Legal Terms

• Conveyancing Terms

  Completion

  This is the moving date. On the day of completion the balance purchase price is sent to the seller’s conveyancer. The sellers should have left the property and left the keys with the agents. The conveyancer will only allow the estate agent to release the keys once they have received the balance of the purchase price. Once completion has take place you can now move in.

  Conveyancer

  A conveyancer is a lawyer who specialises in buying or selling property (houses, flats, business premises or land).

  Conveyancer’s Fees

  This is the cost for the work carried out by the conveyancer. Make sure you check whether this includes VAT. Find out how much your fees would be with our get a quote online service.

  Disbursements

  Fees paid to third party companies that carry out specific tasks in the buying/selling process. For example the local authority for planning searches.

  Exchange of Contracts

  Both the buyers and sellers sign a contract and their solicitors normally exchange them. On exchange both parties are committed to buy and sell the property. The deposit will have been paid and a completion date agreed. There are large financial penalties to pay if either side fails to complete after exchange.

  Fees For Acting For Lender

  If you are having a mortgage, your mortgage company will ask your solicitor to act for them as well and will make it a term of your mortgage that you pay the fee.

  Fixtures, Fittings & Contents Form

  The seller completes this form. It is a list of items being left or removed from the property on completion.

  Freehold

  Property and associated land is owned outright.

  Help to Buy Equity Loan

  With a Help to Buy: Equity Loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.

  You won’t be charged loan fees on the 20% loan for the first five years of owning your home.

  The Help To Buy Scheme is due to end on 31st March 2023, no applications can be made after 6pm on 31st October 2022.

  Insurance Against Transaction Failure

  At Hegarty Solicitors we give clients the option of purchasing our No Move No Fee insurance policy in case the transaction fails.

  Joint Tenants

  Joint Tenants have equal rights to the whole property and are each entitled to half of the sale proceeds. If a property is owned as joint tenants then on the death of one of the joint owners it passes automatically by way of survivorship to the surviving joint owner. Alternatively, a property can be owned as “tenants in common” which means that you would then be able to control the destination of your share of the property in your Will.

  Land Registration Fee

  This is for registering the new owners of the property at the land registry.

  Leasehold

  The exclusive right to reside in a property for a fixed period of time e.g. 90 years or 999 years. At the expiry of the lease you will have to vacate the property or purchase another lease. This type of purchase may involve additional payments to the individual or company that owns the freehold – including maintenance or ground rent. You will also be limited by the lease as to how you can alter or use the premises.

  Official Copies of the Title

  When you are selling a property your conveyancer must apply for a copy of the title and title plan from the land registry. These are commonly referred to as ‘official copy entries’. If the property is unregistered these are not necessary.

  Property Information Form

  The seller completes this form to give general information about the property, for instance whether there have
  been disputes with neighbours, any guarantees on the property and if they have made any alterations.

  Redemption Figure

  This is the amount required to repay your mortgage.

  Searches

  The searches give information about the property. The main searches are:

  • Local authority – this looks at whether the council has adopted the road, planning applications and permissions and tree preservation orders.
  • Drainage – this shows if the property is connected to the mains water supply and sewerage system and if property is on a water meter.
  • Environmental – this will search to see if the property may be on contaminated land, land liable to flooding, subsidence or landslip, or is near a landfill site.
  • Land Registry – this will protect the buyer between exchange and completion and prevent any entries being made at the land registry.
  • Bankruptcy – all mortgage lenders require evidence that the buyer is not bankrupt.

  Shared Ownership

  Shared Ownership means that buyers can buy a share of a property (between 25% and 75% of the home’s value) and pay rent on the remaining share to a developer or housing association. You can take out a mortgage to pay for your share of the home’s purchase price but this will need to be approved by the developer or housing association. At a later date, you could buy bigger shares to increase your share of the property.

  Stamp Duty Land Tax

  If you purchase a residential property for over £250,000 you will have to pay Stamp Duty Land Tax to HMRC. The tax is charged at increasing rates for each portion of the price. There are different rules if you’re buying your first home and for additional residential properties.

  Stamp Duty Land Tax can be complicated to calculate, HMRC have a handy calculator here:- http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm

  Tenants in Common

  A property owned as “tenants in common” means that two or more owners each have a separate share of the property. This can either be half each or a defined percentage. Unlike Joint Tenants, each person’s share is not passed automatically to the other owner/s when they die. Each owner can leave their share of the property to whoever they wish in their will.

  Title Deeds

  Shows who owns the property, and if there are any rights or obligations attached to it.

  Transfer Deed

  This document transfers the legal title from the name of the seller to the buyer and is sent to the land registry to register the new details.

• Wills, Trusts and Probate Terms

  Beneficiary

  A beneficiary is a person to whom who you wish to leave a particular gift in your Will. They can be an individual, a charity or there may be a class of beneficiaries, e.g. grandchildren. If a beneficiary is under 18 then unless an alternative age is specified they will be entitled to their inheritance upon attaining the age of 18.

  Court of Protection

  The Court of Protection is a specialist Court which deals with applications on behalf of people who have lost their mental capacity and are therefore unable to manage their own affairs. The Court has the power to appoint a ‘Deputy’ to deal with property and financial affairs and in some instances the health and personal welfare of the person who is no longer able to make their own decisions. The Court works alongside the Office of the Public Guardian to oversee the general management of the affairs.

  Deed of Variation

  Where a beneficiary may wish to vary what is left to them so as to pass it on to someone else.

  Deputy

  A Deputy is someone appointed by the Court to make decisions for someone who is mentally incapable of doing so on their own. A Deputy is responsible for making decisions for a mentally incapable person until either the death or recovery of that person. A Deputy is usually a close friend or relative of the person concerned but can be a professional such as a solicitor, or a local authority.

  Executors

  Your Executors are the organisation, person or persons appointed by you to ensure that the instructions contained in your Will are carried out and are in charge of collecting all assets, paying any inheritance tax and distributing the estate to the beneficiaries as per the directions outlined in the Will.

  Your Executors will need to identify the size of your estate, pay any debts and funeral expenses before distributing the remainder of your estate in accordance with your Will.  This can be a complicated role and it is important that you consider your Executors carefully as it involves a great deal of responsibility.

  Grant of Representation

  A Grant of Representation is a document issued by the Probate Registry which authorises the Personal Representatives to administer the deceased’s estate. There are two basic types of Grant of Representation:

  • Grant of Probate: this is where a deceased person has left a Will and the Grant of Probate is issued to the Executors appointed
  • Grant of Letters of Administration: this is usually where the deceased person has not left a Will although it can be where a Will has been left but it is not proved by the Executors.

  Guardians

  If you have children, it is important to consider appointing a guardian to look after your children in the event of your death. The appointment of guardians does not take effect until all persons with parental responsibility have died. Mothers automatically have parental responsibility for their children. Fathers also have automatic
  parental responsibility if they are married to the mother at the time of the birth of the child or subsequently get married or become registered on their birth certificate after 1 December 2003. It is also possible to include a provision in your Will to provide your Executors with discretion to pay any costs/expenditure incurred by your guardians in the care of your children.

  Inheritance Tax

  Inheritance Tax is payable on your estate (subject to some exemptions) when you die. The first £325,000 of your estate, known as the “Nil‐Rate Band” is taxed at 0%. Some people will also be able to use a “Residence Nil -Rate Band” which could be worth up to £175,000 of extra allowance meaning up to the first £500,000 of your estate is taxed at 0%. The value of the estate which exceeds the Nil‐Rate Band (and any Residence Nil-Rate Band) is taxed at 40%. A reduced rate of 36% could be achieved in circumstances where at least 10% of the value of a qualifying estate is left to charity.

  Assets that pass to spouses/civil partners are exempt from Inheritance Tax. Based on the information you have provided, if we feel that your estate is likely to be subject to Inheritance Tax we may contact you to discuss your options if you so wish. Where someone dies on or after 9 October 2007 who had been in a marriage or civil partnership (and the marriage or civil partnership came to an end on death) the survivor’s personal representatives have a ‘permitted period’ in which to claim the unused nil rate band and residence nil rate band of the spouse or civil partner who has predeceased.

  Intestacy

  If a valid Will is not made, you die subject to the intestacy rules. These are the statutory rules which have financial constraints and are rigid in their application.

  The division of your estate under the intestacy rules depends on your surviving relatives. In the case of a Husband and Wife and two children, if the Husband were to die without a Will then the Wife will receive all the Husband’s personal belongings with a statutory legacy of £270,000 (or everything if the total is less) plus one half of any balance outright. The children will then receive the remaining half of the balance in equal shares. Where a person dies without a Will leaving a spouse but no children or other descendants, the whole estate passes to the spouse.

  The intestacy rules do not apply to surviving partners who were not married or in a civil partnership with the deceased, or any stepchildren, therefore making a Will is important to ensure your family members receive their inheritance.

  Joint Tenants

  If a property is owned as joint tenants then on the death of one of the joint owners it passes automatically by way of survivorship to the surviving joint owner. Alternatively, a property can be owned as “tenants in common” which means that you would then be able to control the destination of your share of the property in your Will.

  Lasting Powers of Attorney

  A Lasting Power of Attorney (LPA) is a legal document that enables you to appoint someone (known as an Attorney/Attorneys) to make decisions on your behalf at a future time when you may not be able to make such decisions.

  You can create two types of LPA:

  • Property and Financial Affairs LPA
  • Health and Welfare LPA

  Residuary Estate

  Your Residuary Estate is what is left of your assets after your funeral expenses, debts, administration expenses, any Inheritance Tax and any specific gifts or cash gifts have been satisfied. It is possible to leave a percentage of your Residuary Estate to particular beneficiaries or a certain number of shares. It is important to consider who you would wish to receive any particular percentage/share of your Residuary Estate if the chosen beneficiaries predecease you, for example, if your Residuary Estate is gifted to your children, provision can be made for the children of a predeceasing child to receive the parent’s share.

  Revocation

  Upon signing your new Will any previous Will made by you will be revoked unless steps have been taken to avoid this. It is therefore important that you forward to us copies of any existing Wills and in particular any Wills made abroad so that your new Will can be prepared to ensure that any foreign Wills are not automatically revoked.

  Specific Gifts

  In your Will you can leave a specific item to a beneficiary, e.g. a certain item of jewellery or item of sentimental value. If that particular item is not within your possession at the time of your death, the gift will fail. It is also possible to leave any jewellery owned by you at the time of your death to a particular beneficiary. If you wish to leave a property to a beneficiary in your Will, please contact us to discuss this gift further as there are considerations that will need to be taken into account, e.g. if it is a property where there is a mortgage, who pays the costs of transfer etc.

  Will

  A Will is a document in which a person, called the Testator, appoints Executors to administer their estate after their death. The Executors are in charge of collecting all assets, paying any inheritance tax and distributing the estate to the beneficiaries as per the directions outlined in the Will. The document is signed and witnessed and must comply with certain legal requirements to be valid. It is therefore important to seek legal advice to ensure that your Will is valid.

• Divorce and Separation terms

  Conditional Order (formerly Decree Nisi)

  Once 20 weeks have passed from the issue of a divorce application, a Conditional Order can be made. This is an order that shows that the court is satisfied that all legal requirements have been met to proceed with a divorce. At this stage the divorce is not complete; there is a six week minimum mandatory period between grant of Conditional Order and Final Order.

  Final Order (formerly Decree Absolute)

  This is the final stage of divorce and the legal document that ends a marriage.

  Applicant (formerly Petitioner)

  The person who starts the divorce proceedings.

  Respondent

  In a sole application, the party against whom the application is filed, the other spouse in divorce proceedings.

• Employment Law Terms

  Disbursements

  Disbursements are costs related to your matter that are payable to third parties, such as Barristers Fees and Medical Report Fees.

  Form ET1

  The claim form outlining your case and the nature of the dispute.

  Form ET3

  The response form when a claim has been made against you.

  Interlocutory Applications

  A provisional decision given during the course of a legal action.

  Making an Unless Order

  If you do not comply with an order made by the Employment Tribunal you risk losing part (or all) of your claim/response.

  Particulars of Claim

  Document that sets out the factual detail of your claim, and the legal basis for it.

  Protected Conversation

  A protected conversation allows an employer to have an ‘off the record’ chat with an employee to discuss issues, such as performance. The chat or discussion is ‘protected’ from being referred to if you later take your claim to an employment tribunal. There are strict rules controlling what your employer may talk to you about in a protected conversation.

• Litigation, Debt and Insolvency Terms

  Litigation, Debt and Insolvency Terms

  Adverse costs

  In England, costs “follow the event” and the losing party pays the winning party’s costs.

  Adjudication

  The legal process of resolving a dispute or deciding a case.

  Affidavit

  A written statement by an individual that is sworn to be true. The signing of the document is witnessed by a solicitor.

  Arbitration

  A way of resolving disputes with a third party, or arbitrator, who decides the final award.

  Bankrupt

  The legal status of a person who is unable to repay debts owed to its creditors.

  Champerty

  Is an illegal agreement in which a person with no previous links with a lawsuit, finances it in order to share the proceeds.

  Claimant

  A person making a claim.

  Compensation

  Something, typically money, awarded to someone in recognition of loss, injury, or suffering. Can also be known as ‘Damages’.

  Creditor

  A person or organisation to whom money is owed.

  Defendant

  The person accused of committing a crime or is the one being sued.

  Deponent

  A person who makes a voluntary declaration in a written statement, which is signed under oath.

  Disbursements

  Disbursements are costs related to your matter that are payable to third parties, such as court fees.

  Disclosure

  The making available of required documents that are in the possession of the other party involved in the proceedings.

  Injunction

  A court order stopping a person from doing something or making a person do something.

  Insolvent

  Being unable to pay debts when they are due or where liabilities exceed assets.

  Litigation

  The process before a court.

  Mandamus

  A remedy in the form of an order to tell an inferior court what to do.

  Mediation

  An alternative way of resolving disputes. A mediator is appointed to help the parties reach an acceptable solution.

  Non-recourse

  Most third party funded litigation is on a non-recourse basis, which means that should the claim be unsuccessful, the funder has to write off the whole of the investment.

  Obiter dictum

  Judges’ comments made in passing which are not binding, only persuasive.

  Tort

  A civil wrong that causes someone loss or harm.

  Writ

  Also known as the originating summons or claim form. The court claim is written on this form.

• Commercial Property Terms

  Commercial Property Terms

  Alienation

  The ability for a tenant to dispose of its interest under a lease, for example by assigning (or transferring) it to a third party or by underletting the premises to a third party.

  Break Clause

  A clause within a lease giving the tenant, the landlord or, possibly, both parties the ability to terminate the lease part way through the term. Often there are certain conditions attached to the break right that must be strictly adhered to, e.g. an obligation to serve a minimum of 6 months’ written notice on the other party prior to the break date.

  Chattel

  Something that a person can own in physical form, being a tangible, moveable asset, e.g. an item of furniture or equipment/machinery.

  Collateral Warranty

  A contract between a building contractor (or sub-contractor) or a professional consultant (e.g. an architect) with a third party, usually a new tenant or a buyer, under which the contractor/consultant warrants to the third party that it has complied with the terms of its building contract/professional appointment (as the case may be). It is therefore a way for a tenant or buyer of newly constructed commercial premises to have a right of action against the contractors/consultants involved in the construction of a building, where the contractors/consultants were engaged by a third party, usually being the landlord or the seller.

  Dilapidation’s

  Items of disrepair. Most commonly used when referring to a tenant’s liability to a landlord under a lease to repair the premises and to return them to the landlord in repair at the end of the lease term.

  Easement

  A right benefiting a property that can be exercised over land owned by someone else, e.g. a private right of way or a right to use service media for the passage of electricity, water, gas and other utilities.

  Forfeiture

  These provisions relate to the landlords ability to terminate the lease before the term end date. The forfeiture provisions in the Lease will set out the circumstances in which the landlord is able to forfeit the lease.

  Option Agreement

  A contract between a landowner and a buyer under which the buyer pays a premium (or option fee) in return for the right (but not the obligation) to purchase land within a specified period either at a fixed price or at a price to be determined in accordance with a pre-agreed formula at the point the option under the contract is exercised.

  Overage

  Also known as claw back or uplift clause. If you are selling a property or some land, it can be possible to include provisions in the documents under which you sell the property which state the Buyer will be required to may a payment to you if, in the future the land or property gets planning permission or is developed and as a result of this increases in value.

  Restrictive Covenant

  A restriction affecting freehold land that prohibits the use if the land in some way for the benefit of another party’s land.

• Tax Terms

  Tax Terms

  Accruals

  Earnings included in a business’ accounts where payment is yet to be received, or expenses where that are yet to be paid.

  Acquisition

  In Capital Gains Tax rules, this means obtaining an item/asset (purchasing or any other means)

  Allowances

  Allowances are the standard tax-free limits set by the government – they are usually reviewed every year but can also be frozen for a period. The allowance is given to all UK & Commonwealth citizens and some others who may qualify.  The Personal Allowance is given to everyone resident in the United Kingdom and can also be available to some Non-UK Residents. From 6th April 2010 the allowance has been subject to an income limit of £100,000. An individual whose income exceeds that will have the allowance withdrawn at £1 for every £2 of income over £100,000.

  The Married Couples Allowance has been restricted to those over 65 at 6th April 2000.

  Agricultural Relief

  You can pass on some agricultural property free of Inheritance Tax, either during your lifetime or as part of your will.

  Agricultural property that qualifies for Agricultural Relief is land or pasture that is used to grow crops or to rear animals intensively. There are other qualifying and non-qualifying activities which need to be considered.

  Agricultural Relief can be given at 100% or 50% if the qualifying criteria is met.

  Annual Investment Allowance

  The Annual Investment Allowance (AIA) can be used against new equipment (except cars) during a tax year and up to £1,000,000 until 31 March 2023. If the total cost of all equipment is £1,000,000 or under, you can claim all of it as your AIA against business income.

  Basis Period

  The period for which the businesses profits are taxable; this is typically the same period as the actual accounting period because tax is paid on the profit shown on the accounts.

  Special rules apply in:

  • The first three years of a business
  • When the business comes to an end
  • If the accounting date changes

  These rules mean that the profit against which you are taxed will not always be calculated from a single set of accounts; the basis period might be different than the accounting period in some cases.

  From 6 April 2023, substantial changes are being made to the basis period rules and all basis periods will have to be either 31 March or 5 April following the changes.

  Business Asset Disposal Relief

  You may be able to pay less Capital Gains Tax when you sell (or ‘dispose of’) all or part of your business.

  Business Asset Disposal Relief means you’ll pay tax at 10% on all gains on qualifying assets.

  Business Relief

  Business Relief reduces the value of a business or its assets when working out how much Inheritance Tax has to be paid.

  Any ownership of a business, or share of a business, is included in the estate for Inheritance Tax purposes.

  You can get Business Relief of either 50% or 100% on some of an estate’s business assets assuming the qualifying criteria is met.

  Capital Allowances

  The purchase cost of an asset is not normally permitted as an expense. This is because the asset retains a value which will decrease over time. Businesses can claim an allowance to reflect the depreciation. The Annual Investment Allowance, First Year Allowances and Super Deduction can be considered.

  Capital Gains Tax

  If you own a chargeable asset that goes up in value and you sell it for a profit, you may be charged Capital Gains Tax (CGT).  CGT is a tax payable on the increased value of an asset.

  The first £12,300 (2022/23 tax year) is not taxable as it is covered by the annual exempt amount (AEA). A charge of 10%/18% applies at any amount above that up to the individual’s unused basic rate tax band (at £34,970) and then at 20%/28% once this threshold has been passed, depending on the asset disposed of.

  From 6 April 2023 the following proposed changes are being made:

  • For the tax year 2023 to 2024 the AEA will be £6,000 for individuals and personal representatives, and £3,000 for most trustees.
  • For the tax year 2024 to 2025 and subsequent tax years the AEA will be permanently fixed at £3,000 for individuals and personal representatives, and £1,500 for most trustees.

  The measure also fixes the CGT proceeds reporting limit at £50,000.  Therefore, any assets disposed of with gross proceeds in excess of this amount will need reporting to HMRC irrespective of CGT liability.

  Construction Industry Scheme (CIS)

  CIS is a tax scheme that regulates payments to subcontractors in the Construction Industry. An individual subcontractor should register if they do not want deductions to be made at a higher rate; the contractor must deduct tax at source before making a payment – this is presently 20%. All payment and tax deduction details must be recorded on the tax deduction voucher.

  Deferment – National Insurance

  If you have a job and are also self-employed then you will be liable for Class 1, 2 & 4 NI (National Insurance). However, contributions will be refunded over and above a certain figure. If your NI contribution for a given tax year will exceed the maximum, it is advisable to apply to defer payment. Seek advice from HMRC or whoever advises you on tax liability to calculate your eligibility for this

  Deficiency Relief

  Life Insurance policies: It is possible to receive taxable income from a Life Insurance Policy during the period it is held. Termination of the policy should result in more being paid out than what has been paid in. If the amount paid out is less than the value of tax paid out, then too much tax has been paid. If this is the case, then you may claim Corresponding Deficiency Relief

  Dividend allowance

  Individuals with dividend income below £2,000 in a tax year currently benefit from the dividend allowance which taxes dividend income up to £2,000 at 0%.

  It is proposed that from 6 April 2023, the dividend allowance is reduced to £1,000 and then to £50 from 6 April 2024.

  First Year Allowances (FYA)

  If you buy an asset that qualifies for 100% first year allowances you can deduct the full cost from your profits before tax.

  You can claim 100% first year allowances in addition to annual investment allowance (AIA), as long as you do not claim both for the same expenditure.

  You can claim ‘enhanced capital allowances’ (a type of 100% first year allowance) for the following equipment, which must be new and unused:

  • electric cars and cars with zero CO2 emissions
  • plant and machinery for gas refuelling stations, for example storage tanks, pumps
  • gas, biogas and hydrogen refuelling equipment
  • zero-emission goods vehicles
  • equipment for electric vehicle charging points
  • plant and machinery for use in a freeport tax site, if you’re a company

  Form 64-8

  This is also known as the “Authorising your agent” form. A taxpayer permits the tax office to communicate with their agent and to deal with them regarding matters that concern HMRC.

  Free Standing Additional Voluntary contributions (FSAVCs)

  These are payments by an employee into a private scheme that is separate from any company scheme. The rules about maximum contributions differ slightly from personal pension schemes

  Income Tax

  Income tax is paid by individuals, personal representatives and trustees on a wide range of income types and at various rates. Each will have different allowances.

  K Codes

  Where a tax code contains “K”, it means the deductions are greater than the allowances

  Lower Rate Tax

  This was a tax rate that applied to bank and building society interest. It was 20% but has been replaced with the 10% the Starting Rate for savings. If non-savings related income is above the limit then the 10% starting rate will not apply to savings. Interest on your savings will be taxed at 20% (basic rate)

  Personal Savings Allowance (PSA)

  The Personal Savings Allowance was introduced for savings income (such as interest) paid to individuals. Broadly, this means that basic rate taxpayers will be able to receive up to £1,000 of savings income, and higher rate taxpayers can receive up to £500 of savings income, without any tax being due.  The PSA will not be available to any saver with additional rate income.  Alongside the introduction of the PSA, banks, building societies and NS&I have ceased to deduct tax from account interest they pay to customers.

  Property Allowance

  The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property as long as the conditions are met.

  Rent a Room scheme

  The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.

  Super Deduction and 50% special rate first year allowance

  There are 2 types of temporary first year allowances:

  • the super-deduction
  • 50% special rate first year allowance (also known as SR allowance)

  Only companies can claim them both against the cost of certain new and unused plant and machinery you buy for your business from 1 April 2021 up to and including 31 March 2023.

  The super-deduction lets you deduct up to 130% of the cost from your profits before tax.

  50% special rate first year allowance lets you deduct 50% of the cost from your profits before tax.

  Trading Allowance

  The trading allowance is a tax exemption of up to £1,000 a year for individuals with trading income from:

  • self-employment
  • casual services, for example, babysitting or gardening
  • hiring personal equipment, for example, power tools

  This allowance does not apply to trading income from a partnership.

If you can’t find the legal term you are looking for, please contact your legal adviser or email us at enquiries@hegarty.co.uk. The Solicitors Regulation Authority also has a handy guide to legal jargon www.sra.org.uk/jargonbuster.