Glossary

Freehold

Freehold is full ownership of a property and the land it stands on, with no time limit, giving the owner complete control over its use, occupation, and future sale.

Long Leasehold

A long leasehold, often called a virtual freehold, is a lease agreement—typically lasting 99 years or more—that gives the leaseholder many of the rights and responsibilities of outright ownership, while the freehold remains with the landlord.

Commercial Lease

A commercial lease is a legally binding agreement between a landlord and a commercial tenant that sets out the terms under which a commercial property can be occupied and used with the tenant paying rent.

Licence to Assign

Most leases provide that the tenant can assign a commercial lease to a buyer providing they obtain the landlord's consent.  The Licence to Assign is the document in which the landlord consents to the lease being assigned from the seller (the assignor) to the buyer (the assignee).

AST – Assured Shorthold Tenancy

The most common type of residential rental agreement in the UK, where a tenant rents a property from a landlord for a fixed term, typically 6 or 12 months, with the possibility of renewal or termination at the end of the term.

Goodwill

Goodwill is an intangible asset of the business which represents the good name and reputation of the business.  When a business is set up its goodwill is valued at £0. As the business progresses and establishes a name for itself, the goodwill increases in value.  As a general rule of thumb, goodwill is valued at the equivalent of one to three times gross profit of a business, but different multipliers are used for different kinds of businesses.

Exchange of Contracts

A deposit is paid and there is a legal commitment, and a completion date is set. At this stage vendors allow purchase to come to the business meet customers, suppliers, etc.

Completion Date

This is the date when the buyer takes over the running of the business and the seller receives the money.  In law the ownership of the business passes on the Completion Date.

SAV - Stock at Valuation

Most businesses sell a product and when you buy a business this stock is not usually included in the asking price.  When you buy the business, you may need the stock to carry on trading while you introduce your own lines. So, the value (cost price) of the stock is calculated and paid for when you take over the business.

FRI Lease - Full Repairing and Insuring Lease

An FRI lease requires the tenant to pay all running costs, e.g. maintenance, rates and insurance.

SDLT - Stamp Duty Land Tax

A tax paid on the purchase of property or land in England and Northern Ireland. The amount of SDLT due depends on the purchase price of the property and is paid by the buyer.

EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortisation

A financial metric that measures a company's profitability by excluding expenses related to interest, taxes, and non-cash accounting items like depreciation and amortization.  Sometimes referred to as Adjusted Net Profit.