The following Property practice note provides comprehensive and up to date legal information covering:
A derivative is a financial contract that gives an investor a return based on the performance of an underlying asset. In essence, the contract involves a bet between two parties as to how a chosen asset will perform over an agreed period.
In the property derivatives market, the underlying asset is not an individual property or portfolio of properties; instead it is a property index (such as one of the many published by the Investment Property Databank in relation to commercial property or, for residential property, the Halifax House Price Index). These indices record the total return of a class of property (ie aggregated income and capital growth or decline) over a period (yearly, quarterly or monthly) compared as a percentage increase or decrease on the previous period.
The use of property derivatives allows investors to buy or sell exposure to the property market quickly and cheaply by buying or selling contracts which are based on the returns from the movements of the chosen index. This is potentially an entirely ‘synthetic’ property portfolio, because neither party to the contract needs to own any property.
The most common type of property derivative is the ‘total return swap’ or ‘contract for difference’. The following example illustrates how such a derivative works.
An investor, who has £50 million to invest, enters into a swap contract with a bank.
The investor agrees
**Trials are provided to all LexisPSL and LexisLibrary content, excluding Practice Compliance, Practice Management and Risk and Compliance, subscription packages are tailored to your specific needs. To discuss trialling these LexisPSL services please email customer service via our online form. Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.
To view the latest version of this document and thousands of others like it, sign-in to LexisPSL or register for a free trial.
Existing user? Sign-in
Take a free trial
Statutory declaration of solvencyA company enters voluntary liquidation when the members of the company vote to do so by a special resolution. For more information, see Practice Note: What is a members' voluntary liquidation (MVL) and where/when is it typically used?Before the members can vote on a
Express and implied contractual terms distinguishedContractual terms may be either express or implied:•express terms—are terms which are actually recorded in a written contract or openly expressed in an oral contract at the time the contract is made (or there may be a combination of written and oral
This Practice Note considers the doctrine of forum non conveniens, also referred to as the appropriate forum or the proper place for a dispute to be determined. This doctrine is of relevance when determining whether the courts of England and Wales have jurisdiction to hear a dispute and is applied
Disposal and devolutionThe equity of redemption arises as soon as the mortgage is made. It is an interest in the land which the mortgagor can:•transfer, lease or mortgage inter vivos, or•by will (it passes on intestacy)No cloggingIt is a fundamental principle of a mortgage that there must be no clog
0330 161 1234
To view our latest legal guidance content,sign-in to Lexis®PSL or register for a free trial.