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Glossary

This glossary has been prepared as a simple guide for newcomers to the licensed trade and property transactions. It is not guaranteed to be accurate or up to date, and is not a substitute for proper professional advice or guidance. Sidney Phillips does not accept responsibility for any loss occasioned by reliance upon information presented on this website.

 

EULA (glossary)

Although presented to assist potential buyers of licensed businesses, the information contained in this section is - in many cases - very simplified or abbreviated. You confirm that you understand the inherent limitations, you agree not to rely upon any glossary content without seeking appropriate professional advice, and declare that you will not hold Sidney Phillips responsible for any loss occasioned in relying upon any information obtained from this website.

Absolute Title

For registered land. In the case of freehold, the registered proprietor has a guaranteed title subject only to the entries on the register. In the case of leasehold, it guarantees that the registered proprietor is the owner of a valid lease.

Abstract of Title

The history of title to a piece of land.

Advance

Another name for a mortgage or loan

Alterations

Alterations to properties which are held on lease are generally controlled by the landlord. i.e. alterations are only allowed if written consent has been obtained from the landlord.

Annual Percentage Rate of Loan Interest (APR)

Lenders have to quote the Annual Percentage Rate (APR) of a loan so that you can compare difference schemes. The calculation of APR takes into account other costs such as the arrangement fee and indemnity premium. It gives a more accurate indication of which mortgage is likely to be most expensive.

Annuity Loan

A repayment mortgage.

Assignor

The seller of a Lease, who assigns the Lease to a purchaser

Assignee

The purchase of a Lease, who accepts the assignment from the seller

Assignment/Assigning

One way in which a tenant may pass on the lease obligations to a third party, generally by selling the lease and business to a successor (assignee) who has first been approved by the landlord as assignee.

Auction

A public sale of a property in which prospective purchasers bid against each other. The highest bidder becomes the purchaser and a contract is created at the fall of the hammer. A 10% deposit is usually payable immediately after the auction. A prudent bidder therefore has to have all funds in place to complete the purchase before bidding.

AWOPM - Amusement without Prizes Machine

i.e. a coin in slot games/ entertainment machine without prizes.

AWPM - Amusement with Prizes Machine

i.e. "one arm bandit".

Bankers Draft

A cheque signed by a Bank Manager - not the customer. As such, it is treated as being equivalent to cash.

Barrel

The unit of capacity used in brewing, equal to 36 gallons (approx. 163 litres).

Break Clause

A break clause is a provision in a lease allowing either the landlord or the tenant to terminate the lease at a specified date without waiting for the term to expire.

Bridging Loan

Arranged by a buyer who has to complete the purchase of one property before receiving the proceeds of sale of another property which will ultimately provide part of the purchase price.

Broker (Insurance or Finance)

An independent person or company who advises on and arranges a loan or insurance.

Broker (Licensed Trade)

In the licensed business transfer context Agents are sometimes instructed to find tenants for Brewers or Pub Cos where the Brewer/Pub Co does not pay us a fee. In such circumstances, the Agent acts as a Broker and the applicant / prospective purchaser becomes a client, paying us a fee for introducing them to the pub which they obtain. This scenario is most common where a short term (e.g. 3-5 years) tenancy is offered.

Building Insurance

An insurance policy to protect against loss or damage to a property. It is usually necessary to arrange building insurance upon exchange of contracts, prior to completing a purchase.

Business Plan

An appraisal of a business providing an analysis of what it is achieving present and what the prospective purchaser might plan to do with it, including profit and loss and cash flow calculations. Business Plans are invariably required by Pub Cos of potential lessees and Banks of potential borrowers.

Capital Required

An indication of the actual cash funds which a purchaser might need to apply for a licensed premises.

Capped Rate

One of the bases on which interest is paid on a loan. This has similar advantages to a fixed rate as the interest rate will not rise above the ‘cap'. Such schemes sometimes include a ‘collar' or minimum rate.

Cash Flow Analysis

One of the exercises in the preparation of a business plan. Even though a Projected Profit and Loss Account may show a profit on the first year, heavy start up payments on refurbishment etc. may cause the business to go into the red in the early months. A month by month cash flow analysis demonstrates when the business is likely to be in deficit so that adequate provision can be made in advance for a Bank overdraft.

CCJ

See County Court Judgement

Cesspit

Non-mains drainage system where sewage is collected in a large tank which has to be emptied at regular intervals.

Client

In the property world, the client is the person or company who pays an Agent or Broker a fee for a service usually of selling or letting a property. Sidney Phillips are usually the Agents for the seller who pays us a fee when we introduce a buyer. In such circumstances the seller is our client and the prospective purchaser is an applicant. We help the applicant find a pub but the applicant does not pay us a fee. Conversely: See Broker and Retaining Client.

Completion Date

The day when the property actually changes hands, with the purchaser taking possession following payment of the full price to the seller - usually arranged by solicitors.

Composite Barrelage

Used by Brewers and Pub Cos - a method of expressing total wet trade including beers, ciders, wines and spirits. Beers and ciders remain as 36 gallon barrels, wines and spirits are "converted" to barrelage equivalent by various formulae (depending on a Brewer/Pub Co) typically counting 3 gallons of wines and spirits as one composite barrel. Many Pub Cos also include mineral supplies in the composite barrelage.

Conditions of Sale

The detailed standard terms which govern the rights and duties of the Buyer and Seller of a property as laid down in the contract they sign.

Contents Insurance

While insurance cover for the contents of a business is not a legal requirement for a freeholder, many leases require the tenant to have this cover. See trade package insurance.

Contract

A document containing all essential details and agreement between Seller and Buyer i.e. price, names and addresses of parties, details of the properties being bought and sold.

 

When exchanged, both Buyer and Seller are committed to complete the transaction. In contrast, when still "subject to contract" either can decide not to proceed.

Contracted Out

Means contracted out of protection of the Landlord and Tenant Act 1954. The effect is that, at the end of Lease, the Tenant does not have any right to claim an extension to the Lease and must give possession unless the Landlord chooses to offer another Lease.

Conveyance

If a property is freehold and has an unregistered titled, the deed by which the owner transfers ownership. If the title is registered, the deed is called a ‘transfer'.

Conveyancing

An general term describing the legal process involved in buying and selling property.

County Court Judgement (CCJ)

A judgement against a person for non-payment of a debt. Borrowing money becomes difficult as lenders are reluctant to make offers to people who have failed to manage their financial affairs properly.

Covenant

A legally binding obligation in a Sale or Lease.

Deposit

The amount that the buyer has to pay on exchange of contracts as part of the purchase price. Usually 10%.

Dilapidations Deposit

A deposit which is often required by a landlord as a condition of the grant of a lease. The deposit is held as protection against the lessee failing to repair the property.

Discounted Rate

One of the bases on which interest is paid on a loan. A discounted rate gives a reduction of, for example, 2% off the variable rate for a specified period. Although the rate may rise and fall, the borrower will be paying less than the standard variable rate.

E/S - En-suite

En-suite - referring to bedrooms which have their own bathrooms or shower rooms with WC.

Easement

A right which the owner of one property has over an adjoining property, such as a right of way or a right of light.

EHO - Environmental Health Officer

Liquor and catering businesses are subject to inspection and approval by the environmental health officer to ensure compliance with hygiene and safety regulations.

Employment Protection

See "TUPE"

Encumbrance

A burden or liability to which a property is subject even when it is sold.

Endowment Assurance

Life assurance policy to provide a fixed sum on death or on maturity.

Engrossment

is a deed prior to its execution.

Enquires Before Contract

See: Preliminary Enquires. A number of detailed questions about a property which the Seller answers through his solicitors.

Equity

The net value of a property to the owner after any mortgage has been deducted/paid off.

Exchange of Contracts

The stage at which a buyer and seller sign and exchange contracts creating a legally enforceable agreement to complete the sale. At this stage, the buyer should arrange building insurance.

Execution

The signing of a document expressed to be a deed in the presence of a witness.

Experience - Trade Experience

Although direct experience of the licensed trade is not considered essential, prospective purchasers or lessees are strongly advised to gain some experience working in the pub trade before they acquire a business. It is important to establish that they actually like the pub lifestyle i.e. working when everyone else is relaxing.

Extension - Special Order of Exemption

An extension to standard licensed trading hours which may be granted by the local justices for special occasions.

Fire Certificate

Now replaced by Fire Risk Assessment - the requirement for all commercial premises to have a schedule of the fire risks and procedures to be adopted in the event of a fire.

Fixed Costs

The costs of running a business which do not change relative to the turnover of the business e.g. rent, Rates, Insurance, Accountancy. See also - Variable Costs.

Fixed Rate

One of the bases on which interest is paid on a loan. The rate is fixed for a specified number of years, so the borrower knows what payments will be over that period. After this period, the rate usually reverts to the lender's standard variable rate.

FR & I

see: Full Repairing and Insuring

Freehold

The absolute ownership of property, as opposed to leasehold. The most complete form of ownership of land in the UK.

Full Repairing & Insuring

Refers to the responsibility/obligation of a lessee. The lessee is fully responsible for all repairs and insurance of the building to be leased.

GATT - Good Average Tenants Trade

i.e. a Brewers or Pub Cos assessment of the trade which a good average tenant should be capable of achieving in a particular house.

Gross Profit

The profit achieved on the sale of goods after paying for their purchase but before deducting wages and other fixed and variable costs of the business.

Gross Profit Percentage/Mark Up Percentage

The percentage of gross profit is measured relative to the selling price of goods in comparison with "mark up" which is measured relative to the cost price of the goods e.g. (and assuming that VAT is excluded from both cost and selling prices) an item which retails for £1 but costs 50p produces a 50% gross profit and the mark up on cost is 100%.

Ground rent

A rent which is usually fairly low, being a rent of the land on which a building stands, but excluding the building. See also peppercorn rent.

Guarantee

If a lease is granted to a limited company, the Directors of that company may be required to personally guarantee the obligations for the term of the lease. If the business fails, the guarantors may have to pay the rent or repair the building from their personal assets.

Indemnity Insurance

Additional insurance cover which some lenders might require if a mortgage is for a high percentage of the value of a property.

Indemnity

An agreement to pay for any losses, which may arise from a breach of any other obligation.

Ingoing

Often "estimated ingoing". Specifying the total cash capital requirement for a tenancy, to cover the cost of buying the trade inventory, stock, security deposit and expenses. This usually has to be cash, as banks are reluctant to assist with the purchase of short tenancies.

Inheritance Tax

A tax payable by your beneficiaries if you die. If the total value of your property and your assets exceeds the threshold then your estate could be liable for inheritance tax (see Inland Revenue site for latest threshold figure).

Interest only Mortgage

With an Interest Only Mortgage it is usual to use an investment scheme such as an endowment policy or a pension scheme to repay the loan at the end of the mortgage term and in the meantime interest is paid to the lender on the outstanding balance. The debt remains the same while the value of the investment is planned to increase, usually over a specified term, to equal or exceed the original debt.

Internal Repairing

Describes the responsibility of the tenant or lessee being limited only to repair, decorate and maintain the interior of the property, plus windows and doors. The lessor/landlord undertakes to maintain the main structure of the building. Commonly applicable in short term/brewers type tenancies.

Land Charge Registry

A government department which keeps a register of certain charges on land in England and Wales, the title of which is unregistered. The register is open to public search and is quite distinct from the land registry, which deals with properties where title is registered.

Land Registry

Government department responsible for the registration of all property dealings in the UK.

 

The registration can provide full details of all owners and mortgages, benefits and burdens affecting the property.

 

Not to be confused with the Land Charges Registry which deals with properties having unregistered titles.

Landlord and Tenant Act 1954

The main Act setting out the Law relating to business tenancies in England and Wales. Unless "contracted out" the lessee has right to apply for a new Lease at the end of the initial lease term, and the grounds for the Landlord to refuse are limited to three basic reasons:-

 

(a) tenant's non-compliance with the terms of the Lease

 

(b) the Landlord wishes to redevelop the property

 

(c) the Landlord wishes to occupy the property himself

 

Grounds for opposition

 

Failure to repair, rent arrears, breach of other obligations, the offer of alternative accommodation by the landlord, undesirable subletting (where the tenancy is a sub tenancy and the landlord could obtain a significantly higher rent for the building overall if that sub tenancy was extinguished. Intention to demolish or reconstruct. Landlords intention to occupy (must have owned the freehold for 5 years).

 

The statutory renewal of the tenancy by the Court cannot exceed 14 years.

Lease

An agreement under which an Owner (the Landlord or Lessor) of a property grants to another person (the Tenant or Lessee) exclusive possession of the property for an agreed term of years in return for Rent.

 

A lease is a legal document which imposes obligations on the tenant, which can be enforced in court.

Leasehold Property

A property held under a lease in return for a rent. See lease.

Legal Charge

Also known as a ‘Mortgage'

Lessee

The person to whom a lease is granted

Lessor

The person who grants a lease

Lien

The legal right to retain the property of another as security for the performance of an obligation.

Listed, Listed Building

An indication that a building is listed as being of architectural and historical interest. When a building is listed it is subject to fairly strict control as to what changes can be made, with more vigorous planning control.

Local Authority Enquires

A standard set of questions which a solicitor asks of a local authority about a property and the area in which it is located, including questions about ownership of the roads and drains serving the property.

Local Search

See local authority enquiries.

LPG

Liquid petroleum gas (propane) either a tank (rented) supply or cylinders.

MAT - Moving Annual Total

i.e. a Brewers' or Pub Co's projection of trade (usually expressed as barrels etc.) for a full year based on the trade for a part year.

Mortgage

The detailed agreement covering the terms of a loan from a mortgagee to a mortgagor to assist in buying a property. It is registered at the land registry as a charge against the land. The agreement gives the mortgagee (lender) the power to sell the property if the borrower (mortgagor) defaults on the mortgage payments.

Mortgage Arrangement Fee

This is usually required by a lender before giving a firm loan offer.

Mortgage Redemption Fee

A charge made by a mortgagee if the mortgage is paid off before the agreed time such as e.g. arranging a mortgage for 20 years, but selling the property after 10 years.

Mortgage Protection Policy

An insurance policy on the life of a borrower to insure in the event of the borrower's death, the repayment of a mortgage loan.

Mortgagee

The person or company (usually a bank) from which a property buyer borrows money to fund a purchase. The company to whom the property is mortgaged.

Mortgagor

The buyer of the property who borrows money from a mortgagee, and offers the property as security for the loan.

Negative Equity

The situation which arises when the value of a property has dropped to less than the amount borrowed against it.

O/A Offers Around

An indication that the agents are inviting offers around the quoted price, in anticipation that offers might be received either above or below the quoted price.

Off Licence

A licence for the sale of intoxicating liquor for consumption off the premises.

Offers

Similar to offers around - but perhaps implying that offers below/near the quoted price will be considered.

Peppercorn Rent

A very low or nominal rent, usually a token payment for a very long lease.

PPL - Phonographic Performance Limited

A body which collects licence fees for music publishers from operators who play music for their customers.

Prescriptive rights

Rights over a property acquired as a result only of long occupation or use of it.

Principal

The amount of the loan on which interest is calculated.

Private Treaty

A "normal" sale of a property for a price agreed privately between a buyer and seller in contrast with auction or tender.

Privity of Contract

In the context of leases, makes the original or previous tenant responsible if a subsequent tenant (assignee) fails to meet the obligations of the lease.

Proprietary Club

A business which is operated with an on licence and is a profit making body but has conditions as to membership, with club rules set before the licensing justices.

PRS - Performing Rights Society

A body which collects royalties for artists and performers from publicans who play recorded music.

Purchaser

Is the buyer of the property.

Put and keep in good repair

A very important condition in a lease which makes the new lessee responsible for not only keeping the property in good repair as per its existing condition, but also putting into good condition any current defects.

Redemption

The repayment of a mortgage.

Register at Land Registry

The register of title kept by the Land Registry, subdivided into:

(a)Property Register (describing property and the estate for which it is held

(b)Proprietorship Register (stating class of title, e.g. absolute, qualified);

(c)Charges Register (containing notices of charges or incumbrances).

Registered Title

Title or ownership of freehold or leasehold property which has been registered at the Land Registry with the result that ownership is guaranteed by the State.

Registered Club

Not a licence as such. A club operated by not less than 25 members who share a common interest and run a non profit making enterprise by for and on behalf of its members. The members are owners and permitted to purchase and consume liquor on the premises while guests are not allowed to purchase.

Re-mortgage

Negotiate a new mortgage or loan to pay off an existing mortgage (and perhaps increase the amount borrowed) - usually done either to reduce the rate of interest being paid or to transfer a loan from a Brewer to a Bank in order to obtain best Brewers discounts.

Repayment Mortgage

A system of paying off a mortgage in which the monthly payments are part interest and part capital, usually at a fixed payment rate whereby the balance of interest payment and capital repayment changes to become predominately capital as the mortgage reaches the end of the repayment period.

Reserve Price

A minimum price below which a property will not be sold when offered at auction.

Restrictive convenant

An obligation restricting the use of land, which is binding on subsequent owners.

Retaining Client

A person or company which wishes to buy a business and agrees to pay an Agent a fee for successfully finding a business for him is a retaining client. An Agent acting for a retaining client does not expect to receive a fee from the seller of a property or business when a sale is arranged with that Agents' retaining client.

Review / Rent Review

Occasion when the rent paid by the tenant/lessee to the landlord/lessor is reviewed (usually upward only) to the full market rent. Rent Reviews are usually at 3 or 5 year intervals.

 

Standard exclusions from the rent assessment are any:

(a) effect on rent of the tenants occupancy

(b) personal goodwill of the tenant

(c) effect on rent of any voluntary improvements by tenant

(d) improvement in value relating to the licence if the Court considers any benefit of the enhanced licence belongs to the tenant.

Right of Way

The right of a owner of a property (and visitors etc.) to walk or drive over property owned by someone else who's land might be described as "subject to rehicular right of way".

RV - Rateable Value

The notional annual rental value as assessed for the calculation and charge of business rates. Where a business also has living accommodation, the living accommodation is allocated a band for council tax payment - a personal expense.

SAV - Stock at Valuation

An indication that the trading stocks at a business are to be sold at valuation in addition to the agreed purchase price.

SEARCH - Searches

Enquiries made of the Land Registry to ensure that the sellers' title to a property is good. See also Local Search, Land Registry

SECTION 34 Gaming Permit

A permit obtained from the licensing justices in conjunction with an on licence. This is required for amusement with prizes machines (one arm bandits) and the number and location of machines are approved by the Court.

Security Deposit

A cash deposit sometimes required on a lease, to be lodged with the landlord/lessor as security against the tenant/lessee failing to meet any obligations under the lease - mainly non-payment of rent.

Septic Tank

Non-mains drainage system which uses bacterial action to break down sewage and the outflow is piped to disperse underground. Might need emptying occasionally.

Special Hours Certificate (Section 77)

Allows a fully licensed business which has a Public Entertainments Licence to trade for extended hours provided provision is made for the service of food. The sale of intoxicating liquor is regarded as ancillary to the food. The S77 can only provide extra hours up to those approved within the PEL.

Stamp Duty

A government tax on all property purchases over the current applicable threshold excluding goodwill and fixtures and fittings. See:

www.inlandrevenue.gov.uk/rates/stamprates.htm

for current rates of stamp duty.

Structural Survey

A survey or inspection of a property to check on the building structure and its general condition. Usually recommended for older properties. Not to be confused with a Valuation Report which might be required by a Bank or lender which is required only to asses the value of the property, not its condition.

Sub Let / Sub Letting

A way in which a tenant passes on the lease obligations to a third party, in which the tenant remains as head tenant of the lease, still subject to the lease obligations but grants a sub lease to another tenant who undertakes the same or similar obligations. The head lessee continues to pay rent to the landlord and the sub tenant pays the head lessee.

Subject to Contract

An indication that the sale of a property has been agreed, but not so as to constitute a binding legal agreement. Either buyer or seller can still back out without giving any reason until exchange of contracts.

Survey

See Structural Survey

SWOT Analysis

A brief analysis which forms part of a business appraisal covering the main strengths, weaknesses, opportunities and threats to the maintenance or development of a business.

Telegraphic Transfer

A process by which solicitors arrange for the balance of the purchase price to be transferred into the sellers solicitors bank account using cleared funds, usually by a specified time on the completion date.

Tenancy/Brewers Tenancy

A term commonly used to describe a short term letting or lease which is probably for 3 years initially and then continues from year to year. See also "internal repairing".

The tenancy is not transferrable/assignable, and the tenant is usually only responsible for internal repairs and decorations.

Tender

A method of offering property for sale. This usually involves inviting prospective purchasers to submit binding offers to purchase a property, which the seller can choose to accept or decline. The process is not public unlike auction. See also Private Treaty. An informal tender indicates that any offer - when accepted - is still subject to contract.

Title Deeds

The legal documents which prove ownership of a property.

TOGC

See Transfer of a business as a going concern

Trade Package Insurance

An insurance policy customised for a particular business sector. For example a licensed trade package insurance will usually cover the building, trade furnishings and equipment, public liability, employees liability, loss of profits following business interruption, theft, etc.

Transfer of a Business as a Going Concern (TOGC)

When a business such as a trading Public House is sold or transferred as a going concern, whether freehold, leasehold or tenancy, by a VAT registered seller to a VAT registered buyer, provided some basic conditions are fulfilled, VAT is not chargeable on the sale of the assets. See www.hmce.gov.uk/notices/700-09.htm

TUPE - Transfer of undertakings (Protection of Employment) Regulations

The regulations giving employees protection against dismissal when a business changes ownership.

Under Offer

An indication that a property has been sold subject to contract.

UON

An expression used by Sidney Phillips indicated that a property has been sold subject to contract and that no viewings are being invited, as the purchaser has confirmed the ability to proceed i.e. the sale is fairly certain.

UOV

An expression used by Sidney Phillips to indicate that a property is under offer but other viewings will still be permitted as the prospective purchaser has not confirmed a definite ability to proceed.

Valuation Report

A report usually prepared for a Bank or other lender to confirm that a property has a value which is sufficient to provide security for a loan or mortgage. Not to be confused with a survey.

Variable Costs

The costs of running a business which change dependent on the turnover of the business e.g. wages, power, repairs, hire costs, bank charges etc. See also - Fixed Costs.

Variable Rate

One of the bases on which interest is paid on a loan - the most common type . The interest rate that you pay goes up and down in line with interest rates in the economy as a whole. When the interest rate goes up, the amount that you have to pay also rises, and it falls when interest rates come down.

VAT on Property

VAT is not usually chargeable on a Pub being sold by an individual sole trader where the business is a going concern. Where a property is being sold by a property investment company (such as a Brewer or Pub Co) VAT will probably be chargeable, on between 80-90% of the purchase price (excluding the private accommodation). The VAT paid is usually reclaimable by a VAT registered trading purchaser, but having to pay the VAT can cause cash flow difficulties for the first few months (See TOGC)

VAT on Rent

Most pub leases are from Pub Cos which elect to waive the building's exemption from VAT. VAT is therefore chargeable on the trade proportion of the rent (i.e. excluding the proportion attributable to the private accommodation - commonly apportioned as 10-20%. Tenants who are registered for VAT will be entitled to recover the VAT through their business VAT returns.

Vendor

is the seller of the property.