Commercial Property Jargon Buster

Commercial Search

a

Acceptance
The document that is signed when you accept the mortgage offer from a lender.

Admin or application fee
The fee charged by lenders to cover the cost of processing your mortgage application.

Annual percentage rate (APR)
This represents the true cost of a loan and can be used to compare mortgages. APR includes the repayment, plus interest charges and other fees, such as arrangement or booking fee. Full details of these should appear on all quotes.

Applicant
The person(s) wanting to buy or rent a property.

Appraised value
The estimated value of a property from a surveyor.

Assignee 
One to whom an assignment has been made.

A ssignment
The Assignment of Lease is a title document (also referring to the process itself) whereby all rights that a lessee or tenant possesses over a property are transferred to another party.

Assignor
One who makes an assignment; one who transfers property to another.

Auction
The property is sold to the highest bidder provided the bid meets or exceeds the reserve price. All surveys or searches need to be arranged by the bidder, prior to the auction.

b

Basic variable rate
The standard interest rate charged by a lender. This rate can go up or down, depending on the state of the economy and market conditions.

Break clause
This clause means that in specific circumstances, the landlord or tenant can terminate the tenancy before it is due to end.

Bridging loan
A temporary loan taken out by a buyer before his or her own property is sold, to allow the buyer to complete the purchase of the new property in the meantime.

Building survey
The report produced by a chartered surveyor after inspecting a property, which will point out any structural defects or other areas of concern.

Buy to let mortgage
A mortgage that is tailored for investors who plan to buy a property to let on the open market.

c

Capital
Money put down as the deposit on a property, or the amount used to buy a property. May also be called equity.

Capped mortgage
The maximum rate of interest you will have to pay on your mortgage - usually set for a fixed period.

Chain
A situation where the buyer is relying on the sale of their property before being able to complete the purchase of a new one.

Collateral
This is when a property is used to guarantee the repayment of a loan.

Commission
The fee paid to an estate agent or auctioneer on completion.

Completion date
The date when any outstanding balance on the property is made, and when the buyer gains access to the property.

Contract
The legal document between the buyer and seller of a property, usually handled by their respective solicitors. The document sets out all the relevant terms of the agreement.

Conveyancing
This is the legal process that transfers ownership of a property from seller to purchaser.

Credit check
This is a check on the credit history of the applicant made by the lender or their appointed agency, looking at their past credit record, repayments, arrears, and any County Court Judgements.

d

Deeds
This is the legal document that proves you own the property and is held by the lender until the loan is repaid.

Deflation
This occurs when prices fall, and is the opposite of inflation.

Deposit
The amount the buyer has to pay once he or she enters the formal agreement, usually when contracts are signed. The sum usually varies between 3 - 9 months for leasehold assignments.

Discount rate mortgage
This is a mortgage with a lower interest rate than the standard variable rate, usually fixed for a period of time.

Draft contract
A draft document usually prepared by the seller’s solicitor for preliminary scrutiny.

e

Early repayment fee
This is a charge you may incur when you pay off your mortgage sooner than agreed.

Easement
The term used when someone has a legal right over a property they don’t own. This can include right of access.

Endowment mortgage
An interest-only mortgage, plus monthly payments into an endowment policy that is designed to cover the loan in full at the end of the term.

Equity
This is the difference between what the property is worth and the amount still owed on the mortgage. If the amount owed is higher than the value of the property, this is known as negative equity.

Exchange of contracts
The point when buyer and seller sign and exchange legally binding contracts, committing them to the transaction at the agreed price.

f

Fixed rate mortgage
A mortgage where the rate of interest is fixed for a set period.

Fixtures and fittings
Any non-structural items that are included in the purchase of the property, such as carpets, lights, cooker, curtains etc.

Flying freehold
This is when part of a freehold property is located above or overhangs a different freehold property.

Freehold
When the owner has complete ownership, including the land, on which the property is built.

FRI (full repairing and insuring)
Typical of leases to commercial tenants. Under the terms of FRI leases, the tenant must carry out all maintenance and repairs to the property, both inside and out.

Furniture and Furnishings (Fire Safety) Regulations
These regulations (1988 and 1993 amendments) require all upholstered domestic products in a property to be certified as being compliant.

g

Gas Safety Regulations 1988
Any gas appliance in a property has to be inspected and certified by a gas engineer before any tenants move in, and annual inspections must be carried out thereafter.

Gazumping
The term for when the seller has already accepted an offer - subject to contract - from one buyer, but then accepts a better offer from another buyer.

Gazundering
This is when the buyer makes a lower offer for the property just before the exchange of contracts - more likely to happen when the housing market is sluggish.

Ground rent
The annual sum paid to the freeholder on a leasehold property.

Guarantor
A lender can request a borrower to have a guarantor in place to cover the debt if the borrower should happen to default.

Guide price
The guide price is an indication of what a property may fetch, typically included in an auction catalogue.

h

Higher lending charge
The fee paid to the lender to protect him or her should the borrower default on the loan. Usually a one-off fee that is typically charged on mortgages which are 75% over the value of the house.

Home buyer survey
This type of survey will be less detailed than a structural survey, and is aimed as a general guide for potential buyers.

Household insurance
This is the type of policy that covers the property owner against damage to the property as well as complete loss, caused by flooding, fire or some other natural disaster. Contents are covered by a contents insurance policy.

HMO (houses in multiple occupancy)
This applies to a building of three or more floors, occupied by three or more people who are not living as one household but do share some facilities, such as toilets and bathrooms.

i

IFA
Independent financial advisor.

Illiquid
A term for an investment that can’t be converted easily and quickly into cash without incurring high costs.

Improvement grant
This type of grant is issued by the local authority to meet some or all of the costs of improving a property. Special conditions apply.

Interest only mortgage
The term for a mortgage in which the interest rate is the same for the term of the mortgage. The borrower has to make sure they have enough funds to pay off the outstanding amount on the mortgage at the end of the term.

j

Joint agency
When two estate agents act together to secure sale of a property, this is known as joint agency. Typically, commission from the sale is shared between the two. If several estate agents are involved, the one who introduced the buyer is the sole recipient of the commission.

Joint income
Joint income is the gross income for the two borrowers who are applying for a joint mortgage.

Joint tenants
A term for two or more individuals who are co-owners of a property. If one dies, their share of the property passes to the co-owner, irrespective of the terms in the will of the deceased.

l

Land certificate
This is a certificate of proof of ownership that is issued by the Land Registry.

Land registration and fee
This is when you register your title to a specific area of land with the Land Registry office. This is usually done by your solicitor who charges a Land Registry fee.

Lease
The legal document by which the leasehold or freehold property owner lets the premises to another person or party, for a fixed length of time.

Lessee
The lessee is the one who holds the lease; in other words, the tenant.

Lessor
The lessor is the one who grants the lease; in other words, the landlord.

LTV (loan to value ratio)
LTV is the proportion of the property’s value that the lender is willing to loan - this can be up to 100%.

m

Maintenance or service charge
Typically, an annual charge made by the landlord to cover the costs of repairs and general maintenance of the property.

Mortgage
The amount of money borrowed from a lender, such as a bank or building society, on the security of property.

Mortgage broker
This is a company or individual who advises borrowers on the types of mortgages available and can help them to source the most suitable product, as well as process the application on their behalf.

Mortgage deed
The legal documents that detail the conditions of a loan and confer ownership of a property.

Mortgage indemnity guarantee
This is a form of insurance policy that the lender may ask the buyer to pay, usually when the loan to value ratio (LTV) is above 90%.

Multiple agency
This is when more than one agent is representing the vendor.

n

National approved letting scheme
This is an accredited scheme for management and lettings agents and gives landlords and tenants the assurance they are dealing with those who provide a defined level of service.

Negative equity
Negative equity is when the value of a property is below that of the outstanding amount owed on the mortgage. If the owner sells the property, he or she will still owe money on the loan.

Nominal interest rate
Nominal interest rate is the rate of interest that hasn’t been adjusted for inflation.

Non-recoverable expenses
Typically, these refer to costs that can’t be recovered from a tenant by a landlord. This can include outgoings such as agency fees, property management fees, rent arrears, and refurbishment costs.

o

Offer
The sum of money that a buyer or tenant offers to pay for a particular property.

Offer of a loan
Formal approval of the mortgage offer, with details of all the terms and conditions that apply.

Office copy entry
A document from the Land Registry that confirms ownership of the property.

OMV (open market value)
The price that a property should achieve when there is a willing seller and a willing buyer, and when the property has been adequately marketed.

Outline planning permission
Planning consent for a proposed building that is issued by the local authority, subject to certain conditions.

p

Party wall
This is a wall separating two adjoining properties, for which both owners have rights and responsibilities.

Peppercorn rent
The term for a token amount of rent, typically when a land or property owner doesn’t want to charge rent, but has to fix an amount to acknowledge the existence of a lease agreement.

Pre-contract enquiries
These are enquiries made by the buyer’s solicitor and sent to the seller, before the exchange of contracts. Typically, these enquiries seek clarification on specific points regarding the property.

Probate
The document issued by the court to an executor to prove the validity of a will. When a property is involved, no sale can proceed until probate has been granted.

r

Redemption
When a mortgage has been repaid in full.

Re-mortgage
This is when the owner refinances the property by switching lenders or taking out a different mortgage with the existing lender. The property remains as security.

Repossessions
If the borrower defaults on their mortgage, the lender can repossess the property and put it up for sale, usually by auction, to recover some or all of the outstanding debt.

Retention
This is when the lender retains some of the loan until certain improvements or repairs have been carried out to the property.

Right of way
This is an established legal right people have to access a particular part of your property.

s

Search
A request for information about a property, typically to ascertain any adverse conditions.

Self certification
A mortgage offered to borrowers, usually self-employed or contractors, who cannot prove their income by payslips or audited accounts. Alternative proof of income is required and usually the borrower will have to pay a higher rate of interest, or put down a bigger deposit on the property.

Shared equity
This is when the borrower buys part of the property and a third party, such as a housing association, purchases the other part.

Sitting tenant
This is when a property is occupied by a tenant who has a legal right to remain. Properties with sitting tenants typically have a lower asking price.

Stamp duty
When you purchase a property above a certain price in the UK, you are liable to pay stamp duty. These rates are set by the government in the budget.

t

Tenancy agreement
The legal document that sets out all terms and conditions of the rental agreement, and protects the rights of the tenant and landlord.

Tender
The process by which prospective buyers submit sealed bids for a property, by a set date and time. Once an offer is accepted by the vendor, this becomes legally binding.

Tenure
Denotes if a property is leasehold or freehold.

Title deeds
The legal documents that prove ownership of the property and are held by the mortgage lender until the loan is repaid in full.

Title search
This is when a solicitor or conveyancer investigates history of ownership of the property, to check for any unresolved claims or other restrictions that could affect future ownership.

Tracker
The type of mortgage that typically tracks (follows) the Bank of England base rate.

u

Under offer
The situation when an offer on a property has been made and accepted although contracts are still to be exchanged. At this point, the buyer and seller can decide not to proceed with the transaction and the status of the sale is ‘subject to contract’.

Underpinning
When the existing foundations of a property are not strong enough and need to be reinforced by underpinning.

Unencumbered
This is a term used when a property is free of any borrowings or loans secured on it.

v

Vacant possession
Any previous occupants, including tenants, have to vacate the property before you move in.

Valuation
The value put on a property after a basic survey has been carried out by a surveyor, usually under instruction from the lender.

Variable base rate
This is the basic interest rate charged on a mortgage. This can change depending on economic conditions and, as a result, monthly repayments may go up or down.

Vendor
The term commonly used to describe the seller of the land or property.

Void period
This relates to the period when the property is empty or unoccupied by the tenant.

w

Wayleave
This is when the landowner grants right of way, typically to utility companies, to allow them to lay cables, fix faults, maintain pipelines, and so on.

y

Yield
This is the income from a property, when calculated as a percentage of its market value. Net yield is the rate of return once all costs, such as taxes, commission, and price of purchase, have been subtracted. Gross yield is the return on investment amount before any costs are subtracted.