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Glossary of terms commonly used in home purchasing

A - F

Completion statement
Prepared by the seller’s solicitor, this statement details how much money should be paid by the buyer upon completion, taking into account figures such as the purchase price and service charge. 

Contracts
Two identical documents to detail the terms of the sale, one to be signed by the seller and the other by the buyer. Once the exchange of signed contracts has taken place, both parties are legally bound to complete the transaction. 

Conveyance
The legal transfer of a property from the seller to the buyer.

Covenant
A restriction or allowance made within a title deed.

Deposit                                 Usually 10% of the purchase price that is paid upon exchange of Contracts

Easement
A right which the owner has over an adjoining property, such as a right of way.

Engrossment
The actual document (contract/lease) which is signed, as opposed to a draft document.

Energy performance certificate (EPC)
This is required when a property is advertised for sale, and contains information about the energy use and typical energy costs of a property. It also contains recommendations about how to reduce energy use and save money.

Freehold
Full ownership of the property and the land on which it stands. Generally, houses are freehold and apartments are leasehold, but this isn't always the case. When buying a property through shared ownership, the property will be leasehold regardless of the property type. If the property is a house and the full 100% is purchased in the future, it will then usually become freehold.

 

G - L

Ground Rent                             This is a rent payable annually to the freeholder of the building or land on which it stands. Generally it is payable for flats, but sometimes it is also payable for houses. In the case of shared ownership, ground rent is payable only once the leaseholder has staircased to 100%. The amount varies but will be made clear at the point of sale. 

Independent financial adviser (IFA)
Also known as a mortgage adviser, they work on a buyer's behalf to arrange a mortgage and progress the application through to a formal offer from a bank or building society.  

Insurance

Buildings insurance: for leasehold homes, this is provided by Hackney Council as the Freeholder and covers the external structure of the property.
Contents insurance: this would be arranged by the occupier of the property, and it is important because it covers the value of the possessions within the property.

Lease/leasehold
The lease is the contract by which one party conveys land, property, services, etc. to another for a specified time. It is similar to a Tenancy Agreement, but for a longer term which is typically 125 years. It contains all the terms both parties need to adhere to, and it is important that a buyer asks their solicitor to explain any aspects which they're not sure about. When purchasing a leasehold property, they become a leaseholder. 

Local authority search
This search checks if a property is likely to be affected by any planning proposals or decisions, and checks restrictions such as rights of way that may affect the property. It will be carried out by the buyer's solicitor.

L - P

Long stop date
In the case of off-plan purchasing, this is the latest date the builder is expected finish building the property. If they do not, a buyer can withdraw from the sale without penalty.

LTV (loan to value)                  This term refers to how much mortgage has been taken out in relation to how much the property is worth. It's a percentage figure that reflects the amount of the property that is mortgaged, with the remainder being the amount of deposit used (the amount you own is usually called your equity). For example, if you were to purchase a property valued at £500,000 and did so with a mortgage of £450,000 and deposit of £50,000, your LTV would be 90%.

Memorandum of sale
A document issued by the seller or their appointed sales agent once a property has been reserved by a buyer. The document outlines the details of the sale including details of all parties, figures, and any conditions of sale applied at this stage. 

Mortgage
The loan required to purchase a property, usually arranged with a bank or building society.

Mortgage valuation survey
A mortgage valuation survey is commissioned by the lender in order to make sure that the property is not being sold for more than it’s worth, and that it will be adequate security for the amount of the loan.

Practical completion (PC)
The date the build of a property and all associated matters are completed.

Pre-contract enquiries
A set of detailed questions and requests for information about the property which are requested by the buyer’s solicitor and answered by the seller’s solicitor before the buyer agrees to sign the contract.

R - Z

Reserve Fund                             As part of the service charge, an amount of money is sometimes requested in order to build up a fund to cover the cost of irregular and/or expensive works such as external decorations, structural repairs or lift replacement. This can (but not always) prevent large one-off bills in the future.

Service charge
A charge for the repair, management and on-going maintenance of communal areas. This will also include the buildings insurance cost.

Staircasing                               This word is used with regards to shared ownership, to describe buying more shares in the property. After one year of ownership, you can purchase in increments of 10% or purchase the whole remaining share in one go depending on what you can afford. When you buy from us, you can staircase to 100%, but other housing providers vary.

Stamp duty land tax (SDLT)
A tax payable by the buyer of a property. When buying a shared ownership home, the buyer can elect pay the stamp duty amount calculated from the full market value, or in the case of a shared ownership home, the initial share being purchased. The HMRC website can be used for guidance but the buyer’s solicitor will advise and handle payment on behalf of the buyer.

Target Completion Date
In the case of off-plan purchasing, this is the date the builder has indicated they are expecting to finish the property to the required standards. 

Title Deeds
The legal document which proves and details ownership.