Sales Terminology
Memorandum of Sale – this is the document produced by the estate agent that sets out the buyer’s and seller’s names and details and the terms of the sale, principally price. The agreed timeframe to exchange and completion is also set out on this document. The Memorandum is sent to the solicitors by the estate agent.
Contract papers – also known as the ‘draft contract package’, this is the draft contract and associated documentation sent from the seller’s solicitor to the buyer’s solicitor that kicks off the conveyancing process.
Exchange – this is also known as ‘exchange of contracts’ and is when a buyer and seller exchange signed contracts and become legally bound to the sale. Usually 10% of the sale price is paid by the buyer to the seller on exchange.
Completion – this is when the sale is completed i.e. you do what you contracted to do at exchange and the buyer becomes the legal owner. The balance of the sale price is transferred (usually 90% of the agreed sale price) to the seller and keys are released to the buyer, usually by the estate agent.
Freehold - if you own the freehold, it means that you own the building and the land it stands on outright. It is your name in the land registry as “freeholder”, owning the “title absolute”. Most houses would be freehold and most apartment buildings or blocks are owned by a freeholder.
Leasehold - leasehold means that you have a lease from the freeholder (sometimes called the landlord) to use the property for a number of years. The leases are usually long term – often 90 years or 125 years but as high as 999 years. Most individual flats and apartments are leasehold and the apartment building as a whole is the freehold. In the Barbican the freeholder is the City of London Corporation. When the lease is 'low', often approaching or below 90 years, there is a legal process where you can pay the freeholder for a 'lease extension'. Most Barbican Estate flats had 125 year leases starting from 1981 and therefore are approaching 80 years left on the lease. If you are a Barbican leaseholder and you have not already extended your lease we would advise you to look into this without delay and liaise with the City of London. This agency can refer you to solicitors who can assist with a lease extension.
Share of freehold – this occurs where the freehold is bought from the freeholder collectively by the leaseholders. You can do this as long as at least half of the leaseholders agree to buy a share. There are benefits to this as it gives you more control over your property and you will not have to pay ground rent. It also means you can extend your lease fairly easily.
Management company – this is the company that is responsible for the running of an apartment building or blocks of flats. The people who control this company will be leaseholders and they often do it voluntarily. In many apartment buildings, these people will often be referred to as the ‘residents’ committee’ or the ‘directors’. Every leaseholder becomes a shareholder in the management company.
Managing agent – the day to day running of an apartment building is often contracted out to a managing agent by the management company. In the Barbican the Barbican Estate Office and house officers essentially perform the task of managing agent for all of the blocks on the Estate. The managing agents are often chartered surveyors but you also get companies that are focused solely on ‘block management’. The agent will collect the service charge from leaseholders, deal with the accounts, organise cleaning and general maintenance, payment of building insurance etc.
Ground rent – this is the annual rent paid to a freeholder by leaseholders; an amount of £150 to £250 is common but it can be higher or lower. In the Barbican the annual ground rent for most flats is just £10 or 'peppercorn ground rent' as it is known.
Service charge – this is the annual amount paid by leaseholders for the general running and maintenance of the building and common parts. The service charge will pay for building insurance, cleaning and general maintenance, electricity in the common parts, grounds maintenance and occasionally a contribution to a sink fund.
Sink fund – this is a fund that leaseholders pay into so funds are available for expensive jobs such as window, roof or lift replacement as and when they become necessary. The Barbican Estate does not maintain a sink fund for the blocks so major works bills are raised to leaseholders as and when required. The Barbican Estate office generally gives a good notice period when works are being considered and planned so no major works bills should come as a surprise and leaseholders are given time to budget for them.
NHBC Certificate - a National House Building Council Certificate is an industry recognised standard for new build houses and apartments. It will provide a 10-year guarantee against any structural defects. In order to comply with NHBC regulations the building will be inspected throughout the build process to ensure that the build meets satisfactory standards and quality.
If you have any questions on the sale of your property, would like to discuss the process or would like a free no-obligation valuation please call us on 020 7060 0450 or email us at sales@thomasmichael.co.uk.