Real Estate Terms
Below is a breif overview of some of the more common real estate terms. I do not represent the following definitions to be complete or legally exact, but offer them only to facilitate a better understanding of certain terms and concepts as they relate to real estate.
ADJUSTMENT DATE: Date agreed to by both parties to a real property transaction for the adjustment of property taxes, rent, interest, and other items.
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.
ASSUMABLE MORTGAGE: A Mortgage that allows a purchaser to assume or take over the responsibilities and liabilities under the mortgage from the vendor.
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.
BLANKET MORTGAGE: A single mortgage registered against two or more individual parcels of real property.
BREACH OF CONTRACT: Failure, without legal excuse, to perform any promise which forms the whole or part of a contract.
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 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.
CAVEAT: A notice registered against the title to land warning those looking at the title that a claim has been made.
CLOSED MORTGAGE: A mortgage which cannot be fully paid out before expiry of its term.
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.
CONSTANT PAYMENT LOAN: A loan which is repaid by equal and consecutive instalments that include principal and interest.
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.
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.
DEPOSIT: An amount deposited with the brokerage by the purchaser when an offer to purchase is made.
EASEMENT: A limited right of use of another's land by a landowner for the benefit of his 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).
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.
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.
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.
INSURABLE VALUE: The estimated value of a property for insurance purposes.
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.
JOINT TENANCY: Where two or more persons acquire an equal undivided interest in a property. When one person dies, that person's share automatically goes to the survivor or survivors.
LATENT DEFECT: A hidden or concealed defect that would not be discovered during the course of a reasonable inspection.
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).
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.
LIEN: A claim or charge on real or personal property for payment of some debt, lien obligation or duty.
LIFE ESTATE: An interest in land to be enjoyed during a person's life, and which ends on that person's death.
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.
MORTGAGE: A document evidencing a debt owed by the borrower (mortgagor) to the lender (mortgagee). Registration of the mortgage in the Land Title Office transfers the mortgagor's interest in land to the mortgagee as security for the repayment of the debt.
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.
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.
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.
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.
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.
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.
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.
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.
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.
VARIABLE RATE MORTGAGE: A loan being repaid by payments which change as the market interest rate changes.
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.
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
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.
(Real Estate Trading Services Licensing Course Manual: UBC Real Estate Division. 2008. Real Estate Trading Services Licensing Course Manual. Vancouver, BC: UBC Real Estate Division).