If you’re buying a new build home, you are likely to come across a host of industry terms and phrases – some will be familiar and others less so. Here are some of the most common property terms and jargon and what they mean for your purchase.
The legal name sometimes used to describe the seller of the property.
The legal agreement that sets out the main terms that have been agreed – for example: price, address, names etc. Two copies are drawn up, and each party signs one in readiness for the exchange of contracts.
The part of the purchase price which the buyer pays on exchange of contracts. For Help to Buy this is 5% of the purchase price less the reservation deposit already paid.
A payment made to secure the property. At this point the property is taken off the market. This payment forms part of the purchase price.
SUBJECT TO CONTRACT (STC)
This indicates that an agreement is not yet legally binding.
AUTHORITY TO PROCEED
Once checks have been completed by Help to Buy a buyer will receive an Authority to Proceed (ATP). The ATP will be sent to your solicitor/ conveyancer and/or mortgage broker and will contain the legal documents that should be explained to you by them.
AUTHORITY TO EXCHANGE/CONCLUDE MISSIVES
Once your solicitor/conveyancer has checked your mortgage offer to ensure that the purchase price and available HTB funds are consistent with the ATP, they will need to request permission to exchange contracts from Help to Buy. If approval is given then Help to Buy will send an Authority to Exchange (ATE) to your solicitor/conveyancer, typically this happens within three working days of the request being submitted.
EXCHANGE OF CONTRACTS
This is the legal commitment to purchase and only happens once your solicitor has confirmed that your interest in the property is protected.
You will be required to provide a portion of the purchase price (less the reservation fee paid). This is usually 5%. (Usually 2.5% in Scotland).
Usually either 21 or 28 days from receipt of draft contracts. (Or could be as much as six weeks).
There are usually two dates, a ‘short stop’ and a ‘long stop’. The short stop date will be relayed as an estimated date, this is when the developer expects to have finished the building.
The long stop date is the date by which they must have done so.
COMPLETION ON NOTICE/NOTICE TO COMPLETE
Completion on Notice normally means as a buyer, once the building has been physically completed, you’ll have just 10 days to complete yourself, get your keys and move in, most importantly after paying the balance of your purchase and legal fees. Notice to complete cannot be given unless a building regulations completion certificate or a new homes warranty and insurance certificate, such as an NHBC, have been issued.
Completion of the legal transaction with all monies and documents having been distributed. This is also when you will receive the keys to your new home. When purchasing off-plan the completion date is usually estimated at the point of reservation.
DEFECT LIABILITY PERIOD
Following practical completion the builder/contractor will remain liable for any defects for a set period of time.
This entails the developer identifying and making good minor issues, such as touching up paintwork and adjusting appliances, prior to the buyer moving in.
Purchasing a new build property which has yet to be built.
A general term that is used to describe the purchase and sale of property.
An inspection made by a qualified surveyor. There are three main types of survey. Valuation report (for mortgage purposes), Homebuyers’ report (also comments on general condition) and Full Structural survey (examines structural detail).
All developments have to comply with stringent building standards and are offered with the benefit of structural defects insurance (sometimes referred to as a warranty).
Most major developers subscribe to the National House Building Council (NHBC) scheme which offers a 10 year “Buildmark” warranty. Other developers may subscribe to similar schemes such as the Premier Guarantee Scheme or LABC warranty.
The warranty is designed to cover defects in the property which may arise during the warranty period as a result of the developer’s failure to observe the scheme requirements.
If you purchase a new home which is Freehold, you own the building and the land that it stands on outright. It is your name in the land registry and you won’t have to pay annual ground rent, unlike a leasehold property.
To be given ownership of a property but not the land it is built on. This normally requires payment of ground rent to the landlord. A leasehold is normally offered for 99 or 999 years, or shorter terms.
GROUND RENT (ENGLAND & WALES ONLY)
The annual fee which a leaseholder pays to the freeholder.
SERVICE/ESTATE OR MANAGEMENT CHARGE
A charge that made towards the upkeep of a freehold or leasehold property.
Prior to completion the service charge for a home will usually be estimated on a GBP per square foot basis. Following completion Service Charge is collected from freeholders or leaseholders by an appointed managing agent.
Certified Identification is required for Anti Money Laundering and you will be required to provide certified proof of identification and address (dated within the last three months).
A formal written offer made by a bank or building society to lend an approved amount to purchase a property.
Your monthly repayment includes part interest and part capital repayment. So long as you meet all of the payments required by the lender on time, your mortgage will gradually reduce until it is repaid in full.
MORTGAGE REDEMPTION FIGURE
The amount required to repay the outstanding capital/interest of a mortgage.
PROPERTY INFORMATION FORM/FIXTURES, FITTINGS AND CONTENTS FORM (PIF)
Standard forms about the property that the seller answers for their solicitor such as what will be left behind and details of guarantees.
The Government department which records who owns what land, and under what conditions.
ENERGY PERFORMANCE CERTIFICATE (EPC)
This contains information on energy use, energy performance, carbon dioxide emissions and fuel bills.
PREDICTED ENERGY ASSESSMENT (PEA)
Predicted energy assessments are for new build homes. Normally, when a home is designed, a “target energy rating” based on the design is produced to show a building inspector that the property will meet requirements under Part L of the Building Regulations. The final energy performance of the property must achieve at least this target energy rating to receive its final sign-off from the building inspector.
Given the importance of providing energy efficiency information to the prospective buyer, this existing process will be used to produce a predicted energy assessment.
Please note that when a property is complete a full Energy Performance Certificate will be provided by the developer (See Energy Performance Certificate).
REQUISITION ON TITLE
An enquiry relating to the completion agreements.
This comprises a Property Information Form, a Fixtures, Fittings and Contents Form, a copy of the title deeds and the draft contract.
STAMP DUTY OR LBTT (SCOTLAND)
A tax, paid by the buyer, that is calculated on the percentage rate applicable to each portion of the sale price.
Checks of local council records for planning applications and restrictions, and so on.
Legal documents that prove ownership of land/buildings and the terms on which they are owned.
TRANSFER OF TITLE
The document that passes the ownership from the seller to the buyer.
Independent Financial Advisor.
Independent professional bodies who investigate complaints on behalf of customers against estate agents, solicitors and insurance companies.
MEMORANDUM OF SALE/SALES LETTERS
This document records the fact that both the buyer and seller have agreed to the transaction. It can also be called a Notification of Sale. It usually records the details of the price being paid, the details of the seller and buyer and their respective lawyers. If there are any conditions to the sale (for example, exchange by a certain date) then this will form part of the Memorandum of Sale. It is not a legally binding document.