A
Administration fee
A cost charged by a company to set up a loan. This can also be known as an ‘arrangement fee’.
Air rights
The right to build or develop upwards in the airspace above a property. Owning air rights can also be used to protect a view from another building. In the UK, most freeholders automatically own a property’s air rights.
B
Break clause
A provision in a legal document which ensures an exit strategy if certain conditions are not met.
Broker
A person who arranges or negotiates an agreement on behalf of someone else.
C
Capital value
The value of an asset.
Change of use
All buildings are permitted to be used for specified purposes. A ‘change of use’ refers to the alteration of this specification. For example, from an office to a home.
Commercial
A term used to describe property that is used for business purposes, such as a factory, office, or shop. To be commercial, no one can live at the property.
Commitment fee
A cost charged by a lender to secure a loan while legal documents are being processed. This commitment fee acts as insurance that the deal will proceed, and it will be refunded once complete.
E
Exit fee
A cost charged by a lender on redemption of the loan. Early redemption could incur an additional fee.
F
Freeholder
The person who owns a property or land outright.
First charge
The first debt that will be paid off if a property or assets are to be sold. For example, a mortgage.
G
Green development
A term used to describe construction or refurbishment that is sustainable and environmentally responsible.
Ground lease
A lease of land from a freeholder for tens or hundreds of years. Any properties built on this land are known as ‘leasehold’.
Gross internal area (GIA)
The total area within a property boundary (usually an industrial space), minus walls and stairs.
I
Independent financial advisor (IFA)
A financial expert who can advise on and recommend financial products. They’re unbiased and can help you make a decision that is right for you.
Intermediary
A person who connects others to bring about an agreement. For example, a broker or an IFA.
Investment yield
The percentage of capital value made through annual rent.
Investor
A person who puts money into property, business, or other financial schemes with the aim of making money.
L
Land Registry
The government department that registers the ownership of all land and property in England and Wales.
Lease
A contract that grants possession of property or land in exchange for rental payments.
Lender
A person or institution that lends money, often with an interest fee.
Lessee
A tenant.
Lessor
A landlord.
Licence
A legal permission to do something.
Loan completion
Also known as a loan drawdown, this describes the final phase of securing a loan when all documents are in order and money has been exchanged.
Loan redemption
When all borrowed money and interest has been repaid.
Loan to value (LTV)
A value to dictate the amount of money lent compared to the value of the property or asset. For example, a £300,000 loan against a property worth £600,000 has an LTV of 50%.
N
Net internal area (NIA)
The usable space within a commercial property’s perimeter walls.
R
Rack Rent
The best rent obtainable.
Rate
The amount of interest on a loan. This can be stated as a monthly or yearly percentage.
Refinance
The process of restructuring finances or taking out a new loan to pay back another. For example, when a mortgage replaces a short-term bridging loan.
Residential
A term used to describe property that is lived in. For example, houses or apartments.
Restrictive covenant
Part of a lease which restricts certain actions. For example, changes to the structure or landscaping cannot be made without permission, noise must be kept below a certain level, or there is a limit on the number of vehicles than can be parked on the premises.
S
Second charge
A secured loan and the second debt that will be paid off if a property or assets are to be sold. This sits behind a first charge, such as a mortgage.
Senior loan
A type of first charge loan that has priority for repayment over other debts.
Stamp duty land tax (SDLT)
A government tax calculated on a property’s purchase price. The name and levels of this tax may vary based on location.
Subletting
When a tenant rents out a property to a sub-tenant.
T
Term
The length of time an agreement is in place for. For example, you may have a bridging loan for 12 months.
Termination
The end of a lease by mutual agreement or the end of the tenancy term.
Term sheet
A nonbinding agreement that sets out the basic conditions of a loan or investment.
Third party equity
When a person other than the main parties in a property transaction have an interest. For example, if a borrower offers a jointly owned property as collateral for a loan.
U
Use class
The category a commercial property falls under according to the Town and Country Planning Order 1987. For example, A1 shops, A2 financial and professional services, or A3 restaurants and cafes.
V
Value added tax (VAT)
The tax on the supply of goods and services in business.