Glossary Of Property Terms
A to C
Retail sale or display of goods for sale other than hot food, including retail warehouses, hairdressers, undertakers, travel and ticket agencies, post offices (but not sorting offices), pet shops, sandwich bars and other cold food for consumption off the premises, showrooms, domestic hire shops, dry cleaners, funeral directors and internet cafes, in all cases where the sale, display or services is to visiting members of the public. The changes that are permitted to A1 plus a single flat above.
A2 financial and professional services
Financial services such as banks and building societies, professional services (other than health and medical services) including estate and employment agencies and betting offices. The changes that are permitted are to A1, to A1 plus a single flat above, and to A2 plus a single flat above.
A3 restaurants and cafes
For the sale of food and drink for consumption on the premises - restaurants, snack bars and cafes. The changes that are permitted are to A1 or A2.
A4 drinking establishments
Public houses, wine bars or other drinking establishments (but not night clubs). The changes that are permitted are to A1 or A2 or A3.
A5 hot food takeaways
For the sale of hot food for consumption off the premises, the changes that are permitted are to A1 or A2 or A3.
Absolute compliance requires that the party covenanting as such complies with the requirements of the covenant in full. Where found in a break clause absolute compliance of certain conditions is the prerequisite of successfully satisfying the break clause.
Adjudication provides a forum for disputes to be settled quickly; normally within 28 days. It is generally the statutory procedure for settling building disputes. It has proved particularly useful in allowing works to continue and avoiding unnecessary tensions. An adjudicator’s decision is binding but the decision can be revisited in, for example, arbitration or a court of law.
Alienation is the legal transfer of title of ownership to another party.
Alienation provisions are those clause(s) in a lease that govern a tenant's ability to dispose of its leasehold interest.
Alterations are works undertaken by the tenant which alter, cut, divide, relocate or modify the demise, which can include the building, partitions, mechanical and electrical services, or finishes.
Alternative Dispute Resolution (ADR)
Alternative Dispute Resolution (ADR) refers to a range of processes for resolving commercial disputes without seeking redress from the courts. In addition to Arbitration, this most commonly means Mediation, Adjudication and Conciliation. Some pre-litigation protocols require, or strongly encourage, the use of ADR - particularly Mediation - prior to commencing legal proceedings, with potential consequences in the Award of Costs against non-complying parties.
Antecedent Valuation Date (AVD)
This is the date by which market conditions are assumed to prevail. Physical factors are taken at or after a rating list is compiled. There is a two year gap between the Antecedent Valuation Date and the publication of a Rating List which enables the Valuation Officer and the appellant ratepayer to consider rental evidence without needing to project or speculate.
Arbitration is governed by statute. Agreements to refer disputes to a specialist arbitrator are often made in a lease or building contract. Arbitration is private; the arbitrator’s award is final and binding and is based on evidence put forward. There are limited rights of appeal to the courts on procedural irregularities and points of law. This is a popular way of resolving property disputes where privacy and speed are important
An asset valuation is the formal "open market" or "existing use" valuation of land, offices and buildings or plant and machinery. Asset valuations are used in company accounts, or for establishing the value of an asset for loan security or in merger & acquisition activity.
An assignment of a lease is where the tenant transfers/sells its entire interest in the property for the unexpired term of the lease to an assignee.
An auction is a sale which takes place, usually in public, when a property is sold to the highest bidder, provided the amount of money offered reaches the reserve price. The sale process by auction is immediate, with exchange of contracts being achieved on the “fall of the hammer”.
Authorised Guarantee Agreement (AGA)
The concept of the Authorised Guarantee (AGA) was introduced by the Landlord & Tenant (Covenants) Act 1995 to implement changes to the law on Privity of Contract on Assignment of a commercial property lease. It is an agreement that an outgoing tenant enters into with the landlord when it assigns its lease to a new tenant. Under the AGA, the outgoing tenant guarantees the performance of the covenants by the new tenant. The outgoing tenant therefore becomes the guarantor for the new tenant.
Offices (other than those that fall within A2), research and development of products and processes, light industry appropriate in a residential area. The changes permitted are to B8 (limited to change of use relating to not more than 235 sq m of floor space).
B2 general industry
Use for industrial purposes other than ones falling within class B1 (excluding incineration purposes, chemical treatment or landfill or hazardous waste). The changes that are permitted are to B1 and to B8 (limited to change of use relating to not more than 235 sq m of floor space).
B8 (storage & distribution)
Storage, including open air storage. The changes that are permitted are to B1 (limited to change of use relating to not more than 235 sq m of floor space).
Beneficial occupation is one of the essential requirements in designating rateability. Together with exclusive occupation and sufficient permanence, beneficial use is required before any party can be subject to a business rate liability.
Conservation activities designed to deliver biodiversity benefits in compensation for losses, in a measurable way. The government has announced plans to introduce biodiversity offsetting schemes to the UK. The first pilot schemes began in spring 2012, with the stated aim of testing a ‘metric based approach’ towards biodiversity conservation.
A break clause (alternatively called a ‘break option’ or ‘option to determine’) is a clause in a lease that provides the landlord or tenants a right to terminate the lease before its contractual expiry date, if certain criteria are met. You must state if it is a single time only, and specify when. There can be multiple break options. The normal notice period is not less than 6 months prior written notice and if a break clause is exercised there can be a penalty.
A break notice is the formal notification that one party wishes to exercise its right to terminate the lease (a break clause, option to determine or break option). Break notices must be served correctly and require a degree of care to ensure the right is successfully exercised. For example, the notice must be served the correct number of months before the break date and may require compliance with pre-conditions.
A break option (alternatively called a ‘break clause’ or ‘option to determine’) is a clause in a lease that provides the landlord or tenant with a right to terminate the lease before its contractual expiry date, if certain criteria are met.
BREEAM (Building Research Establishment Environmental Assessment Method) is a recognised environmental assessment method and rating system for buildings, which was first launched in 1990. BREEAM is one of the most commonly used standards for best practice in sustainable building design, construction and operation and is a widely recognised measure of a building's environmental performance. A BREEAM assessment evaluates a building’s specification, design, construction and use, such as energy and water use, the internal environment (health and well-being), pollution, transport, materials, waste, ecology and management processes.
Building insurance covers the landlord against damage, destruction and loss of rent. The cost of the insurance premium is normally reimbursed by the tenant.
A building survey is a report on a building by a building surveyor on the structural integrity of a building and its state of repair. This report would usually cover the condition of the structure, incidence of any defects to the fabric of the building and the state of repair of fixtures and fittings, services and plant installations. A building survey is often required by a lender prior to agreeing to a loan which is secured against the value of the property in question.
Business rates, or non-domestic rates, are a tax on the occupation of commercial property and other non-domestic property. The Local Government Finance Act 1988 introduced business rates in England, Wales and Scotland. Properties are assessed in a rating list with a rateable value. Rating Lists are created and maintained by the Valuation Office Agency, with a revaluation generally occuring every five years.
Hotels, boarding and guest houses where no significant element of care is provided (excludes hostels). There are no permitted changes.
C2 residential institutions
Residential care homes, hospitals, nursing homes, boarding schools, residential colleges and training centres. There are no permitted changes.
C2A secure residential institutions
Use for a provision of secure residential accommodation, including use as a prison, young offenders institution, detention centre, secure training centre, custody centre, short term holding centre, secure hospital, secure local authority accommodation or use as a military barracks. There are no permitted changes.
This class is in three parts: C3a - Use by a single person or a family (a couple whether married or not, a person related to one another with members of the family of one of the couple to be treated as members of the family of the other), an employer and certain domestic employees (such as an au pair, nanny, nurse, governess, servant, chauffeur, gardener, secretary and personal assistant), a carer and the person receiving the care and a foster parent and foster child. There are no permitted changes. C3b - Up to six people living together as a single household and receiving care e.g. supported housing schemes such as those for people with learning disabilities or mental health problems. There are no permitted changes. C3c - Up to six people living together as a single household. This allows for those groups that do not fall within the C4 HMO definition, e.g. a homeowner who is living with a lodger. There are no permitted changes.
C4 houses in multiple occupation
Small shared dwelling houses occupied by between three and six unrelated individuals, as their only or main residence, who share basic amenities such as a kitchen or bathroom. The changes permitted are to C3.
In commercial property, a Calderbank offer is a written offer to settle, frequently in relation to a rent review made "without prejudice" save as to costs. Either landlord or tenant can make a Calderbank offer. A Calderbank offer may only be referred to after the Arbitrator, tribunal or court has made their decision on the substantive matter. The intention of a Calderbank offer is to protect a party against costs.
Capital expenditure (capex) are funds used by an organisation to acquire or upgrade physical assets, such as property or equipment.
The cash receipts minus cash payments over a defined period.
The Construction Design and Management Regulations 2007 (CDM) are designed to improve health and safety and manage the risks on site. A CDM-Co-ordinator (CDM-C) is appointed to advise and assist the client in meeting their duties as a client under the Regulations. Duties include ensuring the appointment of competent designers and contractors, notifying the Health and Safety Executive (HSE) about the project, advising the client on the suitability of the initial construction phase plan and the arrangements made to ensure welfare facilities are on site from the start and producing a health and safety file suitable for use at the end of the construction phase.
Change of use
Change of use is the ability to change the way in which land or buildings are used, either by a simple alteration in the nature of the use, or through alterations and additions which modify the use. A change of use may also arise through a material intensification in the present use, or by subtly altering the present use to a point where the changes amount to development. There are certain types of change of use which do not require planning permission. For example, a change of use from one type of shop to another. Certain changes are permissible between and within the use classes without the need for planning permission, subject to satisfying the appropriate criteria. Other uses are considered Sui Generis; that is, they are uses on their own unrelated to other uses. A change of use from, say, a field to a caravan park would require planning permission, so too a domestic garage to a business workshop, or house to an hotel etc. You should first consider the permitted development rights then the Use Classes Order to determine whether an intended change of use requires planning permission or not.
Clawback is also known as overage. It is a right to receive future payments which are triggered by future events – for example achieving planning permission for change of use or development, practical completion of a development, or the sale or lease of the completed development.
The rules governing when a property is ready for occupation and assessment for rating need proper understanding. The Completion Notice procedure is operated by the local authority responsible for rate collection and provides the opportunity to challenge a notice. Time is of the essence and delay could prove costly. We have successfully opposed the content of Completion Notices and thereby delayed liability on behalf of developers, saving substantial amounts for clients.
Compulsory Purchase is an acquisition of interests in land or rights, generally by a public body such as a government department or local authority, which is authorised by an appropriate Compulsory Purchase Order. This process entitles the purchaser to acquire from an unwilling owner or occupier. This is most commonly related to proposals for future public works such as transport developments and can come from local authorities, Highways or Government agencies. Anyone who has land acquired as part of a CPO is generally entitled to compensation. There are a number of rules and regulations governing the assessment of compensation, which not only relate to the value of the land and buildings, but also losses arising from disturbance, severance and injurious affection and in circumstances where no land is taken.
A condition precedent is a lease covenant including conditions, which must be strictly fulfilled to satisfy the requirements of the lease.
Land that is contaminated contains substances in or under the land that are actually or potentially hazardous to health or the environment. Britain has a long history of industrial production and throughout the UK there are numerous sites where land has become contaminated by human activities such as mining, industry, chemical and oil spills and waste disposal. Contamination can also occur naturally as result of the geology of the area, or through agricultural use.
Commercial property leases generally automatically qualify for the protection afforded to tenants at lease expiry by the Landlord & Tenant Act 1954. The parties to a lease may, by agreement, contract out of the Act. The main consequence of so doing is to remove the tenant's rights of renewal, and eligibility for compensation in certain circumstances (eg landlord's redevelopment ). See also Security of Tenure.
The Contractor's Test is the method of valuation used for property where there is no open market, for example a public building. It is also the method of valuation adopted ‘as a last resort’ for rating.
A covenant, in its most general sense, is a solemn promise to engage in or refrain from a specified action. In property, covenants in a lease refer to the obligations imposed on each party by the various clauses. A tenant's covenant strength refers to the quality of a tenant's financial status, and its ability to perform the covenants in the lease.
CPI (Consumer Price Index)
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services. The CPI Index is used to track price changes associated with the cost of living. In the commercial property market leases are often granted with rent reviews occurring by reference to either the Consumer Prices Index, or more commonly, the Retail Prices Index (normally on an upwards only basis). There are a number of differences between the CPI and RPI indices – the most well-known of which is in the area of mortgage payments, which are excluded from the CPI but included in the RPI. The CPI was first introduced in 1996 and in 2003 the Government announced that the UK inflation target would be based on the CPI, replacing the Retail Price Index for this purpose.