Real Estate Glossary

a.

acceleration clause - A term in the contract which brings the maturity date of the loan forward if the borrower defaults, so that the Outstanding Balance is immediately due and payable.

accrual basis - Accounting procedure which recognizes revenue at the time it is earned, as opposed to when it is actually received. This method ties in with the Revenue Principle. Contrast with Cash Basis.

actual value - Actual value as determined by the assessor. This value, in thousands of dollars, when multiplied by the tax rate equals the amount of real property taxes payable.

adjacent - In law, implies that two or more properties are not widely separated, though they may not physically touch.

adjoining - In law, implies that two properties are contiguous or touching each other as opposed to adjacent to one another.

adjustment date - The date on which all adjustments of prepaid expenses, taxes, utilities, rents, interest, and similar items will be calculated. Adjustments: Those items of a financial nature which are to be settled between the parties as of the Adjustment Date. The usual items for adjustment are annual property taxes, water rates, local utilities, garbage removal, Strata Fees, Interest on assumed mortgages, and rents, but can also include fuel in a tank, prepaid cable services, insurance, and any other item for which one or the other of the parties should be compensated before the transaction is fully completed Agreement of Sale.

affidavit - A written statement of facts, the contents of which are sworn under oath to be true by the person making the statement. An affidavit is sometimes used in court proceedings as evidence in place of oral testimony.

agent - At common law, an agent is any person who contracts to act for or on behalf of another, who in turn, is known as the principal. The common law principles of agency apply to all levels of licensee, including brokerages, managing brokers, associate brokers and representatives, as defined by the Real Estate Services Act, when they are acting on behalf of a vendor or purchaser.

agreement for sale - A contract by which the owner of land (vendor) agrees to sell land to another (purchaser) who agrees to purchase it. The purchaser's interest is registered in the Land Title Office as a charge against the vendor's certificate of title. The contract provides that the purchase price will be paid by instalments.

airspace - Historically, one owned the airspace above a parcel of land "to the heavens". Today, airspace refers to the legal concept that a person who owns land also owns as much of the airspace above the land as he or she can effectively use.

amortization - The process of paying off a loan by periodic payments of blended principal and interest.

anniversary - Most lenders allow borrowers to make a payment on the anniversary of the mortgage. (For a mortgage assumed on June 1, a payment can be made every subsequent June 1 for the term of the mortgage.) It is applied against the principal and is a good way of reducing a loan.

appraisal - A process that determines the market value of a property.

appreciation - The amount by which real property (or any other Asset) has increased in value.

appraised value - An estimated value of a property that is completed by a certified appraiser for mortgage financing.

approved lender - A lending institution authorized by the Government of Canada to make loans under the terms of the National Housing Act. Only Approved Lenders can negotiate mortgages that require mortgage insurance.

arm's length transaction - Transaction in which the parties involved are not inclined toward making voluntary concessions to each other.

assessment - Appraisal, usually for real property taxation purposes.

assets - What the borrower owns. This could include real estate, savings, vehicles, RRSPs, GICs, stocks, bonds, household goods, etc..

assign - To transfer over to another. (e.g., "I assign all right, title and interest in Blackacre to my wife, Elaine.")

associate broker - A licensee who meets the educational and experience requirements to be a managing broker, but who is providing real estate services under the supervision of a managing broker (formerly known as an "Agent 9.15" under the now repealed Real Estate Act).

assumable mortgage - A Mortgage that allows a purchaser to assume or take over the responsibilities and liabilities under the mortgage from the vendor.

assumption - A legal document signed by a homebuyer that requires the buyer to assume responsibility for the obligations of a mortgage by the builder or original owner.

assurance fund - A fund established by the B.C. provincial government to compensate any person who is deprived of land because of the operation of the Land Title Act in certain cases where there has been a fraud committed, a mistake made, or an improper act of the Registrar of Titles or his employees.

b.

bad debt allowance - An estimate of the amount of rent that may become uncollectible from the tenants of occupied units (also known as collection loss allowance).

balance due on completion - The amount of money the purchaser will be required to pay to the vendor to complete the purchase, after all adjustments have been made.

balance sheet - A financial statement listing Assets, Liabilities, and Owner's Equity at a specific point in time. Also known as a Statement of Financial Position or Statement of Assets and Liabilities.

balanced market - Where demand for property equals the supply of available property. Sellers usually accept reasonable offers and houses generally sell in sufficient time periods. Prices remain stable and there is usually a good number of homes to choose from.

base rate, prime rate - Generally the lowest interest rate charged by a lender to its most preferred customers. Some loans are expressed as being "X" percentage points above Prime Rate. The Base or Prime Rate plus the percentage agreed upon is used to determine the amount of interest due on a variable rate mortgage loan. Blended Payment Mortgage: A mortgage with blended payments of principal and interest. Generally resulting in the same monthly payment over the term of the loan.

balloon payment - Any payment of principal over and above the regular payment.

blanket mortgage - A single mortgage registered against two or more individual parcels of real property.

blended payments - A mortgage payment that includes principal and interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases.

bonus - The portion of the face value of a mortgage loan which exceeds the funds actually received by the borrower and which is intended as additional compensation for the lender.

book value - The original cost of a noncurrent asset less all depreciation claimed to date.

book value (of a mortgage) - The original face value of the mortgage less the amount of principal repayment, or the mortgage amount outstanding at a particular point in time. At origination, the book value and face value are the same.

borrower qualification - The process of determining the maximum amount that can be lent to a potential borrower, given his or her income and the Lending Value of the property to be purchased.

borrowing - Incurring an obligation to repay a debt in order to invest or consume more than one currently owns.

breach of contract - Failure, without legal excuse, to perform any promise which forms the whole or part of a contract.

break even point - The square footage of floor space (or number of units) which must be rented in order for revenues to exactly equal expenses.

brokerage - A licensee (often corporate) on behalf of which other licensees must provide real estate services.

brokerage fee - A fee charged by a mortgage broker for arranging a loan.

builders' lien - A claim registered against the title to land by a contractor, supplier of materials or workman with respect to work done or materials supplied to improve that land.

building codes - Provincial or locally adopted regulations that control the design, construction, repair, quality of building materials, use, and occupancy of any structure under its jurisdiction.

building permit - A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or repaired. It must be posted in a conspicuous place until the job is completed and passed as satisfactory by a municipal building inspector.

building scheme - Refers to a scheme of development which comes into existence where defined land is laid out in parcels and intended to be sold to different purchasers or leased or subleased to different tenants each of whom enters into a restrictive covenant with the common vendor or landlord agreeing that his particular parcel should be subject to certain restrictions as to use.

buyer's agent - A person or firm representing the buyer. A Buyer's Agent's primary allegiance is to the buyer. The buyer is the Buyer Agent's client.

buyer's market - When there is a higher number of homes to choose from than buyers in comparison. Prices of homes tend to be lower and they remain available for sale longer. Buyers usually have more leverage in negotiating a purchase.

c.

capital cost allowance (cca) - The amount that an owner of an income producing asset is allowed to deduct as an expense for Income Tax purposes as a result of ownership of that depreciable asset. Only one-half of the ordinary CCA may be claimed in the first year of the holding period; no CCA may be claimed in the year of sale.

capital risk - The risk of losing all or part of an Investment. (Capital at risk is the estimate).

capitalization - Changing a stream of income to a capital market value (current market value) using a required rate of return.

capitalization rate - The return an investor requires for investing in a property to receive the annual net operating income flows. It can be estimated from similar properties by dividing their estimated net operating incomes by the prices at which the properties sell.

cash basis - Accounting procedure which recognizes revenue at the time it is actually received in cash form. Contrast to Accrual Basis.

cash reconciliation statement - A calculation of the cash available at any point in time. The old cash balance plus all receipts less all disbursements will compute the current cash at hand.

cash-equivalent price (of an offer) - See Market Value (of an offer).

caveat - A notice registered against the title to land warning those looking at the title that a claim has been made.

cca - Abbreviation of Capital Cost Allowance.

ceiling price - The maximum price that a purchaser is willing to pay for a property. Compare to Floor Price.

certificate of pending litigation - A notice of a pending court action registered against the title to property for the purpose of warning all persons that the title to the property is in litigation and preventing dealings with respect to the property.

certificate of title - A document signed by a title examiner or attorney, stating that the seller has good marketable and insurable title.

chattel mortgage - A document evidencing a debt owed by the borrower (mortgagor) to the lender (mortgagee). The mortgage is secured by the lender against personal property owned by the borrower as collateral to ensure the repayment of the debt. These mortgages are governed by the Personal Property Security Act.

chattels - Articles of personal property (i.e., a car, stereo, television, etc.) as opposed to real property.

client - The person being represented by an agent. The agent owes the client the duties of utmost care, integrity, confidentiality and loyalty. Closing: The act of completing the registration of the Land Transfer to the Purchaser in the Land Title Office, obtaining Mortgage Funds, if any, and Paying out the Balance of Sale Proceeds to the Vendor.

civil law - A system whereby the law of a nation is set out in a comprehensive set of writings. An example of these writings or codes would be a Criminal Code for a country.

closed mortgage - A mortgage which cannot be fully paid out before expiry of its term. A mortgage loan that has a locked-in payment schedule, which does not vary over the life of the closed term. A buyer who uses a closed mortgage will likely have to pay the lender a penalty if you fully repay the loan before the end of the closed term.

closing costs - Costs, in addition to the purchase price of a home, such as legal fees, transfer fees, and disbursements, that are payable on the closing date. Closing costs typically range from 2%-4% of a home's selling price.

closing date - The date on which the sale of a property becomes final and the new owner takes possession.

closing statement - A statement prepared for a purchaser or vendor, showing the amounts to be received and paid out. The difference between these amounts represents either the balance payable (by the purchaser) or the cash proceeds from sale (to the vendor) upon completion of the transaction. See also Purchaser's Statement of Adjustment and Vendor's Statement of Adjustment.

CMHC - Canada Mortgage and Housing Corporation. A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also creates and sells mortgage loan insurance products.

CMHC Insurance - If your down payment is less than 25%, you must have mortgage insurance. It insures the lender against the possibility of you defaulting on your mortgage. Canada Mortgage and Housing Corporation is the principal source of mortgage insurance. Commitment Letter: A letter outlining the amount, terms and conditions under which a lender is willing to offer a mortgage. Common Areas: Lands or improvements on land that are designated for common use and enjoyment by all occupants, tenants or owners. The lobby, a pool, tennis court or common hallways would all be Common Areas in a condominium or townhouse complex. Common Tenancy: The ownership of property by two or more persons, where on the death of one, his share does not automatically go to the other(s) but is credited to his estate. Compound Interest: Interest charged on both the principal amount of a loan as well as on the interest charged in a preceding period.

collateral mortgage - A mortgage that secures a loan by way of a promissory note. The money borrowed can be used to buy a property or can be used for another purpose, such as a home renovation or a vacation.

co-ownership syndicate - A real estate syndicate organization in which two or more investors are owners of an undivided interest in real property.

commitment letter / mortgage approval - Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

common law - A system of law made up of principles and rules of action based upon the ancient customs and usages of the people of a nation which have been recognized, affirmed or enforced by the courts.

comparative method - An appraisal method which bases the value of the subject property on the price of similar properties which have sold recently. Also named the Market Method.

completion date - Date on which the purchaser's solicitor undertakes to the vendor (or his solicitor) that he will pay the balance owing to the vendor upon the Transfer of Title being accepted for registration.

compound interest - Interest which, during the life of the loan, is charged or calculated at regular intervals and if not immediately paid (as in an interest only loan) will, in subsequent periods, earn interest itself (as in an interest accruing loan).

compounding frequency - Indicates the number of times compound interest is charged or calculated per year (for example, semi-annually or monthly).

condition - A fundamental term of a contract, a breach of which allows the injured party to terminate the contract and/or sue for damages or Specific Performance.

condition precedent - Legal term for a "subject to" clause. In contract law, a condition precedent calls for the happening of some event or the performance of some act before the contract shall be binding upon the parties.

conditional sales agreement - A contract for the sale of goods by which the seller reserves ownership (but not possession) of the goods until the price has been paid (usually by instalments). Such contracts are regulated by the Personal Property Security Act.

consideration - The legal term for the reason which induces a party to enter into a contract. Consideration may be in the form of a right, interest, profit or benefit accruing to one party. It may also be in the form of an agreement not to do something, or loss suffered by the other.

consistency principle - The accounting rule which states that once a firm has selected a method of recording financial transactions from a number of alternative options, all of which are acceptable under generally accepted accounting principles, it will apply those principles over subsequent accounting periods.

constant payment loan - A loan which is repaid by equal and consecutive instalments that include principal and interest.

consumption - The act of spending money on goods which decrease in value after the time of purchase (for example, the purchase of bread or a refrigerator). Contrast to Investment.

contract - An agreement between two or more persons which creates an obligation to do or not to do a particular thing.

contract of purchase and sale - A contract of purchase or sale of land which contains the obligations of the vendor and purchaser with respect to the purchase and sale.

conventional mortgage - A mortgage loan up to a maximum of 75% of the lending value of the property. Mortgage loan insurance is not required for this type of mortgage.

conversion (of an interest rate) - The process of changing an interest rate with one compounding frequency to an equivalent rate with a different compounding frequency.

conveyance - The process of transferring an interest in land from one person to another by way of a transfer document. Conveyancing usually refers to the transfer of title to land but also includes dealings such as assignments, leases, and mortgages.

corporate veil - In law, this refers to the distinct status of a corporation as a separate entity from its shareholders and corporate officers. Because a corporation is a separate entity, a person dealing with the corporation may not know the identities of the shareholders or officers. For example, the names of the owners of an incorporated business are not shown on its financial statements.

corporation - A business entity which is owned by shareholders who decide on the general policies of the company through their elected Board of Directors. A corporation is a separate legal entity and therefore has the rights and liabilities of an individual.

cost of borrowing - The annual cost of credit over the life of a loan, including interest, service charges, brokerage, loan fees, CMHC or other mortgage insurance. Covenants: Usually called Restrictive Covenants because they restrict the use of real property. Often required as part of the subdivision process by the approving authority, these are charges registered against the title, and binding upon all subsequent owners. These covenants govern how a property may be used. The most common are Covenants for in favour of the Ministries of Health, Environment or Highways. Also Schemes" which have the same effect but are declared by the developer as away of maintaining controls on the appearance of the homes in the subdivision and the uses of the properties. Counter Offer: An offer made by the seller back to the buyer altering one or several terms and/or conditions of the offer as originally written.

cost method - A method of appraisal which determines the value of a property by adding the market value of the site to the cost of replacing the existing building.

cost of goods sold -The cost to the business of manufacturing or purchasing the items actually sold.

cost principle - A generally accepted accounting principle which states that the historical cost of an asset must be reflected in a company's Financial Statements.

counter-offer - A statement by the recipient of the offer which has the legal effect of rejecting the offer and of proposing a new offer to the offeror (who then becomes the recipient of the "new" offer).

court order enforcement act -An Act which, amongst other things, provides for the rights and remedies of individuals attempting to collect on judgments awarded by the Court.

covenant - A clause in a legal document which, in the case of a mortgage, gives the parties to the mortgage a right or an obligation. For example, a covenant can impose the obligation on a borrower to make mortgage payments in certain amounts on certain dates. A mortgage document consists of covenants agreed to by the borrower and the lender. The person making the covenant is called the covenantor and the person in whose favour it is made is called the covenantee.

credit analysis - An investigation of a loan applicant's ability to repay.

credit bureau report -A report by a credit-reporting agency that maintains a history of timely, or untimely, repayment of debt. The lender's primary source of information regarding the credit history of a borrower.

creditor - A person to whom a debt is owed. Contrast to Debtor.

curable depreciation - Wear and tear or outmoded design which can be corrected at a cost that is economically feasible (e.g., worn carpeting). Contrast to Incurable Depreciation.

current assets - Those assets which will be converted into cash, sold, or consumed within one year or the normal operating cycle of a business, whichever is longer. Current Assets may include Cash, Marketable Securities, Accounts Receivable, Inventories, and Prepaid Expenses. Compare to Noncurrent Assets.

current cost - The amount of money it would be necessary to spend today to reconstruct existing improvements. See also Historic Cost.

current liabilities - Those Liabilities which are expected to be paid within one year. Current Liabilities may include Accounts Payable, Property Taxes Payable, Wages Payable, and Income Taxes Payable.

d.

date of valuation - In appraisal, the date for which the value of the subject property is established, not to be confused with the date at which the appraisal takes place.

debt coverage ratio - The number of times net operating income must cover the annual mortgage payments (principal and interest). For example, if the lender requires the borrower to earn $1,100 in net income to allow him $1,000 in annual mortgage payments, the ratio is 1.1:1. The lender usually states the ratio as a number exceeding one (i.e., 1.1) and the maximum allowable loan payment can then be calculated by dividing N.O.I. by the number supplied (i.e., $1,100 ÷ 1.1 = $1,000.) See also Ratio.

debt financing - Incurring an obligation to repay a debt in order to invest or consume more than one currently owns.

debt service - The making of mortgage payments by the borrower, as arranged with the lender.

debtor - One who owes a debt. Contrast to Creditor.

deceit - A fraudulent or deceptive misrepresentation used by one person to deceive or trick another person ignorant of the true facts.

deed - A legal document, which is signed by both the vendor and the purchaser transferring ownership. This document is registered as evidence of ownership.

default - Failure to abide by the terms of a mortgage loan agreement. A failure to make mortgage payments, defaulting on the loan, may give cause to the mortgage holder to take legal action to possess (foreclose) the mortgaged property.

demise -The legal term for the granting of a Lease.

deposit -A sum of money placed in trust by the purchaser when an Offer to Purchase is made. The real estate representative or lawyer holds the sum until the sale is closed, and then it is paid to the vendor.

depreciation - The amount by which the value of improvements has decreased over time as a result of wear and tear or changes in taste. Depreciation can be classified as physical or functional and curable or incurable. See also Depreciation Expense and compare to Capital Cost Allowance.

depreciation expense - The periodic cost of owning depreciable assets which are subject to wear and tear, such as buildings and equipment. No depreciation expense can be taken on land. Depreciation expense is a method of accounting for the initial cost of an asset in its subsequent periods of use.

discharge of mortgage - A document signed by the lender and given to the borrower when a mortgage loan has been repaid in full.

disclosure statement (in development) - A document prepared by the developer of a subdivision to ensure that investors or purchasers have adequate information upon which to base a purchasing decision.

disclosure statement (in mortgage brokerage) -A schedule showing the face value of the loan, all costs associated with issuing the loan to the borrower, and the effective annual rate as required by the B.C. Mortgage Brokers Act.

discounting - The process of expressing expected future income in terms of a present value.

distress -A legal term for a landlord's right to seize and sell a tenant's personal property in order to recover arrears of rent.

diversification - The process of investing funds in more than one project or industry in order to reduce the risk of incurring unexpected losses. The opposite of "putting all your eggs in one basket."

divided ownership syndicate - A real estate syndicate organization in which the investors are the individual owners of the (condominium) units.

dividends - That part of a corporation's after-tax income that is distributed to the shareholders.

dominant tenement - Land to which the benefit of a right (i.e., an easement or restrictive covenant) is attached.

down payment - The portion of the house price the buyer must pay up front from personal resources, before securing a mortgage. It generally ranges from 5%-25% of the purchase price.

duress - A situation where a person is forced to enter into a contractual relationship against his will by the threat of imprisonment either to himself or his family, or the threat of actual physical force.

e.

easement -A limited right of use of another's land by a landowner for the benefit of his land. The land receiving the benefit is called the dominant tenement and the land granting the benefit is called the servient tenement.

economic life - The time span over which a property is employed in its Highest and Best Use.

effective annual rate - An annual interest rate which is compounded once a year. This rate is used for disclosure purposes under the B.C. Mortgage Brokers Act.

encroachment - A fixture, such as a wall or fence, which illegally intrudes into or invades on public or private property, diminishing the size and value of the invaded property.

encumbrance - A judgment, mortgage or lien or any other claim which is registered against the title to land.

equitable mortgage - The transfer of equity in property as security for a debt. Technically, any mortgage registered on title subsequent to the first mortgage (i.e., second or third mortgage).

equity - The difference between the price for which a home could be sold and the total debts registered against the home. Equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.

equity (in common law) - The concept of justice being administered by the Courts according to fairness as contrasted with the strictly formulated rules of common law. In law the term "equity" denotes the spirit and habit of fairness, justness, and right dealing which would regulate interaction of men with men.

equity (in mortgage finance) - The difference between a property's market value or purchase price and the debt incurred to purchase the property.

equity of redemption - The mortgagor's right to repay the mortgage.

equivalent rate - Two interest rates are equivalent if, for the same amount borrowed, over the same period of time, the same amount is owed at the end of that period of time.

escalator clause - A term in a commercial lease which allows the landlord to charge the tenant for any increases in specified operating expenses.

execution - The process of commencing proceedings to collect an amount owing by reason of a judgment.

f.

face value of a loan - The loan amount which must be repaid at a stated rate of interest according to the contract terms.

fee simple - The legal term for the maximum interest in land available to a person, or the maximum of legal ownership. Equivalent in many ways, for practical purposes, to absolute ownership.

fiduciary - A person who holds a position of trust with respect to someone else and is obliged, by virtue of the relationship of trust, to act solely in the other person's benefit.

final payment - The last instalment that is made on a fully amortized loan. It is usually smaller than the preceding periodic payments.

financial statement - A numerical presentation of particular aspects of a business. Common financial statements include the Balance Sheet and the Income Statement.

first home loan insurance - This is a CMHC product of particular interest to people looking for their first home. It allows qualified first-time buyers to purchase a home with as little as 5% down. In these cases, CMHC will insure mortgages of up to 95% of the home's purchase price or the market value of the property, whichever is less. (Restrictions may apply. Contact your local lender.)

first-year half/rate rule - In the year an asset is purchased, only one-half the maximum allowable CCA may be claimed.

fiscal year - Any period of twelve consecutive months chosen by a business as its accounting period.

fixed expenses - Those costs which will be incurred irrespective of the extent to which a property is occupied.

fixture - A chattel attached to real property; anything which has become so attached to the land as to form, in law, part of the land.

floor price - The minimum price that a vendor is willing to accept for a property. Compare to Ceiling Price.

foreclosure - A legal action taken by a mortgagee to obtain possession of a property, by reason of the mortgagor's default in payment of the principal and/or interest of the mortgage debt.

frustration - A legal doctrine that provides that where the existence of a specific thing is necessary for performance of the contract, the duty to perform is discharged if the thing, for reasons beyond anyone's control, is no longer in existence at the time for performance.

fully amortized mortgage - Loan which is repaid completely by a series of payments over the full duration of the amortization period.

functional depreciation - The loss in value caused by outmoded or inadequate design (e.g., small closets in a residential property) which may be curable or incurable. See Curable Depreciation and Incurable Depreciation. Compare to Physical Depreciation.

future value - Any lump sum which is payable or will have been accumulated some time from now.

g.

GE capital mortgage insurance company - GE Capital Mortgage Insurance Company is the only private sector source of mortgage insurance to lenders in Canada . Gross Debt Service Ratio: The amount of money needed to pay principal, interest, taxes and sometimes, energy costs. If the dwelling unit is a condominium, all or a portion of common fees are included, depending on what expenses are covered. Gross debt service is divided by household income. A rule of thumb is that GDS should not exceed 30%. It is also referred to as PIT (Principal, Interest and Taxes) over income.

general partnership - A form of organization in which two or more persons carry on a business with a view to profit. Each general partner assumes unlimited liability. The partnership is not a taxable entity; net income is distributed to the partners who, in turn, must report this income on their personal income tax return. Compare to Limited Partnership.

generally accepted accounting principles - The rules and guidelines followed in the preparation of Financial Statements. They include the Cost Principle, the Revenue Principle, the Matching Principle, the Objectivity Principle, the Consistency Principle and the Fiscal Year.

goodwill - The amount by which the purchase price of a business exceeds the fair market value of its net assets. This extra amount could be attributed to factors such as the value of good customer relations, high employee morale, a well-respected business name, or other intangible attributes of the business which are not quantifiable, but contribute to purchasers' expectations for the income potential of the business.

graduated payment mortgage - An innovative loan arrangement in which the periodic payments made by the borrower increase in size over all, or a portion of, the term of the mortgage contract.

gross debt service ratio - The percentage of gross income which is the maximum amount a mortgagor is allowed to pay annually in principal, interest, and property taxes. For example, a mortgagor may pay $270 out of $1000 gross income as P.I.T. payments. This ratio is usually expressed as a percentage i.e., P.I.T. payments can be 27% of gross income. Compare to Loan-to-Value Ratio. See also Ratio and Total Debt Service Ratio.

gross income - The amount earned through employment or investment before taking taxes or other deductions into consideration. This amount may or may not be the same as gross income for purposes of mortgage lending.

gross lease - A lease in which the landlord pays for all the operating expenses. Contrast to Net Lease.

gross potential rent - The rent which would be collected if all units were leased at market rents.

gross potential revenue - Similar to Gross Potential Rent, except it also includes income from other sources such as parking income or laundry income (in the case of an apartment building, for example).

gross realized rent - Gross Potential Rent less Vacancy Allowance and Bad Debt Allowance.

gross realized revenue - Gross Potential Revenue less an allowance for Vacancy and Bad Debt. Note that different rates may be used for the different income sources (i.e., 5% vacancy rate for units, 2% vacancy rate for parking spaces).

guarantor - One who becomes contingently or secondarily liable for another's debt or performance.

h.

highest and best use - That use of land which, within all constraints (for example, zoning bylaws), will provide the maximum net return during the foreseeable future.

high-ratio mortgage / insured mortgage loan - A mortgage loan in excess of 75% of the lending value of the property. This type of mortgage must be insured - for example, by CMHC - against payment default.

historic cost - The actual amount of money spent at the time the asset was purchased or the improvements were built. See also Current Cost.

holdback - An amount of money withheld by the lender during construction of a house to ensure that construction is satisfactory at every stage. A standard holdback is 10% of the total cost of the building project.

howey test - One of two tests which determines whether an investment unit is a security. The other test is called the Risk Capital Test.

i.

imperfect market - A market in which (similar) properties are traded for either more or less than actual Market Value.

improvement - A structural addition to the land which can be considered to be a fixture.

income method - An appraisal method, also called the Investment Method, which is typically used for income producing properties. It converts the income stream produced by the property into a market value for the property by using a Capitalization Rate.

income statement - A financial statement which lists the revenues and expenses of a business organization for a stated period of time. Also called a profit and loss statement.

income tax - That part of taxable income which a person or corporation is required to forward to Revenue Canada periodically.

incurable depreciation - Wear and tear or outmoded design which can only be corrected at considerable expense and, in fact, correction may be cost-prohibitive (e.g., narrow hallways). Contrast with Curable Depreciation.

indefeasibility - A legal principle. In B.C., subject to certain statutory exceptions, the Title Register is conclusive evidence that the person named as holding an estate in land is in fact entitled to that interest, and his holding is not subject to any condition or encumbrance other than those shown on the Title Register.

indenture - A document or deed, expressing certain objects between two or more parties.

infant - In B.C., a person under 19 years of age which, generally speaking, is the age of legal competence.

inflation - A rise in the average price level.

injunction - A court order which either restrains a party from doing something or requires a party to do something.

insurable value - The estimated value of a property for insurance purposes.

interest - The cost of borrowing money for a given period of time. Interest is usually paid to the lender in instalments along with repayment of the principal loan amount.

interest accruing loan - Debt which is paid off as one lump sum, including principal plus accumulated compound interest.

interest adjustment - The process of calculating compound interest payable on the amount borrowed between the day the monies are advanced and the day the amortization period starts.

interest adjustment date (IAD) A date from which interest on the mortgage advanced is calculated for regular payments. This date is usually one payment period before regular mortgage payments begin. Interest due between the date the mortgage is advanced and the IAD is due on closing

interest rate - The percentage rate that represents the cost of borrowing or the benefit of lending money.

interest-only loan - A loan which is serviced by interest-only payments. At the end of the term the full principal plus interest for the last payment period of the loan is still owing.

investment - The spending of capital today in order to receive benefits in the future (e.g., the purchase of a Canada Savings Bond which pays interest periodically). Contrast to Consumption.

invitation to treat - A type of advertisement used by one to induce the public or some individual to submit their own offers. An invitation to treat is not an offer capable of acceptance to form a contract.

j.

joint tenancy - The form of ownership in which the Registered Owners of equal interests in the property declare that there shall be an automatic right of survivorship. If one dies, the other automatically becomes the owner of the entire property. The property does not form part of the deceased's estate and is deemed to pass to the surviving owner the moment before death.

joint venture - A type of business where two or more business organizations cooperate in a particular undertaking. Profits or losses are shared by the participants and taxed in their hands.

judgment - An award granted to a successful party to litigation by the court. The award may include a specific amount of money to be paid to the successful party by the unsuccessful party to the litigation.

jurisprudence -The collection of legal decisions out of which legal principles or rules emerge.

l.

latent defect - A hidden or concealed defect that would not be discovered during the course of a reasonable inspection.

latent value - The value possessed by a property which has potential for redevelopment because it is currently not employed at its Highest and Best Use.

lateral support - The support provided to one piece of land by the land which lies next to it.

lease - An instrument granting exclusive possession of land to another for a specified term, usually at a rent. The one who grants the lease is called the Landlord (or Lessor) and the one to whom it is granted is called the Tenant (or Lessee ).

lending value - The estimated value of a property for lending purposes. It is a long-term, conservative estimate of the value of the security as determined by the lender and, therefore, does not necessarily equal Market Value or Sales Price.

leverage - The partial use of debt to finance investments. The use of debt can magnify the potential variations of yields on the equity portion of the investment.

liability - Monies owed by a business. Contrast to Asset.

licence - With respect to real property, a privilege to enter onto premises for a certain purpose. However, this privilege does not confer upon the licensee any title, interest or estate in such property (e.g., exclusive right to possession of the property). Examples of a licence include a hotel suite where monthly rates may be available but the innkeeper has the right to enter the suite at his pleasure.

lien - A claim or charge on real or personal property for payment of some debt, lien obligation or duty.

lien (mechanics) - A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid. A lien must be properly filed by a claimant. It has a limited life, prescribed by statutes that vary from province to province. If the lien holder takes action within the prescribed time, the homeowner may be obliged to pay the amount claimed by the lien holder. Alternatively, the lien holder may force a sale of the property to pay off the debt.

life estate - An interest in land to be enjoyed during a person's life, and which ends on that person's death.

life estate pur autre vie - The form of Life Estate where the measuring life is that of some other person. (e.g., A man may grant a life estate pur autre vie to his deceased son's wife [his daughter-in-law] for the life of his grandchild. If the grandchild dies, the daughter-in-law loses her interest.)

limited liability - The principle that a shareholder or limited partner cannot be held liable for more than he has paid into (or agreed to pay into) the firm. Contrast to Unlimited Liability.

limited partnership - A form of organization in which two or more persons conduct a business. It consists of one or more limited partners and one or more general partners. A general partner assumes unlimited liability but a limited partner has limited liability. Compare to General Partnership.

liquidated damages - A specific sum of money expressly stipulated by the parties to a contract as a pre-estimate of the amount of damages to be recovered by either party for a breach of the contract by the other.

liquidity - The degree of ease and certainty with which an asset can be converted into cash.

listing agreements - A contract between an owner (vendor) and a real estate licensee whereby the licensee agrees to try to find a purchaser for the listed property in return for the vendor paying a stipulated amount of commission should the licensee be successful.

listing price - The value at which a property is advertised for sale.

loan-to-value ratio - The percentage of lending value which determines the maximum loan available. See Ratio. Compare to Gross Debt Service Ratio or Total Debt Service Ratio (for residential underwriting) and Debt Coverage Ratio (for commercial underwriting).

m.

management survey - A study of a property and the factors which affect it. The survey includes an analysis of the region, the market, the neighbourhood, and the property and also presents a study of the economics of alternatives, a financial analysis, and a management plan.

managing broker - The licensee responsible for a brokerage, and who is responsible for exercising the rights conferred on the brokerage as well as for the performance of the duties imposed on the brokerage by its licence. In addition, the managing broker is responsible for the control and conduct of the brokerage's real estate business, including the supervision of its related licensees. Sometimes also meaning the human representative of a corporate real estate brokerage. See the Real Estate Services Act, sections 5 and 6.

market method - See Comparative Method.

market rate - The prevailing interest rate, at any given point in time, at which financing or refinancing can be expected.

market value (of a property) - In appraisal, the expected or forecasted sales price.

market value (of an offer) - The amount of cash which would have to be received today that equals the downpayment plus the present value of the mortgage loan discounted at the market rate.

matching principle - A generally accepted accounting principle which states that expenses should be recognized in the same period as the revenues with which they are associated.

maturity date - The date on which the balance owing on a mortgage becomes due; the final day of the term of a mortgage.

metes and bounds - A system of land description whereby all boundary lines are set forth by use of terminal points, directors, and angles - mete referring to a limit or limiting mark, the bounds referring to boundary lines.

misrepresentation - A false assertion of fact which, if accepted, leads one to an incorrect belief about a given situation.

mistake - A legal term which describes the situation where a person, under some erroneous conviction of law or fact, does, or omits to do, some act which but for the erroneous conviction, he would not have done or omitted doing.

mitigate - The legal doctrine of "mitigation" imposes upon an injured party a duty to exercise reasonable diligence and ordinary care in attempting to minimize his damages after injury has been inflicted.

mortgage - Security for a loan to purchase property. It is the purchaser's personal guarantee to repay the loan and a pledge of the property as security for the loan.

mortgage life insurance - Insurance to pay off your mortgage in full if you die. Many lenders offer this insurance and add the premium to your mortgage payments. However, you may want to compare rates for equivalent products from an insurance broker.

mortgage loan insurance - Insurance required by lenders for high-ratio mortgages (more than 75% of the purchase price). It is available from CMHC or a private insurer for a cost of between 0.5% and 3% of the amount of the mortgage.

mortgage payment - A regularly scheduled payment that is blended to include both principal and interest.

mortgagee - The lender who provides the mortgage loan.

mortgagor - The borrower who pledges the property as security for the loan.

n.

necessaries - Generally, a necessary is an article indispensable or proper and useful, for the sustenance of human life (i.e., food, drink, clothing, medical attention).

negligence - A legal term for the failure to use such care as a reasonably prudent and careful person would use under similar circumstances; it is the doing of some act which a person of ordinary prudence would not have done under similar circumstances or failure to do what a person of ordinary prudence would have done under similar circumstances.

negligent misrepresentation - A legal principle which provides that if, in the ordinary course of business, a person seeks information or advice from another who possesses special skills in circumstances in which a reasonable man would know that his special skills were being relied upon, and the person asked chooses to give the advice without clearly qualifying his answer so as to show that he does not accept responsibility if it is incorrect then he accepts a legal duty to exercise such care as the circumstances require. If he is incorrect he may be liable for his negligent misrepresentation.

net income - The amount by which revenues exceed expenses in any given time period. Contrast to Net Loss.

net lease - A Lease in which the tenant pays some or all of the operating expenses. See also Triple Net Lease. Contrast to Gross Lease.

net loss - The amount by which expenses exceed revenues in any given time period. Contrast to Net Income.

net operating income (in appraisal) - Gross Potential Revenue less Vacancy Allowance, Bad Debt Allowance, and total Operating Expenses. This amount is calculated excluding Income Tax, Mortgage Payments, and Depreciation Expense or Capital Cost Allowance.

net proceeds - The face value of a loan less all brokerage fees, legal fees, appraisal costs and other charges.

net worth - A person's total financial worth, calculated by subtracting total liabilities from assets.

NHA - Premium Insurance required by lenders for high-ratio mortgages (more than 75% of the purchase price). It is available from CMHC or a private insurer for a cost of between 0.5% and 3% of the amount of the mortgage. The premium can be added to your mortgage loan and paid off as part of your regular mortgage payments, or paid off in a lump sum at the time of purchase to save interest charges on the premium itself.

nominal rate of interest - An interest rate quoted as a rate per annum; it is equal to the interest rate per compounding period multiplied by the number of compounding periods. (For example, j2 = 10%; j4 = 12%; j12 = 11.5%).

nominee - Under the now-repealed Real Estate Act, the nominee was the equivalent of the managing broker.

noncurrent assets - Those assets that will not be sold within one year or the normal operation cycle of a business. Noncurrent Assets may include property, plant, and equipment. Compare to Current Assets.

noncurrent liabilities - Those liabilities which are not expected to be paid within one year.

novation - A novation refers to a creditor's acceptance of a 3rd party in place of the debtor so that the 3rd party becomes the debtor and the original debtor is released by the creditor from having to pay off the debt.

o.

objectivity principle - A generally accepted accounting principle which states that all recorded financial information is based upon objective and verifiable data.

offer - A proposal to do or refrain from doing some specified thing usually followed by an expected acceptance, counter-offer, return promise or act. The person who makes the offer is called the offeror. The recipient of the offer is called the offeree.

offer to purchase - A written contract setting out the terms under which the buyer agrees to buy. If accepted by the seller, it forms a legally binding contract subject to the terms and conditions stated in the document.

offering memorandum - A condensed version of a prospectus.

open listing - A listing given to any number of licensees without liability to compensate any except the licensee who first acquires a buyer ready, willing and able to meet the terms of the listing; the sale of the property automatically terminates the listing.

open mortgage - A type of mortgage loan where the borrower can make a partial or full payment of the principal amount at any time, without penalty.

operating expenses - Those costs which have to be incurred to keep any business going, including the business of renting real property. See also Fixed Expenses and Variable Expenses.

option agreement - A document stipulating that, in exchange for a deposit, a specified individual is to be given the first chance to buy a property at or within a specified period of time. An option holder who does not buy at or within the specified period loses the deposit and the agreement is cancelled. P.I.T. Principal, Interest, and Taxes - payments due on a regular basis under the terms of a mortgage agreement. Generally, payments are made monthly and include one-twelfth of the estimated annual municipal and school taxes. Since these taxes change from year to year, this section of the mortgage will change accordingly.

option to purchase - A right conferred by a contract to accept or reject an offer to buy property within a certain time.

outstanding balance - The amount owing to the lender at any specified time, whether it is to be repaid over an amortization period or in a lump sum at the end of the term.

owners' equity - A classification on the balance sheet. Equal to Total Assets less Total Liabilities.

p.

partial amortization - A loan repayment scheme in which the term is shorter than the amortization period. Whereas the loan payments will be calculated as if the loan will be paid back over the full amortization period, at the end of a specified term the outstanding balance is due and payable.

partnership - See General Partnership and Limited Partnership.

patent defect - A defect which is plainly visible or which can be discovered during the course of a reasonable inspection.

payment - A periodic instalment that is made to service a debt. For an interest-only loan, the payment consists of interest; for a constant payment loan, the payment consists of interest and principal.

percentage lease - A lease agreement which specifies that the tenant will pay the Landlord:

periodic rate - The interest rate which is charged per compounding period (for example, per month or per day).

periodic tenancy - A tenancy which automatically renews itself on the last day of the term for a further term of the same duration until terminated by either party.

physical depreciation - The loss in value due to wear and tear (e.g., peeling paint) which may be curable or incurable. See Curable Depreciation and Incurable Depreciation. Compare to Functional Depreciation.

pooling agreement - An agreement between investors who have a direct ownership in real property to share revenues and expenses generated by individual rental units.

portable mortgage - A borrower can transfer the terms, conditions and interest rate of his or her current mortgage to the home the borrower would like to purchase.

possession date - Date on which the purchaser is entitled to possession of the property.

power of attorney - A document conferring authority to one person to act as another's agent on his or her behalf.

power of sale - A clause inserted into a mortgage giving the mortgagee the right and power, on default in the payment of the debt secured, to advertise and sell the mortgaged property at public auction to satisfy the mortgage debt, without the necessity of foreclosure proceedings.

pre-approved mortgage - When a lender approves the potential mortgagor for a specified amount, based on how much money the lender is prepared to lend to the borrower. This allows buyers to shop for homes that they already know they can obtain financing for and not homes that are potentially too expensive, or out of the borrowers means to finance.

pre-payment - The act of fully or partially paying off the outstanding balance of a loan at any point during the term of the loan at a time earlier than set out in the contract.

present value - The current equivalent of a future dollar amount.

principal - That portion of the original amount borrowed which still has to be paid back to the lender.

private law - The law that deals with disputes between two or more individuals.

private nuisance - A legal term for wrongfully allowing the escape of injurious things onto another person's land or the wrongful disturbance of an easement or other interest granted over land.

pro forma statement - A financial statement which shows expected future revenues and expenses.

procedural law - The part of law which sets out the methods of determining and enforcing rights as between parties.

profit a prendre - A right to take the produce or part of the soil from the lands of another. For example: minerals, oil, stones, gravel, etc.

profit and loss statement - See Income Statement.

property insurance - A guarantee to the registered owner or mortgagee of an interest in land that after a specified hazard (for example, a fire) the value of the interest in land can be restored.

property purchase or land transfer tax - A toll paid to the provincial and/or municipal government(s) for transferring property to the buyer from the seller.

proprietorship - A business enterprise that is owned by a single owner who assumed unlimited liability. The proprietorship is not a taxable entity; the profits or losses of the business are reported on the owner's personal income tax return.

public law - The law that regulates disputes between individuals and the public as a whole (i.e., the state). The term "public" may be: (i) general (applying to all persons within the jurisdiction); (ii) local (applying to a geographical area); (iii) special (relating to an organization or authority charged with a public interest).

public nuisance - A legal term for some unlawful act or omission which endangers the safety or comfort of the public or some section of the public.

purchaser's statement of adjustment - A closing statement in a real property transaction which indicates the balance of cash required from the purchaser to complete the transaction. See also: Closing Statement.

q.

quantum meruit - Literally, "as much as he deserves". A doctrine that no one who benefits by the labour and materials of another should be unjustly enriched thereby; under those circumstances, the law implies a promise to pay a reasonable amount for the labour and materials furnished, even though a specific contract price may not have been agreed to.

r.

rating grid - A matrix which is used to make adjustments to comparable properties in order to derive the value of the subject property when using the market comparison method of appraisal.

ratio - A ratio expresses one value in terms of another value; e.g., one out of every four houses is painted white. It can be stated as a fraction, one-quarter (1/4) of the houses are white; as a percentage, twenty-five percent (25%) of the houses are white; or as a ratio, one out of four (1:4) houses is white.

real estate security - Any security whose principal or major assets consist of real property and/or buildings attached to land.

real estate syndicate - Any form of organization in which two or more investors share in the ownership of an interest in real estate.

realtor - A real estate representative who is a member of an organization of persons engaged in the business of buying and selling real estate, such as the Canadian Real Estate Association.

recent - In appraisal, that time period just prior to the date of valuation over which demand and supply conditions have remained relatively stable.

refinance - To pay off a mortgage or other registered encumbrance and arrange for a new mortgage, sometimes with a different lender.

register - As a noun, the term refers to the books in which certificates of indefeasible title are entered or kept and, as a verb, the term refers to registering documentation pursuant to the provisions of the Land Title Act.

reinvestment - The act of investing the funds generated by one investment into another investment.

renewal - At the end of a mortgage term, the borrower re-negotiates the loan for a new term.

replacement cost - The expense that has to be incurred to build a modern equivalent of the subject property. Contrast to Reproduction Cost.

replacement reserve - The amount of funds set aside for periodic replacement of building components that wear out more rapidly than the building itself and must be replaced during the building gas economic life (also referred to as replacement allowance).

representative - A licensee providing real estate services under the supervision of a managing broker.

reproduction cost - The expense that has to be incurred to build an exact replica of the subject property. Contrast to Replacement Cost.

rescission - In the law of contracts, a rescission amounts to the unmaking, or an undoing of it from the beginning, as opposed to a termination.

residual method - This appraisal method is used for properties with redevelopment potential. To employ this method, another appraisal method is used to derive the property's value assuming it were employed in its highest and best use. Then, depending on whether the residual value of the land or the building is to be found, the cost of the building or the market value of the land is subtracted.

restrictive covenant - A covenant restricting the use of the land of the covenantor (the Servient Tenement) for the benefit of land belonging to the covenantee (the Dominant Tenement). An example would be a restriction on the height of a building on one piece of land so that adjacent or adjoining lands are not put in shadow.

retained earnings - The net income of current and prior periods less dividends paid, belonging to the shareholders of a corporation.

return - See Yield.

revenue principle - A generally accepted accounting principle which states that revenue is the value received from the sale of goods and services, interest, rent, and the gain or loss on the sale of assets. According to this principle, revenue is recognized on an accrual basis.

reverse annuity mortgage - An innovative loan arrangement in which the lender makes periodic payments to the borrower during the loan term. At the end of the term, the borrower will have to repay the balance owing by refinancing or selling the property.

revocation - The term for the cancellation of an offer communicated by the offeror to the offeree prior to acceptance.

right to purchase - A right conferred by an Agreement for Sale of land.

risk - See Capital Risk.

s.

sale leaseback - Situation in which the vendor will lease the subject property from the purchaser.

sales price - Value in exchange; the price obtained in an actual transaction.

salesperson - The term used in the now repealed Real Estate Act, to refer to the licencee level equivalent of a representative.

saving - The process of consuming less than what can be afforded in order to increase consumption in the future.

second mortgage -An additional mortgage on a property that already has a mortgage.

seller's market - More buyers are looking for homes than there are homes for sale. There is a smaller inventory of homes available for sale and many buyers looking to purchase. House prices generally increase and homes sell quickly.

servient tenement - Land bearing the burden of an easement or other right (i.e., restrictive covenant).

shareholder - Individual who has purchased the rights and obligations associated with (part of) the equity of a corporation.

similar - In appraisal, two properties are similar if the actual differences between the properties will not have a material effect on their selling price.

simple interest - Interest which is charged only once on the sum originally borrowed, and paid at the end of the term along with the full amount of the principal. Contrast to Compound Interest.

soft costs - Large outlays beyond the basic costs of land acquisition and construction of buildings.

specific performance - The court, rather than granting damages in lieu of performance, orders that the terms of the contract be carried out by the party in default.

stakeholder - Generally, a stakeholder is a third party chosen by two or more persons to keep money on deposit, the right to the money which may be contested between them.

stare decisis - Literally, "let the former decision stand" - to abide by prior decisions and not to disturb the doctrine of the courts that, when the court has once laid down a principle of law applicable to a certain state of facts, it will adhere to that principle, and apply it to all future cases, where the facts are substantially the same; regardless of whether the parties and property are the same.

strata or condominium fee - A payment made by all owners of condominiums or townhouses within a particular complex that is allocated to pay expenses such as maintenance, repairs and management costs.

statement of adjustment - A balance sheet statement that indicates credits to the vendor - for example, the purchase price - and any prepaid taxes and credits to the buyer, such as the deposit, and the balance due on closing.

statutory declaration - A written statement of facts signed by the maker and sworn to be true, usually before a lawyer or notary. A statutory declaration is similar to an affidavit.

straight-line depreciation method - One possible method used to calculate depreciation expense for accounting purposes. The expected salvage value is subtracted from the purchase price of the depreciable item and the result is divided by the expected economic life to find the periodic depreciation expense.

straight-line principal reduction loan - A mortgage which is paid off with periodic payments which always include the same amount of principal and an amount of interest based on the balance still owing.

sub-mortgage broker - A defined term in the Mortgage Brokers Act. Basically, an individual employed by a mortgage broker who satisfies any one of the following requirements:
· carries on a business of lending money secured in whole or in part by mortgages, whether the money is his own or that of another person;
· holds himself out as, or by an advertisement, notice or sign indicates that he is, a mortgage broker;
· carries on a business of buying and selling mortgages or agreements for sale;
· in any one year, receives an amount of $1,000 or more in fees or other consideration, excluding legal fees for arranging mortgages for other persons; or
· during any one year, lends money on the security of 10 or more mortgages.
· carries on a business of collecting money secured by mortgages.

subdivision - This is a defined term in various statutes. Basically, a subdivision is the division of land into two or more parcels.

subject property - The property to be appraised.

substantive law - The part of law which creates, defines, and regulates legal rights and obligations.

support - The term for the right to have one's ground supported so that it will not cave in when an adjoining owner makes an excavation. Support is of two kinds, lateral and vertical.

survey - A document that illustrates the property boundaries and measurements, specifies the location of buildings on the property, and indicates any easements or encroachments.

syndicator - The promoter who sets up a syndicate investment package.

t.

tax rate - The number of dollars per $1,000 worth of actual value which is payable in property taxes.

tax sheltering - The process of creating a taxable loss on an investment property, and applying such a loss to offset taxable income generated by another source.

taxable income (loss) - Income (loss) reported for tax purposes. It is not to be confused with net income (loss). Net income (loss) is arrived at by the deduction of Depreciation Expense, whereas taxable income (loss) is calculated after the deduction of Capital Cost Allowance.

taxable value - Actual value as determined by the Assessor. This value, in thousands of dollars, when multiplied by the Tax Rate equals the amount of real property taxes payable.

tenancy agreement - Contract between the landlord and the tenant, pertaining to the letting of residential premises.

tenancy at will - A tenancy where the tenant, with the consent of the landlord, occupies land as a tenant for a term which can be terminated by either party at any time.

tenants in common - Where two or more persons acquire interests in a single property. Each may sell or bequeath their interest and in the event of death, their interest becomes a part of their estate.

term - The length of time during which a mortgagor pays a specific interest rate on the mortgage loan. The entire mortgage principal is usually not paid off at the end of the term because the amortization period is normally longer than the term.

terminal value - The value upon destruction of an asset.

time clause - A clause contained in a contract for purchase or resale of land which allows a party to invoke a time period in which a condition precedent must be removed. A failure to remove the condition precedent within the time period would result in the termination of the contract.

time share plan - A plan providing for the recurring use, occupation, or possession of real property to circulate on a periodic basis among persons in the plan.

title (freehold or leasehold) legal possession - A freehold title gives the holder ownership of land and buildings for an indefinite period of time. A leasehold title gives the holder a right to use and occupy land and buildings for a defined period of time. In a leasehold arrangement, actual ownership of the land, sometimes along with the buildings, remains with the landlord.

torrens land registration system - A system for registration of the actual title to land in order to provide security to those holding interests in land and to remove the need for retrospective investigation of titles to land.

tort - A private wrong or injury, other than breach of contract, for which the court will provide a remedy in the form of an action for damages.

total debt service ratio - The percentage of gross income which is the maximum amount that a mortgagor is allowed to pay annually in principal, interest and property taxes on all debts. Compare to Loan-to-Value Ratio. See also Ratio and Gross Debt Service Ratio.

trade record sheet - A form required and approved by the Real Estate Council, which contains certain required information in respect to trades in real estate in relation to which a brokerage provides trading services.

trespass - A legal term for wrongfully entering, remaining on, or placing something on another's land.

triple net lease - A lease in which the tenant pays all operating expenses. See Net Lease.

trust account - An account where money is deposited by one for the benefit of another. The money is devoted to a particular purpose and cannot or should not be diverted for other purposes.

trust syndicate - Syndicate organization in which the investors hold real estate indirectly as beneficiaries under a trust agreement. Such a trust may be referred to as a Real Estate Investment Trust (REIT).

trustee - Individual or business entity in whose name a trust is held.

u.

undepreciated capital cost (ucc) - An account which includes the purchase price of all assets belonging to the same class less all CCA accrued over time for that class.

undertaking - A promise given in the course of legal proceedings by a party or his lawyer, generally as a condition to obtaining some concession from the opposite party.

undue influence - Any improper or wrongful constraint, manipulation, or persuasion whereby the will of a person is overpowered and he is induced to do or refrains from doing an act which he would not do or would do if left to act freely.

unlimited liability - The obligation of an owner to pay his creditors from his personal assets if his company cannot pay its debts. Contrast to Limited Liability.

usury - In law, referring to regulating the charging of interest rates. Historically, charging interest on money lent or the taking of any compensation whatever for the use of money offended the usury laws which disallowed this practice.

v.

vacancy allowance - An estimate of the amount of rent that may be foregone because of unoccupied units.

valuation - See Appraisal.

value in exchange - See Sale Price.

variable expenses - Those costs which vary according to the extent to which a property is occupied (e.g., janitorial services in an office building).

variable rate mortgage - A loan being repaid by payments which change as the market interest rate changes.

vendor take-back mortgage - A mortgage taken back by the vendor from the purchaser to facilitate a sale, whereby the vendor becomes the mortgagee and the purchaser becomes the mortgagor.

vendor's statement of adjustment - Closing Statement which shows the net amount of proceeds to be received by the vendor upon completion of the transaction. See also Statement of Adjustment.

vertical support - The right of land to be supported by the land which lies under it.

void contract - A contract which never had any legal existence or effect and which is not capable of being enforced.

voidable contract - One which exists until repudiated by a party entitled to do so at which time it becomes void.

w.

warranty of authority - An agent's promise or guarantee to third parties that his or her actions fall within the scope of authority given by the principal. An agent acting outside of the scope of authority breaches the warranty of authority.

waste - An abusive or destructive use of property by a person in rightful possession is one form of waste. There are other forms of waste described in the text.

wrap-around mortgage - A second mortgage, registered on title, which includes a prior existing mortgage. It may be written for an amount equal to the outstanding balance of the first mortgage or may also add additional funds for a larger loan balance than currently exists. Payments under the new mortgage include the payments under the original mortgage and the new mortgagee undertakes the responsibilities as mortgagor under the original mortgage.

y.

yield - The income and/or value appreciation of an investment expressed in terms of the purchase price of that investment. For example, if a property that has sold for $100,000 is worth $2,000 more one year later and has generated an income of $5,000 during the year, the yield to the investor is ($2,000 + $5,000) ÷ $100,000 = .07 or 7%. See Return.

z.

zoning bylaws - Municipal or regional laws that specify or restrict land use.

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