Glossary

TERM

DEFINITION

Administration charge

A charge payable under a lease by a leaseholder for approvals, provision of information or as a result of a breach of his obligations.

Annual Accounts

The Annual (yearly) accounts are usually described as ‘financial accounts’, ‘company accounts’ or ‘statutory accounts’. The main aim of yearly accounts is to present a comprehensive report of the financial activity of your limited company during its latest financial year.

Arrears

Money that is owing by one party to another. This will usually be an amount owing by a leaseholder to a landlord which is payable under the lease, such as ground rent or a service charge.

Articles of Association

Written rules about running the company agreed by the shareholders or guarantors, directors and the company secretary.

Assignment

The transfer of ownership in a legal estate in land (leasehold or freehold).

Board Meeting

A meeting of the board of directors of a company at which the policy of the company and major decisions as to its future actions are discussed.

Breach of Covenant

A breach of a clause in a lease. This could be breaking an obligation or a prohibition that is spelt out in the lease. A classic example is a covenant for a leaseholder to pay a service charge towards exterior maintenance.

Common Hold

The indefinite freehold tenure of part of a multi-occupancy building (typically a flat) with shared ownership of and responsibility for common areas and services

Common Parts

The parts of a building or land retained by the freeholder which provide some form of amenity or support for the holders of leasehold titles within the same block or estate.

Confirmation Statement

The annual confirmation statement is a new filing requirement that was introduced on 30th June 2016. It has replaced the annual return (Companies House Form AR01) but serves exactly the same purpose in a simplified format. All private limited companies and limited liability partnerships (LLPs) registered in the United Kingdom must deliver at a confirmation statement to Companies House at least once every 12 months, even if the business is dormant.

Conveyance

The legal instrument or document transferring the ownership of a legal estate in land.

Conveyancing Pack

See pre-contract enquiries.

Demised Premises

The flat, apartment or house and any associated land (for example, a garage) which is let to the leaseholder.

Development

Any building or land that forms part of the scheme under which the Lease operates.

Dispensation

A party may apply to a court or a tribunal to avoid serving a notice under a legal procedure. If they succeed, the court or tribunal issues a dispensation from serving that notice. An example is a landlord applying to a tribunal to dispense with the need to serve a consultation notice in relation to major works where the works are urgent and the leaseholders will not be significantly prejudiced (eg the leaseholders can demonstrate to the tribunal that they would have made observations on estimates had they been properly consulted).

Enfranchisement

(In a leasehold context) The collective acquisition of the freehold interest by the leaseholders.

Forfeiture

(In a leasehold context) The early termination of a lease by the landlord. Forfeiture means the lease can be terminated and the property revert to the freeholder. This could arise arises if the leaseholder breaches the terms of the lease. An example could be a failure by a leaseholder to maintain their flat. The law restricts the use of forfeiture even where the lease has been breached; however, if you find yourself in this situation you should seek legal advice. If an alleged breach is not admitted or agreed by the leaseholder the landlord will have to apply to the First-tier Tribunal or a court for a determination of the breach before they can start any forfeiture action.

Freehold

The highest legal estate in land by which it is held absolutely, subject only to the Crown.

Freeholder

The owner of a freehold estate.

General Meeting

A general meeting is a meeting of a company’s shareholders (unlike a board meeting, which is a meeting of the directors). Companies Act 2006, Part 13 (comprising 80 sections) provides the statutory framework for the calling and conduct of general meetings.

Ground Rent

The consideration payable for a long lease of land and/or buildings on a regular basis throughout its term payable to the landlord by the lessee as required by the lease.

Head Lease

The superior of two or more levels of leases created out of a freehold estate. The owner of a headlease will be the immediate landlord in respect of an under-lease but will still be the leaseholder or tenant of the “head landlord” or freeholder.

HMO

A House in Multiple Occupation as defined by section 257 of the Housing Act 2004 and the subject of regulations referred to in that Act.

Landlord

The person or company which owns and rents or leases the Property.  This person may also own the freehold or may have a superior leasehold interest in the property themselves.

Land Registry

The registry of titles in land in England and Wales which maintains a public record of ownership, mortgages, charges and sales of registered titles.

LEASE

The Leasehold Advisory Service.

Leasehold

Where there is a lease of the property it is called leasehold property. This means that the property is owned for a set period of time.

Leaseholder

A tenant under a long lease.

A lease that was originally granted for a term of more than 21 years.

Long Leasehold

A lease that was originally granted for a term of more than 21 years.

Management Company

A Management Company referred to in the Lease, or a Right to Manage Company created under the Commonhold & Leasehold Reform Act 2002, to provide services and administer the terms of the Lease either directly or through Managing Agents.

Managing Agent

A person or organisation which acts on behalf of the landlord, management company or Tenant’s Right to Manage company within their terms of reference, subject to any legal restrictions.

Marriage Value

Marriage value is the increase in the value of the property following the completion of the lease extension, reflecting the additional market value of the longer lease. In that this potential ‘profit’ only arises from the landlord’s obligation to grant the new lease, the legislation requires that it be shared equally between the parties. Marriage value begins at an unexpired term of 80 years.

Pre-Contract Enquiries

Enquiries raised during the conveyancing process by potential purchasers of property, many of which are forwarded to freeholders and managers in the form of a conveyancing pack.

Property

Property Tribunal

The building and land which makes up the subject property as defined by the lease.

The First-tier Tribunal (Property Chamber) – in England

 Qualifying Long Term Agreement

A ‘Qualifying Long Term Agreement’ is a contract between a landlord and a company or individual to supply goods, services, or works to a building or estate for

1. A period of 12 months or more.

AND

2. Any affected leaseholders will be required pay a Service Charge of £100 or more per 12 month period towards the costs of these goods, services or works.

Qualifying Works

Works on a building or any other premises which will cost over £250 for any one contributing leaseholder.

Reserve Fund

A fund which allows the build-up of monies to pay for repair and replacement of major items or to equalise cyclical expenditure such as external decoration, avoiding excessive peaks in the Service Charges.  Reference to a Reserve Fund within this document should be taken to include any sinking fund or replacement fund in existence.

Resident Management Company

Where leaseholders have a share or membership in the management company. A Residents’ Management Company (RMC) protects the interests of the leaseholders. RMC’s typically manage common parts of the building although they may have other responsibilities.  The RMC’s are run by directors, who are usually unpaid and appointed from the residents themselves.

Residents’/Tenants’ Association

A group of lessees with or without a formal constitution or corporate status, or a recognised residents’ association which is ‘recognised’ by law and with a formal constitution.

Resolution

A resolution is a legally binding decision made by company directors or shareholders. If a required majority vote in favor of the resolution put forward, then it is regarded as having been “passed”. Shareholders can pass ordinary resolutions or special resolutions at general meetings or they can pass written resolutions. Resolutions can be passed by the directors and the shareholders at the relevant meeting.

Right to Manage

A right for leaseholders in blocks of flats to take over management of their building without having to prove fault on the part of their landlord.

RTM Company

A company set up specifically to exercise the Right to Manage.

Section 20

Section 20 of the Landlord & Tenant Act 1985, which requires that there be consultation with the lessees in respect of certain works.

Service Charge 

The amount payable by a lessee as part of, or in addition to, rent in respect of services, repairs, maintenance, insurance, improvements or costs of management.  The amount payable may vary according to the costs incurred or to be incurred and may include an estate charge.

Statement

A list of invoices and payments or credit notes to an individual’s account.

 Sinking/Reserve Fund

 Often used interchangeably with the term reserve fund, the term sinking fund was originally used specifically to refer to money collected to cover the cost of future large individual items of expenditure such as a new roof, or replacement lift.

Term

The period of time for which a lease is granted. Long leases are frequently granted for a term of 99 years or more.

Tripartite Lease

Leases with three parties usually leaseholder, a freeholder and a separate management agent/company