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Real Estate Glossary

Absorption Rate
The rate (speed) at which vacant space is either leased or sold to users in the marketplace. This rate is usually expressed in square feet per year or in the case of multi-family housing, in the number of units per year.

Acknowledgment
A formal declaration before a duly authorized officer (such as a notary public) by a person who has executed an instrument that such execution is his own act and deed. An acknowledgment is necessary to entitle an instrument (with certain specific exceptions) to be recorded, to impart constructive notice of its contents and to entitle the instrument to be used as evidence without further proof. The certificate of acknowledgment is attached to the instrument or incorporated therein.

Acre
A measure of land equal to 43,560 square feet.

Amortization
The period of time required to reduce a debt to zero when payments are made regularly. Amortization periods are most often 15, 20, or 25 years long.

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.

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.

"As-Is" Condition
The acceptance by the buyer of the existing condition of the premises at the time that a sale is consummated. This would include any physical defects.

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.

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.

Balloon Payment
A large principal payment that typically becomes due at the conclusion of the loan term. Generally, it reflects a loan amortized over a longer period than that of the term of the loan itself (i.e. payments based on a 25 year amortization with the principal balance due at the end of 5 years).

Bankrupt
The condition or state of a person (individual, partnership, corporation, etc.) who is unable to repay it's debts as they are, or become, due.

Blended Payment
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.

Bridge Loan
A loan which enables a buyer to purchase a property, then allow for time to rehab and/or increase NOI prior to placement of permanent financing or enables buyer to get financing to make a down payment and pay closing costs before selling the present property. Also called “gap” financing. This type of financing is provided by real estate investment banks such as TD Bank.

Building Code
The various laws set forth by the ruling municipality as to the end use of a certain piece of property and that dictate the criteria for design, materials and type of improvements allowed.

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.

Bullet Loan
Any short-term, generally five to seven years, financing option that requires a balloon payment at the end of the term and anticipates that the loan will be refinanced in order to meet the balloon payment obligation. Essentially, should the refinancing not be available, often due to the property not performing as anticipated, the borrower is "shot" and the property is subject to foreclosure. An example of this is when a developer borrows to cover the costs of construction and carry-costs for a new building with the expectation that it would be replaced by long-term (or "permanent") financing provided by an institutional investor once most of risk involved in construction and lease-up had been overcome resulting in an income-producing property.

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.

Capitalization Rate
The rate that is considered a reasonable return on investment (on the basis of both the investor's alternative investment possibilities and the risk of the investment). Used to determine and value real property through the capitalization process. Also called "free and clear return".

Closed Mortgage
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.

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.

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.

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.

Conditional Offer / Conditions of Sale
An Offer to Purchase that is subject to specified conditions, for example, the arranging of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met.

Construction Loan
A short-term, interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as work progresses. Typically a recourse loan to the borrower.

Construction Management
The actual construction process is overseen by a qualified construction manager who ensures that the various stages of the construction process are completed in a timely and seamless fashion, from getting the construction permit to completion of the construction to the final walk-through of the completed premises with the buyer.

Cost Approach
A method of appraising real property whereby the replacement cost of a structure is calculated using current costs of construction.

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.

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.

Conveyancing
The transfer of ownership of any property or real estate from one person to another.

Debt Service Coverage Ratio (DSCR)
The relationship between the annual net operating income (NOI) of a property and the annual debt service of the mortgage loan on the property. Both Lenders and Investors calculate this ratio to assist them in determining the likelihood of the property generating enough income to pay the mortgage payments. From the lender's viewpoint, the higher the ratio, the better.

Debt Service
The periodic payment (monthly, quarterly, or annually) necessary to pay the interest and principal on a loan which is being amortized over a longer term (usually 25-30 years).

Deed In Lieu Of Foreclosure
A deed given by an owner/borrower to a lender to satisfy a mortgage debt and avoid foreclosure.

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.

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
Spreading out the cost of a capital asset over its estimated useful life or a decrease in the usefulness, and therefore value, of real property improvements or other assets caused by deterioration or obsolescence.

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

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.

Easement
A right acquired for access to or over, or for the use of, another person's land for a specific purpose, such as a driveway or public utilities.

Encroachment
The intrusion of a structure which extends, without permission, over a property line, easement boundary or building setback line.

Encumbrance
A registered claim for debt against a property, such as a 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.

Escalation Clause
A clause in a lease which provides for the rent to be increased to reflect changes in expenses paid by the landlord such as real estate taxes, operating costs, etc. This may be accomplished by several means such as fixed periodic increases, increases tied to the Consumer Price Index or adjustments based on changes in expenses paid by the landlord in relation to a dollar stop or base year reference.

Exclusive Agency Listing
A written agreement between a real estate broker and a property owner in which the owner promises to pay a fee or commission to the broker if specified real property is leased during the listing period. The broker need not be the procuring cause of the lease.

Expense Ratio
A comparison of the operating expenses to potential gross income. This ratio can be compared over time and with that of other properties to determine the relative operating efficiency of the property considered.

Fair Market Value
The sale price at which a property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts.

FHLI 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.)

Finance Charge
The amount paid for the privilege deferring payment of goods or services purchased, including any charges payable by the purchaser as a condition of the loan.

First Mortgage
A mortgage which, by reason of its position, has priority over all other encumbrances. The holder of the first mortgage has a priority right to payment in the event of default.

Foreclosure
A legal procedure in which the lender gets ownership of the property if the borrower defaults on the mortgage loan.

General Contractor
The prime contractor who contracts for the construction of an entire building or project, rather than just a portion of the work. The general contractor hires subcontractors, (e.g., plumbing, electrical, etc.), coordinates all work, and is responsible for payment to subcontractors.

Gross Debt Service Ratio
The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, heating costs, and half of any condominium maintenance fees.

Gross Absorption
A measure of the total square feet leased over a specified period of time with no consideration given to space vacated in the same geographic area during the same time period.

Gross Lease
A lease in which the tenant pays a flat sum for rent out of which the landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc.

Guaranty
Agreement whereby the guarantor undertakes collaterally to assure satisfaction of the debt of another or perform the obligation of another if and when the debtor fails to do so.

Hard Cost
The cost of actually constructing the improvements (i.e. construction costs).

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.

Highest and Best Use
The use of land or buildings which will bring the greatest economic return over a given time which is physically possible, appropriately supported, financially feasible.

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.

Improvements
In the context of leasing, the term typically refers to the improvements made to or inside a building but may include any permanent structure or other development, such as a street, sidewalks, utilities, etc.

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

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 rate at which you pay interest to the lender. For example, when the mortgage balance is $100,000, and the interest rate is 6 per cent, one single annual payment will include $6,000 interest. More frequent payments will result in different amounts.

Indirect Costs
Development costs, other than material and labor costs which are directly related to the construction of improvements, including administrative and office expenses, commissions, architectural, engineering and financing costs.

Internal Rate of Return (IRR)
The true annual rate of earnings on an investment. Equates the value of cash invested with cash returns. Considers the application of compound interest factors.

Joint Venture
An agreement by two or more individuals or entities to engage in a single project or undertaking. Joint ventures are used in real estate development as a means of raising capital and spreading risk. For all practical purposes a joint venture is similar to a general partnership. However, once the purpose of the joint venture has been accomplished, the entity ceases to exist.

Judgment
The final decision of a court resolving a dispute and determining the rights and obligations of the parties. Money judgments, when recorded, become a lien on real property of the defendant.

Judgment Lien
An encumbrance that arises by law when a judgment for the recovery of money attaches to the debtor’s real estate.

Landlord’s Lien or Warrant
A warrant from a landlord to levy upon a tenant’s personal property (e.g., furniture, etc.) and to sell this property at a public sale to compel payment of the rent or the observance of some other stipulation in the lease.

Lease
An agreement whereby the owner of real property (i.e., landlord/lessor) gives the right of possession to another (i.e., tenant/lessee) for a specified period of time (i.e., term) and for a specified consideration (i.e., rent).

Lease Agreement
The formal legal document entered into between a Landlord and a Tenant to reflect the terms of the negotiations between them; that is, the lease terms have been negotiated and agreed upon, and the agreement has been reduced to writing. It constitutes the entire agreement between the parties and sets forth their basic legal rights.

Lease Commencement Date
The date usually constitutes the commencement of the term of the Lease for all purposes, whether or not the tenant has actually taken possession so long as beneficial occupancy is possible. In reality, there could be other agreements, such as an Early Occupancy Agreement, which have an impact on this strict definition.

Leasehold Improvements
Improvements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvements to be made in the leased premises by Landlord.

Legal Description
A geographical description identifying a parcel of land by government survey, metes and bounds, or lot numbers of a recorded plat including a description of any portion thereof that is subject to an easement or reservation.Letter Of Credit: A commitment by a bank or other person, made at the request of a customer, that the issuer will honor drafts or other demands for payment upon full compliance with the conditions specified in the letter of credit. Letters of credit are often used in place of cash deposited with the landlord in satisfying the security deposit provisions of a lease.

Letter Of Intent
A preliminary agreement stating the proposed terms for a final contract. They can be "binding" or "non-binding". This is the threshold issue in most litigation concerning letters of intent. The parties should always consult their respective legal counsel before signing any Letter of Intent.

Lending Value
The purchase price or appraised value of a property, whichever is less.

Listing Agreement
An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation.

Loan-to-Value Ratio
The ratio of the loan to the lending value of a property expressed as a percentage. For example, the loan-to-value ratio of a loan for $25,000 on a home which costs $100,000 is 25%.

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.

Low Rise
A building with fewer than 4 stories above ground level.

Market Rent
The rental income that a property would command on the open market with a landlord and a tenant ready and willing to consummate a lease in the ordinary course of business; indicated by the rents that landlords were willing to accept and tenants were willing to pay in recent lease transactions for comparable space.

Market Study
A forecast of future demand for a certain type of real estate project that includes an estimate of the square footage that can be absorbed and the rents that can be charged. Also called “Marketability Study”.

Market Value
The highest price a property would command in a competitive and open market under all conditions requisite to a fair sale with the buyer and seller each acting prudently and knowledgeably in the ordinary course of trade.

Maturity Date
The last day of the term of the mortgage agreement. On this day the mortgage loan must be paid in full or the agreement renewed.

Mechanic’s Lien
A claim created by state statutes for the purpose of securing priority of payment of the price and value of work performed and materials furnished in constructing, repairing or improving a building or other structure, and which attaches to the land as well as to the buildings and improvements thereon.

Mixed-Use
Space within a building or project providing for more than one use (i.e., a loft or apartment project with retail, an apartment building with office space, an office building with retail space).

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.

Normal Wear and Tear
The deterioration or loss in value caused by the tenant’s normal and reasonable use. In many leases the tenant is not responsible for “normal wear and tear”.

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.

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.

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
The actual costs associated with operating a property including maintenance, repairs, management, utilities, taxes and insurance. A landlord’s definition of operating expenses is likely to be quite broad, covering most aspects of operating the building.

Operating Expense Escalation
Although there are many variations of operating expense escalation clauses, all are intended to adjust rents by reference to external standards such as published indexes, negotiated wage levels, or expenses related to the ownership and operation of buildings.

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.

Percentage Lease
Refers to a provision of the lease calling for the landlord to be paid a percentage of the tenant's gross sales as a component of rent. There is usually a base rent amount to which "percentage" rent is then added. This type of clause is most often found in retail leases.

Performance Bond
A surety bond posted by a contractor guaranteeing full performance of a contract with the proceeds to be used to complete the contract or compensate for the owner’s loss in the event of nonperformance.

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.

P.I.T.H.
Principal, Interest, Taxes, and Heating - costs used to calculate the Gross Debt Service ratio (GDS).

Plat (Plat Map)
Map of a specific area, such as a subdivision, which shows the boundaries of individual parcels of land (e.g. lots) together with streets and easements.

Portability
An option available on a mortgage that enables the mortgagor to take their current mortgage loan with them to another property without penalty.

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.

Preleased
Refers to space in a proposed building that has been leased before the start of construction or in advance of the issuance of a Certificate of Occupancy.

Prime Tenant
The major tenant in a building or, the major or anchor tenant in a shopping center serving to attract other, smaller tenants into adjacent space because of the customer traffic generated.

Prepayment Privileges
Allows the borrower to make voluntary payments on the mortgage loan, in addition to the regular, scheduled mortgage payments.

Principal
The amount of money borrowed.

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.

Raw Land
Unimproved land that remains in its natural state.

RealtorŪ
A trademark name for 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.

Real Property
Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing and heating fixtures, or other items which would be personal property if not attached.

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

Regular Mortgage
With this type of mortgage, you pay between 10% and 25% of the cost of the home as a down payment. The remaining balance is the amount of the mortgage loan required. A high-ratio mortgage requires mortgage loan insurance. CMHC offers it for a premium of 0.5%-3% of the mortgage amount. This fee can be added to your mortgage payments or paid in full on closing.

Renewal Option
A clause giving a tenant the right to extend the term of a lease, usually for a stated period of time and at a rent amount as provided for in the option language.

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

Rent
Compensation or fee paid, usually periodically (i.e. monthly rent payments, for the occupancy and use of any rental property, land, buildings, equipment, etc.

Rent Commencement Date
The date on which a tenant begins paying rent. The dynamics of a marketplace will dictate whether this date coincides with the lease commencement date or if it commences months later (i.e., in a weak market, the tenant may be granted several months free rent). It will never begin before the lease commencement date.

Rent-Up Period
That period of time, following construction of a new building, when tenants are actively being sought and the project is approaching its stabilized occupancy.

Representation Agreement
An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation.

Sale-Leaseback
An arrangement by which the owner occupant of a property agrees to sell all or part of the property to an investor and then lease it back and continue to occupy space as a tenant. Although the lease technically follows the sale, both will have been agreed to as part of the same transaction.

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.

Setback
The distance from a curb, property line or other reference point, within which building is prohibited.

Site Analysis
The study of a specific parcel of land which takes into account the surrounding area and is meant to determine its suitability for a specific use or purpose.

Site Development
The installation of all necessary improvements, (i.e. installment of utilities, grading, etc.), made to a site before a building or project can be constructed upon such site.

Site Plan
A detailed plan which depicts the location of improvements on a parcel of land which also contains all the information required by the zoning ordinance.

Slab
The exposed wearing surface laid over the structural support beams of a building to form the floor(s) of the building or laid slab-on-grade in the case of a non-structural, ground level concrete slab.

Soft Cost
That portion of an equity investment other than the actual cost of the improvements themselves (i.e. architectural and engineering fees, commissions, etc.) and which may be tax-deductible in the first year.

Special Assessment
Any special charge levied against real property for public improvements (e.g., sidewalks, streets, water and sewer, etc.) that benefit the assessed property.

Specific Performance
A requirement compelling one of the parties to perform or carry out the provisions of a contract into which he has entered.

Strip Mall
Any shopping area, generally with common parking, comprised of a row of stores but smaller than the neighborhood center anchored by a grocery store.

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.

Subcontractor
A contractor working under and being paid by the general contractor. Often a specialist in nature, such as an electrical contractor, cement contractor, etcSurface Rights: A right or easement granted with mineral rights, enabling the possessor of the mineral rights to drill or mine through the surface.

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

Tax Base
The assessed valuation of all the real property that lies within the jurisdiction of a taxing authority, which is then multiplied by the tax rate or mill levy to determine the amount of tax due.

Tax Lien
A statutory lien, existing in favor of the state or municipality, for nonpayment of property taxes which attaches only to the property upon which the taxes are unpaid.

Tax roll
A list or record containing the descriptions of all land parcels located within the county, the names of the owners or those receiving the tax bill, assessed values and tax amounts.

Tenant (Lessee)
One who rents real estate from another and holds an estate by virtue of a lease.

Tenant Improvements
Improvements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvements to be made in the leased premises by the landlord.

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.

“Time Is Of The Essence”
Means that performance by one party within the period specified in the contract is essential to require performance by the other party.

Title Insurance
A policy issued by a title company after searching the title and which insures against loss resulting from defects of title to a specifically described parcel of real property, or from the enforcement of liens existing against it at the time the title policy is issued.

Title Search
A review of all recorded documents affecting a specific piece of property to determine the present condition of title.

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.

Total Debt Service Ratio (TDS)
The percentage of gross annual income required to cover all payments for housing and all other debts, such as car payments.

Turn Key Project
The construction of a project in which a third party, usually a developer or general contractor, is responsible for the total completion of a building (including construction and interior design) or, the construction of tenant improvements to the customized requirements and specifications of a future owner or tenant.

Under Construction
When construction has started but the Certificate of Occupancy has not yet been issued.

Under Contract
A property for which the seller has accepted the buyer’s offer to purchase is referred to as being “under contract”. Generally, the prospective buyer is given a certain period of time in which to perform its due diligence and finalize financing arrangements. During the period of time the property is under contract, the seller is precluded from entertaining offers from other buyers.

Unencumbered
Describes title to property that is free of liens and any other encumbrances. Free and clear.

Unimproved Land
Most commonly refers to land without improvements or buildings but can also mean land in its natural state.

Use
The specific purpose for which a parcel of land or a building is intended to be used or for which it has been designed or arranged.

Vacancy Factor
The amount of gross revenue that pro forma income statements anticipate will be lost because of vacancies, often expressed as a percentage of the total rentable square footage available in a building or project.

Vacancy Rate
The total amount of available space compared to the total inventory of space and expressed as a percentage. This is calculated by multiplying the vacant space times 100 and then dividing it by the total inventory.

Vacant Space
Refers to existing tenant space currently being marketed for lease. This excludes space available for sublease.

Variance
Refers to permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship. Included would be such things as the particular physical surroundings, shape or topographical condition of the property and when compliance would result in a practical difficulty and would deprive the owner of the reasonable use of the property.

Variable-rate Mortgage
A type of mortgage with fixed payments but fluctuating interest rates. The change in current interest rates doesn't alter the amount of the mortgage payment, but determines how much of each payment is applied against the principal amount and how much goes to pay interest to the lender.

Vendor Take-Back Mortgage
Mortgage financing arranged between the seller of the property and the buyer. Often this type of loan is a second mortgage, which the seller is willing to arrange at below market rates to allow the buyer to purchase the house. Most of these arrangements are not renewable or transferable to the next owner of the house.

Zoning Bylaws
Municipal or regional laws that specify or restrict land use.

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