Conveyancing

For other uses, see Conveyance (disambiguation).

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.[1]

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.[2] The systems of public record often have a French background.[3]

England and Wales

In England and Wales, conveyancing is usually done by a solicitor or a licensed conveyancer; either may employ or supervise an unqualified conveyancer. What is being conveyed, or transferred, is a piece of land or property, sometimes referred to archaically as "messuage".[4][5][6] 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.[7]

Under English 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 is a component of the cost of moving house in the United Kingdom.

The conveyancing process applicable to feudal fiefdoms heritable by an heir was that of "re-enfeoffment", involving the consecutive procedures of paying homage, paying a feudal relief and obtaining seisin.

Scotland

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 missives of sale between the solicitors on behalf of each of the seller and purchaser. Missives are letters the body of which contain proposed sale contracts and that negotiate terms, one missive at a time, essentially as an offer and counter-offer. Once all the contractual terms are agreed, the missives are said to be concluded, and these serve as 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 land 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 Search 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".

Australia

In Australia, much of the land first colonised by the United Kingdom still falls into the category of Common Law (also known as the Old System).[8] However, since the introduction of the Torrens title in 1858, most land is now regulated under the new system of conveyance.

Conveyancing in Australia is usually carried out by a solicitor or a licensed conveyancer. Kits are available for the buyer 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 a licensed conveyancer usually takes 4–6 weeks. Most firms offer fixed price services which normally include costs for searches, legal advice and other outlays.

In most states and territories a typical conveyance includes, but is not limited to, the following:

The states of Queensland and New South Wales allow a "cooling off" period of 5 days for residential contracts. This time is afforded to the purchaser to reconsider his or her position and enable them to cancel the contract if they so wish, in which case the purchaser may be legally bound to pay 0.25% of the purchasing price to the seller. Not all contracts have a cooling off period such as when purchasing a property at auction.

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.

United States

The conveyancing process in the United States varies from state to state depending on local legal requirements and historical practice. In rare situations, the parties will engage in a formal "closing." In a formal closing 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.

Much more commonly, the transaction is closed by use of an escrow. Practice vary from state to state as to who conducts the title search to make sure the seller has or can convey clear title, including what liens must be paid, and as to who acts as the escrow holder. In many states attorneys still act as the escrow agent and title inspector. In many others those functions are conducted by licensed escrow agents who often are affiliated with or even owned by a title insurance company. Some use a mix, such as having an attorney conduct the escrow while the title investigation is handled by the title insurance company or its agent.

In order to protect themselves from defects in the title, buyers will frequently purchase title insurance at this time for themselves. They will almost always be required to purchase title insurance for their lender as a condition of the loan.

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.

Words used to indicate conveyance, or words of conveyance include grant, devise, give, and sell.

Public records

In the Roman tradition, private rights to land were enforceable even if secret; this tradition remained to some extent in Europe up through the 19th century, but modern systems no longer allow for this secrecy.[3]

See also

Notes

  1. ↑ Black's Law Dictionary (7th ed. 1999)
  2. ↑ Dukeminier et al., Property 559 (6th ed. 2006)
  3. 1 2 Arruñada B. (2011). Property titling and conveyancing. Chapter 12 in Kenneth Ayotte and Henry E. Smith, eds.,Research Handbook on the Economics of Property Law.
  4. ↑ Bouvier, John (1870) [1st pub. 1839]. A Law Dictionary, Adapted to the Constitution and Laws of the United States of America, and of the Several States of the American Union: With References to the Civil and Other Systems of Foreign Law. Vol. II (Fourth ed.). Philadelphia: G.W. Childs. p. 176. Retrieved 6 December 2012.
  5. ↑ Sheets v. Selden's Lessee, 69 U.S. 177, 187 (1864)
  6. ↑ Benjamin Lynde Oliver, R. Day (1827). Practical Conveyancing. Glazier & Company. p. 250.
  7. ↑ Conveyancing: Solicitor or DIY? HM Land Registry.
  8. ↑ ISSN 2200-9698 (2013). Land and Property Information - Old System Information and Search Guide
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