Jargon buster

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

Abstract of title
This refers to 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
This is the date the RTM company took over legal responsibility for the running of the property.

This refers to the 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.

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.

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.

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.

This refers to the transfer of ownership of an insurance policy or lease.

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

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.

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Claim dispute reasons
The freeholder/landlord has recourse to three reasons for disputing a claim notice.  These are: (1) the units in the property do not qualify for RTM status; (2) the RTM company does not comply with legislation; or (3) there are not sufficient lessees to make an RTM i.e. those lessees who want to form an RTM insufficiently represent (i.e. make up more than 50% of) the qualifying lessees within the building.

Claim notice – Section 79
This refers to a claim to acquire the right to manage any premises, made by giving notice of the claim and the relevant date (the date on which notice of the claim is given).

Common areas
These are the areas not owned by any individual lessee but shared by all owners in an apartment block or estate.  They may include car parks, entrance halls, gardens, lifts and corridors.

Commonhold and Leasehold Reform Act 2002
This Act of Parliament makes provision about commonhold land and amends the law about leasehold property.  Part of the Act makes provision for leaseholders to assume the responsibility for the running of their building.  It also ensures the reasonableness of service charges.

Company secretary
A company secretary is legally accountable for the RTM/RMC company’s compliance with the law.

Competent landlord
In the context of Lease extensions and freehold purchase, a competent landlord is the person who, in relation to the relevant tenancy, has sufficiently superior interest in the property to be able to grant an extension to the lease.  To identify the competent landlord, you would need to know the details of all landlords who may be between you and the freeholder and especially the length of term of any intermediary landlords’ leases.

Completion date
This is the date on which you take legal possession of the property.

A contract is a legally binding exchange of promises or agreement between parties that the law will enforce. Contract law is based on the Latin phrase pacta sunt servanda meaning pacts must be kept.  Breach of contract is recognised by the law and remedies can be provided.

This is the legal term for transferring the title of a property from one party to another, typically by deed or bill of sale, etc.

Counter Notice – Section 84
This is a notice sent by the Landlord to the RTM company that either admits that the RTM company is entitled to acquire the RTM or alleges that the RTM company is not entitled to acquire the Right to Manage.

This is a binding promise in a deed to do or not to do something.  For a property, covenants are rules and regulations contained in the lease or title deeds such as the maintenance of some part of the building or restrictions to trading.

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Deed of variation
This is the way a badly drafted lease is changed.  Obtaining a Deed of Variation would entail the vendor obtaining the freeholder’s permission to change the original terms of the lease.  This may also be undertaken through the LVT.

These are 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.  This would entail the vendor obtaining the freeholder’s permission 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.

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.

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

Draft contract
This is 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
This is 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.

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This is a term given to the rights a person may enjoy over another property such as drainage rights, access to a neighbour’s land to carry out maintenance on their own property.

This refers to an obligation or liability attached to a property.  Property may be bought or sold even though there are encumbrances attached to it. Encumbrances are attached to the property and not to the property owners and therefore a person who buys property with the encumbrance is bound to the encumbrance.

When draft deeds to a property are approved after amendments have been made they are engrossed for the vendor and purchaser to sign.

This is the difference between the market value of a property and the claims held against it.

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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.

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'.

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

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Ground rent
This is the amount of money paid for the use of the land on which leasehold property resides.

This refers to a third party who guarantees the repayment of a loan, financial debt or lease obligation, using his or her own assets if necessary, should the borrower default on their obligation.

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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 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.

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This refers to an independent financial adviser who is not tied to any one company and must provide independent financial advice.

Improvement rate
In the context of lease extensions and freehold purchase, this is the rate by which the value of a flat increases by virtue of it having an extension to the lease.

This refers to a list of items and their condition included with a property, usually furniture, furnishings and movable items.  On tenancies, the inventory is used to describe the condition of the property and its contents at the start and end of the tenancy so that any dilapidations during the tenancy can be identified.

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Joint tenancy
This refers to the 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.

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This refers to a property’s head lessor or freeholder.

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. The relationship between the tenant and the landlord is called a tenancy and the consideration for the lease is rent.

This refers to 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 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)
This is a non-departmental public body and statutory tribunal in England that adjudicates on various types of landlord and tenant disputes involving residential property in the private sector. An LVT consists of a panel of three; one with a background in property law (generally a solicitor); one with a background in property valuation (generally a qualified surveyor); and a layman.

This refers to a person who holds a lease.  A leaseholder may also be called a lessee or a tenant.

This refers to a person who holds a lease.  A lessee may also be called a leaseholder or a tenant.

This refers to the person who grants a lease.  A lessor may also be called a landlord.

An LTV shows the mortgage loan as a percentage of the value of the property.

Local Authority search
This refers to 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.

Landlord - Freeholder
This may be either an individual/individuals or a corporate body such as a RMC. Ownership derives little benefit apart from the receipt of ground rent and any monies from granting lease extensions.

A legal document by which the freehold or leasehold owner of a property lets the premises to another party for a specific length of time, after which point it may revert to the freeholder or superior leaseholder.

Leaseholds show that the ownership of a property is by determined in a lease.

Leasehold Property
A property governed by a Lease.

Leasehold Valuation Tribunal (LVT)
The LVT is the formal name given to the body appointed to make decisions on various types of dispute relating to residential leasehold property. In some cases it has the power to vary leases. It would be at an LVT hearing the tenants (lessees) would make an application for the Right to Manage or dispute reasonableness of service charges. LVT power includes reasonableness of administration charges and is able to award costs (not fines).

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Maintenance charge
This refers to the cost of repairing and maintaining internal and external communal parts of a building, charged by apportionment to the leaseholder, tenant or lessee.  The maintenance charge may also be called a service charge.

Marriage value
In the context of freehold purchase and lease extension, the marriage value is the difference between the existing value of the lease (less leaseholder improvements) and the value of the flat without any benefit conferred by the 1993 Act plus the value of the unimproved flat with a long lease less the loss of ground rent and reversionary value in the flat.  This does not apply if your flat has more than 80 years unexpired at the valuation date and only applies to flats that are participating in the purchase of the freehold. There is no marriage value (or substitute called hope value) payable in respect of non-participating flats.

Memorandum and Articles of Association
The memorandum gives details of the Articles of Association, company’s name, objects (purposes) and share capital. It also sets out the limits of the shareholders liability if the company was wound up. The articles set out the members’ rights and the directors’ powers.

Managing agents
An agent authorised to manage the business affairs in connection with the property of another such as a landlord, an RTM, an RMC or a developer.

Management Company
With leasehold property, a management company will usually be set up to administer the affairs of a block of leasehold properties.  Typically, management companies in this context are RMCs or RTMs.  The management company or more usually their agent, deal with the day-to-day running of the property, repairs and renewals.  They collect a service charge from the property owners (normally shareholders in the management company) to pay for the upkeep and maintenance of the building and for the administration of this service.

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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.

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Office copy entries
These are copies of the entries recorded at the Land Registry proving ownership of a property.  If the property has a registered title, the vendor’s solicitor will need to apply for office copy entries from land registry before a draft contract can be prepared.

This refers to the Company Secretary and Directors of a company.

An independent professional body that investigates complaints made against professions such as estates agents, solicitors, insurance companies, etc.

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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 acknowledgement 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
This is 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.

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Qualifying leaseholder
This refers to a tenant/flat owner who holds a lease on a property of more than 21 years in length.

Quantity surveyor
A quantity surveyor (QS) or cost engineer is a professional person working within the construction industry. The role of the QS is, in general terms, to manage and control costs within construction projects and may involve the use of a range of management procedures and technical tools to achieve this goal.

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Residents Managing Company (RMC)
This is a company normally 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. Interestingly there is no requirement to pay ground rent. 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.

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Schedule of dilapidations
This refers to a survey that identifies any repairs that are required on tenanted properties.  Dilapidations are breaches of covenant to repair a building that is tenanted.

These are the enquiries made by solicitors requesting information held on a property by Land Registry or the Local Authority.

Service Charge
This refers to the cost of repairing and maintaining internal and external communal parts of a building, charged by apportionment to the leaseholder, tenant or lessee.  The service charge may also be called a maintenance charge.

This refers to the rights of a landowner over the rights of another.  These rights are for use or enjoyment such as the right to light and maintaining the character of a residential neighbourhood.  Servitudes (or equitable servitudes) operate much like a covenant.

Sinking fund
This refers to monies collected by the management company to cover specific major long-term expense that will be undertaken in the future.  It differs from a reserve fund, which is built up to cover non-specific future expenditure.  Money destined for the sinking fund is usually collected as part of the service charge, if specifically provided for within the lease.  It cannot be re-directed for any other purpose.

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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.

This refers to the temporary possession of a property by a tenant.

Tenancy Agreement
This refers to the legal document that identifies the rights of both tenants and landlords by detailing the terms and conditions of the rental arrangements.

This refers to the ownership of a property by two people. When one joint tenant dies, the other may not necessarily inherit the property as it is automatically passed on to the deceased’s estate.  Another form of ownership is joint tenancy.

This refers to 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.

This is 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
This refers to the documents that show the legal ownership of a property.

Transfer deeds
This refers to documents from Land Registry that transfer legal ownership from buyer to seller.

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This refers to an individual property contained within a development, such as an apartment.

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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.

This is the legal term referring to the person who sells property or land.

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

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