«GLOSSARY OF TERMS The following Glossary of Terms is not intended to be legal definitions, but rather a lay expression or explanation of how the ...»
PLOTTAGE OR ASSEMBLAGE: Putting several smaller, less valuable parcels together under one ownership to increase value of total property.
POCKET TO POCKET LEASE: A lease transaction wherein both the lessor and lessee are usually the same person or company but operating through different entities, and wherein the lease payment exactly meets an obligation of the lessor. As an example, Investor A owns an industrial building and a manufacturing company, called Company B. Investor A leases his building to Company B for the tax benefits involved and sets the rent at the total of his expenses in operating the building (taxes, insurance, maintenance, replacement reserves, etc.). The term “o k top ce”s s dt c n oemoving the rent payment from one pocket to another and is p ce t o k tiu e o o n t s mei s l k o na a“ a eo c n e i c ” ot me a o n w s l s f o v n n e.
s e e POINT OF BEGINNING (POB): In a metes and bounds legal description, the starting point of the survey, situated in one corner of the parcel; all metes and bounds descriptions must follow the boundaries of the parcel back to the point of beginning.
POINTS: A point is one percent of the amount of the loan, paid to the lender at the time the loan is made, in order to obtain the loan.
POLICE POWER: The inherent right of the state to pass laws, within lawful limits, that promote the order, safety, health, morals and general welfare of its citizens. This right is the basis of zoning, the official map, and building codes.
PORTFOLIO LOAN: A loan originated and maintained by the lender and not sold in the secondary mortgage market.
POTENTIALLY RESPONSIBLE PARTY (PRP): Any individual or company that is potentially responsible for or has contributed to a spill or other contamination at a Superfund site. Whenever possible, the EPA requires PRPs to clean up sites they have contaminated. (See Superfund) POWER OF ATTORNEY: A written, notarized and recordable instrument used to appoint an attorney in-fact, a person who may act as the agent on behalf of the writer to the extent indicated in the instrument.
POWER OF SALE: A clause in a trust deed or mortgage that gives the holder the right to sell the property in the event of default by the borrower. The proceeds from the sale are used to pay off the mortgage debt first and any surplus is paid to the mortgagor.
PRE-LEASE: Leasing of premises in a building under construction which is not yet ready for occupancy.
Allard Commercial Brokerage –Glossary of Terms Page 62 of 62 PRELIMINARY NOTICE: Notifies a customer that work to be completed is subject to the lien rights of the contractor. Preliminary notice must be given prior to recording of a mechanic's lien, and should be filed by a contractor at least 20 days prior to the start of work. If notice is given later, liens will cover only the work starting 20 days prior to filing.
PRELIMINARY TITLE REPORT: A title report that is made before a title insurance policy is issued or when escrow is opened. A preliminary report or policy of title insurance reports only on those documents having an effect on the title and should not be relied on as being an abstract.
An abstract of title, on the other hand, reflects all instruments affecting title from the time of the original grant and also includes a memorandum of each instrument, and makes no attempt to determine which of the documents currently affects record title. The "preliminary" is not a binder or commitment that the title company will thereafter insure the title to the property, although this commitment may be obtained at an added cost.
PREPAID INTEREST: Where the down payment is partly or entirely accepted as prepayment of interest on the purchase money encumbrance. This is taken as a deductible expense by the buyer and ordinary income by the seller. IRS has disallowed prepaid interest of any significance.
PREPAID ITEMS: On a closing statement, items that have been paid in advance by the seller, such as insurance premiums and some real estate taxes, for which he or she must be reimbursed by the buyer.
PREPAYMENT CLAUSE: A clause in a trust deed that allows a lender to collect a certain percentage of a loan as a penalty for an early payoff.
PREPAYMENT PENALTY: The amount set by the creditor as a penalty to the debtor for paying off the debt before it matures; an early-withdrawal charge. The prepayment penalty is charged by the lender to recoup a portion of interest that the lender had planned to earn when the loan was made. It covers the lender for initial costs to set up the loan, to service it and to carry it in the early years of high risk. This punitive device also may represent the loss of income to the lender for the time the mortgage is paid off and the funds remain uncommitted. The reason most lenders are willing to allow prepayment after five years without penalty is that much of the total note's interest has been paid in by that time.
PREPAYMENT PRIVILEGE: A clause in a mortgage that gives the borrower the privilege of paying off part or all of the mortgage debt before it becomes due.
PRESCRIPTION: Acquiring a right in property, usually in the form of an intangible property right such as an easement or right-of-way, by means of adverse use of property that is continuous and uninterrupted for the prescriptive period established by state statute. Use of land is adverse when it is made under a claim or right. Therefore, there is no adverse use if the owner has granted permission, if the user has paid for the use or if the user has admitted that the owner has a superior right in the property. Prescription is often used interchangeably with the term adverse possession, which more strictly refers to the acquiring of title to lands. As in adverse possession, the essential elements are that the prescriptive right be adverse, under claim of right, continuous and uninterrupted, open, notorious and exclusive, with the knowledge and acquiescence of the servient owner, and continuing for the full prescriptive period. By "continuous" is meant that the property is used on a regular basis.
PRESENT WORTH: The discounted present day value of money to be collected in the future.
PRICE: What is paid for something.
Allard Commercial Brokerage –Glossary of Terms Page 63 of 63 PRIMA FACIE: Latin phrase; at first sight; on the first appearance; on the face of it; so far as can be judged from the first disclosure; presumably; a fact presumed to be true unless disproved by some evidence to the contrary.
PRIMARY LENDERS: Originators of real estate loans, including commercial banks, savings and loan associations and mutual savings banks.
PRIMARY MORTGAGE MARKET: The mortgage market in which loans are originated and consisting of primary lenders.
PRIMARY AND SECONDARY RENTALS: A lease covenant under which a rental is divided into two categories. The primary rental is a fixed amount usually based upon a definite percentage of property value as established at the time of the execution of the lease agreement. The secondary rental, which would be prorated according to the space, which a tenant might occupy in a building, covers the expense of taxes, repairs and insurance, water, heat, etc. The secondary rental agreement achieves the same result as an escalator clause.
PRIME RATE: The minimum interest rate a commercial bank will charge to its largest clients.
Prime rates are determined in part by the rate the bank pays for the money they lend to borrowers. Decisions of the Federal Reserve Bank (The Fed) to increase or decrease the supply of money can cause the prime rates banks charge to fluctuate.
PRIME TENANT: When on or more subleases have been made on a property, the original lessee is sometimes referred to as the prime tenant.
PRINCIPAL: Someone who directs or authorizes another to act in his or her place regarding relations with third persons; buyer or seller; the amount of money borrowed; the original amount borrowed.
PRINCIPAL MERIDIAN: The main imaginary line running north and south and crossing a base line at a definite point; used by surveyors for reference in locating and describing land under the rectangular (government) survey system of legal description.
PRINCIPLE PAYMENTS: The total principle payments during the year of all loans either now against the property of being projected against it.
PRIVATE GRANT: The granting of private property to other private persons.
PRIVATE OFFERING: An offering of sale to no more than 10 persons.
PRIVITY OF CONTRACT: The relationship between contracting parties (i.e., mortgagor to mortgagee or assignee to assignor).
PROBATE: A minimum four-month period during which the Superior Court has jurisdiction over the administration of the estate of a deceased person.
PROBATE SALE: A court-approved sale of the property of a deceased person.
Allard Commercial Brokerage –Glossary of Terms Page 64 of 64 PROCURING CAUSE: That effort which brings about the desired results. Also called predominant efficient cause or the contributing cause.
PROGRESSION: An appraisal principle that states that, between dissimilar properties, the value of the lesser-quality property is favorably affected by the presence of the better-quality property.
PROJECTION: An estimate of future performance and/or tax consequences resulting from either no charge of after a particular contemplated transaction.
PROMISSORY NOTE: An unconditional written contract containing a promise to pay a definite amount of money at a definite future time.
PROPERTY: The rights or interests which an owner has in something owned.
PROPERTY BRIEF: Produced by the listing agent, a property brief is simply a flier about the property pointing out attractive features. It usually contains a photograph and floor plan of the building.
PROPERTY MANAGEMENT: That aspect of the real estate industry devoted to marketing, leasing, managing and maintaining the property of others.
PROPERTY MANAGER: Someone who manages real estate for another person for compensation. Duties include collecting rents, maintaining the property and keeping up all accounting.
PRORATION: The division and distribution of expenses and/or income between the buyer and seller of property as of the date of closing or settlement.
PROTECTIVE COVENANTS: (restrictive covenants) A contract to protect and preserve the character and integrity of the area covered by the covenant (use, size, kind, set-backs, architectural, etc.) Applied individually as sold or recorded and applied simultaneously to all property in a development.
PUBLIC DEDICATION: When private property is intended for public use, it may be acquired in this manner.
PUBLIC GRANT: The transfer of title by the government to a private individual.
PURCHASE MONEY: Deed of trust, mortgage of land contract given to the seller to secure payment of the balance of the purchase price or a deed of trust, mortgage, or land contract.
PURCHASE-MONEY MORTGAGE: A mortgage given as part of the buyer's consideration for the purchase of real property, and delivered at the same time that the real property is transferred as a simultaneous part of the transaction. It is commonly a mortgage taken back by a seller from a purchaser in lieu of purchase money. A purchase-money mortgage is usually used to fill a gap between the buyer's down payment and a new first mortgage or mortgage assumed, as when the buyer pays 10 percent in cash, gets an 80 percent first mortgage from a bank, and then the seller takes back a purchase-money second mortgage for the remaining 10 percent.
PURCHASE MONEY TRUST DEED: A trust deed which is given by the buyer (taken back by the seller) as part or all of the purchase price of a property.
QUIET TITLE ACTION: A suit brought for the purpose of establishing clear title to real property or to remove a cloud on the title.
QUIT CLAIM DEED: A deed used to transfer any interest in real property which the grantor may have. It contains no warranties or obligations of any kind.
RANGE: A land description used in the U.S. government survey system consisting of a strip of land located every six miles east and west of each principal meridian.
RATE: The percentage of interest charged on the principal.
RATE CAP: The limit on the amount the interest rate can be increased at each adjustment period in an adjustable rate loan. The cap may also set the maximum interest rate that can be charged during the life of the loan.
RATIFICATION: The approval of a previously authorized act, performed on behalf of a person, which makes the act valid and legally binding.
REAL ESTATE: See REAL PROPERTY.
REAL ESTATE AGENT: Someone licensed by the Department of Real Estate, holding either a broker or salesperson license, who negotiates sales for other people.
REAL ESTATE BROKER: Someone holding a broker license and permitted by law to employ those holding a salesperson license, who may negotiate sales for other people.
REAL ESTATE COMMISSIONER: The Real Estate Commissioner is appointed by the governor and serves at the governor's discretion. The commissioner determines administrative policy and enforces that policy in the best interests of those dealing with real estate licensees. The person selected as commissioner must have been a practicing real estate broker in California for five years, or otherwise engaged in real estate activity for five of the past ten years.
REAL ESTATE INVESTMENT TRUST (REIT): A way investors with a small amount of capital can pool their resources to buy real estate. A method of pooling investment money using the trust form of ownership. In the 1960s Congress provided favored tax treatment for certain business trusts by exempting from corporate tax certain qualified REITs that invest at least 75 percent of their assets in real estate and that distribute 95 percent or more of their annual real estate ordinary income to their investors. As an alternative to the partnership or corporate methods of investing in real estate, the REIT offers some of the flow-through tax advantages of a partnership or syndication while retaining many of the attributes and advantages of a corporate operation.