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Friday, May 26, 2017

 

Glossary Of Real Estate Terms And Definitions


 
Real estate transactions use legal contracts governed by legislation in the jurisdiction where they occur and real estate law and legal terms used vary from place to place.

This Glossary of Real Estate Terms and Definitions is intended to give the reader with a general understanding of the definitions of terms commonly used in real estate transactions in British Columbia, Canada, not provide an exhaustive dictionary of legalese.

If the reader intends to become involved in a real estate transaction he or she should seek qualified legal advice in the geographic area where the transaction will occur. In the meantime, here are the definitions of some common real estate terms.


Acceleration Clause - A term in a loan contract which enables the lender to move the maturity date of the loan forward if, and when, the borrower defaults on the loan such that the outstanding balance of the loan becomes due and payable immediately.

Adjacent - Properties whose boundaries are close to each other though they may or may not touch. (see Adjoining)

Adjoining - Properties whose boundaries are contiguous or touching each other. (see Adjacent)

Adjustment Date - The date in a real estate contract that all parties agree will be the date all property taxes, rent, interest, etc. are adjusted.

Affidavit - A legal statement of fact sworn under oath to be true by the person making the statement.

Agent - A person who contracts to act for, or on behalf of, another person who is known as the principal.

Agreement For Sale - A contract by which the owner of a property agrees to sell to another party who agrees to purchase it on an agreed upon date some time in the future.

Airspace Ownership - The concept that a person who owns land also owns as much of the airspace above his land as he can effectively use. This concept is subject to local laws and interpretation.

Amortization - The systematic retirement of a loan over time by means of periodic payments of blended principal and interest.

Appraisal - The process of setting a value on a real estate property usually for the purpose of providing a mortgage lender with comfort that his loan is secure on the date of the appraisal. (see Assessment)

Appreciation - The amount that property has increased in value.

Arm's Length Transaction - An agreement between two parties between whom the absence of a personal or business relationship means they are unlikely to make voluntary concessions to each other.

Assessment - The process of making an official valuation of a property for the purpose of taxation. The assessed amount, in thousands of dollars, is multiplied by the tax rate to produce the amount of property taxes payable. (see Appraisal)

Assign - To transfer beneficial ownership of a property to another party.

Assignee - The party that receives interest in property in exchange for legal consideration.

Assignor - The party that gives interest in property in exchange for legal consideration.

Assumable Mortgage - A mortgage which may be transferred from the seller to the purchaser of a property under conditions detailed in the contract. (see Mortgage)

Balloon Payment - A payment against the principal of a loan which exceeds the regular payment.

Borrower Qualification - The process by which a mortgage lender determines the maximum amount that will be loaned to the buyer of a particular property.

Breach Of Contract - The failure to perform any part of a contract without the legal right to do so.

Brokerage Fee - The fee that may be charged to a purchaser by a mortgage broker for arranging a mortgage loan on a property.

Builder's Lien - Claim for materials supplied and/or work done by a contractor that is registered against a property and is valid for one year from the date of registration.

Chattel - Any article of personal property owned by someone that can be removed from a real estate property by the seller before a sale completes. (see Fixture)

Chattel Mortgage - A document evidencing debt that is secured by named personal property owned by the borrower.

Civic Address - The street address of a property.

Clear Title - A property that is not subject to any financial encumbrances. There is no money owing against the property.

Closed Mortgage - A mortgage loan that can not be fully paid out before the expiry of the mortgage contract term.

Completion Date - The date that ownership of the property transfers from the seller to the buyer and the balance owing is paid to the seller by the buyer.

Compound Interest - Interest on a loan is added to the principal owing at regular intervals becoming part of the principal that earns further interest. (see Interest)

Compounding Frequency - The number of times per year that interest is charged or calculated.

Condition - A fundamental premise upon which fulfillment of a contract depends.

Condition Precedent - Legal term for a "subject to" clause.

Condominium - Individual ownership of a unit in a multi-unit structure or on land owned in common.

Condominium Fees - Scheduled payments by condominium owners to cover common costs and expenses.

Consideration - The inducement for a party to enter into a legal agreement.

Contract - A binding agreement between two or more parties which creates an obligation for the parties to do or not do things named in the contract.

Contract Of Purchase And Sale - A contract which details the terms by which ownership of a property will be transferred from a seller to a purchaser.

Conveyancing - The process of transferring ownership of a property from the seller to the purchaser.

Counter-offer - The changing of an offer by the recipient of the offer such that the original offer is rejected and a new offer is created.

Debt Service - The amount and schedule of repayment to a lender by a borrower.

Deed - A document evidencing ownership of a property. (see Title)

Deposit - The amount of money deposited in the trust account of his agent by a purchaser when an offer to purchase is made.

Disclosure Statement - A document prepared by the developer of a real estate project to ensure that purchasers have adequate information about the project on which to base a decision
.
Down Payment - The amount of a buyer's cash payment towards the purchase of a property. The remainder of the purchase price is usually in the form of a mortgage loan.

Easement - A limited right of use of part of someone else's land for limited purposes. Examples could be for sewer, water or power lines.

Encroachment - A fixture such as a tree or roof on one property that illegally intrudes on another's property reducing its value or use.

Encumbrance - Any claim registered against title to a property.

Equity - The difference between the market value of a property and the dollar value of any encumbrances against it.

Fee Simple - The maximum interest in a property. Essentially equivalent to absolute ownership.

Fixture - A chattel that has become so attached to a property as to form part of that property. Fixtures must be included in the sale of a property unless specifically excluded in the contract of purchase and sale. (see Chattel)

Foreclosure Action - A law suit commenced in Supreme Court by a mortgagee (lender) once a default occurs in a mortgage.

Form B (Strata) - A document from the property manager of a strata complex certifying that certain information with respect to the Strata Lot is correct. This document is also called an Information Certificate.

Gross Lease - A lease by which the landlord pays all of the operating expenses (see Lease, Net Lease, Triple Net Lease).

Guarantor - A person who undertakes to pay the debt of another in the event of default by the original debtor.

Infant - In British Columbia, Canada, a person under 19 years of age.

Injunction - A court order that either restrains a party from, or requires a party to do, a specified act.

Interest - The cost of borrowing or the benefit of lending a sum of money. (see Interest Rate)

Interest Rate - The annual percentage cost of interest. (see Interest)

Joint Tenancy - Where two or more people have equal undivided interests in a property. When one joint tenant dies his or her share is automatically distributed among the survivors. (see Tenants In Common)

Lease - A legal contract granting exclusive use of a property to a tenant for a specified period of time. (see Gross Lease, Net Lease, Triple Net Lease)

Legal Description - Description of real property as recorded in the Land Title Office (not the street address).

Lien - A legal claim filed against a property to ensure that the property cannot be sold without the owner repaying a debt.

Listing Agreement - A contract between the owner of a property and a real estate agent by which the owner agrees to pay the agent an agreed on commission should the agent be successful in finding a buyer willing to meet the owner's terms.

Listing Price - The value at which a property is offered for sale.

Maturity Date - The final date of the term of a mortgage upon which the balance owing becomes due.

Mortgage - A legal document evidencing the debt owed by a borrower to a lender. (see Mortgagee, Mortgagor)

Mortgagee - The lender in a mortgage document. (see Mortgage)

Mortgagor - The borrower in a mortgage document. (see Mortgage)

Net Lease - A lease in which the tenant pays some or all of the operating expenses. (see Lease, Gross Lease, Triple Net Lease)

Offer - A proposal by a prospective buyer to purchase a property on certain terms such that if the seller chooses to accept the offer it becomes a contract of purchase and sale.

Open Mortgage - A mortgage allowing part or full payment of the principal at any time without penalty. (see Mortgage)

Option To Purchase - A contract between the owner of a property and a prospective buyer giving the buyer the right, but not the obligation, to buy the property within a certain time period.

Outstanding Balance - The amount unpaid debt that is owed to the lender by the borrower at any specific time.

Payment - The scheduled periodic installment made to service a debt.

Portable Mortgage - A mortgage that a borrower can transfer from his current home to another that the borrower would like to buy with the terms, conditions and interest rate intact. (see Mortgage)

Possession Date - Date on which a purchaser takes possession of the purchased property and is free to occupy it.

Pre-Approved Mortgage - A mortgage for which a lender approves the terms of before the borrower has actually selected a property to purchase. (see Mortgage)

Principal - The amount of a loan still owing at any given time. The amount on which interest is paid.

Property Transfer Tax - A fee paid by the purchaser of a property to the government agency regulating real estate in that jurisdiction upon completion of the transfer of title of that property.

Purchaser - The person buying the property, who will be registered as the new owner after registering the transfer document. Also called the Buyer.

Refinancing - The process of renegotiating the terms of an existing mortgage or paying off the existing mortgage and obtaining a new one.

Restrictive Covenant - A charge registered against a property limiting the use of the property and prohibiting certain uses.

Right of First Refusal - Agreement giving a party rights to make an offer on property if a sale is pending.

Right of Way - A charge registered on title allowing a party access rights to the property. A Right of Way is limited to certain benefits, such as power poles, telephone poles, sewer, etc. and can only be filed by persons defined in the Land Title Act.

Second Mortgage - A mortgage loan with the property as security by which the lender is not repaid upon default or liquidation until the first mortgage holder has been paid in full. Because of their higher risk second mortgages invariably have a considerably higher interest rate.

Standard Mortgage Terms - This is the part of the mortgage which is standard to most mortgages. This part outlines the 5 basic obligations of the mortgage, and imposes a personal covenant to pay on the Borrowers.

Statement of Adjustment - Purchaser - Details of the payments required from the purchaser to the seller to enable the transfer of ownership of the property to the purchaser.

Statement of Adjustment - Seller - Details the cash receipts and payments required by the seller to clear title and enable the transfer of ownership of the property to the purchaser.

Statutory Building Scheme - A charge registered against the property showing limitations as to what buildings, etc. can be built on a property.

Survey Certificate - A drawing prepared and signed by a BC Land Surveyor which identifies the boundaries of the property and the location of the home inside the property lines.

Tenants In Common - Where two or more parties acquire interests in a single property. Each may sell or bequeath their interest and in the event of their death their interest becomes a part of their estate. (see Joint Tenants)

Term - The time period at the end of which a mortgage becomes due and payable.

Time Share - Legal ownership of a property by a number of parties such that each owner has the right of exclusive use of the property for a certain time period or periods each year.

Title - Evidence of the right of legal ownership of a property. (see Deed)

Triple Net Lease - A lease in which the tenant pays all of the operating expenses. (see Lease, Gross Lease, Net Lease)

Valuation Date - The date on which an appraisal or assessment is deemed to have occurred which is not to be confused with the date on which it was actually done. (see Appraisal, Assessment)

Variable Rate Mortgage - A loan with each scheduled payment consisting of the same amount of principal each time but with the interest portion changing as interest rates change.

Vendor - The person who is selling the property. Also called the Seller.

Vendor Take-Back Mortgage - A vendor (seller) may effectively loan a buyer a portion of the sales price such that the vendor becomes the mortgagee and the buyer becomes the mortgagor.

Zoning Regulations - Strict laws enacted by local government that determine how a property may or may not be used.

These are the basic terms and definitions used in conducting a real estate transaction in British Columbia, Canada. You can now feel comfortable with some of the sometimes confusing vocabulary used by the real estate industry during the normal course of business.


About the Author:

Don Willoughby is a top-producing real estate professional with RE/MAX of Whistler in Whistler, British Columbia, Canada, North America's premier destination ski resort. He provides many valuable tips and advice to people interested in real estate generally and Whistler Real Estate in particular on his website. Read Don's Whistler newsletters and learn even more about real estate online at www.real-estate-at-whistler.com.


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