Glossary

Glossary of common terms used in the Property sector by estate agents and managing agents:

ADVANCE (finance): An advance is money given to a borrower by a lender and secured by the property as part of the mortgage debt. A further advance is borrowing more from your mortgage lender than the initial advance.

AGREEMENT (contract law): A contract legally binding both parties to complete the sale or purchase. It details the terms and conditions agreed upon by the buyer and seller. Often referred to as the “Contract”.

AGREEMENT IN PRINCIPLE (finance): An estimate of how much money you can borrow from a mortgage lender. What you can borrow is based on your income and credit history; it can be used as evidence that you have the funds in place for when you have an offer for a property accepted. Also known as a decision in principle, mortgage in principle, approval in principle or mortgage promise.

ADVERSE POSSESSION (Land law):Often referred to as ‘squatter’s rights’ and is based on an ancient philosophy requiring owners of land to actually make productive use of it. Adverse Possession means someone occupying land belonging to someone else, without permission. If someone does this continuously for a number of years (normally 10 or 12 years) then, in certain circumstances, the land may become theirs.

ALTERATIONS (leases): Alterations are works undertaken by the tenant which alter, cut, divide, relocate or modify the demise, which can include the building, partitions, mechanical and electrical services, or finishes.

APPRAISAL (buying & selling property): A valuation is the same as an appraisal. It is when someone, such as an estate agent, assesses the property in order to assign a value to it. This can also apply to rental values of a property.

ASSIGNMENT (leases): An assignment of a lease is where the tenant transfers/sells its entire interest in the property for the unexpired term of the lease to an assignee.

ASSURED SHORTHOLD TENANCY (Letting): An ‘Assured shorthold tenancy agreement’ (AST) allows a landlord to let out a property to a tenant while retaining the right to repossess the property at the end of the term of the tenancy. However, the landlord will need to give the tenant at least two months’ notice of any reoccupation. Under an AST the landlord has the automatic right to regain possession at any point after the fixed term of the tenancy agreement has expired as long as they provide reasonable notice. After the initial agreed period, usually 6 months but can be longer, the landlord is able to evict the tenant without a legal reason. The Housing Act 1988 which sets out the grounds upon which the landlord can reply upon to gain possession.

BANK RATE (finance): Commonly known as the ‘base rate’, it is the interest rate set by the Bank of England which influences other banks. It is generally used as a benchmark for the interest rates banks charge when lending money. This will affect all mortgage holders if they have a standard variable rate.

BREAK CLAUSE (leases): A break clause (alternatively called a ‘break option’ or ‘option to determine’) is a clause in a lease which provides the landlord or tenant with a right to terminate the lease before its contractual expiry date, if certain criteria are met.

BUYER: The individual or entity interested in purchasing a property.

CAPITAL GAINS TAX: A tax on the profit made from selling a property that is not the seller’s primary residence.

CAPITAL GROWTH: The increase in the value of a property over time.

CHAIN (buy and selling property): A property chain is a sequence of property sales that must all happen at the same time. For instance, you are in a chain if you are buying from someone who also needs to buy a property, and so on. A property chain is created when these transactions all depend on each other. If you’re in a chain, your completion day timeline may look something like this: In the morning, the first buyer in the chain will complete their purchase and transfer the funds for their house sale. The first person in the chain is usually a first- time buyer, without another property to sell. “No upward chain” is where the person you intend to buy from has no plans to buy a property themselves. “Chain-free” means that there’s no one else to worry about in terms of waiting for them to buy or sell their own properties.

COMPLETION: The final stage of the property sale, where ownership is transferred, and funds are exchanged.

COVENANT (property law/leases): A covenant is a provision or promise that has been written into a deed (lease) which may affect or limit the use of the property or land. There are two different types of covenants: positive and restrictive. A positive covenant is an obligation which requires some form of action (such as maintaining a fence or wall), whereas a restrictive covenant limits or prevents the use of land in a specified way.

CONVEYANCER (property law) : A lawyer who specialises in the transferring of homeownership and other areas of property law. They are required if you are using a mortgage and will cover every legal aspect of the home purchasing process.

CONVEYANCING: The legal process of transferring ownership of a property from the seller to the buyer.

DEEDS (property law/leases): These are documents often held electronically at HM Land Registry which show who owns the title of a property or land, along with any responsibilities on the property, e.g. what you can/cannot alter, rights of way, etc.

DEED OF VARIATION (Legal): A deed which changes the terms of a lease or other document.

DEPOSIT (buying or selling property): An amount of money used to secure a property purchase, usually ten per cent (or lower) of the full price. Paying a deposit displays your initial commitment to purchase with the remaining amount to be paid later or provided in the form of a mortgage.

DISBURSEMENTS (buying and selling): These are fixed costs incurred by a conveyancing provider undertaking the conveyancing process on your behalf, which are then passed on to you. Examples include local authority and bankruptcy searches.

EARLY REPAYMENT CHARGE (ERC): A charge incurred when you overpay on a mortgage or transfer to a different mortgage product during a specified amount of time (known as the early repayment charge period). The charge covers potential lost interest to your lender. Most mortgages will allow you to overpay up to a certain amount annually without incurring a charge. 

ENERGY PERFORMANCE CERTIFICATE (EPC): A certificate that rates the energy efficiency of a property, required for most property sales and rentals.

ESTATE AGENT: A professional who represents buyers or sellers in property transactions and helps facilitate the buying, selling, or renting of properties.

EXCHANGE OF CONTRACTS: The point at which both parties become legally bound to the property transaction.

FREEHOLD: Ownership of a property and the land it stands on without any time limit.

FLYING / CREEPING FREEHOLD: This arises when part of one property is built on top of part of another property and so the upper property owner does not own the building or land underneath the “flying” part. Consequently the lower property is known as the “creeping” part.

GAZUMPING: When a seller accepts a higher offer from a different buyer after initially accepting another buyer’s offer.

GAZUNDERING: When a buyer reduces their offer just before the exchange of contracts.

HMO (HOUSE IN MULTIPLE OCCUPATION): A property rented out to three or more tenants who are not part of the same household.

INTEREST ONLY MORTGAGE (finance): A mortgage whereby interest only is paid to the mortgagee and the capital amount of the original loan is repaid at the end of the mortgage term either by an endowment policy maturing or a pension or other savings plan maturing.

JOINT TENANTS (LEGAL): When property is owned by two people as “joint tenants,” on the death of the first of those people, the property passes outright to the survivor. It matters not what is contained in the deceased’s will.

LAND REGISTRY: A government agency responsible for maintaining records of property ownership in England and Wales.

LEASE: A legal agreement between a landlord (freeholder) and a tenant (leaseholder) specifying the terms and conditions of the leasehold property.

LEASEHOLD: Ownership of a property for a fixed period (lease) within a larger property, often subject to payment of ground rent to the freeholder.

LESSEE (legal): The current owner of the leasehold property as opposed to the freeholder or landlord whose interest is subject to the lessee’s right of occupation until the lease term has come to an end.

LESSOR (legal): The person who owns the superior title and is entitled to the ground rent under the lease and possession of the property at the end of the lease term.

MANAGING AGENT: A professional or company responsible for managing and maintaining properties on behalf of the property owner.

MORTGAGE: A loan used to finance the purchase of a property, secured against the property itself.

MORTGAGE DEED (legal): The document signed by the mortgagor to create a legal charge which the mortgagee can register at the land registry.

MORTGAGEE (legal): A money lender, such as a building society or bank, who secures the loan against a property

MORTGAGOR (legal): Somebody who takes out a mortgage (a borrower).

NEGATIVE EQUITY (finance): An issue where the amount of money you owe on the property, usually via a mortgage, is more than the sale value of the property.

PROPERTY VALUATION: The process of estimating the market value of a property, often carried out by a qualified surveyor.

PARTY WALL (property): A wall owned jointly with a neighbour and repairable at shared expense.

PERSONAL REPRESENTATIVE (probate law): The person appointed by a will to act for the deceased owner.

POWER OF ATTORNEY (law): This document allows a person to act as a legal representative of somebody else with their consent. These are often used to protect the financial interests of the ill or the elderly.

REDEMPTION FIGURE (finance): This is the sum of money transferred to a lender if you decide to pay back your mortgage early, consisting of the outstanding lump sum balance in addition to a penalty fee charged to cover the interest the lender will subsequently lose out on.

REDEMPTION PENALTY (finance): A penalty charged by a mortgagee when you redeem a mortgage within a fixed rate, discounted rate or cashback period.

REMORTGAGE (finance): Changing a mortgage from one mortgagee to another.

REPAYMENT MORTGAGE (finance): A mortgage where the mortgagor repays both interest and some of the initial capital borrowed each month.

SERVICE CHARGE (leasehold): A payment required by a lessor or managing agent to cover the costs of maintaining and running a development (e.g. gardening and decorating and also insuring a block of flats).

STAMP DUTY: A lump-sum tax that anyone buying a property or land over a certain price in England and Northern Ireland must pay. The current threshold for residential properties is £125,000 and £150,000 for non-residential land and properties. However, the rate you pay will vary depending on the overall purchase price. 

SUBJECT TO CONTRACT (buying and selling property): Negotiations which do not become binding until contracts are exchanged.

TENANTS IN COMMON (law): Where two or more people own a property as ‘tenants in common’, and one of them dies, the deceased’s share of the property will pass according to what has been stated in the deceased’s will (or according to the rules of intestacy, in the even of no will having been made).

TITLE DEED: A legal document that proves ownership of a property which is stored electronically at HM Land Registry.

TRANSFER DEED (legal): A document that legally transfers your property into the name of the buyer. It must be signed by you in the presence of a witness.

TRANSFER OF EQUITY (legal): A document transferring ownership of a share or interest in a property from one person to another.

TREE PRESERVATION ORDER (TPO) (buying and selling property): An order made by the local authority designating a tree or group of trees as protected and requiring the local authority’s permission to lop or fell them.

UNEXPIRED TERM (leases): The remaining term on a lease (A lease granted for 99 years, 10 years ago will have an unexpired term of 89 years).

VACANT POSSESSION (buying and selling property): Possession of a property free of the presence of any people, possessions or rubbish.

VENDOR: The property owner who is selling the property.

WAYLEAVE AGREEMENT (legal): A formal agreement entered into with a property owner to give a service provider (e.g. Electricity or Telephone company) a right for their pipe or cable to pass through or over their property.

YIELD (investment): The return on investment generated by a rental property, usually expressed as a percentage.