ESTATE MANAGEMENT JARGON BUSTER

If you come across a term you don’t fully understand please scroll through this list or get in touch with us on 01424 457 750.

A

Absent landlord
A landlord described as ‘absent’ is one who cannot be contacted. If the lessees want to form an RTM company but are unable to contact the landlord, they can make a legal application acquire the right to manage.

Abstract of title
A legal document prepared by the vendor’s solicitor relating to land not registered with Land Registry, proving the vendor owns the land and any previous mortgages have been discharged.

Acquisition date
The date the RTM company took over legal responsibility for the running of the property.

Amortization
Repayment of a loan by instalments with regular payments to cover the principal and interest.

Amortization term
This refers to the amount of time required to amortize a loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

Annual Percentage Rate (APR)
A calculation that expresses the total cost of a loan as a yearly rate, which takes into account monthly interest payments, mortgage insurance, points and certain fees paid at origination. It generally results in a rate slightly higher than the stated interest rate on a loan.

Annuity mortgage
This type of mortgage includes repayments of both capital and interest in the monthly instalments.

Apportionment
This is how the services charges for the whole of the building are divided between all the lessees. Your proportion of the services charges should normally be set out in your lease.

Architect’s Certificate
This confirms that an architect oversaw the construction of the building. It would be important to have either an architect’s certificate or an NHBC guarantee if you wanted to borrow against your property.

ARLA
Association of Residential Letting Agents: an association set up to maintain the operating standards of its members. Membership requires letting agents to have professional indemnity insurance, prove their competency and provide annual proof, via their accountants, of their banking and accounting procedures.

ARMA
Association of Residential Managing Agents: an association set up to maintain the operating standards of its members. Membership requires residential managing agents to have professional indemnity insurance, prove their competency by way of either experience or professional examination, define an appropriate business strategy, and provide annual proof, via their accountants, of their banking and accounting procedures. Corporate members are also encouraged to continue their professional development by way of externally run courses.

Assignment
The transfer of ownership of an insurance policy or lease.

AST
See Tenancy Agreement.

B

Basic variable mortgage rate
This refers to the standard interest rate used by the lender.

Breach
This, in legal terms, is the breaking (or violation) of a right/duty or law. A breach of contract is a failure to perform a promise or condition that forms part of the contract between the buyer and seller. Therefore service charges, which form part of the terms and conditions of your contract to purchase the property, are not optional. Failure to pay would be a breach of contract and would have consequences, which may, in extreme cases, result in the forfeiture of your lease.

Building survey
This type of survey does not typically include a valuation of the property. It is designed to provide a full assessment of the construction of the building and its current state of repair.

D

Deed of variation
The way a badly drafted lease is changed. Obtaining a Deed of Variation would entail the freeholder and leaseholders agreeing to change the original terms of the lease. This may also be undertaken through the LVT.

Deeds
The legal title documents that prove ownership of a property.

Defective lease
This is a badly drafted lease, which if serious, may require a deed of variation which would entail the freeholder and leaseholders agreeing to change the original terms of the lease. This may also be undertaken through the LVT.

Determination date
This is the landlord’s deadline for a response to a claim notice, usually 30 days after the issue of the claim notice.

Dilapidations
Dilapidation is a term meaning damaging a building or structure through neglect or by intention but more particularly used in the plural in English law.

Director
A company director is legally accountable for the running of a company. S/he is legally obliged to comply with company law and health and safety law.

Draft contract
A preliminary, unconfirmed version of the contract, usually drawn up by the seller’s solicitor and sent to the buyer’s solicitor for approval.

Duty to provide information – Section 93
A notice sent by the RTM company to the landlord requesting information required for managing the property. This can be sent at any time after the Claim Notice has been issued.

F

First Tier Tribunal
This takes over from the LVT (Leasehold Valuation Tribunal) and is part of the Courts and Tribunals Service.

Fixtures and fittings
This refers to any non-structural items contained within a property such as door handles, light fittings etc.

Flying freehold
This refers to a part of one freehold property that is built over part of another so that it does not touch the ground.

Freehold
The buyer of a freehold property owns both the property and the land it stands on – indefinitely. It is one of the two ways of owning land at law, technically called ‘an estate in fee simple absolute in possession’. The other is for a fixed term of years, commonly called ‘a lease’ or ‘leasehold’.

Freeholder
The freeholder holds the freehold of a property and the land it stands on and, in certain circumstances is able to grant a lease.

H

Head lease
Also known as a master lease, this is a lease to an entity that will subsequently grant leases to sub-lessees who will be tenants in possession.

Head Lessee
The head lessee owns the head lease. All sub-leases are issued under the head lease.

House Buyers Report
A shorter form of a structural survey report carried out by a qualified Surveyor.

House rules
This refers to a set of conditions that define the basic standards for communal living in an apartment block or housing development. The management company usually draws up these rules and they cover issues such as noise, keeping pets, hanging laundry from balconies, refuse disposal, parking or other issues that may cause problems between lessees. House rules may be additional to those covered by the terms of the lease.

J

Joint tenancy
A form of ownership of a property by two people in which each person owns an undivided interest in the entire property. When one joint tenant dies, the other has title to the entire property. Another form of ownership is tenancy-in-common.

L

Landlord
This is a property’s head lessor or freeholder.

Lease
A lease is a legal document, which confers a right on one person, the tenant or lessee, to possess property belonging to another person, the landlord or lessor, to the exclusion of the owner landlord for a fixed period of time. The relationship between the tenant and the landlord is called a tenancy and the consideration for the lease is rent.

Leasehold
A form of land tenure where a person has rights over a piece of land for a specific period. Most residential leases have long terms and are usually set initially at 99 years, 125 or 999 years.

Leasehold property
This refers to property where the owner has the right to occupy a property for a fixed period of time.

Leasehold Valuation Tribunal (LVT)
Taken over by the First Tier Tribunals, (see above).

Leaseholder
A person who holds a lease. A leaseholder may also be called a lessee or a tenant.

Lessee
A person who holds a lease. A lessee may also be called a leaseholder or a tenant.

Lessor
The person who grants a lease. A lessor may also be called a landlord.

Loan-to-value
The LTV shows the mortgage loan as a percentage of the value of the property.

Local Authority search
A search made by the buyer’s solicitor for any outstanding enforcement or future development that may affect the property or the immediate surrounding area.

Long lease
A long lease is a lease that is over 21 years in length.

N

NAEA
The National Association of Estate Agents. An association set up to maintain the operating standards of its members. Membership requires Estate and Letting Agents to have professional indemnity insurance and provide annual proof, via their accountants, of their banking and accounting procedures.

Notice of intention to participate – Section 78
After its formation but before its issuance of the claim notice, the RTM may invite all qualifying flat owners in the property to join it.

P

Peppercorn ground rent
A nominal rent where the landlord does not receive an annual payment in cash. When the owner of land or property grants a lease, he must make a charge to acknowledge the existence of the lease. Where the owner does not want to charge any rent but simply wishes to establish the lease exists, he can ask for a peppercorn each year as a token payment. In practice, this is not generally handed over!

Power of attorney
This is a document granting to some person to act in the name of another.

Pre-contract enquiries
Sometimes called preliminary enquiries, these are enquiries made by the purchaser’s solicitor requesting information on a property prior to exchange of contract. The seller is obliged to answer these fully.

Property Misdescriptions Act 1991
An Act to prohibit the making of false or misleading statements about property matters in the course of estate agency business and property development business.

Public liability insurance
A general term for any liability insurance cover for claims brought against the insured by a third party or member of the public, which include injury or death on or in the vicinity of a property.

R

Reserve Fund
A reserve is a fund collected over a period of time to be used for a specific purpose such as a large scheme of work. This could be roof renewal, external redecoration or other large expenditure. The aim is to split the cost over a longer period of time to avoid a very large bill in one service charge year. The landlord can only set up such a fund if the lease allows them to. Also known as a sinking fund.

Residents Association
An organisation formed by the leaseholders and residents within a block of flats or an estate, in order to come together to address issues. The Association must be formally recognised by the landlord by having a formal constitution with properly nominated officers voted for at AGM. The running of the Association must be democratic and representative. Also known as a Tenants Association.

Residents Managing Company (RMC)
This is a company normally set up to manage the property instead of the landlord. Also can be set up by the developer for the lessees and holds the freehold as its asset. There is a requirement for a memorandum and articles of association setting out how the company may trade. The lessees become the shareholders and therefore have a say in how the freehold is run. Voting rights provide for majority decisions relating to the company and its asset, which must be in accordance with the lease. Many leaseholders prefer this type of set-up as they feel they are more in control of related decisions.

However the holding company has to trade solvent. There is a danger that without forward planning and agreed reserve funds, emergency or disputed bills without the ability to pay, would render the company and the total asset insolvent. Until the official receiver had sorted the problem nobody would be able to sell!

Right To Manage (RTM)
The right of owners to take over from the Landlord (or from that Landlord’s appointed manager) the management of their units in a property by means of a Right to Manage Company (see RTM Company)

RTM company
A company formed by leaseholders to take over the management of their units in the property from the landlord or the landlord’s agent. The RTM company is registered at Companies House and is limited by guarantee rather than by share ownership.

T

Taking in charge
A new residential development is said to be “taken in charge” when the local authority takes charge of the management and maintenance of public lighting, roads, open spaces, car parking, water mains, sewers and other shared amenities within the development.

Tenancy
This refers to the temporary possession of a property by a tenant (sometimes referred to as an underlet tenant or sub-tenant.

Tenancy Agreement
The legal document that identifies the rights of both tenants and landlords by detailing the terms and conditions of the rental arrangements. Also referred to as an Assured Shorthold Tenancy Agreement.

Tenants Association
See Residents Association.

Tenancy-in-common
The ownership of a property by two people. When one tenant-in-common dies, the other may not necessarily inherit the property as it would normally pass to the deceased’s estate and heirs. Another form of ownership is joint tenancy.

Tender
This is the process of selling, particularly of property where the price is not set by the vendor but interested parties are asked to make their best offers in writing by a set date, often as sealed bids. It is also the process for receiving bids by contractors for carrying out a piece of work, to ensure the best price for works.

Tenure
A collective term relating to the nature of the owner’s title to a property, for example, freehold or leasehold. Tenure also refers to the length of a lease by which the property is held.

Title deeds
These are the documents that show the legal ownership of a property, registered with the Land Registry.

Transfer deeds
Documents from the Land Registry that transfer legal ownership from buyer to seller.

V

Valuation for mortgage purposes
This refers to a valuation of the property prepared for the lender. This relies on a basic survey to estimate the property value at the time of purchase and does not address any concerns of the borrower.

Vendor

X

Y

Yield
This is an investment valuation term. It refers to the income from a property calculated as a percentage of its value.