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Glossary
Absent Landlord A Landlord who cannot be contacted is defined as 'absent'. Consequently, legal recourse is available to acquire the right to manage property. Acquisition Date The Acquisition Date identifies the starting date for the Right to Manage Company's assumption of the legal responsibility for the running of the designated property. Additional Security Fee Also known as an MIP (Mortgage Indemnity Premium) or an MIG (Mortgage Indemnity Guarantee), this is an advance fee that is charged on mortgages that are over 75% of the value of the property. It is designed to protect the Lender against the Borrower defaulting on the loan. Therefore, the fee is paid to the Lender. Annual percentage rate (APR) For a loan at a stated rate of interest, the annual rate of interest which takes into account of the amounts and dates of repayment of capital and other expenses associated with the loan. Arrangement Fees Where a special interest rate is to be used, an additional fee is also charged for the arrangement of the loan.
Assignment A term used to describe the transfer of the ownership of either a lease or an insurance policy. Auction An auction is the process of bidding for the purchase of a property, where the sale is made to the highest bidder. Basis variable mortgage rate This is the standard interest rate used by the Lender. It can be changed from time to time, usually in response to economic conditions in general of to changes in the Bank of England's base rate. Aviva Directory Best Buy to Let Mortgages Bridging loanWhere the prospective buyer requires funds to complete the purchase of a property before selling his current property, the short-term loan required is known as a Bridge Loan. Block / Block of Flats Self-contained units in a residential property are termed Blocks of Flats. When such blocks seek to form a Right to Manage Company, the Block needs to fulfil legal criteria pertaining to the number of units, its capacity for redevelopment, the proportion of commercial to residential property, and the ability of the tenants to meet qualifying criteria. Building Insurers The issuers of Insurance of the Building. Buildings Insurance The policy issued by the insurers for a building Building survey (formerly known as a structural survey) This type of survey does not typically include a valuation of the property. The survey is designed to provide a full assessment of the construction of the building and its current condition. It includes details of major and minor faults detected and may recommend further specialist investigation of particular aspects of the property. It is particularly useful for listed buildings, older properties, or properties of unique design and also for dilapidated buildings or properties where alterations have been made or are planned.
Building Wealth Buying Investment Property Buy to Let Buy to Let Landlord Insurance Buy to let mortgages Buy to Let Mortgage Calculator If agreed between the Lender and the Borrower, the interest rate on the mortgage has a ceiling, or a 'cap'; a maximum percentage of interest to be charged. The 'ceiling' is valid for a fixed period during the lifetime of the loan. Where the standard interest rate during that lifetime is below the 'cap' then the Borrower is charged interest as per the standard rate. Should the standard rate exceed the 'cap', the Borrower is only charged the 'ceiling' interest rate. Chain If a Buyer can only complete the purchase of a property subject to the completion of the sale of his current property, the purchase is 'chained' to the sale. CML (Council of mortgage lenders) The CML produced the Mortgage Code that ensures customers are treated fairly by lenders. Claim Dispute Reasons The Landlord has recourse to three reasons for disputing the Claim Notice. In the Counter Claim Notice, he will either claim that the units in the property do not qualify for Right to Manage status, or that the Right to Manage Company does not comply with legislation, or that the Members insufficiently represent the qualifying Flat Owners within the properties. Claim Notice – Section 79 A notification issued to the Landlord by the Right to Manage Company advising him that the Company is utilising the legal right to manage the units of the Property. Commercial Purposes Commercial Purposes is a general terms explaining the usage of those parts of a property not used for residential purposes. Commonhold and Leasehold Reform Act 2002 This Act of Parliament permits Flat Owners to assume the responsibility for running their block in a property.
Company Law Company Law governs the activities of a company. Company Secretary A Company Secretary is legally accountable for the Right to Manage Company's adherence to Company Law. He, or she, can also be a director of that company. Counter Notice – Section 84 A Counter Notice responds to the Right to Manage Company. It is issued by the Landlord and either conceding or contesting the entitlement sought by the Claim Notice. Completion Legal transfer of ownership of a property to a Buyer only occurs after completion (when all transactions involved in the sale have been completed). Conditions of sale Conditions of Sale list all rights and obligations due to the Buyer and Seller, and are usually determined by law or by industry or both. Contents insurance Insurance that protects the contents of the property. Contract A Contract is a legally binding agreement between Buyers and Sellers for the completion of the sale of a property. Contract race Where more than one Buyer offers for the property, whoever exchanges binding Contracts first secures the purchase. Conveyancer A Conveyancer is a qualified advisor of the legal requirements of buying or selling a property. Conveyancing The legal work involved in buying or selling of a property. Covenants Covenants are rules and regulations relating to the property, which are contained in its lease or title deed. Deeds Deeds are legal proofs of ownership, held by the Lender. Determination Date The determination date is the Landlord's deadline (typically at least 30 days after the issuance of the Claim Notice) for response to the Claim Notice. Director A Company Director is legally accountable for the running of the Right to Manage Company. He, or she is legally obliged to comply with Company Law and with Health and Safety law.
Duty to Provide Information Notice – Section 93 A request can be sent after the insurance of the Claim Notice to the Landlord by the RTM Company for the information required to run the Block. Deposit Paid to the Lender at the time contracts are exchanged, a deposit is usually 10% of the value of the property. Detached A property that is physically separate from the neighbouring properties. Development A Development is a general term used to describe either modernised and renovated existing property or a newly built property. Dilapidations Dilapidations are any decay, damage, or disrepair in a property. Disbursements Fees (including stamp duty, land registry and search) paid on the buyer's behalf by their solicitor. Discharge The discharge of the mortgage is the process of paying it off. Draft Contract An early version of the contract, issued for discussion and negotiation only. Elemental Or Specialist Investigation This kind of survey is carried out when the Building Survey has identified specific problems with the property (such a cracks in the walls) and recommended specialist analysis, by qualified personnel. It may also require the testing of services, which is not carried out in a Building Survey.
ERC (Early redemption charge) These are the penalties you pay, determined in the mortgage contract, payable to the Lender for NOT continuing to accept the mortgage company's terms ie if you sell or change your mortgage in the first part of a mortgage term, then you'll have to pay the penalties. These can sometimes be as much as 5% of the loan - which is a huge chunk of equity. Endowment mortgage This is a form of mortgage where monthly premiums are made into an endowment policy that pays off the loan at the end of the term. At the same time, the interest is repaid monthly. Equity The difference between the value of a property and the mortgage owed. Excess The initial sum paid on an insurance claim. Exchange of contracts The occasion where signed contracts are physically exchanged and the Buyer and the Seller become legally bound to the price and terms of the purchase and sale of a property. Failed valuation survey The Lender may reject a mortgage application if the surveyor's valuation report shows that the property is worth less than the mortgage sought. Fixed rate mortgage A fixed rate mortgage fixes the rate of interest for a given period of time. Fixtures and Fittings All non-structural items included in the purchase of a property.
Flexible mortgage A mortgage that allows for agreed increases or decreases in the repayments to be made. Freehold Where, the ownership of the property by the owner has no time limit. Financial Obligations Financial Obligations identify those obligations to be paid on behalf of all the Owners(s) in a property, and typically covers maintenance, insurance and repairs. Flat Owner The Flat Owner owns the lease of the flat. Fixed or variable rates Most mortgage companies will give you either a discount on their 'normal' standard variable rate or they'll give a guaranteed fixed rate for a number of years. The thing to look out for here is if you think interest rates will rise, then figure if that will be a good enough discount, of if you want to take a discount on the standard terms. It depends on your personal preferences and degree of acceptability of risk. Gazumping When a seller agrees to sell a property to a Buyer, but has not exchanged contracts, and then accepts a higher offer from a third party. Gazundering When a buyer lowers the offer to the seller before contracts are due to be exchanged. Ground Rent The annual sum the Freeholder charges to the leaseholder.
Guarantor A Guarantor agrees to pay the borrower's debt if the borrower defaults on the loan. Homebuyers's survey and valuation (house/flat buyer's report) Unlike the Building survey, this type of survey does include a valuation of the property. This survey is designed top provide a general assessment of the condition of the building and highlights any significant problems that may affect the property value. It is particularly useful for properties of conventional design, but within the last 150 years. Head Lessee The Head Lessee owns the Head Lease, out of which all sub leases have been issued. IFA Independent Financial Advisor. Individual savings account (ISA) mortgage An interest-only mortgage linked to an Individual Savings Account fund. It is designed to pay off the loan at the end of the period. Interest charges (mortgage) Interest charges are the percentage of the amount borrowed that the Lander then charges to the Borrower. Interest-only mortgage An interest-only mortgage that remains unchanged through the lifetime of the loan. Interest is paid monthly and a separate premium is paid to an investment instrument each month. By the end of the term, the proceeds from the investment instrument are supposed to be sufficient to repay the principal of the mortgage. The borrower is liable to ensure that this is the case.
Interest Rates Inventory Any dilapidation in a property during the tenancy is shown in an inventory (a list of the contents and condition of those contents at the beginning and end of a tenancy). Investigation Prior To Alteration Likely to involve a number of specialists, this survey is required to test the structure and the services of a building prior to any designated alteration to that building.
Investing in Property Investment Mortgage Investment Property Investment Property Financing Investment Property Loans Investment Property Management Investment Property Mortgages Investment Property Mortgage Rates Landlord Insurance The Land registry's fees are for registering ownership of a property. Lease A legal document that establishes the let of a property (in part of in its entirety) by a Freeholder or Leasehold owner for a specified duration of time, after which that Freeholder or Leasehold owner recovers ownership. Leasehold Land or property held under a lease.
Lender's arrangement fees The Lender's fees to the buyer for arranging a loan are known as their arrangement fees. Lender's legal fees The Lender's legal fees for arranging a mortgage are borne by the buyer.
Letting Agents A building protected from demolition or any alteration (without local government permission) due to its being of special architectural or historic interest value. Loan Offer A Loan offer is the Lender's formal approval of the Buyer's request for a mortgage. It notes all the applicable terms and conditions.
Loan to value (LTV) LTV show the mortgage loan as a percentage of the property's value. Generally for buy to let, this is at 85% of the property value, although can go higher to around 90%. Local authority search A search by the buyer's solicitor for any outstanding enforcement or future development issues affecting a property or its immediate vicinity. Landlord The property's Head Lessor or freeholder is the Landlord. Leasehold Property A property governed by a lease. Leasehold Reform, Housing and Urban Development Act 1993 This Act of Parliament allows those Lessees who met the necessary qualification criteria to acquire an extension to their lease. Leasehold Valuation Tribunal The Public body that oversees disputes regarding Leases, Service Charges and the management of discrete units in a property (i.e. blocks of flats). Lessee A Lessee owns the lease to a property Lessor The Lessor grants a Lease to the property because they own the Freehold to that property. Letting Agent An agent, appointed by the landlord, to supply a tenant and manage the appointed property, ensuring that both the property is well kept and that the tenant complies with the tenancy agreement. Long Lease A long Lease is a Lease granted for more than 21 years to a property. Maintenance charge (or service charge) A charge to the Leaseholder or to the tenant for the maintenance and repair of commonly shared internal and external parts of the building.
Memorandum and Articles of Association The defining documents of the running of the Right to Manage Company. Maisonette A Maisonette is a portion of a house that covers more than one floor and is accessible by private entrance. Managing Agent An agent that works for a management company, which will generally manage a block of flats or an estate and charge the residents for the collective services supplied to those flats or estate. Measured Survey Also known as a Dimensional Survey, this survey involves measuring a building's dimensions in order to prepare accurate scale drawings. The reason such drawings are required must be agreed beforehand to confirm the level of detail required and any acceptable tolerances. Mortgage A sum of money lend by a bank or building society and repaid over a fixed (and usually long) period of time where the loan security is the property. Mortgage deed The Mortgage deed legal codifies the terms of the mortgage and the Lender's interest in the property. Mortgage indemnity guarantee (MIG) See Additional Security Fee. Mortgage indemnity premium (MIP) See Additional Security Fee. Mortgage payment protection (MPP) An MPP is an insurance policy that protects the Borrower against inability to work (through illness, redundancy, or disability) by paying the monthly mortgage payment for a fixed period of time. Mortgage rate The standard variable interest rate all mortgage lenders use at the basis for their discounted mortgage rates. This tends to vary according to the Bank of England base rate. Mortgage term The time over which the mortgage is to be repaid in regular payments, or the time at the end of which the mortgage is repaid in its entirety. Mortgagee The Lender of the mortgage (usually a bank or building society) is known as a Mortgagee. Negative equity If the outstanding value of the mortgage exceeds the market value of the property, the Borrower is said to have negative equity.
Non-Residential Any part of a Premises not used for residential purposes. Notice of Invitation to Participate - Section 78 After its information but before its issuance of the Claim Notice, the Right to Manage Company can invite all Qualifying Flat Owners in the property to join it. NHBC (National House-Building Council) scheme Some newly-build properties are covered by this form of Guarantee whereby any defects occurring within a fixed period after construction are repaired. Offer The offer is the Buyer's proposed sum to pay for a property. Officers The Company Secretary and the Directors of the Right to Manage Company. Ombudsman An independent organization that investigates professionals such as estate agents, or solicitors when complaints are made by their customers. Open market value The open market value is the expected price of a property in the marketplace. Payment break A Payment break is a window in flexible mortgage repayments that allows borrowers to suspend payments for a fixed period of time.
Penalties Penalty charges are incurred by Borrowers when they either transfer mortgages to different Lenders or fully repay the loan before the end of the term. Peppercorn ground rent A basic (and usually annual) rent the Freeholder charges to the leaseholder. Pied-a-terre A property kept for occasional or temporary secondary occupation.
Portfolio Property Management The initial enquiries made to the Seller about a property. The Seller must fully answer these before any exchange of contracts. Premium The monthly payment on an insurance policy is the Premium. Premium lease The advance rental for a property is the Premium Lease. Principal The basic loan upon which interest is calculated.
Property Development Property for Sale Property Management Public Liability insurance covers injury or death on or in the vicinity of a property. Purchaser The Purchase is the Buyer of the property. Qualifying Flat Owner The Qualifying Flat Owner owns a long Lease on a property (a lease for more than 21 years)???
Qualifying Tenant The Qualifying Tenant owns a long Lease on a property (a lease for more than 21 years). Qualifying Leaseholder The Qualifying Leaseholder owns a long lease on a property (a lease for more than 21 years). Redemption Redemption describes the point where the mortgage has been repayment in full.
Refinancing A survey that estimates the cost of re-construction of a building damaged under an insured risk. Re-mortgage Re-mortgaging occurs when a property is used to finance a second mortgage if the property has risen in value since the initial mortgage was agreed. Otherwise, this describes the transfer of an existing mortgage to the new lender.
Remortgages ...is the amount by which the rental has to cover the mortgage payments by. This can vary between 125% to 110%. So the higher the rental the better. A word of caution here: depending on the development and the number of phases that are being released, properties can flood the rental market on completion which can drive down rentals. Only when a development is mature can the true rental values be achieved so you may experience some 'dip' in RICS rental valuations on completions - it really depends on your competition. Repayment mortgage Distinct from an interest-only mortgage, this is a mortgage requiring monthly payments that cover both interest and principal so that the amount mortgage gradually reduces until redemption.
Repossession The lender's assumption of the ownership of a property once the Borrower is deemed unable to pay the outstanding mortgage. Retention That part of a mortgage loan that is withheld until specific works or designated repairs have been satisfactorily completed on the property. Reserve Fund Funds collected from Flat Owners over time to finance anticipated Major Works to the property. Right to Manage 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 Not to be confused with a Limited Company, an RTM Company (Right to Manage Company) is separately registered at Companies House as a company that it limited by guarantee (rather than by share ownership). This type of company is usually designed to take over the management of a Block of units within a property.
Schedule of Dilapidations A survey that identifies any repairs required on tenanted properties. This is set against a Landlord's or Tenant's obligations to repair a property as identified in the lease.
Secured Loans A Building or Block that is either detached or otherwise capable of being redeveloped as if it were. Search The enquiry of information about the property held by the Land Registry or by the Local authority. Semi-detached A property physically joined to one other property. Service charge Please refer to 'Maintenance charge'. Sole agent The one estate agent authorised to handle either a sale or let. Solicitor The legal professional handling all legal documentation involved in buying or selling a property. Stamp duty Stamp duties are a tax of between 1% and 4% of the property value if that property has a value greater than £60,000. It should be noted that Stamp duty is only paid by the Buyers. Stock Condition Survey A Stock Condition survey assesses the condition of an organization's current building stock prior to the use of that stock in maintenance programmes. Structural survey Please refer to 'Building survey'. Studio flat A studio flat has one bathroom/shower room and an open-plan living area that incorporates kitchen and bedroom facilities. Subject to contract 'Subject to Contract' is a term to show that no legally binding agreement has yet been made. Surveyor A professionally qualified individual to carry out the survey. Tenancy The tenancy is the temporary possession of a property by a tenant.
Tenancy agreement The Tenancy agreement legally identifies the rights of both tenants and landlords by detailing all the terms and conditions of the rental arrangements. Tenant The Tenant is the party legally entitled to temporary possess a property. Tenants in common 'Tenants in Common' describes a form of ownership by two or more parties. Should one of them die, the other party does not automatically receive the deceased's share of the property as that share forms part of the deceased's estate. Tenure The tenure is the length of the term by which a property is held. Terraced House A terraced house forms part of a connected row of houses. Title Deeds Title deeds are documentary evidence of the legal ownership of a property. Transfer deeds Transfer deeds are documents from the Land Registry that transfer legal ownership to Buyer from Seller. Under Offer A property is 'under offer' when a Seller has accepted a Buyer's offer but has yet to exchange contracts.
UK Mortgages A valuation of the property prepared for Lenders. They require this basic survey of a property to estimate its value for mortgage purposes before lending. It only answers the Lender's queries on the property and does not necessarily address the concerns of the Borrower. Valuers and Valuations These differ according to the valuers opinion: what this means is that with some investment buy to let properties may attract a higher value from some valuers compared with others. This then impacts on the ability to get a mortgage at the required price and then also means that the rental values will reduce. Variable base rate A basic rate of interest (charged on a mortgage) that may rise or fall according to market conditions. Therefore monthly payments can rise or fall accordingly. Vendor The legal term used to describe the Seller of a property.
Wealth Creation Wealth Management The income from a property calculated as a percentage of its value. Return from Glossary to Investment Property Financing
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