society in current and former Commonwealth jurisdictions was historically an association of solicitors with a regulatory role that included the right to supervise the training, qualifications and conduct of lawyers/solicitors...
's National Protocol for domestic conveyancing.
It takes on average 10–12 weeks to complete a conveyancing transaction, but while 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 obligation to the other. This gives rise to a risk of gazumping and its converse, gazundering
Gazundering
Gazundering is the practice of demanding a reduction in price to secure the sale of a property. This is usually done during contract negotiation...
.
Conveyancing has been identified as one of the key targets for companies looking to take advantage of the changes in the law (originally planned to be introduced in October 2011, but which is likely to be delayed for several months), with the introduction of the Legal Services Act. This enables non-lawyers to own law firms, and is a significant threat to solicitors that today rely on income from conveyancing. The reason why this area of law has been targeted is because it is highly process-driven and therefore perceived as being more easily managed by non-lawyers. Recent trends indicate that instead of new firms that will actually carry out the work, instead, panel organisations are being created who take the instruction and pass the work to a panel of solicitors and take a fee from the client for this distribution service.
These new panels employ "progressors" whose role is to merely contact solicitors that are actually transacting the instruction to check on progress. This raises the issue of client-confidentiality and what information may be provided to such non-connected third parties. These progressors have received the moniker of Legal Naggers (or Laggers).
The position in Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
under Scots law
Scots law
Scots law is the legal system of Scotland. It is considered a hybrid or mixed legal system as it traces its roots to a number of different historical sources. With English law and Northern Irish law it forms the legal system of the United Kingdom; it shares with the two other systems some...
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
England and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...
, 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. From 1 December 2008 properties for sale will have to be marketed with information, now branded as the 'Home Information Report'. This should consist of: a Single Survey, an Energy Report and a Property Questionnaire local authority searches and evidence of legal title. The Home Report will be made available on request to prospective buyers of the home. The date of final settlement is in Scotland known as the "date of entry".
Feudal England
The conveyancing process applicable to feudalFeudalism
Feudalism was a set of legal and military customs in medieval Europe that flourished between the 9th and 15th centuries, which, broadly defined, was a system for ordering society around relationships derived from the holding of land in exchange for service or labour.Although derived from the...
fiefdoms heritable by an heir was that of "re-enfeoffment", involving the consecutive procedures of paying homage
Homage
Homage is a show or demonstration of respect or dedication to someone or something, sometimes by simple declaration but often by some more oblique reference, artistic or poetic....
, paying a feudal relief
Feudal relief
Feudal Relief was a one-off "fine" or form of taxation payable to an overlord by the heir of a feudal tenant to licence him to take possession of his fief, i.e. an estate-in-land, by inheritance...
and obtaining seisin
Seisin
Seisin is the term denoting the legal possession of a feudal fiefdom . It was used in the form of "the son and heir of X has obtained seisin of his inheritance", and thus is effectively a term concerned with conveyancing in the feudal era...
.
Australia
In Australia much of the land which was first colonised by the United Kingdom is still Common Law (also known as Old System). However since the introduction of Torrens titleTorrens title
Torrens title is a system of land title where a register of land holdings maintained by the state guarantees an indefeasible title to those included in the register...
in 1858 most land is now under the new system of conveyance.
Conveyancing in Australia is usually completed by a solicitor
Solicitor
Solicitors are lawyers who traditionally deal with any legal matter including conducting proceedings in courts. In the United Kingdom, a few Australian states and the Republic of Ireland, the legal profession is split between solicitors and barristers , and a lawyer will usually only hold one title...
or a licensed conveyancer
Licensed Conveyancer
A Licensed Conveyancer is a specialist legal professional in the United Kingdom, New Zealand, Australia or South Africa who has been trained to deal with all aspects of property law.Typically, their tasks might include:...
. 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, this is usually not recommended.
A common conveyance by a solicitor
Solicitor
Solicitors are lawyers who traditionally deal with any legal matter including conducting proceedings in courts. In the United Kingdom, a few Australian states and the Republic of Ireland, the legal profession is split between solicitors and barristers , and a lawyer will usually only hold one title...
or licensed conveyancer
Licensed Conveyancer
A Licensed Conveyancer is a specialist legal professional in the United Kingdom, New Zealand, Australia or South Africa who has been trained to deal with all aspects of property law.Typically, their tasks might include:...
usually takes 4–6 weeks. Most firms offer fixed price services which usually includes costs of searches
Title search
A title search is a process that is performed primarily to determine the answer to three questions:*Does the seller have a saleable interest in the property?...
, legal advice and other outlays.
In most states and territories a typical conveyance includes, but is not limited to, the following:
- Title SearchesTitle searchA title search is a process that is performed primarily to determine the answer to three questions:*Does the seller have a saleable interest in the property?...
- checking for encumbrances and restrictions on the property
- ensuring any special conditions mentioned in the contractContractA contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
are met - making sure ratesRatesRates is a Portuguese parish and town located in the municipality of Póvoa de Varzim. In the census of 2001, it had a population of 2,539 inhabitants and a total area of 13.88 square kilometres.-History:...
, land tax and water consumption charges are paid by the appropriate party - arranging for the payment of fees and charges
- preparation of legal documents.
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. It is important to note that conveyancing processes, legal documentation, contract requirements and search requirements vary between each state and territory.
A standard search package could include:
- CompanyCompanyA company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...
search - Contaminated Land search
- Council Property search
- Full Council Inspection of Records search
- Land Tax search
- Main Roads search
- Registered Plan Search or Building Units/Group Titles Plan Search
- Titles SearchTitle searchA title search is a process that is performed primarily to determine the answer to three questions:*Does the seller have a saleable interest in the property?...
& check title search
Requirements, searches and costs can vary from state to state, depending on local property legislation and safeguards.
United States
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 insuranceTitle insurance
Title insurance is a form of indemnity insurance predominantly found in the United States which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. Title insurance is principally a product developed and sold in the...
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
Court order
A court order is an official proclamation by a judge that defines the legal relationships between the parties to a hearing, a trial, an appeal or other court proceedings. Such ruling requires or authorizes the carrying out of certain steps by one or more parties to a case...
. 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 check
Certified check
A certified check or certified cheque is a form of check for which the bank verifies that sufficient funds exist in the account to cover the check, and so certifies, at the time the check is written. Those funds are then set aside in the bank's internal account until the check is cashed or returned...
s, 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
Statutory holdback
Statutory holdback or contract holdback is the legal requirement found in most common law jurisdictions' contract law that requires an owner engaging a contractor to hold a particular percentage of payment for a stipulated length of time. This is done to ensure that any and all parties working on...
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
Liquidated damages
Liquidated damages are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach ....
) if the conveyancing is delayed beyond the time limits of the buyer's contingencies, even if the purchase is completed.
Words used to indicate conveyance, or words of conveyance include grant, devise, give, and sell.
See also
- List of real estate topics
- Real estate appraisalReal estate appraisalReal estate appraisal, property valuation or land valuation is the process of valuing real property. The value usually sought is the property's Market Value. Appraisals are needed because compared to, say, corporate stock, real estate transactions occur very infrequently...
- Verification and validationVerification and ValidationIn software project management, software testing, and software engineering, verification and validation is the process of checking that a software system meets specifications and that it fulfills its intended purpose...
External links
- (England) Council for Licensed Conveyancers, the regulatory body for Licensed Conveyancers.
- (England and Wales ) E-Conveyancing, government information about the e-conveyancing programme.
- (Australia ) Law Institute of Victoria, government information about the conveyancing.