Sometimes the terms used during a property transaction can be confusing.
Set out below is the Michael Andrew guide to property terms designed
to help you understand the language used.
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Acceptance
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The document that you will need to
sign and return to a lender if you wish to accept the lender’s
mortgage offer
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Agricultural covenant
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This is a planning condition which permits the
erection of a residential dwelling providing it is occupied by
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.
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Applicant
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The term by which a potential purchaser is often
referred to by estate agents.
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Beneficial owner
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Person owning lands and entitled to it for his
own benefit. Not, for instance, a trust that holds the land for
the benefit of another.
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Bridging finance |
A purchaser under certain circumstances may wish to
complete the purchase of a property whilst still offering his own
for sale. Lenders will advise as to whether the necessary temporary
finance can be made available.
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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.
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Charge |
If a property owner uses his security in the property
to service a loan, a charge is registered and certified. This entitles
the 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.
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Charge certificate |
A certificate issued to a lender by the Land Registry
giving evidence of the lender’s charge over the property.
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Chief rent |
A payment made on freehold land to the original freeholder
forever. Distinct from ground rent which has a limited period.
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Collateral |
Property pledged as a guarantee for the repayment
of a loan.
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Commission or fee to the Estate Agent |
The sum of money paid to the agent, usually on completion,
although legally it is payable on exchange of contracts.
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Completion |
The finalising of the sale when all the monies are
passed over and the purchaser gains access to the property.
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Contract |
Entered into by the vendor and purchaser of a property
which only becomes binding on exchange of contracts, ie. when both
parties have signed the contract and the purchaser has handed over
the agreed deposit (if any) to the vendor.
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Contract race |
Involving two or more purchaser wanting to buy the
same property. Either purchaser or vendor can instigate it although
usually it is the latter. The winner is the first purchaser to exchange
contracts.
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Conveyancing |
The legal process transferring ownership from vendor
to purchaser.
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County court judgement (CCJ) |
Whenever someone fails to pay for something and is
subsequently taken to court, the magistrate may issue a County Court
Judgement against that individual to pay the outstanding debt. It
will only be removed once the debt is cleared.
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Covenant |
A legal requirement of the owner to do, or not to
do, something in relation to the property. For example; restrictions
on its use, changes to its appearance.
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Deeds |
All the legal documents relating to the property.
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Delayed completion |
Completion can take place anytime after exchange of
contracts. However, if it is longer than 28 days it is referred to
as delayed
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Easement |
A right over or under land granted to someone who
is not the owner.
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Engrossment |
The formal and final version of a document prepared
by a solicitor in readiness for signing and sealing following agreement
of the final draft between the parties.
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Equitable interest |
Legal rights in a property that do not include the
right to sell its legal title.
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Exchange of contracts |
This is the stage when the buyer and seller exchanged
signed, binding contracts of purchase and sale. Both then become
committed to complete the transaction.
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Execution |
Signing, sealing and delivering a deed in front of
an independent witness.
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Fixtures & Fittings |
Any items that are to be included in the sale, eg.
Carpets, curtains, curtain rail, wall lights etc.
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Flying freehold |
A flying freehold is formed when part of a freehold
property overhangs a different freehold property or land
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Freehold |
Absolute ownership of land with or without Chief Rent.
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Gazumping |
A term used to denote a situation where the vendor
has accepted an offer but subsequently accepts a higher offer from
another purchaser.
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Gazundering |
A term used to denote a situation where the purchaser
lowers his offer immediately prior to exchange of contracts.
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Ground rent |
This applies only to Leasehold properties and is a
sum paid annually to the Freeholder by the Leaseholder.
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Improvement 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.
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Instruction |
This term is used when the estate agent 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 under which the instruction is offered
by the vendor and accepted by the estate agent.
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Joint tenants |
Two or more people holding property as co-owners.
When one dies, his share of the property automatically passes to
the survivor(s). See also ‘Tenants in common’.
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Joint sole agency |
A situation where two agents are acting as sole
agents, the commission being divided equally, no matter who sells
the property.
See also ‘Multiple agency’.
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Land certificate |
A certificate issued by the Land Registry as proof
of ownership.
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Land Registry |
A Government department where details of properties
with a registered title are recorded along with any charges eg. mortgages.
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Lease |
Ownership of property by way of a leasehold interest
for a fixed term, usually with an annual ground rent.
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Leasehold |
Ownership of land (normally for a fixed period) subject
to an annual payment of a ground rent to the owner of the freehold.
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Lessor |
He who grants a lease – the landlord.
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Lien |
The legal right of one person to hold the property
of another as security for a debt.
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Maintenance charge |
A charge made, usually annually, by the landlord,
to cover the costs of maintaining the property as set out in the
lease.
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Mortgage |
Loan for which property is the security (usually for
house purchase).
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Mortgage deed |
The document enshrining the conditions of a loan secured
on a property.
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Mortgagee |
The lender.
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Mortgage offer |
The letter from the lender offering you the loan and
setting out the terms and conditions upon which it is offered.
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Mortgagor |
The borrower (whose property is secured for the loan).
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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’.
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Offer |
A presentation of intent to purchase a property, at
a price.
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Part-possession |
The term used, when a property is being sold, where
a tenant has legal right of occupation.
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Peppercorn rent |
A term used to denote a ground rent of a trivial amount.
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Preliminary enquiries |
A set of questions raised by the purchaser’s
solicitor and sent to the vendor via his solicitor, prior to exchange
of contracts. They ask for clarification of specific points about
the property which is being sold and the present vendor’s
ownership of it.
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Private treaty (For sale by) |
The sale of property by private treaty is the method
employed by most estate agents, preparing descriptive details of
the property and quoting a definitive asking price. Details are circulated:
potential buyers may view the property and either agree to buy at
the asking price or submit an offer to purchase. Agreement to buy
at this stage (for England and Wales) is subject to formal contracts
being prepared between the vendor and the purchaser and those contracts
being signed and exchanged between the two parties.
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Probate |
The official process of proving a will is valid. In
many cases part of the estate will involve a property, which might
need to be valued for Inheritance Tax purposes. A probate valuation
is generally a negotiated value with the district valuer representing
the Inland Revenue. A sale cannot proceed to exchange of contracts
until probate has been granted.
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Registered land |
Land (including buildings on it) the title to which
is registered at the Land Registry and legal ownership is guaranteed.
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Retention |
An amount held back from the initial loan by the Lender
until certain repairs or improvements have been completed or in some
cases to cover possible road charges on a new estate.
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Right of way |
An individual’s legal right to use any particular
part of a property, in order to gain access to any particular part
of his own property.
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Searches |
A term used to denote the physical and written procedure
for determining any adverse effects in/on a particular property,
whether already in effect or planned to take place.
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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.
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Sole agency |
Where only one agent has the authority to sell the
property.
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Sole-selling rights |
Where one agent has complete control of the sale,
and is entitled to his fee however the property is sold.
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Stanp duty |
This is the tax paid by the purchaser of a property
to the Government. Currently based on the following rates:
Exempt: if the purchase price of the property is under £60,000*
1% of the purchase price on any sales exceeding £60,000 and does not exceed £250,000.
3% of the purchase price on any sales exceeding £250,000 and does not exceed £500,000.
4% if the purchase price on any sales exceeding £500,000.
*This does not apply if the purchase is part of a larger transaction or series
of transactions.
Exempt in certain inner town areas.
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Subject to contract |
A phrase used as a provisional agreement before contracts
have been exchanged where either party may still withdraw from the
transaction.
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Survey |
Available in three types:- Valuation, Home Buyers
and Structural. Inspection of the property by an independent surveyor.
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Tenancy at will or licence |
After exchange of contracts a purchaser may seek
to take possession of a property before financial, legal completion.
This could be to carry out repairs and decorations or to take up
residence early. This can often be organised 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.
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Tenant |
Person who is in possession of a property usually
by way of lease.
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Tenants in common |
Two or more people holding property as co-owners.
When one dies, his share of the property automatically passes to
his estate. See also ‘Joint tenants’.
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Tender - For sale by |
This is the situation where the asking price is
not actually stated, but offers (in writing) are invited. Details
of
the property are prepared, circulated and advertised. The closing
date for the tender is noted. In most cases the vendor will reserve
the right to refuse the highest offer, thereby not being committed
to sell. Offers tendered are usually opened in the presence of
the vendor’s solicitors, at a prescribed date and time. An
acceptance of an offer by the vendor constitutes an immediate contract,
and
in most cases, the party tendering will have made their financial
arrangements and have had a structural survey carried out in advance.
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Tenure |
Whether a property is freehold or leasehold.
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Title |
The rights and liabilities that attach to the property.
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Title - Absolute |
The highest form of tenure available.
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Title - Abstract of |
A summary of title documentation used in the conveyancing
of unregistered properties to prove that the vendor has the right
to sell.
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Title deeds |
Legal documents describing the rights and liabilities
that attach to the property and prove ownership of property.
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Title report on |
Solicitors’ certificate confirming that the
title of the property is acceptable. A Lender must have one before
an advance cheque for the mortgage monies can be issued.
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Unadopted road |
A road which has not been accepted by a Local Authority
possibly as a result of it not meeting the standards laid down (e.g.
road surfaces, drainage etc.). This indicates the possibility of
a road charge liability if and when the road is adopted.
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Under offer |
When the vendor has accepted an offer for his home
but contracts have not yet been exchanged. Either party may still
withdraw from the transaction.
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Vacant possession |
The previous occupants must vacate the property before
you move in, including any tenants.
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Vendor |
The owner of the property to be sold.
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Writ of summons |
Mode of commencing legal proceedings.
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