Jargon Buster "T"
Tenancy in common is a form of ownership involving two or more people. The idea is that if one person dies, their share of the property (or land, if applicable) forms part of their estate.
This is sometimes confused with a joint tenancy. However, the two are very different. With a joint tenancy, if one person dies, their portion of the property goes to the surviving tenant. This is commonly seen with married couples, where automatic inheritance of the entire property falls to the surviving partner. This is known as having Rights of Survivorship.
With tenancy in common, this automatic inheritance does not occur. Instead, the portion of the property owned by the deceased party is treated as part of their estate. This share of the property could be left to whomever is specified in that person’s will.
Another aspect worth noting is that if there are two tenants in common, they may not necessarily own 50% each. Similarly, four people who are tenants in common may not own 25% of the property or land apiece. The percentages can vary.
The biggest issue that can potentially arise with a tenancy in common is when one party wishes to sell and no one else with an interest in the property agrees with this. This could feasibly happen if one tenant dies and leaves their portion to someone in their will. If that person then wishes to sell, it could cause problems. The person receiving the share of the property (or anyone else who wants to sell) would need to file a partition action to try and force a sale.
Tenants are people who live in a property they do not own. They rent it from a landlord for an agreed monthly rental sum. In some cases, rent is paid weekly, but this would be mentioned in the tenancy agreement. It means that any problems with the property such as repairs to the roof, to the plumbing, and so on, would be the responsibility of the landlord to put right.
A tenant should always read and sign a tenancy agreement provided by the landlord before taking up residence of the property. In cases where the landlord uses an agency to handle the rental process for them, you would receive the agreement from them. They would act as a go-between for the two parties to the agreement.
A property could be rented to one or more tenants at the same time. For example, a couple might rent a house or flat. Similarly, it is possible to rent a room within a shared property. In this case, you would rent a room of your own and share certain communal areas, such as the kitchen, bathroom, and lounge. Again, these elements would be stipulated in your rental agreement.
While the landlord is responsible for making sure the property is in habitable condition, it is the responsibility of the tenant to make sure any issues are brought to their attention as quickly as possible. The landlord must then resolve those issues satisfactorily as a condition of the agreement signed by both parties.
There are several ways a vendor can try to sell a property. One method is the tender method. It is also referred to as ‘sale by tender’. The idea is that people who are interested in buying a property can submit sealed bids for it. This means they write down the amount they are prepared to pay for the property and seal it in an envelope. This must be done before a stated time on a set date.
Once the closing date and time are reached, the estate agent handling the sale opens the bids. The best bid is then selected, which may not necessarily be the highest one. For example, the highest bid may be worth £250,000 from a buyer waiting to be approved for a mortgage. The second-highest bid may be worth £247,000, but it may come from a cash buyer. That could influence the seller in choosing the second bid over the highest one.
The process typically involves an Open Day, whereby anyone wishing to view the property will visit and have a look around. If they wish to put in a bid, they can then do so, but are under no obligation to do this. A guide price may be provided in the information given for the property. This means potential buyers have an idea of how much to make their offer for.
Once an offer is accepted by the person selling the property, the arrangement becomes legally binding. The process of selling the property would then continue as normal.
Tenure is a collective term that relates to the nature of the owner’s title to a property. For example, do they own it on a freehold or a leasehold basis? Put simply, tenure relates to something you possess or hold.
Having a freehold tenure means you have the full rights of ownership over that property and the land it sits on. However, if you are looking to buy a property, do check and confirm that this is the case. Never assume a house is freehold and a flat is leasehold; there are occasions when the opposite could be true in each case.
If you have a leasehold tenure on a property, it means you own the property but someone else owns the land the property is sitting on. This is most common where flats or apartments are concerned. Since there are several properties that are essentially built on top of one another, it would be impossible for each flat owner to own the land it is built on.
The landlord, i.e. the owner of the land, would charge ground rent to all those with leasehold properties on that land. The land would also be leased for a specific number of years. The shorter the leasehold, the less valuable the property would be. This is an important point to note if you are considering getting a leasehold tenure to a property. There is also the question of what might happen when the lease nears its end. There are pros and cons to each type of tenure that relate to responsibilities for each.
A title is a record of ownership of a property. The evidence for ownership is found in the title deeds. It is possible to own the title to a portion of a property or to the full property. It is also possible to own the title for a piece of land. Owning the title means you should be able to make changes to the property if you wish (unless it is a listed building, in which case different rules apply).
Some people get titles and deeds mixed up. While they are connected and are both very important, they are different from each other. For example, let’s say you want to buy a house. The current owner has the title to that property. To buy it, the title must be transferred from the current owner to you to complete the purchase. For this to occur, the seller and the buyer both need to sign legal paperwork known as a deed. This will form part of the chain of evidence that denotes who currently owns the property.
If you purchase the property via a mortgage, your lender will have a deed against it. That means they have a claim to the property title until you have cleared your mortgage. Hence why keeping up with repayments is vital, otherwise you could lose your home. Even though you are registered as owning the property, the lender has a hold over it because they need to be sure they can get back their funds if you do not pay back the mortgage.
The total amount payable on a mortgage highlights the total cost of that mortgage. This includes the original amount borrowed and the interest that has accrued on the mortgage during its lifetime.
The amount you eventually pay back once the loan has ended depends on several factors. Interest is charged on the loan throughout the loan period, and this rate will likely vary. The longer you take out the loan for, the greater the total amount payable will be, even if you change lenders and deals along the way.
Those on variable rate deals may find they end up paying more if interest rates rise during their mortgage term. Those on a fixed rate deal would continue to pay the rate shown even if the base rate set by the Bank of England rose considerably during their mortgage term. Hence why many borrowers prefer the security of a fixed rate deal, which can run over a year or more (and sometimes up to five or even 10 years).
Some mortgages allow you to pay more than the amount required each month too. One good way of bringing down the total amount you’ll pay for your mortgage is to overpay whenever you can, assuming your loan allows you to do this. Even small overpayments could make a huge difference to the total amount you end up paying by the time your mortgage ends. You will also build equity in your property far more quickly than you would otherwise.
You could also reduce your mortgage term, which means you’ll own your home free and clear a lot sooner than you would if you simply made the regular monthly payments. Remember to check with your lender whether you can overpay before doing so.
A tracker mortgage typically ‘tracks’ adjustments in the base rate that is set by the Monetary Policy Committee at the Bank of England. This rate is also referred to as the Bank Rate. The MPC holds a meeting every six weeks or so, announcing any change to the base rate shortly after.
Tracker mortgages have interest rates that are adjusted according to the base rate. The loan taken out to purchase the property in question clearly states the level at which the interest will apply. For example, it might be set at 2% plus the base rate.
If the base rate is at 1% when you take out your home loan, the interest payable would be set at 3%. If the Bank of England reduces the base rate to 0.5%, your interest rate on your mortgage would dip too, to 2.5%. Conversely, if the Bank of England sees fit to raise their rate to 1.5%, your interest rate would go up in line with the conditions of your tracker mortgage. In this case, it would rise to 3.5%.
You would typically take out this type of loan for a set period, say five years. Once the agreed period ends, you can either switch to a new tracker rate available at that time or change to a different mortgage product. This could be done with the same lender or by moving to a different lender, depending on which products offer the best deal. These loans are best sought when the base rate is low and the signs indicate it will stay that way.
The term ‘transfer deeds’ refers to the Land Registry document that legally transfers ownership of a property from the seller to the buyer upon completion of the sale. These deeds are also required in other scenarios where a property passes from one person to another. Examples include divorce and if someone dies and leaves their property to someone else, rather than it being sold to create more cash for the estate.
The transfer deeds are handled by a conveyancing solicitor or conveyancer. The property being bought must be registered with HM Land Registry at the end of the conveyancing process. The registration will be done in the name of the person or persons buying the property. Only after this stage is complete will the ownership officially pass from the seller to the buyer(s). It is important to understand a property in England or Wales cannot be sold until the transfer deeds (and the rest of the conveyancing process) are complete.
Transfer deeds are sometimes mixed up with title deeds, but they are a separate entity. Included with the transfer deeds is information gleaned from a local land search, which should confirm there are no issues with the land before the sale proceeds. The contract drawn up with input from both parties should also be part of the deeds, as this will indicate the conditions of sale and the passing of the property from one party to the other.
It is not necessary for the buyer or seller to understand the ins and outs of transfer deeds, as their solicitor or conveyancer will handle all this for them. It can help to understand roughly what is involved at this part of the process though.
A transfer of equity is when a party is either added to a mortgage or removed from it. There are many scenarios where this may occur, but perhaps the most common and familiar involves marriage or divorce.
In the case of marriage, one partner might own a property and have a mortgage on it. When they marry, they wish to add their new husband or wife to the mortgage. This would be a transfer of equity from the original owner to their new partner.
In the case of divorce, the property would be jointly owned by the couple seeking a divorce. A transfer of equity would see ownership of the property transferred to one half of the couple. The person retaining the property ownership would typically buy out the other person’s part of the home.
The process is easier to complete if there is no loan taken out on the property. If no mortgage exists, there is no question of whether the person remaining in the property can afford to meet the mortgage payments each month. Problems can occur that make the situation more complex if affordability comes into it.
Similarly, a transfer of equity can be done with anyone you wish. If you own your property at present and wish to add a sibling or child as a co-owner, certain taxes such as Capital Gains Tax could come into play. It is always important to seek professional advice from a solicitor with experience in the transfer of equity process, so you can see where you stand before you begin.