A Guide to the Property Market of England & Wales
Glossary of Terms
Act of Parliament - A formal document setting out a law which has been passed by Parliament and received the Royal Assent.
Agent - One who acts on behalf of a principal.
Agreement for Lease (or sale) - A contract to enter into a lease (or sale). Under section 42 of the Law of Property (Miscellaneous Provisions) Act 1989, the contract must contain all the terms of the transaction and be signed by all parties. For breach of the alleged contract or there must be a sufficient act of part performance.
Alienation - The transfer of an interest in property to another, e.g. sale of a freehold or grant or assignment of a lease.
Alienation clause (provisions) - Within the UK this is a clause controlling a lessee's right to assign and/or sublet.
Alteration - In property terms this normally means physical changes to a building or structure which may or may not amount to improvements.
Amenity - In property terms something tangible which makes the human environment more pleasant, e.g. landscaped open space within an urban area or a swimming pool in a private garden.
Arbitration - A method of resolving a disagreement between two parties by presenting their different views to an independent arbitrator. The award is binding on the parties but an arbitrator's decision can be challenged in a court of law in certain circumstances.
Arbitration clause - A clause in a contract providing for disputes arising from the contract to be referred for the decision of a third party (arbitrator). Common examples are disputes over rent review clauses or the terms of building contracts.
Arbitrator - An impartial person who is appointed to settle a difference between two parties.
Assign - To transfer an interest in a property, especially a lease.
Assignee - One who receives an assignment, e.g. the assignee of a lease, for so long as he retains that interest and stands in the position of tenant under the lease.
Assignment - The transfer of a property interest, especially a lease, from one party to another.
Assignor - One who makes an assignment.
Beneficial occupation - The physical possession and control of land and/or buildings in a manner entitling the occupier to full use and enjoyment of the premises.
Breach (of contract) - An act, or omission, contrary to one or more of the provisions in a contract and therefore giving the aggrieved party a right to enforce specific performance, to rescind the contract and/or to claim damages, the remedy available depending on the nature of the breach.
Break clause - A clause in a lease which gives the landlord and/or the tenant a right, in specified circumstances, to terminate the lease before its normal expiry date. It usually defines the length of notice to be given and may be subject to contractual or statutory financial provisions.
Broker - An agent or middleman who acts for a vendor or a purchaser in a transaction.
Building survey - An examination of a building by a surveyor (which may include specific tests by the surveyor or other experts) in order to produce a written or verbal report. Such a report would cover, for instance, the condition of the structure, fixtures and fittings, services and plant installations. Depending on the instructions given to the surveyor, these physical features would be described in relation to safety, stability, strength, efficiency and economy in use, ease of maintenance and other factors as required.
Building Surveyor - An individual who is competent to undertake building surveys, prepare building specifications, place contracts with builders, supervise repairs, restoration or new works and generally manage allied works on behalf of clients to whom he will owe the normal duty as an agent or employee, depending on the terms of his engagement.
Capital costs (expenditure) - Money spent on acquiring or improving capital assets, such as land, buildings, plant and machinery as distinct from expenditure of a revenue nature such as money spent on maintenance of existing assets.
Central business district (CBD) - The functional centre around which the rest of a city is structured. Characterised by the presence of comparison shopping, office accommodation, leisure facilities, buildings for recreational use, public museums, art galleries and governmental functions. Generally the area of the highest land values within a city.
Chartered Surveyor - A surveyor who is a qualified member of the Royal Institution of Chartered Surveyors being a Fellow or Professional Associate in one of seven divisions, each covering a different field of activity.
Clear lease - A lease under which the landlord has no actual or contingent liability for outgoings (other than tax), e.g. one let on full repairing and insuring terms or one where the full costs of meeting the landlord's obligations is recoverable from the tenant by an adequate service charge additional to the rent.
Code of Measuring Practice - Guidelines for the measurement of buildings published jointly by the Royal Institution of Chartered Surveyors.
Common Law - That part of the law of the realm built up over the centuries from the principles and rules laid down by the judges in cases decided in courts of law and not by legislative enactment by the legislative authority.
Common Parts - The parts that are multi-occupied in a building which are not let to individual tenants but are either retained by the landlord e.g. for the provision of services, or held in common by the tenants for the purpose of providing access for themselves and their visitors e.g. halls, passages, lifts and stairways.
Compensation - A payment to make amends for the removal or curtailment of rights in property or for an injury, including the payment to the owner for lawfully taking a property against his wishes e.g. by compulsory purchase.
Completion - The final step in the legal process of transferring ownership of property, e.g. when the documents in connection with a sale of land are delivered and when originals and counterparts (see below) are exchanged.
Contract - A legally binding agreement. A contract for the disposal of an interest in land is unenforceable in the absence of a sufficient memorandum in writing or a sufficient act or part performance by one or other of the parties.
Counterpart - A legal document, especially the landlord's copy (signed by the tenant) of a lease (the tenant's being termed the "original" or the "lease").
Covenant - 1. A promise, 'undertaking', an obligation given by one party to another. 2. An obligation undertaken by a party and effected by deed e.g. in a lease, obligations of the landlord or tenant. 3. A subjective assessment of the character and quality of a tenant under terms of being able and willing to comply with the terms and conditions of the lease. In valuations the quality of the covenant will normally influence the yield adopted. A tenant of sound standing is often referred to as a "good covenant".
Crown land - A general term, not used in statute, for any land where an interest belongs to the monarch in right of the Crown or of the Duchy of Lancaster or of the Duchy of Cornwall or belongs to a government department or is held in trust for the monarch but occupied for the purposes of a government department.
Damages - Money recoverable by court action by one suffering a loss or injury resulting from breach of contract, breach of statutory duty, or under either statute or tort.
Deed - A document, being written evidence of a legal transaction, which has been executed as a deed, to testify to the agreement of the parties concerned.
Deemed grant - of a new lease to impose a charge to SDLT on certain landlord and tenant situations where a transaction has not yet taken place. The purpose is to prevent avoidance of tax.
Defects liability period (retention period) - An agreed period following practical completion of a building, engineering or other constructional operation during which the contractor is obliged to remedy any defects appearing in the building caused by the failure of materials or workmanship to meet the requirements of the building contract. Amounts specified in the contract will be withheld until such time as defects are remedied.
Demise - 1. Strictly speaking, this is synonymous with a lease and means the granting of a right to the exclusive possession of property for a term less than that held by the grantor. 2. Colloquially used to signify the premises demised, i.e. the area of property the subject-matter of a lease (demised premises).
Developer's finish - A standard of finish that enables a tenant to occupy the premises subject to carrying out their own fitting out works i.e. partitioning etc.
Dilapidations - These are items of disrepair which arise through breach of contract, especially by one of the parties to a lease, giving rise to a right of damages or remedial action.
Disposal (Disposition) - The transfer of land by, for instance, sale, assignment, granting of a lease, death, gift or exchange.
Easement - A right appurtenant to a parcel of land entitling the dominant owner to use the land of the servient owner in a particular manner, or constraining the legal rights otherwise enjoyed by the servient owner, e.g. a right of way, right to light, right of support. Strictly speaking easements cannot exist 'in gross' i.e. personal and unattached to the ownership of land, but rights similar to easements can be created by statute, usually for the benefit of public utility undertakings, and these are commonly referred to as 'statutory easements'.
Exchange of contracts - The first formal and legally enforceable step in the disposal of real property, i.e. when the parties exchange signed, dated copies of the document embodying the terms of the deal.
Expert - A person having special experience, knowledge and skills in a particular subject.
Fee simple absolute in possession - The only form of freehold ownership which can exist as a legal estate under the Law of Property Act 1925. A fee simple is the highest form of freehold land tenure under English Law, in which a 'fee' signifies heritability of the tenancy and 'simple' that there is no qualification as to the heirs who may succeed to it. 'Absolute' means that it will last for ever, i.e. it is not determinable, except that the land will revert to the Crown as bona vacantia if the owner dies intestate and without heirs, 'in possession' indicates either physical possession or the right to take rents and profits, e.g. the rent payable by a tenant under a lease.
Fixtures (and Fittings) - Chattels which are so affixed or 'annexed' to land or a building as to become in fact part therefore, thereby losing their character as chattels (or moveable) passing with the ownership of the land. Whether or not a chattel or moveable has become a fixture depends on both the degree and object of annexation. For example, if the article cannot be removed without serious damage to itself or to the land or building to which it is attached, prima facie it will be a fixture, however, if the purpose of the affixation is to enjoy the article (e.g. fixing a valuable tapestry to a wall) rather than to benefit the use of the land or building, it may not have become a fixture. Those fixtures which are commonly regarded as easily removable are often described as 'fittings'; hence the expression 'fixtures and fittings'.
Floor Area - The aggregate superficial area of a building, taking each floor into account. The RICS Code of Measuring practice distinguishes the following categories and should be consulted for full details:
(a) Gross External Area (GEA)
(b) Gross Internal Area (GIA)
(c) Net Internal Area (NIA)
Floor Load - The live or superimposed load on the floor usually expressed in pounds per sq.ft. (1lb/sq/ft/) or Kilo Newton's per sq. metre (kN/m).
Freehold - In general this is used as shorthand for the tenure of an estate in fee simple absolute in possession. Strictly speaking however, freehold includes fee simple, entailed interest (formally 'fee tail') and tenancies for life.
Freeholder - One who holds a freehold interest.
Full Repairing (and Insuring) Lease (FRI Lease) - A lease under which the lessee is responsible for the whole cost of repairing and maintaining (and insuring) the property.
Geared Rent - A rent which is calculated as a given proportion of:
(a) The rental value of, or the actual rent(s) received from the subject property; or
(b) The rental value of a broadly similar property or less usually, one of a different kind.
The purpose of gearing is often to reflect any capital contribution made by the tenant but may be for some other reason e.g. lack of evidence of rents or properties similar in all respects to the subject property, in which a rent comparison method will be used.
Guarantor - A third party to a contractual relationship who guarantees certain undertakings by a party to the contract, e.g. that rent will be paid and tenant's covenants performed under the terms of a lease.
Head lease - A leasehold interest held directly from the freeholder and subject to one or more underleases in the whole of, or part of, the property.
Heads of terms - Fundamental points of an agreement intended to form the basis of a formal contract. In a letting these usually include duration of a lease, the initial rent and obligations and rights of the respective parties, right of assignment, sub-letting, maintenance, insurance and use.
Immediate landlord - In a chain of interest, e.g. freeholder, head lessee and occupying tenant, the interest immediately above that of a particular tenant.
Independent expert - Someone with relevant specialist knowledge who is appointed to resolve a difference between parties e.g. as to a rent review or the interpretation of a clause in a lease. He uses his own specialist knowledge in addition to any evidence presented to him. His decision is final and binding on the parties but, unless his contract of appointment provides otherwise, he can be sued by an aggrieved party if his decision is manifestly negligent.
Inherent defect - A defect within the structure of the building which was inadvertently 'built-in' at the time of design or construction or both.
Insurance - The process whereby one party (the insurer) indemnifies the other party (the insured) against the financial consequences, in whole or part, of any loss by way of damage or injury suffered by the insured on the occurrence of certain specified perils.
Interest (in property) - A right of ownership or some right over land in another's ownership. The term embraces legal estates and legal and equitable interests.
Investment - 1. Using a capital sum, other than for the purpose of trade, to acquire an asset which will, hopefully, produce an acceptable flow of income and/or appreciating capital value. 2. An asset acquired by the process described in 1. above.
Land Charges Register - A register for those land charges imposed upon unregistered land. It is one of the registers maintained by the Land Charges Department of the Land Registry under the Land Charges Act 1972. It should therefore be inspected by or on behalf of an intending purchaser of such land before completion.
Landlord - The owner of an interest in land who, in consideration of a rent or other payment (e.g. a premium), grants the right to exclusive possession of the whole or part of his land to another person for a specific or determinable period by way of a lease or tenancy.
Land Registry - The register of land under the supervision of H M Land Registrars. By 2013 all land in England and Wales will be registered and all leases but the shortest (probably less than three years duration) will be compulsorily registrable on grant or assignment. A scale of fees according to value of transaction applies and must be paid on making an application.
Latent defect - A hidden or concealed defect inherent in the design or construction of a building, which could not be discovered by inspection, despite reasonable care.
Lease - 1.- The grant, subject to consideration, of a right to the exclusive possession of land for a definite period (or one capable of definition) which is less than that held by the grantor. 2. The right so granted i.e. the leasehold estate. 3. The original document granting the right. In practice the term 'lease' is usually reserved for a lease for a term exceeding three years.
Leasehold - An estate or land held for a 'term certain' or on a periodic tenancy.
Lessee - The grantee of a lease.
Lessor - The grantor of a lease.
Let - 1. To grant a lease or tenancy especially a short tenancy. 2. To award a building contract.
Licensee - The grantee of a licence.
Licensor - The grantor of a licence.
Negotiation - Discussion, written or otherwise between two or more parties on different sides, the aim being to reach a common agreement.
Negotiator - Someone who conducts negotiations, usually an agent, with a view to reaching agreement with another party or parties, or their agents, in a property transaction, e.g. sale, purchase, letting or rent review.
Net Internal Area (NIA) - The usable space within a building measured to the internal finish of structural, external or party walls, but excluding toilets, lifts and plant rooms, stairs and lift wells, common entrance halls, lobbies and corridors, internal structural walls and car parking areas.
Occupational lease - A lease under which the lessee occupies the land or premises demised rather than grants a further interest to a sub-lessee.
Offer - A presentation or proposal, the acceptance of which may, in certain circumstances, create a contract. To be legally binding when accepted, an offer must be definite as to the parties, the subject - matter and the consideration. In addition, in the case of property transactions, section 40 of the Law and Property Act 1925 provides that to be enforceable the contract must be evidenced in writing. If made 'subject to contract' it does not normally bind the parties involved, but in Scotland it does.
Open Market Value - 1. The best price which might reasonably be expected to be obtained at arm's length for an interest in a property at the date of valuation subject to any statutory assumptions which may be required. 2. For the purpose of asset valuations, which is defined by the RICS Guidance Notes on the Valuation of Assets, defined as the best price which might reasonably be expected to be obtained for an interest in a property at the date of valuation assuming five specified factors.
Open Register - From October 2003, H M Land Registry is moving rapidly to compiling a complete register of all titles throughout England and Wales: within two years (2005) the register and all documents comprising each register (leases, assignments, correspondence etc.) will be open to all as of right. However in certain circumstances, commercially or personally sensitive parts of documents may be excluded from public scrutiny on application to H M Land Registry. Please consult with Hexell Wylie and your solicitors for advice on the application for exclusion of parts of documents from the open Register.
Options to break - See Break clauses.
Original - The copy of the contract, lease, licence or other deed or document which is executed by the landlord.
Owner - Strictly speaking, in relation to landed property this means the freeholder but generally also includes a leaseholder.
Passing rent - The rent which is currently payable under the terms of a lease or tenancy agreement.
Peppercorn rent - A token rent payable as consideration to a landlord, being either of a notional amount of money or, more imaginatively, an English rose or a peppercorn. In modern times this usually occurs when the tenant has paid a premium to the landlord.
Possession - Control over landed property either by occupation and use or, in the case of a landlord, the right to receive the rents, if any, and to exercise the rights and duties in connection with the lease.
Perpetuity - 1. The quality of continuing for ever. 2. Something having that quality e.g. a freehold estate.
Premises - 1. That wording at the beginning of a conveyance or lease giving the date and naming the parties and the words of conveyance including the description of the land(s) (with or without buildings) which is the subject of the document. 2. Land alone or a building or part of a building e.g. an office, together with its land (if any).
Premium - 1. The price paid by an actual or prospective lessee to a lessor, usually in consideration for the rents being reduced to below what otherwise would be payable. 2. Incorrectly, but commonly, the price paid for the purchase of (usually) a leasehold interest. It may represent a capital payment to reflect that the rent payable is below market value or, alternatively, recognise a special value for the purchaser above market value. 3. The periodic amount payable to an insurer by the insured as consideration for the insurance policy.
Privity of contract - The direct relationship between two parties to an agreement which, for each of them, is legally enforceable e.g. the relationship between an original lessor and the original lessee that persists throughout the entire term of the lease (and any extension thereof under an option), even after the assignment of either interest in the property. Changed in leases granted after 1st January 1996.
Profit Rent - In valuing a lessee's interest(s) the sum of the rent(s) received from a sub-tenant(s) and the rental value of any space occupied by the lessee and of any unlet accommodation, less the total rent(s) payable to the immediate landlord(s), with the appropriate adjustments for differences in the terms of the leases.
Quarter Days - (English term days) Lady Day - March 25th; Midsummer - June 24th; Michaelmas - September 29th; Christmas Day - December 25th.
Quiet Enjoyment - The expression for implied right for a tenant to be given possession of the entire property and his entitlement to recover damages if there is substantial physical interference by acts of the lessor's or someone claiming under the lessor.
Rates - Historically that part of a local authority's funds raised by charges based in the occupation of land and buildings within their area. However rates are now taken by Central Government and redistributed to the local authorities.
Registration of Title - Registration of an owner's (freeholder's or tenant's) title at H M Land Registry. Registration provides certain state guaranteed elements of protection and operates as notice to all of the owner's estate in the land.
Reinstatement - The act of putting a part or the whole of a building or structure back into the condition which existed at some relevant previous date.
Rent - Under a lease or tenancy, a periodic payment by the tenant to the landlord for the use of the land. Although usually a sum of money, rent can take other forms, e.g. payment in products or in services. However, the payment must be certain or capable of being ascertained.
Reversionary interest - That part of a grantor's estate or interest in property left after the grant of some lesser interest, e.g. the interest of a landlord after granting a lease.
Rent Free Period - An agreed period usually for several weeks or months, during which a lessee is allowed to occupy the demised premises without payment of rent: (a) In consideration for the tenant incurring expenditure on such matters as fitting out the premises or carrying out repairs and improvements; (b) to reflect market conditions which favour the tenant, e.g. where the space available for letting exceeds the total tenant demand in that area; (c) virtue of both (a) and (b).
Rent Review - A provision in a lease whereby the amount of the rent is to be reconsidered at stated intervals, e.g. every five years, or on specified dates. The method and procedure for reviewing the rent are outlined in the lease. Failing an agreement between the parties, there is normally provision for reference to a third party, i.e. an arbitrator or independent expert.
The Royal Institution of Chartered Surveys, (RICS) - The principal professional body in the British Isles concerned with surveying, It was founded in 1868 by the amalgamation of three surveyors' clubs and has since been joined by, among a number of bodies, the Chartered Land Agents Society, the Chartered Auctioneers and Estate Agents Institute (both in 1970), and the Institute of Quantity Surveyors (1982). The institution was granted a Royal Charter in 1881 and now has well over 80,000 members, including overseas members, in seven divisions. The present divisions are Building Surveyors, General Practice; Rural Practice; Land Surveyors; Minerals; Planning and Development; and Quantity Surveyors.
Schedule of Dilapidation - A list of the requirements of repair and maintenance which a tenant (or landlord) is obliged to make good under the terms of the lease or tenancy of a property. This can be in the form of either an interim schedule prepared and submitted during the lease or tenancy or a terminal (final) schedule on the expiry of the lease or tenancy. In the latter case, the tenant's obligation is usually discharged by a cash payment based upon an agreed estimate of the cost of the relevant repairs or, if lower, the loss in value (if any) of the landlord's interest resulting from the disrepair.
Security of Tenure - 1. The right of a tenant to remain in possession of demised premises in accordance with the terms of the tenancy. 2. The statutory right of certain classes of tenant to remain in occupation of the demised premises beyond the expiry date stipulated on their existing lease or tenancy. The three principle classes of tenant who enjoy such a security are those who occupy certain residential, agricultural or business premises. The rules, constraints, exceptions and conditions applicable to these classes are contained in specific legislation i.e. the Rent Acts, the Agricultural Holdings Acts or Part ll of the Landlord and Tenant Act 1954, respectively. 3. Exercising the right to remain in possession will give rise to a deemed grant of lease for twelve months.
Service Charge - The amount payable by a tenant on account of services provided by his landlord.
Shell & Core - A standard of finish whereby the developer completes the structure, main plant and cores, i.e. common areas, but leaves the interiors of the office floors without ceiling, floors etc. Capital allowances are often given to a tenant to bring the offices up to an agreed standard of finish.
Sinking Fund - A sum of money set aside at regular intervals to earn interest on a compound basis either: (a) To be set off against the diminution in value of a wasting asset e.g. a lease, or (b) To meet some future cash liability.
Stamp Duty Land Tax - Introduced by FA 2003 on 1st December 2003 to replace Stamp Duty. Most freehold and leasehold transactions are chargeable to SDLT. Consult accountants or solicitors for details of the rates of tax payable.
Statute (laws) - The part of the law which derives from legislation, i.e. Acts of Parliament.
Subject to Contract - A phrase which qualifies a proposed agreement so that it is not legally enforceable in England and Wales until a formal contract has been entered into by the parties.
Sublease (underlease) - A lease held from a lessor who has a superior lease of, or including, the demised premises.
Sublessee (underlessee) - One who holds a sublease.
Subtenancy - A tenancy held from a landlord who has a superior tenancy of or including the demised premises. The term is synonymous with sublease where the demise is under seal but also includes an oral or written agreement (not under seal).
Subtenant - One who holds a subtenancy.
Superior landlord - The owner of a superior interest in property.
Superior lease (Superior tenancy) - A superior interest which is not the freehold e.g. a lease subject to an underlease.
Surrender (of lease or tenancy) - Voluntary termination of a lease or tenancy by the tenant for years (or life) yielding up the balance of the term to the immediate landlord (or reversioner).
Tenancy - 1. Strictly speaking, the interest of a person holding property by any right or title. 2. More usually, an arrangement, whether by formal lease or informal agreement, whereby the owner (the landlord) allows another (the tenant) to take exclusive possession of land in consideration for rent, with or without a premium either; (a) For an agreed period or, (b) On a periodic basis until formally terminated. 3. Under the Landlord and Tenant Act 1954 Section 69(1), this means a tenancy created immediately or derivatively out of the freehold, whether by a lease or underlease, by an agreement for lease or underlease or by a tenancy agreement or in pursuance of any enactment (including this Act), but does not include a mortgage term or any interest arising in favour of mortgagor by his attorning tenant to his mortgagee.
Tenancy Agreement - A lease for three years or less, not under seal.
Tenant - A person (or body of persons) holding a tenancy.
Tenant's Fixtures - Objects installed by a tenant which although strictly fixtures are, if capable of being removed without doing serious damage to the property, nevertheless lawfully removable by the tenant on vacating the premises. To qualify as such they must be: (a) Trade fixtures, i.e. attached to a property for the purpose of the tenant's particular trade; (b) Ornamental and domestic fixtures, i.e. chattel or moveable affixed to a house for ornament or the better enjoyment of the object itself.
Tenant's Improvements - Improvements to land or buildings to meet the needs of - and carried out wholly or partly at the expense of - the tenant. When subsequently seeking a renewal of his lease, he may, under the Landlord and Tenant Act 1954 be entitled to the rent being assessed on the assumption that his improvements have not been carried out. If he vacates the premises he may become entitled to compensation under Part I of the Landlord and Tenant Act 1927; the basis of such compensation will reflect the extent to which his improvements have increased the rental value of the premises to the benefit of the landlord.
Tenure - The basis upon which property is held: freehold, leasehold or commonhold (which is a particular form of freehold analogous to condominium title).
Term - 1. The duration of the lease. The term commences from the date specified in the lease, which is not necessarily the date when the document is executed or registered. 2. In a lease or other contract, one of the provisions expresses the agreement between the parties.
Under Offer - Where an offer for a property has been made and accepted in principle but the transaction is still subject to contract.
Under-let (sublet) - The grant of a lease to an under tenant (sublessee).
User Clause (user covenant) - A contractual provision especially one in a lease, specifying a use or uses to which the property in question may be put and/or the use or uses which are prohibited.
Vendee - A purchaser, especially one who buys land.
Vendor - A seller, especially one who sells land.
Warranty - An express or implied undertaking of the truth of a statement, whereby the warrantor becomes legally responsible in the event of the facts being otherwise than as stated, e.g. a vendor may give a warranty that the property being sold is fit for a particular purpose or is in a given state of repair.
With grateful thanks and acknowledgement to The Glossary of Property Terms' compiled by Jones Lang Wootton in association with The Estates Gazette Limited and South Bank Polytechnic.
Part I - Property Tenure
Part II - Property Leases
Part III - The Legal Principles in the Acquisition of Office Property
Part IV - The Legal Principles in the Disposal of Office Property
Part V - Lease Provisions
Part VI - Property and Associated Costs
Part VII - The Steps to Acquiring Offices
Part VIII - Conclusion
Glossary of Terms