Many people find the jargon used by estate agents confusing, please feel free to use this jargon buster to explain the common expressions
A Landlord who cannot be contacted is defined as 'absent'. Consequently, Legal recourse is available to acquire the right to manage property.
Additional security fee
Also known as an MIP (Mortgage Indemnity Premium) or an MIG (Mortgage Indemnity Guarantee), this is an advance fee that is charged on mortgages that are over 75% of the value of the property. It is designed to protect the Lender against the Borrower defaulting on the loan. Therefore, the fee is paid to the Lender.
Where a special interest rate is to be used, an additional fee is also charged for the arrangement of the loan.
A term used to describe the transfer of the ownership of either a lease or an insurance policy.
An auction is the process of bidding for the purchase of a property, where the sale is made to the highest bidder.
Basic variable mortgage rate
This is the standard interest rate used by the Lender. It can be changed from time to time, usually in response to economic conditions in general of to changes in the Bank of England's base rate.
Where the prospective Buyer requires funds to complete the purchase of a property before selling his current property, the short-term loan required is known as a Bridge Loan.
The issuers of Insurance for the Building
The policy issued by the insurers for a Building
Building survey (formerly a full structural survey)
This type of survey does not typically include a valuation of the property. This survey is designed to provide a full assessment of the construction of the building and its current condition. It includes details of major and minor faults detected and may recommend further specialist investigation of particular aspects of the property. It is particularly useful for listed buildings, older properties, or properties of unique design and also for dilapidated buildings or properties where alterations have been made or are planned.
Buy to let mortgage
When Buyers intend to purchase a property in order to let it out, this type of mortgage is offered by the Lender.
If agreed between the Lender and the Borrower, the interest rate on the mortgage has a ceiling, or a 'cap'; a maximum percentage of interest to be charged. The 'ceiling' is valid for a fixed period during the lifetime of the loan. Where the standard interest rate during that lifetime is below the 'cap' then the Borrower is charged interest as per the standard rate. Should the standard rate exceed the 'cap', the Borrower is only charged the 'ceiling' interest rate.
If a Buyer can only complete the purchase of a property subject to the completion of the sale of his current property, the purchase is 'chained' to the sale.
The CML (Council of mortgage lenders) produced the Mortgage Code that ensures customers are treated fairly by lenders. A notification issued to the Landlord by the Right to Manage Company advising him that the Company is utilising the legal right to manage the units in the Property.
Commonhold and Leasehold Reform Act 2002
This Act of Parliament permits Flat Owners to assume the responsibility for running their block in a property.
Company Law governs the activities of a company.
A Company Secretary is legally accountable for the Right to Manage Company's adherence to Company Law. He, or she, can also be a director of that company.
Legal transfer of ownership of a property to a Buyer only occurs after completion (when all transactions involved in the sale have been completed).
Conditions of sale
Conditions of Sale are list all rights and obligations due to the Buyer and the Seller, and are usually determined by law or by industry regulations or both.
Insurance that protects the contents of the property.
A Contract is a legally binding agreement between Buyers and Sellers for the completion of the sale of a property.
Where more than one Buyer offers for the property, whoever exchanges binding Contracts first secures the purchase.
A Conveyancer is a qualified advisor of the legal requirements of buying or selling a property.
The legal work involved in buying or selling of a property.
Covenants are rules and regulations relating to the property, which are contained in its lease or title deeds.
Deeds are legal proofs of ownership, held by the Lender.
Paid to the Lender at the time contracts are exchanged, a deposit is usually 10% of the value of the property.
A property that is physically separate from the neighbouring properties.
A Development is a general term used to describe either modernised & renovated existing property or a newly built property.
Dilapidations are any decay, damage, or disrepair in a property.
Fees (inc., stamp duty, land registry and search) paid on the buyer's behalf by their solicitor.
The discharge of the mortgage is the process of paying it off.
An early version of the contract, issued for discussion and negotiation only.
ERC (Early redemption charge)
The Lender may charge the Borrower a fee determined in the mortgage contract, if the Borrower re-pays the mortgage before the end of the term agreed in that mortgage.
This is a form of mortgage where monthly premiums are made into an endowment policy that pays off the loan at the end of the term. At the same time, the interest is repaid monthly.
The difference between the value of a property and the mortgage owed.
The initial sum paid on an insurance claim.
Exchange of contracts
The occasion where signed contracts are physically exchanged and the Buyer and the Seller become legally bound to the price and terms of the purchase and sale of a property.
Failed valuation survey
The Lender may reject a mortgage application if the surveyor's valuation report shows that the property is worth less than the mortgage sought.
Fixed rate mortgage
A fixed rate mortgage fixes the rate of interest for a given period of time.
Fixtures & fittings
All non-structural items included in the purchase of a property.
A mortgage that allows for agreed increases or decreases in the repayments to be made.
Where, the ownership of the property by the owner has no time limit.
When a seller agrees to sell a property to a Buyer, but has not exchanged contracts, and then accepts a higher offer from a third party.
When a buyer lowers the offer to the seller before contracts are due to be exchanged.
The annual sum the Freeholder charges to the leaseholder.
A Guarantor agrees to pay the borrower's debt if the borrower defaults on the loan.
Homebuyer's survey and valuation (house/flat buyer's report)
Unlike the Building survey, this type of survey does include a valuation of the property. This survey is designed to provide a general assessment of the condition of the building and highlights any significant problems that may affect the property value. It is particularly useful for properties of conventional design, built within the last 150 years.
Independent Financial Advisor.
Individual savings account (ISA) mortgage
An interest-only mortgage linked to an Individual Savings Account fund. It is designed to pay off the loan at the end of the period.
Effectively an auction by envelope where a property is marketed for a set time then, at a specified date bids are required from all interested parties. The sellers can then pick the best bid (knowing that they have the best price that the market is prepared to pay) and enter into a contract of sale. There is no formal reserve and no obligation to sell, so if the sellers are not happy with the highest bid, they can simply decide to withdraw the property.
Interest charges (mortgage)
Interest charges are the percentage of the amount borrowed that the Lender then charges to the Borrower.
An interest-only mortgage that remains unchanged through the lifetime of the loan. Interest is paid monthly and a separate premium is paid to an investment instrument each month. By the end of the term, the proceeds from the investment instrument are supposed to be sufficient to repay the principal of the mortgage. The borrower is liable to ensure that this is the case.
Any dilapidation in a property during the tenancy is shown in an inventory (a list of the contents and condition of those contents at the beginning and end of a tenancy).
Land registry fee
The Land registry's fees are for registering ownership of a property.
A Legal document that establishes the let a property (in part of in its entirety) by a Freeholder or Leasehold owner for a specified duration of time, after which that Freeholder or Leasehold owner recovers ownership.
Leaseholds show that the ownership of a property is by determined in a lease.
Lender's arrangement fees
The Lender's fees to the Buyer for arranging a loan are known as their arrangement fees.
Lender's legal fees
The Lender's legal fees for arranging a mortgage are borne by the buyer.
A building protected from demolition or any alteration (without local government permission) due to its being of special architectural or historic interest value.
A Loan offer is the Lender's formal approval of the Buyer's request for a mortgage. It notes all the applicable terms and conditions.
Loan to value (LTV)
LTV show the mortgage loan as a percentage of the property's value.
Local authority search
A search by the buyer's solicitor for any outstanding enforcement or future development issues affecting a property or its immediate vicinity.
The property's Head Lessor or freeholder is the Landlord.
A property governed by a Lease.
Leasehold Reform, Housing and Urban Development Act 1993
This Act of Parliament allows those Lessees who meet the necessary qualification criteria to acquire an extension to their lease.
A Lessee owns the lease to a property
The Lessor grants a Lease to the property because they own the Freehold to that property.
A Maisonette is a portion of a house that covers more than one floor and is accessible by private entrance.
Also known as a Dimensional Survey, this survey involves measuring a building's dimensions in order to prepare accurate scale drawings. The reason such drawings are required must be agreed beforehand to confirm the level of detail required and any acceptable tolerances.
A sum of money lent by a bank or building society and repaid over a fixed (and usually long) period of time where the loan security is the property.
The Mortgage deed legal codifies the terms of the mortgage and the Lender's interest in the property.
Mortgage payment protection (MPP)
An MPP is an insurance policy that protects the Borrower against inability to work (through illness, redundancy, or disability) by paying the monthly mortgage payment for a fixed period of time.
The standard variable interest rate all mortgage lenders use as the basis for their discounted mortgage rates. This tends to vary according to the Bank of England base rate.
The time over which the mortgage is to be repaid in regular payments, or the time at the end of which the mortgage is repaid in its entirety.
The Lender of the mortgage (usually a bank or building society) is known as a Mortgagee.
If the outstanding value of the mortgage exceeds the market value of the property, the Borrower is said to have negative equity.
Any part of a Premises not used for residential purposes
NHBC (National House-Building Council) scheme
Some newly-built properties are covered by this form of Guarantee whereby any defects occurring within a fixed period after construction are repaired.
NAEA (National Association of Estate Agents)
Professional body that represents estate agents, members have to demonstrate skill and knowledge to join and adhere to a strict code of practice
The offer is the Buyer's proposed sum to pay for a property.
An independent organization that investigates professionals such as estate agents, or solicitors when complaints by made by their customers.
Open market value
The open market value is the expected price of a property in the marketplace.
A Payment break is a window in flexible mortgage repayments that allows Borrowers to suspend payments for a fixed period of time.
Penalty charges are incurred by Borrowers when they either transfer mortgages to different Lenders or fully repay the loan before the end of the term.
Peppercorn ground rent
A basic (and usually annual) rent the Freeholder charges to the leaseholder
A property kept for occasional or temporary secondary occupation.
The initial enquiries made to the Seller about a property. The Seller must fully answers these before any exchange of contracts.
The monthly payment on an insurance policy is the Premium.
A sale by Private Treaty is simply a traditional sale, where a property is marketed indefinitely until it is either sold or withdrawn.
Public liability insurance
Public Liability insurance covers injury or death on or in the vicinity of a property.
The Purchase is the Buyer of a property.
Redemption describes the point where the mortgage has been repayment in full.
Reinstatement Cost Assessment For Insurance
A survey that estimates the cost of re-construction of a building damaged under an insured risk.
Re-mortgaging occurs when a property is used to finance a second mortgage if the property has risen in value since the initial mortgage was agreed. Otherwise, this describes the transfer of an existing mortgage to a new Lender.
Distinct from an interest-only mortgage, this is a mortgage requiring monthly payments that cover both interest and principal so that the amount mortgage gradually reduces until redemption.
The lender's assumption of the ownership of a property once the Borrower is deemed unable to pay the outstanding mortgage.
That part of a mortgage loan that is withheld until specific works or designated repairs have been satisfactorily completed on the property.
Funds collected from Flat Owners over time to finance anticipated Major Works to the property.
Not to be confused with a Limited Company, an RTM Company (Right to Manage Company) is separately registered at Companies House as a company that it limited by guarantee (rather than by share ownership). This type of company is usually designed to take over the management of a Block of units within a property.
Schedule Of Dilapidations
A survey that identifies any repairs required on tenanted properties. This is set against a Landlord's or Tenant's obligations to repair a property as identified in the lease.
A Building or Block that is either detached or otherwise capable of being redeveloped as if it were. Search The enquiry of information about the property held by the Land registry or by the Local authority.
A property physically joined to one other property.
See Maintenance charge.
The one estate agent authorised to handle either a sale or let.
The legal professional handling all legal documentation involved in buying or selling a property.
This kind of survey is carried out when the Building Survey has identified specific problems with the property (such as cracks in the walls) and recommended specialist analysis, by qualified personnel. It may also require the testing of services, which is not carried out in a Building Survey.
Stamp duties are a tax of between 1% and 5% of the property value. It is paid by the Buyers.
See Building survey
A studio flat has one bathroom/shower room and an open-plan living area that incorporates kitchen and bedroom facilities.
Subject to contract
'Subject to Contract' is a term to show that no legally binding agreement has yet been made.
A professional qualified to carry out the survey.
The tenancy is the temporary possession of a property by a tenant.
The Tenancy agreement legally identifies the rights of both tenants and landlords by detailing all the terms and conditions of the rental arrangements.
The Tenant is the party legally entitled to temporary possess a property.
Tenants in common
'Tenants in Common' describes a form of ownership by two or more parties. Should one of them die, the other party does not automatically receive the deceased's share of the property as that share forms part of the deceased's estate.
Tender (or formal tender)
A hybrid, sitting between an Informal Tender and an Auction. In a Formal Tender the property is marketed and bids are submitted in the same fashion as an Informal Tender. The difference between the two methods is that in a Formal Tender bids have to be accompanied by a deposit for the property and contracts are exchanged immediately on acceptance of the highest/best bid. With this method purchasers tend to have finance in place and surveys undertaken before bidding.
The tenure is the length of the lease by which a property is held.
A terraced house forms part of a connected row of houses.
Title deeds are documentary evidence of the legal ownership of a property.
Transfer deeds are documents from the Land Registry that transfer legal ownership to Buyer from Seller.
A property is 'under offer' when a Seller has accepted a Buyer's offer but has yet to exchange contracts.
Valuation (Mortgage Valuation)
A valuation of the property prepared for Lenders. They require this basic survey of a property to estimate its value for mortgage purposes before lending. It only answers the Lender's queries on the property and does not necessarily address the concerns of the Borrower.
Variable base rate
A basic rate of interest (charged on a mortgage) that may rise or fall according to market conditions. Therefore monthly payments can rise or fall accordingly.
The legal term used to describe the Seller of a property.
The income from a property calculated as a percentage of its value.