21 Mar BUYING AND SELLING JARGON EXPLAINED
At Hall & Scott, we always try to explain the process of buying and selling property in simple terms, free of jargon and in-house terminology. We do however realise that other agencies and bodies in the pipeline may not be so accommodating and so we’ve put together this jargon buster full of useful terms related to buying and selling property so as to help you understand the various words and phrases you may come across throughout the process.
Housing built by Housing Associations or Registered Providers, with subsidies from the Government. This has traditionally been known as Council Housing.
Agreement in Principle
Provided by mortgage lenders and banks etc. as a statement that this is what they are prepared to lend the named borrowers subject to the approval of the property. This will show any prospective seller that you are prepared and can afford the property which is always a good thing to be armed with.
A short-term loan commonly used to cover or ‘bridge’ the overlap between the purchase of a new property and the sale of an old one, or where a property needs work in order to get it into a condition to be able to get a mortgage.
The most detailed of the different survey types showing the structural condition of the property.
When a property is purchased specifically to let/rent out to someone else.
A property chain is created when there are multiple transactions that all need to occur at the same time for each sale and purchase to conclude. If you already own a property, it is likely that you will need to sell your current property in order to be able to purchase your new property, so all the transactions need to occur at the same time. If however, you are a first-time buyer you won’t need to sell in order to move, which arguably will make you an easier buyer to work with from a seller’s point of view.
The longer the chain the greater the chance of one element of the chain not doing what they promise and as a result, this will break the chain and potentially stop all of the buyers and sellers in the chain from concluding their sales and purchases.
Commonhold is a type of freehold ownership for a property that’s part of an estate. So, a flat within a block can be owned as freehold.
You’ll be required to join the commonhold association as an owner of a property in the commonhold. And you’ll need to contribute towards the cost of maintaining the estate.
The parts of a freehold building that are shared by the leaseholders eg the hallways and staircases.
The finalising of the sale when all the monies are passed over and the buyer has the legal right to take ownership of the property.
The document drawn up by your solicitor showing all the costs and monies due to complete the purchase of your property.
The process undertaken by the buyer’s and seller’s solicitors of transferring the legal ownership of property or land from one person to another.
Council Tax Band
Council tax is a payment made to your local authority in order to pay for local services like schools, libraries, and refuse or recycling collections. The amount of council tax you pay depends on the value of the property you’re living in.
There are some situations where you don’t have to pay council tax. Students, for example, aren’t required to pay, and some rental properties will include council tax within the rent.
Council tax bands for new homes will be estimated if the council hasn’t confirmed them yet. A council tax listing should be shown alongside all other properties for sale.
Original documents confirming the details of ownership.
Fees paid by the buyer’s solicitor that the buyer will reimburse.
The value of the property less any money that you owe that is secured against it. Negative equity is where the property is worth less than the mortgage you have on it.
An Equity Loan is an amount of money borrowed based on a percentage of the purchase value of your property. The amount to be repaid is based on the same percentage of the final value of your home when you pay it back.
Exchange of Contracts
When copies of signed contracts are exchanged between the buyer’s and seller’s solicitors and the point at which both parties are legally committed to the sale or purchase. The deposit is also paid over to the seller’s solicitor at the same time.
The mortgage company will have the first charge against your property, meaning that their debt is paid before any other debt is secured on the property.
Fixtures and Fittings
The list of non-structural items in the property that the vendor will confirm if they are part of the sale.
Buying a freehold property means you own the property and the land it’s built on. You’ll usually be responsible for the maintenance of the property and have more freedom to extend or change it.
Where the seller, having already accepted an offer, decides to accept a higher offer from another buyer. As both parties are only legally committed to the purchase after the exchange of contracts, the seller is legally entitled to do this. Asking the vendor to stop advertising and doing viewings at the property once your offer has been accepted will reduce the risk of this happening.
When a buyer reduces their offer just before the contracts are exchanged in the hope of forcing the seller to accept less for the property. This can legally happen until the exchange of contracts.
Ground rent is a regular payment made by the leaseholder to the freeholder, or management company.
How much you pay and how often you pay it will be written into the conditions of your lease. If you don’t pay your ground rent, the freeholder could take you to court and ultimately repossess your property.
Ground rent varies from property to property. Some could be a few pounds a year, and others several hundred pounds or more.
Ground Rent Review Period
Ground rent will have a review period written into the leasehold agreement. This means the amount of ground rent can increase each time it’s reviewed. Costs which appear affordable now may not be in the future.
Home Buy Agent
The person who processes your application under the Help to Buy Schemes.
Home Buyers Report
Mid-level property condition report suitable for conventional properties. It does not include a full structural survey.
A blanket term for Not for profit organisations that have the aim of making homes available and affordable for all, including the managing of shared ownership schemes.
The monthly payment only covers the interest due on the loan and so at the end of the mortgage term, the full amount of the mortgage advance will be payable to the lender. This type of mortgage is generally only used by investors or where you have another method in place in order to be able to repay the loan at the end.
A form of ownership used when two or more people own a property. If one of them dies, their share of the property automatically passes to the other owners, regardless of the what it says in the deceased’s Will (also see Tenants in common).
A central government database which registers the details of ownership each time a property is sold.
The document between the leaseholder and the freeholder laying out the right and responsibilities of each party.
Leasehold means you buy the right to live in a property for a fixed number of years. A freeholder will own the land the property is built on. And generally, you’ll have to pay ground rent and services charges.
The length of the leasehold is recorded on the lease agreement. If the lease runs out, the ownership goes back to the freeholder. Leases can be extended, but it can be expensive.
The lease will outline what maintenance you and the freeholder are each responsible for. It’s likely you’ll need the freeholder’s permission to alter your home.
Length of Lease
The length of a lease means how long you’ve bought the right to live in the property for. The leasehold will be for a fixed number of years and will be recorded on the lease agreement.
When the lease runs out, the ownership goes back to the freeholder. Leases can be extended, but it can be expensive.
ISA scheme allowing you to save up to buy a home where you can save up to £4,000 per year and the government will add 25% of the money you pay each year.
Local Authority Search
Checks made with the local council to see if there are any issues that may affect the property.
A property registered and protected as being of special interest or historic importance and for which you need to get permission from the local authority to make changes to.
Loan to Value (LTV)
The amount a mortgage lender is prepared to lend you against the value of your property. If the property was valued at £100,000 and the mortgage lender’s maximum LTV for a scheme was 75%, the maximum mortgage would be £75,000.
A loan secured against a property. A ‘first charge’ will be registered on the property so you can’t sell the property without paying off the mortgage first. If you don’t keep up the repayments the lender can repossess the property and evict you.
The amount of money that the lender will lend you in order to purchase the property.
This is the amount of time over which the mortgage lender will lend you the mortgage advance, at the end of the term the mortgage advance.
NHBC Scheme (National House-Building Council)
One of the main schemes that provide warranties for new build properties.
A peppercorn rent is used to describe a very low or token rent paid by a tenant to a landlord. It allows the tenant a right over the land and is likely to be charged on an annual basis. The name comes from leases where historically the rent was a peppercorn or a pound of peppercorns per year.
Power of Attorney(PoA)
Someone that you appoint to act on your behalf for legal/financial affairs when you are not able to.
Registered Provider (RP)
The new term for Registered Social Landlord (RSL). This includes Housing Associations and Local Authorities.
Your monthly payment pays the part of the interest and part of the money that you have borrowed. Over the length of the mortgage, typically 25 years, you will have paid all of the interest due and paid back the money borrowed.
Royal Institute of Chartered Surveyors.
A deposit provides security for a landlord against damage, or unpaid rent by a tenant.
Service charges are a regular payment for things like building insurance, caretakers, lighting, heating, cleaning and maintenance for shared areas of an estate.
Service charges are common for leasehold properties, but some newer freehold homes may also include a requirement to contribute towards the maintenance of the estate’s communal facilities. These costs can increase and might be required to cover future maintenance that’s currently unknown. This is called a reserve or sinking fund. Always make sure that you understand the charges.
Shared ownership is a form of leasehold where you buy a percentage of the property, and pay rent on the share you don’t own. You may be able to purchase the remaining share at additional cost. When you want to sell the property you might need permission.
Share of Freehold
Sometimes the freehold ownership is shared between multiple properties in the same building, such as flats or maisonettes.
This means you’ll usually be responsible for maintenance of the property and have more freedom to alter or change it.
Sinking Fund/Reserve Fund
Money paid to the freeholder to cover specific, normally larger-scale works to the property.
Also called ‘Tranching up’, it’s where you buy additional shares of your home under a shared ownership scheme.
Stamp Duty Land Tax (SDLT)
Stamp Duty Land Tax is a government tax payable on property or land above a certain price threshold in England or Northern Ireland. Use our stamp duty calculator to work out how much your stamp duty will be.
Similarly, if you’re buying a property or land in Scotland or Wales, there are equivalents of this tax that you might have to pay. Different rates apply for different property prices, so it’s worth looking into it well in advance.
Standard Variable Rate (SVR)
Is the main mortgage interest rate charged by a lender and normally the default rate when fixed-rate deals come to an end. It is based on the Bank of England Base rate.
Subject to Contract (STC)
Offers are accepted subject to contract meaning that they are finalised once contracts are signed and exchanged.
The tenancy length is how long the landlord offers to let the property for. It is the minimum length of the tenancy and many landlords are willing to offer longer-term tenancies. This will be recorded on a contract, or tenancy agreement, between you and a landlord.
Tenants in Common
A form of ownership used when two or more people own a property. If one of them dies, their share of the property forms part of their estate and does not automatically pass to the other owners in common. (see joint tenants also)
Where the vendor has accepted an offer from a buyer and the exchange of contracts is awaited.
The check undertaken by the mortgage lender to assess the value and condition of the property.