We deal with property every day, and sometimes we forget the terminology we use can be confusing for people who are new to lettings or sales. Of course we're always happy to clarify, but we also wanted to give you a handy guide to use any time you come across some property jargon.
If you are letting or renting a property, here are some abbreviations that you're likely to come across:
AST - Assured Shorthold Tenancy: This is the most common form of tenancy, and most new tenancies are automatically this type.
The main criteria are: the property is the resident's main accommodation, the landlord (or "owner" as we like to say) does not live in the property, the tenancy started on or after 15 January 1989, and the landlord is a private landlord or housing association. The rent also must not be less than £1,000 (in London) or more than £100,000 a year.
EPC - Energy Performance Certificate: This is an assessment that rates how energy efficient your property is using a grading system from A (the most efficient) to G. These are a legal requirement for every property that is let or sold and last for 10 years. They're carried out by accredited assessors.
As of April 2018, a property must have a rating of at least "E" to be rented. Higher EPC ratings mean lower energy and fuel bills. You can increase your rating with upgrades like double glazed windows, energy efficient light bulbs, and improving insulation.
EICR - Electrical Installation Condition Report: This is a safety assessment of the existing electrical installations in a property to check for damage, deterioration, and dangerous conditions. They're carried out by a qualified electrician or electrical engineer, and show whether an electrical installation is in a "satisfactory" or "unsatisfactory" condition. EICRs are carried out at least every 5 years for rented properties, though they can be more frequent depending on the condition of installations and when the electrician feels things should be checked again.
A valid EICR must always be in place for a rented property. Not only do they ensure that the property remains safe for residents, EICRs can prevent faulty electrics costing you thousands of pounds down the line!
LRA - Legionella Risk Assessment: This is an audit to assess the risk of Legionella bacteria being present in a property. Owners of rented properties have a legal duty to asses this risk and take measures to minimise it, though they're not legally required to produce a testing certificate.
If you are buying or selling, you will see at least some of these terms come up in the process:
Conveyancing: this is the legal transfer of a property from one party to another. It includes everything from instructing a solicitor, carrying out all necessary enquiries and searches, and securing a mortgage, to signing and exchanging contracts, and completion.
Management pack: this is ordered from a property's managing agent by the seller's solicitor, and sent to the buyer's lawyer. Generally, it contains information about building management and service charges, the buildings insurance policy, fire risk assessments and an asbestos survey if necessary, accounting history, and freeholder contact details. Exactly what is contained in a management pack will vary depending on the type of property; an apartment block will usually have more information than a conversion.
Exchanging contracts: this is when the legal representation for the buyer and the seller swap signed contracts, and the buyer pays their deposit. The agreement becomes legally binding at this stage.
Completion date: this is the date on which the buyer and seller physically move and transfer legal ownership of the property.
Chain-free: a transaction that is chain-free means that it's not reliant on the successful purchase or sale of another property. A chain-free buyer's purchase isn't contingent on them selling a current property. All first-time buyers chain-free buyers.
Leasehold: this is a long-term tenancy where someone buys the right to live in a property for a period of time. Usually leaseholds are 99 or 125 years - the length of time the leaseholder technically owns the property. Leaseholders do not own the ground the property sits on, and they usually pay ground rent to the freeholder. The leaseholder must follow rules governed by a contract with the freeholder, which outlines restrictions like whether they can rent the property out or whether they can have pets. If a leasehold is not extended and comes to an end, ownership of the property returns to the freeholder. Many flats in London are sold as leaseholds.
Freehold: owning a freehold means you own the property and the land it sits on for an unlimited period of time.
Ground rent: this is a regular payment made by a leaseholder to a freeholder as required under a lease.
Buy-to-let: this is when a property is purchased as an investment with the intention to let the property out and become an owner (what we call our landlords). Benefits of buying to let include a regular passive income in rental yield, and the potential for capital growth with the appreciation of the property's value over time.
Gazumping: this is when another buyer makes an offer on the property you are in the process of purchasing and the seller accepts it, pushing you out of the purchase. Though it is frustrating, gazumping is legal and can happen at any time before you've exchanged contracts.
At Paramount we do a few things to minimise the chances of this happening. We want to avoid disappointing buyers who have found their perfect property. If we have multiple buyers interested in a property we'll ask everyone to submit their best and final offers within a certain timeframe. We won't share information about a pending offer with other buyers before a seller has made a decision. And we also offer lockout agreements, where the buyer and seller put down a non-refundable 1% (subject to contract) to show their commitment to the transaction.