Like many industries, the world of Property investment is littered with jargon. If you are new to the business it can be quite overwhelming at first. Even seasoned property investors are often caught out with a bit of jargon that they have never encountered before.
We have searched around for you and found a really comprehensive jargon buster that explains numerous terms in a clear and concise way that is easy to understand even if you are just starting out. The jargon list has been compiled by OnTheMarket.com and presented by abelestates.co.uk. It can be found below.
Property Investment Jargon Buster A-E
A landlord described as “absent” is one who cannot be contacted. If the lessees wish to create a Right To Manage Company but are unable to contact the landlord, they are free to make a legal application to acquire the right to manage.
The document you need to sign when accepting a lender’s mortgage offer.
A payment which is charged to cover the costs of processing a property rental application. This is paid by the tenant and will be taken from the initial monies once the Tenancy starts.
Annual Percentage Rate (APR)
The total cost of a loan, taking into account interest charges, arrangement fees and other costs, shown as a percentage.
A payment which is charged to cover the costs of drawing up a tenancy agreement. This is usually shared between the landlord and tenant.
The Association of Residential Letting Agents, the UK’s foremost professional body for letting agents.
These are fees charged by a mortgage lender or broker to arrange a loan.
To transfer the right or interest in a property from one person to another.
Assured shorthold tenancy (AST)
A widely used rental agreement where the tenant is an individual and net rent does not exceed £25,000 a year. It covers a fixed period, so both parties know the date the property will be vacated.
The rate of interest which the Bank of England charges for lending to other banks. These banks then use it as a benchmark for the interest rates they charge when lending money to consumers, often stipulating an interest rate “X% above the base rate”.
A clause sometimes agreed between the landlord and tenant to be inserted in a fixed term agreement, typically if the initial fixed term is for a year or more. A break clause will usually allow either landlord or tenant to give written notice after a particular date or period of the tenancy in order to end the tenancy earlier than the original fixed term.
A temporary short-term loan enabling someone to purchase a property before selling his or her existing property.
Building inspection/Structural survey
A report on the physical condition of a property. The surveyor will look at all accessible parts of the property and give a written report on defects or issues affecting it. See also Home Buyer Report. Not to be confused with a mortgage valuation.
Capital, also known as equity, is an asset that is less liquid than cash. It represents the amount of money you have put into a property, investment or deposit.
A chain is formed when several property sales and purchases are inter-dependent. A chain can be complicated but a good estate agent will be able to help keep it moving.
Closing date (Scotland only)
A time and date by which your solicitor must submit the buyer’s best offer in writing to the seller’s solicitor.
The point at which the sale of the property is concluded and the buyer receives the keys.
A document which your solicitor or conveyancer will provide as a record of all the financial transactions and costs.
Conditions of sale
The specific items in a sale contract that govern the rights of the buyer and the duties of the seller.
The legal document detailing the agreement of terms between the seller and buyer. When a sale is agreed, a draft contract is sent to the buyer by the seller’s legal representative and at exchange of contracts both parties are bound to a date on which to complete the sale.
Where two or more purchasers are given a draft contract and the first one to exchange contracts buys the property.
A representative, solicitor or licensed conveyancer, who deals with the legal aspects of buying or selling a property. The buyer and seller will each appoint their own conveyancer.
The legal process of transferring the ownership of a property.
Rules governing the property in its title deeds or lease.
Credit search references
References requested for a tenant applying to take up rented accommodation. Many agents and individual landlords use external companies who will contact the applicant’s employer, landlord and check the tenant’s credit history, providing a report on their financial suitability to rent.
Date of entry (Scotland only)
The date on which you become the owner of the property and can move in, having paid all money due.
The legal documents that prove the ownership of the property.
When buying: The amount of money paid by the buyer on exchange of contracts, usually 10% of the purchase price.
When renting: A monetary sum held by the landlord or agent for security against damage to a property or a breach of the tenancy terms. This is usually the equivalent to six weeks’ rent but may vary. If the deposit is for an Assured Shorthold Tenancy (AST), then it must be protected by one of the approved tenancy deposit protection schemes.
The Deposit Protection Service
The DPS is the only custodial scheme authorised by the Government; it is free to use and open to all landlords and letting agents. It requires a tenant’s deposit to be paid over to the DPS for the duration of the tenancy. This amount is then paid back at the end of the tenancy when an agreement between both parties has been reached.
Items that have been damaged during a tenancy. The tenant is usually responsible for the cost of repair or replacement.
The items in addition to legal fees in conveyancing. These may include Stamp Duty Land Tax, Land Registry fees, search fees, mortgage redemption costs and any other expenses. All conveyancers should be able to estimate the likely level of disbursements before the transaction commences.
Disposition (Scotland only)
The new title deed, which is required in order to transfer the title of the property into your name.
The initial version of the contract. This may be amended during the course of the sale but becomes final at the point of exchange of contracts.
A right that affects a property – such as the right of neighbours to pass over an access path or the right of the water company to have their pipes and drains running under the property.
Questions which are raised by the buyer’s conveyancer, often about survey or property information forms.
The Energy Performance Certificate (EPC) shows the energy efficiency and carbon emissions of a property and gives an indication of the fuel bills. It is displayed as two graphs – the energy efficiency and environmental impact of the property. Each is graded from A (the best) to G (the worst).
Your equity in your property is how much of it you own. It is the difference between the value of your home and the mortgage you still owe. Negative equity occurs when you owe more to your lender than the sale price of the property.
Exchange of contracts
The buyer and seller both sign the contract for sale and at a certain time and date the conveyancers action the exchange. At this point, the sale is binding and no terms may be altered.
Part two of the Jargon buster will be posted next week.