MY CHATEAU

Property Terms – Used in the UKIf buying or selling a property in the UK I would not do so without a Solicitor. During the period of your purchase having an understanding of terminology when the Solicitor and Conveyancer begin discussing contract detail terms will help you feel more part of the process.

 

 

- Acceptance:The document that you will need to sign and return to a lender if you wish to accept the lender's mortgage offer.

- Additional security fee:This is a one-off fee charged by the lender. It is usually payable, up-front, on mortgages of more than 75% of the house value in order to protect the lender from repayment defaults. It is also known as MIG (Mortgage Indemnity Guarantee), Indemnity Premium or Indemnity Guarantee Premium.

- Agricultural Covenant:This is a planning condition that permits the erection of a residential dwelling providing it is occupiedby a person employed or associated with working on the land. Properties subjected to such a covenant are effectively "blighted"by this stipulation and values are relatively low because they cannot be sold to anyone who fails to meet the condition imposed,unless the planning authorities agree to lift the covenant.

- Applicant:The term by which a potential purchaser is often referred to by estate agents / auctioneers.

- Annual percentage rate: This is commonly known by its acronym, APR. The APR gives the true annual cost of a finance agreement, expressed as a percentage, through the calculation of interest, insurance provided and any other fees charged. It provides an excellent basis for comparison across loans.

- Arrangement fees:These fees cover the arrangement of loans on certain products. They usually apply to loans for which a special rate of interestapplies; for example fixed or capped rates.

- Assignment:This is the transfer of ownership of a lease or insurance policy.

- Auction: A means of selling a property whereby it is listed at an auction and if the property does not reach the reserve pricethen it is not sold. If it does then the auctioneer's hammer falls that represents an exchange of contracts and the successfulbidder is legally obliged to pay a 10% deposit and sign a memorandum of sale before leaving the auction. Usually completion takes places 28 days later and the buyer cannot re-negotiate any of the stipulated terms and buys the property "as seen".Structural surveys and searches would have to be made in advance by a bidder.

- Basic variable mortgage rate:This is the standard rate of interest charged by a mortgage lender, who, taking into consideration any influential economicconditions, may, at times, increase or decrease this rate accordingly.

- Beneficial Owner: Person owning land and entitled to it for his own benefit. Not, for instance, a trust that holds the land forthe benefit of another.

- Bridging Finance: A purchaser under certain circumstances may wish to complete the purchase of a property whilst stilloffering his own for sale. Lenders will advise as to whether the necessary temporary finance can be made available and thepurchase can go ahead earlier. Some people use this means for a few days to enable them to move from property a to propertyb over a couple of days.

- Building survey (formerly full structural survey): This is an examination of a building by a surveyor in order to produce a full report on the structural integrity of the property aswell as its state of repair. Although all houses should be surveyed, and, indeed, many mortgage providers require it, it isparticularly useful for older properties, those in a state of disrepair, those that have been extensively altered or extended, or anyproperty that you may wish to alter or extend yourself.

- Capital:This is the amount of the loan upon which interest is calculated.

- Capped mortgage:This is a mortgage, normally agreed over a fixed period of time, with an upper limit (or cap) above which the rate of interestcannot rise. If the standard interest rate is lower than the upper limit then you will be charged at the lower rate; if the standardvariable rate is higher then you will be charged at the rate agreed.

- Caution: Entries on the land register protecting the interests of a third party. Any applicant for first registration of title is notified to him whereupon he can take appropriate action to protect his interests.

- Chain:This situation occurs when a line of buyers and sellers are all simultaneously involved in linked property transactions. When oneof these is not successful - for instance, when someone's house sale falls through - the entire 'chain' breaks and each of thetransactions is held up, or they fail entirely.

- Charge: If a property owner uses his security in the property to service a loan, a charge is registered and certified. This entitlesthe lender to be regarded as a secured creditor to be paid out of the proceeds of a sale in the event of a default on the loan.

- Charge Certificate: A certificate issued to a lender by the Land Registry giving evidence of the lender's charge over theproperty.Chief Rent:A payment made on freehold land to the original freeholder forever. This is distinct from ground rent that has alimited period. (See also Freehold).

CML

This acronym stands for The Council of Mortgage Lenders, a body that devised the Mortgage Code to ensure that lenders treatconsumers fairly. This Code no longer exists as the FSA (Financial Services Authority) is now responsible for regulating mortgagelending on a statutory basis.

Collateral:

Property pledged as a guarantee for the repayment of a loan.

Commission of Fee to the Estate Agent /Auctioneer:

The sum of money paid to the agent, usually on completion, although legally it is payable on exchange of contracts.

Completion: The finalising of the sale when all the monies are passed over and the purchaser gains access to the property.

Conditions of sale

The detailed, standard terms which govern the rights and duties of the buyer and the seller of the property as specified in thecontract that they sign. These may be national, statutory, or conditions of the Law Society.

Contents insurance

This insurance covers loss or damage to your possessions within the property, subject to the terms and conditions of theagreement.

Contract:

Entered into by the vendor and purchaser of a property that only becomes binding on exchange of contracts, i.e.when both parties have signed the contract and the purchaser has handed over the agreed deposit (if any) to the vendor.

Contract Race:

Involving two or more purchaser wanting to buy the same property. Either purchaser or vendor can instigate italthough usually it is the latter. The winner is the first purchaser to exchange contracts.

Conveyancer

This is a third party, such as a solicitor or licensed Conveyancer, who is hired by the buyer or seller to deal with the legal aspectsof a property transactionConveyancing:The legal process transferring ownership from vendor to purchaser.

County Court Judgement (CCJ):

Whenever someone fails to pay for something and is subsequently taken to court, themagistrate may issue a County Court Judgement against that individual to pay the outstanding debt. It will only be removed once the debt is cleared.

Covenant:

A legal requirement of the owner to do, or not to do, something in relation to the property. For example; restrictionson its use, changes to its appearance.

Deeds:

All the legal documents relating to the property. (See also Title Deeds) DeedsThese are legal title documents that transfer the ownership of property from one party to another. The deeds will be held by themortgage lender.

Delayed Completion:

Completion can take place anytime after exchange of contracts. However, if it is longer than 28 days itis referred to as delayed. Easement:

A right over or under land granted to someone who is not the owner.

Deposit

This is a proportion of the total cost of a property (very often 10%), which is paid out by the buyer (rather than included in the mortgage agreement) upon exchange of contracts.

Detached

This term describes a property that stands alone from other properties, having no adjoining walls.

Development

This term describes a newly built residence (or group of the same) or an older property that has been refurbished andmodernised.

Dilapidations

This term describes any disrepair or damage to a property; it is usually used in relation to a rented property.

Disbursements

These are the fees paid by the buyer's solicitor on behalf of their client and include items such as stamp duty, land registry andsearch fees.

Discharge

This describes paying off (or discharging) a mortgage.

Draft Contract

This is a preliminary document, setting out unconfirmed contractual arrangements.

Engrossment:

The formal and final version of a document prepared by a solicitor in readiness for signing andsealing following agreement of the final draft between the parties.

Equitable Interest:

Legal rights in a property that do not include the right to sell its legal title.

Exchange of Contracts:

The stage when the buyer and seller exchanged signed, binding contracts of purchase and sale. Both then become committed to complete the transaction.

Equity

This is the monetary value of a property or business beyond any amounts owed on it in mortgages or other claims.

Excess

This is the sum of money, agreed in advance, that the claimant is expected to pay out themselves prior to receiving the rest of the amount as an insurance claim for losses incurred.

Exchange of contracts

This is the point at which signed contracts are physically exchanged, signifying a legal commitment from both the buyer andseller to the purchase and sale of a property under the agreed terms.

Execution:

Signing, sealing and delivering a deed in front of an independent witness.

Failed valuation survey

This occurs when the surveyor's report indicates that the value of the property is less than the sum requested by the borrower;on the basis of this the lender may then refuse the mortgage application

Fixed rate mortgage

This is a mortgage for which the agreed rate of interest is set for a specific period and cannot be increased or decreased duringthat time.

Fixtures & fittings

This term describes all non-structural items included in the purchase or lease of a property Any items that are to be included in the sale, e.g. carpets, curtains, curtain rails, wall lights, cooker etc.

Flying Freehold:

A flying freehold is formed when part of a freehold property overhangs a different freehold property or land.

Freehold:

Absolute ownership of land with or without Chief Rent.

Gazumping:

A term used to denote a situation where the vendor has accepted an offer but subsequently accepts a higher offerfrom another purchaser.

Gazundering:

A term used to denote a situation where the purchaser lowers his offer immediately prior to exchange ofcontracts.

Ground Rent:

This applies only to Leasehold properties and is a sum paid annually to the Freeholder by the Leaseholder.

Guarantor

This is a party who guarantees repayment of a loan, using their own assets if necessary. A lender may sometimes require a borrower to appoint such a party.

Homebuyer's survey and valuation (house/flat buyer's report)

This is a survey report that is carried out by a chartered surveyor to assess the state of a property and its value. It is not asdetailed as a structural survey,

HMO

Homes of Multiple Occupancy.

IFA (Independent Financial Adviser).

Individual savings account (ISA) mortgageThis is an interest- only mortgage which is linked to a tax-efficient Individual Savings Account (ISA) fund. At the end of the loanperiod, this pays off the outstanding loan amountImprovement

Grant:

A grant made by the local authority towards the cost of repairing or improving property. Further information with regard to grants is available from your local council / authority.

Instruction:

This term is used when the estate agent or auctioneer is formally instructed by a property owner to market the property, usually by private treaty, in order to find a purchaser. The resulting contractual agreement confirms the terms underwhich the instruction is offered by the vendor and accepted by the estate agent.

Joint Tenants:

Two or more people holding property as co-owners. When one dies, his share of the property automaticallypasses to the survivor(s). (See also Tenants in Common).

Interest charges (mortgage)

This is the actual cost of a loan, calculated as a percentage of the amount borrowed and charged by the lender accordingly.

Interest-only mortgage

This is one of two types of mortgage, the other being a capital repayment mortgage. The total amount due on an interest-onlymortgage stays the same throughout the mortgage term - only the interest ( and a premium to an investment vehicle) are paid.The proceeds from the investment vehicle are then intended to repay the mortgage at the end of the mortgage term. Theamount available will depend on the performance of the investment vehicle. A borrower who chooses an interest- only mortgageis responsible for ensuring that there are sufficient funds available for the repayment of their mortgage at the end of the term.

Inventory

This is a detailed list that describes the furnishings and contents of a leased property (and their condition). It is agreed betweenowner and tenant at the commencement of the tenancy in order that any dilapidation occurring during the tenancy can beidentified.

Joint tenants

This describes ownership of property by two parties whereby if one of them dies, their share of the property automaticallytransfers to the surviving party, thus giving them full ownership. With this arrangement, no will is required to transfer theproperty.

Land Certificate:

A certificate issued by the Land Registry as proof of ownership.

Land Registry:

A Government department where details of properties with a registered title are recorded along with anycharges e.g. mortgages.

Lease:

Ownership of property by way of a leasehold interest for a fixed term, usually with an annual ground rent.

Leasehold:

Ownership of land (normally for a fixed period - 99 years 999 years etc) subject to an annual payment of a groundrent to the owner of the freehold.

Lien:

The legal right of one person to hold the property of another as security for a debt.Lender's arrangement feesThis is an amount charged by the lender to the borrower for the arrangement of a loan.

Lender's legal fees

These are the legal fees that the lender is required to pay when arranging a mortgage. The cost of the fees is passed on to thebuyer of the property.

Lessor:

The person / company who grants a lease - the landlord.

Listed building

This describes a property that has been included on a statutory list of buildings of special architectural or historic interest. Suchbuildings cannot be altered or demolished without (local) government consent.

Loan to value (LTV)

This is the amount of an outstanding mortgage expressed as a percentage of the property's value.

Local authority search

This is the procedure whereby a conveyancer approaches the local authority to ascertain whether there are any outstandingenforcement or future development issues which have the potential to affect a property or its surrounding area.

Maintenance Charge:

The charge made, usually annually, by the landlord, to cover the costs of maintaining the property asset out in the lease. Maisonette

This describes a property whose accommodation is arranged over two or more floors, normally used as a self-containedapartment

Mortgage:

Loan for which property is the security (usually for house/ property purchase for a private individual or now more and more common - Buy to Let property).

Mortgagee

This is the organisation that provides a mortgage to the buyer of a property and can include banks andbuilding societiesMortgage Deed: The document incorporating the conditions of a loan secured on a property.

Mortgagee: The lender - buildingsociety/ bank etc.

Mortgage Offer: The letter (advice) from the lender offering you the loan and setting out the terms and conditions upon whichit is offered.

Mortgage indemnity guarantee (MIG)

This is an insurance payment that mortgage lenders may require buyers to make if their loan exceeds a specified proportion of the purchase price.

Mortgage indemnity premium (MIP)

This is an insurance policy that protects the lender against mortgage repayment defaults. Although the policy is of benefit to thelender, it is usually the borrower who pays the insurance premium.

Mortgage payment protection (MPP)

This is insurance against your inability to meet your mortgage repayments, should you be unable to work because of illness,disability or redundancy. It normally comes into effect for a limited period, usually a year.

Mortgage rate

This is the standard variable interest rate that is quoted by mortgage lenders. It will normally follow the Bank of England's baserate. Discounted mortgage rates are all based on this rate.

Mortgagor:

The borrower - owner (whose property is secured for the loan).

Mortgage term

This is the period of time over which the loan is to be repaid. For repayment mortgages this will happen over that period. Forendowment mortgages, this will happen at the end of the period.

Multiple Agency:

A situation where two or more agents are acting for the vendor. The agent who introduces a successful purchaser is the only one paid. (See also Joint Sole Agency).

Negative equity

This occurs when the amount owed on a mortgage is greater than the value of the property that has been mortgaged.

NHBC scheme (National House-Building Council)

This is a specific type of building guarantee that may be available on newly built homes. It guarantees that defects occurringwithin a specified time after construction are resolved.

Offer:

Make an offer on the purchase price with the intention of purchasing

Part-Possession:

The term used when a property isbeing sold, where a tenant has legal right of occupation.

Offer of a loan

This is a formal document that approves the mortgage that has been applied for and details the terms and conditions that willapply to such a mortgage.

Ombudsman

This is a third-party professional body who deals with and investigates complaints on behalf of customers. These can includecomplaints against, for example, estate agents, insurance companies and solicitors.

Open market value

This is an opinion of the best price a property would acheive on the open maket, assuming a willing buyer and seller.

Payment break

This is an option on some flexible mortgages that allows the borrower to take a break in making mortgage payments for aspecified period. This is normally up to 6 months.

Penalties

These are the costs that can be incurred if the borrower wishes to repay a loan early (i.e. to facilitate a change of lender).

Peppercorn Rent:

A term used to denote a ground rent of a trivial amount.

Preliminary Enquiries:

A set of questions raised by the purchaser's solicitor and sent to the vendor via his solicitor, prior toexchange of contracts. They ask for clarification of specific points about the property that is being sold and the present vendor'sownership of it.

Premium

This is the cost of an insurance policy, normally paid monthly.

Premium lease

This is a special type of lease, in which a lump sum is paid at the start of the period, instead of a monthly rental.

Principal

This is the original, total sum of the loan which is used to calculate interest.

Private Treaty (For sale by Private Treaty):

The sale of property by private treaty is the method employed by most estateagents, preparing descriptive details of the property and quoting a definitive asking price. Details are circulated - post email,website local paper etc: potential buyers may view the property and either agree to buy at the asking price or submit an offer topurchase. Agreement to buy at this stage (for England and Wales) is subject to formal contracts being prepared between thevendor and the purchaser and those contracts being signed and exchanged between the two parties.

Probate:

The official process of proving a will is valid. In many cases part of the estate will involve a property, which mightneed to be valued for Inheritance Tax purposes. A probate valuation is generally a negotiated value with the district valuerrepresenting the Inland Revenue. A sale cannot proceed to exchange of contracts until probate has been granted.

Public liability insurance

This is an insurance policy, taken out by the owner, which covers them in case of injury or death to anyone on or within theperimeter of a property.

Purchaser

This is the person or legal entity who is buying a property from a seller.

Redemption

The point in time at which a mortgage has been fully repaid.

Registered Land:

Land (including buildings on it) the title to which is registered at the Land Registry and legal ownership isguaranteed.

Re-mortgage

The refinancing of a property normally occurring when switching a mortgage between lenders or when a second mortgage istaken out to draw down equity gained by a rise in the value of a property.

Repayment mortgage

This is a mortgage that is repaid by way of regular, normally monthly, installments that combine capital repatments withinterest.

Repossession

This is when the mortgage lender takes possession of a property due to non-payment of the mortgage, as per the agreed terms.

Retention:

An amount held back from the initial loan by the Lender until certain repairs or improvements have been completedor in some cases to cover possible road charges on a new estate

Right of Way:

An individual's legal right to use any particular part of a property, in order to gain access to any particular partof his own property.

Searches:

A term used to denote the physical and written procedure for determining any adverse effects in/on a particularproperty, whether already in effect or planned to take place.

Service charge

Please refer to 'Maintenance charge.

'Sitting Tenant:

To occupy the property as tenant, but have legal rights without a lease. Any sale would be subject to any rights of a tenant who has occupation. A property with a sitting tenant can often have a much reduced asking price.

Sole Agency:

Where only one agent has the authority to sell the property.

Sole Selling Rights:

Where one agent has complete control of the sale, and is entitled to his fee however the property is sold.

Stamp Duty:

This is the tax paid by the purchaser of a property to the Government in the UK. Currently based on the followingrates:(from March 2006 Budget)Up to £125,000 - nil £125,001 to £250,000 - 1% £250,001 to £500,000 - 3% More than£500,000 - 4%

Structural survey

Please refer to 'Building survey.

'Subject to Contract:

A phrase used as a provisional agreement before contracts have been exchanged where either party maystill withdraw from the transaction. Often seen on estate agents boards.

Superior Lease or Head Lease:

This is the lease that the landlord holds. This is often the case in an apartment/flat where theowner has the leasehold interest, but another individual owns the freehold. There is then this lease under which the Property owner is responsible for the obligations / covenants. When a property is let out the tenant renting a property then also has tocomply with any of these obligations - e.g. not to hang out washing on a balcony etc.

Survey:Valuation, Home Buyers and Structural. I

nspection of the property by an independent surveyor. The last one is the most comprehensive.

Tenancy at Will or Licence:

After exchange of contracts a purchaser may seek to take possession of a property beforefinancial, legal completion. This could be to carry out repairs and decorations or to take up residence early. This can often beorganised and a licence arranged between both parties' solicitors. The purchaser paying an appropriate rate of interest on the balance of the outstanding monies (i.e. purchase price less deposit paid) instead of rental.

Tenant:

A person, persons (company or organisation) who is entitled to occupy a property under the terms and conditions of a tenancy agreement.Tenants in Common:Two or more people holding property as co-owners. When one dies, his share of the propertyautomatically passes to his estate. (See also Joint Tenants).

Tender - For Sale by Tender:

This is the situation where the asking price is not actually stated, but offers (in writing) areinvited. Details of the property are prepared, circulated and advertised. The closing date for the tender is noted. In most casesthe vendor will reserve the right to refuse the highest offer, thereby not being committed to sell. Offers tendered are usuallyopened in the presence of the vendor's solicitors, at a prescribed date and time. An acceptance of an offer by the vendorconstitutes an immediate contract, and in most cases, the party tendering will have made their financial arrangements and havehad a structural survey carried out in advance..

Tenure:

Whether a property is freehold or leasehold.

Title:

The rights and liabilities that attach to the property.

Title - Absolute:

The highest form of tenure available.

Title - Abstract of:

A summary of title documentation used in the Conveyancing of unregistered properties to prove that thevendor has the right to sell.

Title Deeds:

Legal documents describing the rights and liabilities that attach to the property and prove ownership of property.Title Report on:Solicitors' certificate confirming that the title of the property is acceptable. A Lender must have one before anadvance cheque for the mortgage monies can be issued.

Transfer deeds

These are documents, prescribed by HM Land Registry that are used to transfer real property from its legal owner to anotherparty.

Unadopted Road:

A road which has not been accepted by a Local Authority possibly as a result of it not meeting the standardslaid down (e.g. road surfaces, drainage etc.). This indicates the possibility of a road charge liability if and when the road isadopted.

Under Offer:

When the vendor has accepted an offer for his home but contracts have not yet been exchanged. Either partymay still withdraw from the transaction. The agent will often display a board saying "Sold subject to contract" at this point

Vacant Possession:

The previous occupants must vacate the property before you move in, including any tenants.ValuationThis is the value of a property, normally used for mortgage purposes, attained from a basic survey of the property. Mortgagelenders insist on a valuation before lending.

Variable base Rate

This is the basic rate of interest that is charged on a mortgage. It may vary in accordance with the Bank of England's base rateand relevant market conditions.

Vendor:

The owner of the property to be sold. Writ of Summons: Mode of commencing legal proceedings.The above has been compiled to assist people with various terminology used in the act of buying, selling or renting of property.