«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 ...»
CONTRACT OF SALE: A contract for the purchase and sale of real property in which the buyer agrees to purchase for a certain price and the seller agrees to convey title by way of a deed or an assignment of lease (for leasehold property). In addition to binding the parties to the purchase and sale of the property during the period of time required to close the transaction, the contract frequently serves as the initial directions to the closing agent or escrow company to process the mechanics of the transaction. In essence, the contract of sale is an executory contract to convey property, serving as the vehicle to get to the deed, which finally conveys title; it is the blueprint for the entire transaction. Some of the many names for this contract are sales contract, purchase agreement, deposit receipt, offer and acceptance, agreement of sale, offer to lease or purchase and sale agreement.
CONTRACT RENT: The rent designated in a lease. The term describes the actual rent paid.
CONTRACTION JOINT: Generally a saw-cut or sheet-metal strip that separates a 1000 square foot section of floor to reduce cracking, for, as concrete hardens, it shrinks, creating stresses that the joint reduces.
CONTRACTOR: An individual and/or firm used in performing work on construction projects.
There are different classes of contractors, which are normally listed under the heading of subcontractors. The function of the subcontractor is to perform a particular talk only under the Allard Commercial Brokerage –Glossary of Terms Page 17 of 17 direction and coordination of the general contractor, who takes on the responsibility of managing the project in accordance with the construction documents. The general contractor is normally selected through bidding procedures and is totally responsible for completion of the project in a skillful manner that is acceptable to both architect and owner. However, the general contractor may be pre-selected to handle all work within a particular project and could be contracted on a time-and-material basis, which may or may not have an upset maximum.
CONTRACTUAL INTENT: Intention to be bound by an agreement, thus preventing jokes and jests from becoming valid contracts.
CONVECTION SYSTEM: A system in which heat is transferred through the circulatory motion of air that occurs when the temperature varies due to the difference in air density and the action of gravity. A hot-water heat or steam radiator is one such system.
CONVENTIONAL MORTGAGE: A mortgage loan that made with real estate as security and not involving government participation in the form of insuring (FHA) or guaranteeing (VA) the loan.
The mortgagee can bean institutional lender or a private party. The loan is conventional in the sense that it conforms to accepted standards and that the lender looks solely to the credit of the borrower and the security of the property to ensure payment of the debt. Conventional loans include those loans insured by private mortgage insurance companies and are frequently more flexible with respect to terms and interest rates, although they reflect a higher interest rate and larger down payment requirement due to the higher risk involved.
CONVERSION: The appropriation of property belonging to another.
CONVEYANCE: A document, such as a deed, used to transfer title to property from one person to another. The term is also used in describing the act of transferring.
COPING: Tile or concrete installed on top of a parapet rising above the roof line of a building to prevent water leakage.
CORD DROP: A rubber-covered electrical wire connected to equipment.
CORE: Core space includes the square footage used for public corridors, elevators, washrooms, stairwells, and electrical and janitorial closets.
CORE DRILLING: A method of drilling holes in floors and ceilings to allow telephone and electrical installations.
CORING: A mechanical system of removing a cylindrical section of concrete from the existing floor to gain access to the duct system.
CORNER LOT: A lot found at the intersection of two streets.
Allard Commercial Brokerage –Glossary of Terms Page 18 of 18 CORPORATION: A legal entity, created by law as a legal person having certain powers and duties of a natural person, together with the rights and/or liabilities, distinct and apart from those of the persons composing it. A Corporation, however, never dies and only ceases to exist when and if it is dissolved through the proper legal process.
COST: Represents expenses in money, labor, material or sacrifices in acquiring or producing something.
COST BASIS: An original price, plus acquisition expenses; used for income tax purposes.
COUNTEROFFER: A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offerer.
COVENANT: An agreement, written into deeds and other instruments, promising performance or nonperformance of certain acts or stipulating certain uses or non-uses of the property; usually found in such real estate documents as deeds, mortgages, leases and contracts for deed.
Breakeven - The total carrying costs (annual expenses plus dept. service) as a percentage of gross income.
Effective gross to carrying costs - This ratio shows how many times the annual carrying costs are covered by the annual effective gross income.
Net operating income to debt service (Debt Coverage Ratio) - This ratio shows how many times the annual net income covers the annual debt service.
CPI: Available from the Bureau of Labor Statistics -- an index used as a basis for calculating rental increase adjustments. Several forms of the index are published.
CROSS-OVER FLOOR: A floor in which one bank of elevators connects to another bank of elevators, allowing tenants to have access to floors in other elevator banks without returning to the lobby of the building.
CT CABINET: The equipment at which a power company connects its meter; one square inch of copper buss will allow 1000 amperes.
DAMAGES: Money payment ordered by a court to be paid to one whose property rights or personal rights have been violated.
DAMPER: A valve or plate operated mechanically or manually to regulate airflow to or from any prescribed point.
DEALER: A person who holds property primarily for sale to customers in the ordinary course of his trade or business.
DEBT SERVICE: The annual amount of interest and principal paid on a mortgage loan.
DECLARATION OF RESTRICTIONS: A statement of all the covenants, conditions and restrictions (CC&Rs) that affect a parcel of land. A subdivider may note the restrictions on the map or plan when recording the subdivision plat. If the restrictions are numerous, the subdivider may also prepare a separate document called a declaration, listing all the restrictions, and then record this declaration. (See CC&Rs) DEDICATION: The voluntary transfer of land by its owner to the public for some public use which has been accepted for such use by authorized public officials on behalf of the public.
DEDUCTIONS: Itemized standard deductions and minimum standard deductions. The amount deducted from the gross income to arrive at the adjusted gross income.
DEED: A written instrument that, when executed and delivered, conveys title to or an interest in real estate.
DEED IN LIEU OF FORECLOSURE: Voluntarily signing over to a lender the property pledged as collateral on a defaulted loan. It is an alternative to a foreclosure action. Its main disadvantage to a lender is that the deed does not wipe out junior liens, as a foreclosure action would. (See Junior Lien)
DEED OF RECONVEYANCE: The transfer of legal title from the trustee to the trustor (borrower) after a trust deed debt has been paid.
DEED OF TRUST: Also known as a trust deed, an instrument used to create a mortgage lien; the trustor (borrower) conveys the title to a trustee who holds it for the benefit of the beneficiary (the lender).
DEED OF TRUST, ALL INCLUSIVE: A purchase money deed, which is subordinate to, but yet includes the encumbrance or encumbrances to which it is subordinated. Similar to a land contract except that title actually is passed, and may be guaranteed by title insurance. The seller remains as the trustor on the existing loan or loans.
Allard Commercial Brokerage –Glossary of Terms Page 20 of 20 DEED RESTRICTIONS: Clauses in a deed limiting the future uses of the property. Deed restrictions may take many forms. They may limit the density of buildings, dictate the types of structures that can be erected, or prevent buildings from being used for specific purposes or at all. Deed restrictions may impose a myriad of limitations and conditions.
DEFAULT: Failure to meet an obligation when due or to perform any provision of a lease, mortgage, or other agreement. The most common occurrence of default on the part of a buyer or lessee is nonpayment of money when due. A default is normally a breach of contract and the nondefaulting party may seek legal remedies to recover any loss.
DEFAULT JUDGEMENT: A court order resulting from the failure of a defendant to answer a complaint in a lawsuit.
DEFEASANCE CLAUSE: A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan.
DEFEASIBLE FEE ESTATE: An estate in which the holder has a fee simple title that may be divested upon the occurrence or nonoccurrence of a specified event. There are two categories of defeasible fee estates: fee simple on condition precedent (fee simple determinable) and fee simple on condition subsequent.
DEFECT OF RECORD: Any encumbrance on a title that is made a part of the public record.
Recorded defects include judgments, deeds of trust, mortgages, other liens and easements.
DEFECTIVE TITLE: A blemish, imperfection or deficiency. A defective title is one that is irregular and faulty.
DEFERRED PAYMENT: A payment program under which the total balance of principal and an amount for finance charge is put off (deferred) until the future. This balance is paid by means of installments over a long period.
DEFICIENCY JUDGEMENT: A court order to pay the balance (deficiency) owed on a loan after the proceeds from sale of the security are not sufficient to pay off the loan.
DEFINITE AND CERTAIN: Precise acts to be performed are to be clearly stated.
DEMISED PREMISES: Premises, or parts of real estate, in which an interest or estate has been transferred temporarily, such as an interest in real property conveyed in a lease.
DEMOGRAPHY: The statistical science dealing with the distribution, density, vital statistics, etc., of population.
Allard Commercial Brokerage –Glossary of Terms Page 21 of 21 DEMOLITION CLAUSE: A clause within a lease denoting the fact that if or when the ground lease has expired, the building will be demolished per such clause. Due to the demolition of the building, the lessor must notify the tenants within an established time of such condition.
DEPARTMENT OF REAL ESTATE (CALIFORNIA): The California agency that administers the Real Estate Law, including the licensing of real estate brokers and agents.
DEPOSIT RECEIPT: Also known as a sales contract; the primary document used to present an offer on real property.
DEPRECIABLE BASIS: In investment real estate, only structures can be depreciated. The depreciable basis is the original basis less the value of the land.
DEPRECIATION: Loss of value due to causes other than casualty. Depreciation usually includes (1) physical deterioration (ordinary wear and tear), (2) functional depreciation (see Obsolescence) and (3) economic obsolescence (see Economic Obsolescence). Curable when it can be remedied by repair or an addition to the property; incurable when there is no easy or economic remedy.
DEPRECIATION ALLOWABLE: The depreciation which is permissive by the Internal Revenue Service or other taxing authority or that amount which must be taken annually by the investor as an expense item and charged against the adjusted basis when determining capital gain.
DEPRECIATION, DECLINING BALANCE METHOD OF: Where the improvement portion of an investment basis is depreciated by a fixed percentage of the remaining balance each year over the useful life of the improvements, i.e., 150% of straight line for new. FOR FIRST USERS ONLY.
DEPRECIATION, STRAIGHT LINE METHOD OF: Where the improvement portion of the investment (less salvage value) is depreciated an equal amount each year over the useful life of the improvements.
DEPRESSED DOCK: See truck well.
DEREGULATION: A process where financial institutions that formerly had been restrained in their lending activities by the law are allowed to compete freely for profits in the marketplace.
DEVISE: A transfer of real property under a will. The donor is the devisor and the recipient is the devisee.
DIFFUSER: A device for reducing the velocity of airflow from a mechanical duct system supplying air. Its shape is usually circular or square and it is set in the ceiling at predetermined locations to diffuse air within that space.
DIRECT CHARGE OF OPERATING EXPENSES: On a NNN lease where the tenant does not pay costs directly.
DIRECT EXPANSION SYSTEM: Air conditioning in which cooling is achieved by the direct use of Freon in the cooling coil.
DISCONNECT SWITCH: The switch protecting a system from short-circuiting.
DISCOUNT: To sell a note for less than its face value. To receive the present value of a note, minus a deduction to cover interest.
DISCOUNTED CASH FLOW: Used in measuring the return from a real estate investment; the present value of a future income stream as determined by a given discount rate.