Jargon Busting Around Buying and Selling Property

This article was first published in Fine & Country magazine.

Unless you buy and sell property regularly, (which let’s face it most of us do not) then the jargon used by lawyers when dealing with your property can be confusing or just down right unintelligible. Below are some of the commonly used words and phrases which may be used for flats and apartments, together with an explanation of what they mean.

Share transfer

The purchase of shares in a company which owns the property. The company’s Articles of Association will set out which part of the building the shares you buy allow you to use and live in.

Articles of Association

The document which sets out a company’s duties to the shareholders and the shareholder’s rights and duties as the owner of shares in the company.

Company Secretary

A person or business that looks after the company’s paperwork and records. They will usually be responsible for calling annual general meetings to discuss the company’s accounts and other administrative matters.

Flying freehold

A property that is split into separate units through a document called a Declaration which is registered in the Royal Court.

Association

The name of the legal body which owns the property created through the flying freehold Declaration.

Declaration

The document which sets out how the Association owns the property. It will define the boundaries of the property and state the number and how it is split into units. It also sets out the Association’s duties to maintain and insure the property and the co-owner’s rights and duties in relation to their part of the property.

Managing Agent

The person or business who looks after a property split into multiple units. They will look after the common areas and collect the payment of service charges from the owners. Managing agents can manage both share transfer or flying freehold properties.

Common areas

Both Declarations and Articles of Association will set out the parts of the building the owners share between themselves. This will usually include stairways, halls, any shared gardens, foundations and structural parts of the property.

Budget

A statement prepared by the Managing Agent detailing the likely expenses for the property’s maintenance, insurance and administration fees. The budget gives guidance for the expenses which may differ during the course of a year.

Sinking fund

An account which a company or Association may have a savings account to pay for future expenses such as redecoration or replacement of a lift. A sinking fund is an amount of money which is set aside to cover any major work which is needed to the property in the future. Monies towards the company’s or Association’s sinking fund are commonly included within your monthly or quarterly service charge, which is paid to the Managing Agent. Any expense which cannot be covered by the sinking fund will be for the co-owners to pay based on the contributions set out within the Articles of Association for share transfer properties and through the Declaration for Flying Freehold properties.

Service charges

An amount the owner pays to the company or Association and is based upon the budget figures. The amount paid is set out in the Company’s Articles of Association and Declaration as percentage. They may be paid monthly or quarterly depending upon how the company or Association decide to collect the charges.

Hopefully this cuts through the jargon you may hear when buying or selling a flat. Please remember there are no stupid questions and so if you are not sure what your lawyer means do not be afraid to ask.