Confused About
Real Estate Terminology?


Real estate terminology can be very confusing.

When listening to your agent, lawyer or mortgage broker use real estate terminology while describing the real estate contract and the various clauses used during the process of buying and selling houses, does it sometimes seem like they're speaking a foreign language? To a novice, common real estate terms can certainly seem that way.

Do you hear real estate terms you've never heard before or may have, but still don't really understand? Have you ever heard real estate jargon that you always thought meant something completely different than what you're now told? Since you don't buy or sell a home everyday, it's quite understandable. Fortunately, the older and oft confusing 'legalese' terms have been replaced with more common language.

To get you through your real estate contract for purchase or sale, here's a realty glossary in alphabetical order, with commonly used and sometimes misunderstood real estate terminology.

How to Use this Page

  1. Click the term or phrase below to move directly to its explanation, or
  2. Click a letter to go to the group whose first word begins with that letter, or
  3. Contact me if your term or phrase is not included herein, or
  4. Submit your story and I may create a new page based upon your story.

A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  Z

Abstract of Title,   Acceleration Clause,   Acceptance,   Accrued interest,   Acknowledgement,   Adjustments,   Adverse Possession,   Affidavit,   Alienation Clause,   Amendment,   Amortization,   Appraised Value,   Appurtenance,   As Is Condition,   Assumable Mortgage,   Attornment of Rent

Balloon Mortgage,   Blended Payment,   Breach of Contract,   Buyer Agency 

Capitalization Rate,   Capitalized Value,   Caveat Emptor,   Certificate of Charge,   Certificate of Occupancy,   Cessation of Charge,   Chain of Title,   Charge,   Chattels and Fixtures,   Chattel Mortgage,   Client vs Customer,   Closed vs Open Mortgage,   Cloud on Title,   Collateral Mortgage,   Collateral Security,   Commission,   Commitment,   Completion Date,   Condition Precedent and Subsequent,   Confirmation of Acceptance,   Confirmation of Cooperation and Representation,   Conforming Loan,   Consideration,   Construction Advance,   Contingency,   Conventional Mortgage,   Conveyance,   Cooperating Brokerage,   Co-operative,   Counter-Offer,   Covenant

Damages,   Deed,   Deposit vs Down Payment,   Discharge of Mortgage,   Dominant Tenement,   Dower Interest,   Dual agency 

Easement,   Encroachment,   Encumbrance,   Environmental Issues,   Equity,   Equity of Redemption,   Escape Clause,   Escrow Account,   Escheat,   Estoppel Certificate,   Exclusive Listing,   Exculpatory Clause,   Expropriation

Fee Simple,   Freehold vs Leasehold,   Fully Amortized Loan

Gale Date,   Graduated Amortization Mortgage,   Grant,   Gross Rent Multiplier,   Gross Debt Service,   Guarantor

Highest and Best Use,   High Ratio Mortgage,   Hold Back,   Holdover Period

Income Property Loan,   Indenture,   Injunction,   Interest Adjustment,   Interest Escalation,   Interest-Only Loan,   Interim Financing,   Intestate,   Irrevocable Date 

Joint and Several Note,   Joint Tenancy vs Tenants in Common

Kitec Plumbing,   Knob and Tube 

Lawyer's Title Opinion,   Legal Description,   Lending Value,   Lessee vs Lessor,   Letter of Commitment,   Letter of Credit,   Liens and Encumbrances,   Lis Pendens,   Listing Agreement,   Listing Brokerage,   Loan to Value Ratio,   Lock-in Clause

Marketable Title,   Market Value,   Matrimonial Home,   Maturity Date,   Mechanics Lien,   Metes and Bounds,   Moratorium,   More or Less,   Mortgage,   Mortgage Broker,   Mortgage Postponement,   Multiple Representation,   Mutual Release

Negative Cash-Flow,   Net Operating Income,   Non-Recourse Loan,   Notice of DOR,   Notice to Conditional Buyer,   Notice of Fulfillment,   Null and Void

Open End Mortgage,   Open Listing

POLARIS,   Power-of-Attorney,   Power-of-Sale,   Prepayment Clause,   Prior Charge,   Property Assessment

Quantum Meruit,   Quit Claim Deed

Radon,   Redemption Period,   Registration and Discharge Dates,   Release of Covenant,   Rent Economic,   Representations and Warranties,   Requisition Date,   Right of Survivorship,   Right-of-Way,   Riparian Rights,   Running with the Land

Sale and Lease-Back,   Sealed and Delivered,   Seller Property Information Statement,   Setback,   Severance,   Sheriff's Execution Search,   Single Family Dwelling,   Specific Performance,   Spousal Consent,   Status Certificate,   Statute of Frauds,   Step-Up and Step-Down Lease,   Survey,   Survive and Not Merge on Closing

Tax Lien,   Termites,   Time Is of the Essence,   Title,   Title Insurance,   Title Search,   Torrens System,   Total Debt Service,   Transfer of Charge

UFFI,   Umbrella Mortgage,   Underwriter

Vacant Possession,   Valid,   Valuable Consideration,   Variable Interest Mortgage,   Vendor Take Back Mortgage

Waiver,   Wrap-Around Mortgage

Zero Lot Line,   Zoning


There is obviously lots of other location-specific real estate terminology in use, but in my area of the world, these seem to be the most commonly misunderstood. In your area, other real estate terminology may be more prevalent, but the ultimate meaning of the related terms will likely be similar, if not identical.  Also, I've included some real estate terminology that is oft found elsewhere with respect to finance and law. For my American guests, I've also included a few terms used in your country.


Confused about a particular real estate term that's not on the list? Have an interesting story to tell? Click here to submit your inquiry or your story.

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Abstract of Title

A written history of the title to a parcel of real estate as recorded in the local Land Registry Office.

Acceleration Clause

A clause in the mortgage document which immediately advances the maturity date of the loan. It states that upon default, the principal sum of the mortgage loan, along with accrued interest, becomes due and payable.

Acceptance

The time at which an offer to purchase is signed and accepted.  The fact that it was accepted must be, on a timely basis, relayed to the person that made the offer (or counter-offer) for all parties to be bound to the contract.

Accrued Interest

The interest on a loan which has accumulated and unpaid since the previous payment date as described in the loan document.

Acknowledgment

At the bottom of the signature page of a real estate sale contract, more correctly called an Agreement of Purchase and Sale (APS) - whether buying or selling, is an area where the parties to the contract affix their signatures, address, phone number and lawyer's contact information. By signing here, the parties are simply acknowledging receipt of a true copy of the real estate contract, which is legally necessary to form a binding contract between the parties.

The address portion may be particularly important for the delivery of notices, unless a clause is included in the agreement designating the agents as authorized recipients of any notices between the parties.

Adjustments

When you buy a home, you obviously require a down payment. Unless you have sufficient cash to pay the entire purchase price, you'll also require a mortgage.

A deposit is submitted with your offer or delivered to the listing brokerage upon acceptance of your offer by the seller. This deposit is credited toward the purchase price on the completion date (closing) as part of your down payment. The balance of your down payment, in addition to the full mortgage advance from your lender, is also paid to the seller on closing and adjusted to reflect such things as prepaid property taxes, monthly condo fees or fuel oil.

For example, if your closing occurs in the middle of the month and the seller has paid the full condo fee for the month, you owe them two weeks worth of fees for the last two weeks of that month. Similarly, if the seller has paid property taxes until the end of the year, it's your responsibility to reimburse them for the taxes applicable for that period of time from your closing date until year end.

Depending on when during the month the closing is scheduled to occur, adjustments could also include a partial month's interest on your mortgage. This is referred to as a mortgage interest adjustment.

If your 'new' home is heated with oil, the seller normally has the tank filled immediately prior to closing, and the cost of a full tank of oil is charged to you on the Statement of Adjustments prepared by your lawyer or closing service and credited to the seller. You'll typically hear such real estate terminology from your lawyer.

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Adverse Possession

This real estate terminology refers to a situation wherein someone other than the owner takes physical possession of a property without the express or implied consent of the owner.

Affidavit

A written declaration made under oath before a notary public or other authorized officer.

Alienation Clause

This clause, used in a mortgage loan document, enables the mortgagee (lender) to demand payment of the outstanding balance, including interest, from the mortgagor (borrower) upon sale or transfer of title of the subject property. It's also known as a "due on sale" clause.

Amendment

This real estate terminology refers to a common document which is used when one or more of the terms of your real estate contract require changing after it's been executed by both the buyer and seller. Real estate clauses, the price or completion date may be deleted, inserted or altered.

To be legally valid, it must be signed and dated by all parties to the agreement, with each receiving a true copy prior to the irrevocable (expiry) date of the amendment. It's also preferable, though not absolutely necessary, to have signatures properly witnessed. And since digital signatures are now in vogue, witness signatures seem to be going the way of the dodo bird. For more on amending a contract, click here.

Amortization

This common real estate terminology refers to the gradual retirement of a debt by means of scheduled partial payments of blended principal and interest at regular intervals. The amortization period is the prearranged allotted time, traditionally 25-30 years, to completely retire a debt through the scheduled payments. It's not to be confused with the 'term' of a loan, which is the date upon which a loan is renewed and interest rate adjusted to reflect then current rates.

An amortization schedule is normally produced to show each loan payment amount, what portion of each payment is applied to both the principal and interest, as well as the remaining balance to be paid. This schedule shows each payment until there is a zero balance and the loan is paid in full. At the half-way point of the time period to totally pay off the loan, the amounts of principle and interest are equal, as shown on the above illustration.  Click mortgages.for more information.

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Appraised Value

An estimate of property value as opined in a report by a qualified individual appraiser (AACI). Appraisals performed for mortgage lending purposes may not necessarily reflect the market value of the property or the purchase price. 

An appraisal is a professional determination of value.  Lenders usually require such a report of the property by a licensed, disinterested party before agreeing to loan money to a buyer to purchase the property.  The appraiser may employ one or more of several methods of determining its value, such as comparable sales in the immediate area, the cost approach, the income approach or the highest and best use of the property.

Appurtenance

Something which is outside the subject property itself, but belongs to the land and is joined thereto. For example, a road over the adjacent property owned by someone else, which provides access (right-of-way) to the subject property, is an appurtenance.

As Is Condition

This real estate terminology is used to disclaim any warranties or representations regarding the condition of a property. For example, a seller may include the major appliances with a listing of their property, but is not prepared to warrant, or guarantee, its continued operation. In other words, the buyer gets the fridge with the purchase, but if it's not working, too bad for the buyer. Such a phrase is often used in the case of older equipment such as a furnace or air conditioner.

Assumable Mortgage

This real estate terminology refers to the situation wherein the buyer takes over the existing mortgage on a property on the same terms as the original party (normally the seller) that obtained the mortgage. Thus, the buyer would not have to apply for a new loan. Though now quite uncommon in the current low interest rate economy, the buyer could assume the loan without having to financially qualify for it. However, mortgage requirements are now much more stringent.

Attornment of Rent

The redirection of rental income to a mortgagee (lender), usually in the event of default by the mortgagor (borrower).

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Balloon Mortgage Payment

This is a final mortgage loan payment of principle with any accrued interest at the end of the term which pays off the outstanding balance of a loan. It could also represent a partial payment before the remaining balance is renewed for another term.

A balloon mortgage loan requires that the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it were to be paid over a 30 year period, but requires that at the end of the 10th year, the entire remaining balance must be paid.

Blended Payment

Equal payments consisting of both principal and interest, paid regularly during,  and amortized over, the term of a mortgage.

Breach of Contract

Failure to fulfill an obligation under a contract such an Agreement of Purchase and Sale or a Lease Agreement. A breach confers a right of action on the offended party. For example, if a buyer fails to complete an Agreement of Purchase and Sale, they could be cited in violation of the terms of the contract, hense, in breach.

Buyer Agency

Another type of written real estate contract is called a Buyer Representation Agreement (BRA), which creates an agency relationship between a buyer and a real estate brokerage. It explains services to be provided by the brokerage, establishes a fee arrangement, term and specifies any obligations of the buyer. This type of agency has become quite common over the past couple of decades.

Normally, the principle obligation of the buyer is to work exclusively with the named brokerage during the term of the contract. The brokerage owes the buyer, his client, confidentiality and owes a seller (who is not a client of the same brokerage) fairness and honesty. In many areas, buyer agency has become the default arrangement between buyers and their agents.

To learn more about buyer agency and relevant real estate terminology, visit the Toronto Real Estate Board.

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Capitalization Rate

The rate of return anticipated by an investor in property. Click here for more on the subject of Return on Investment (ROI).

Capitalized Value

The value of a property based on the annual net income produced by said property.

Caveat Emptor

"Let the buyer beware". Prior to entering into an Agreement of Purchase and Sale, a buyer is advised to fully examine the property of interest and performing their due diligence, which should include a home inspection report. Rural property purchases should also include inspections of the well and possibly septic system.

Certificate of Charge

A mortgage loan document in the Land Titles System.

Certificate of Occupancy

This real estate terminology refers to a document to be obtained from the local municipal government which states that the new construction has been officially inspected and is constructed in accordance with building code regulations.  Thus, the property is ready to be occupied.

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Cessation of Charge

A discharge of a mortgage loan in the Land Titles System.

Chain of Title

The sequence of conveyances and encumbrances affecting a title to land from the time that the original patent was granted or as far back as records are available.

Charge

The name given to a mortgage document when title is registered under the Land Titles Act.

Chattels and Fixtures

The real estate terminology for items included and excluded in a sale are oft confused. In a typical Agreement of Purchase and Sale (APS), items such as non-installed major appliances, area carpets, plug-in electric lights, pool tables or curtains are often, but not always, included in the contract. As these are movable and not physically attached to the property, they are referred to as chattels. And unless specifically mentioned as being included in the contract, they are automatically excluded.

Fixtures, on the other hand, include such items as furnaces, air conditioner systems, drapery tracks, built-in appliances, installed broadloom, hard-wired electric lights, garage door openers (remotes, though actually chattels, are typically included with the opener), owned security systems and satellite dishes and attached swimming pool equipment. Unless specifically excluded in the real estate contract, anything that is physically attached to the property is automatically included in the purchase.

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Chattels, however, must be written into the agreement to be included in the sale, otherwise, they're automatically excluded from the sale.

If a furniture-type wall cabinet, for example, is physically attached to the wall, technically, it's considered a fixture. Thus, the seller's agent would be wise to inquire if such a piece is attached in any way and if so, exclude it on the listing. Otherwise a seller might be force to leave it behind.

A buyer may request a warranty (promise) from the seller that the fixtures and chattels will be in good working order on the date of completion, free and clear of any encumbrances (liens). The seller may refuse and instead, demand the buyer buy them on an “as-is” basis.

Rental items, such as hot water tanks, water softeners and sometimes furnaces and air conditioners, are excluded from a sale because a seller has no right to sell them. The buyer must agree to assume the rental contract(s) as part of the agreement. If there's no reference made to rental items, a problem could arise after closing when the rental company demands payment. If unpaid, they typically have the right to remove their equipment from the property or, depending on the terms of the rental contract, go after the previous owner.

Chattel Mortgage

An encumbrance against moveable possessions or personal property that may be removed without damage to the property. Examples are non-built-in furniture, unattached major appliances and uninstalled area rugs.

Client vs Customer

The regularly used real estate terminology defining the relationship between a buyer or seller and the brokerage is often confusing for the public.

A brokerage may provide services to buyers and sellers as clients or customers. If a buyer or seller prefers to have their own representation, they enter a Buyer Representation Agreement (also referred to as a Buyer Agency Agreement) or a Listing Agreement respectively and become a client of the brokerage.

If a buyer or seller prefers not to be represented as such, they become a customer of the brokerage. This would be documented in a Customer Service Agreement. Unlike a client relationship, the brokerage does not owe a customer the duty of confidentiality - only honesty and fairness. However, a brokerage can still provide many valuable services to a customer.

A buyer who chooses to be a customer must understand that "their" agent legally works for the seller as a sub-agent and owes the seller confidentiality. Therefore, anything a buyer says to "their" agent, while believing it's being said in confidence, must be relayed to the seller. In the vast majority of cases, the buyer elects to be represented as a client since to do so is in their best interests.

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Closed vs Open Mortgage

A closed mortgage loan is a reference to the absence of the privilege to accelerate repayment during the term of a mortgage loan either by bulk payment(s) or increase to scheduled remittances. In other words, the loan cannot be paid off, in part or in full, prior to maturity.

On the other hand, an open mortgage is issued without the restriction or denial of repayment rights until the maturity of the mortgage. If specified as open, the mortgagor (borrower) can make extra payments of principal at any time or at specified times, with or without repayment penalty.

Cloud on Title

This real estate terminology refers to any encumbrance or claim that affects title to a property.Typically, the cloud must be removed before a mortgage loan may be advanced and registered on title.

Collateral Mortgage

A mortgage which secures a loan given by way of a promissory note. In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.And this loss is normally orchestrated by the lender by way of a power-of-sale or foreclosure proceedings.

Collateral Security

An additional form of security, pledged to reduce the risk of a mortgagee for a lender.

Commission

With the onslaught of negotiable commission rates, flat fees and mere postings to our MLS® system since late in the last century, this part of our industry's real estate terminology has become quite topical.

When a homeowner enters into a listing agreement with a real estate brokerage, authorizing the brokerage to market their property, the homeowner agrees, amongst other things, to pay the brokerage for its services by way of a commission, usually but not always calculated as a percentage of the sale price of the property. It could also be a flat fee, and is payable upon the date set for completion or closing of the Agreement of Purchase and Sale (APS).

Sometimes, under the terms of a BRA, a buyer must pay a commission to their agent. In the vast majority of cases, however, the seller pays the buyer's agent, referred to as the cooperating brokerage (CB) in the agreement, through the listing brokerage. If the BRA states that their agent is to receive a certain commission as stated on the listing and during negotiations, the CB commission is reduced, the buyer could be held responsible to pay any difference between what was contractually promised in the BRA and what is to be paid by the seller. This reduction must be indicated on the Confirmation of Cooperation and Representation and agreed by all parties, including the buyer.

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Commitment

Also referred to as a mortgage commitment, this common real estate terminology refers to a written notice from a lender that advises of its approval to advance a specified amount of funds, such as for a mortgage loan, under certain conditions. Typically, the borrower must financially and legally qualify to be granted such approval.

Completion Date

When a buyer and seller enter into an Agreement of Purchase and Sale ( APS), along with numerous other terms and conditions, the agreement must include a completion date when the balance of funds are to be paid by the buyer to the seller in exchange for possession and the transfer of clear title to the buyer. The more common real estate terminology for this is closing date. For information about altering a closing date, click here.

Condition Precedent and Subsequent

Condition precedent requires that an event or action is necessary before an Agreement of Purchase and Sale (APS) becomes binding. Condition subsequent refers to a future event upon the happening of which the contract becomes no longer binding on the parties. For normal real estate transactions, the former type is used most often. For example, a mortgage loan must be approved or a satisfactory home inspection report must be obtained before the APS becomes firm and binding.

Confirmation of Acceptance

Once the negotiations of an Agreement of Purchase and Sale (APS) are complete, the last party to affix their initials to the document must also add their signature, date and time on the appropriate line on the signature page. This confirms the final acceptance date and time from which the clock begins to tick for any time-related conditions that may be contained in the agreement.

For example, unless stated otherwise in the agreement, the deposit must typically be delivered to the listing brokerage within 24 hours from this date and time.

Confirmation of Cooperation and Representation

This standard form, executed by all parties to an Agreement of Purchase and Sale (APS), including the two agents on behalf of their respective brokerages, must form part of every real estate transaction in Ontario when a brokerage is involved. It sets out the relationships between the buyer(s), seller(s) and brokerages, that is to say, who is working for whom.

It also states what commission will be paid to the cooperating brokerage representing the buyer. If there's no cooperating brokerage, then the appropriate real estate terminology is multiple representation, also known as dual agency. This is also stated on this form, wherein all parties provide their consent and acknowledgment to the dual agency relationship.

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Conforming Loan

A mortgage loan in the USA that meets underwriting guidelines for the Federal National Mortgage Association, a government agency that is a major mortgage investor, commonly known as Fannie Mae (FNMA), and the Federal Home Loan Mortgage Corporation, also known as  Freddie Mac (FHLMC), a publicly held corporation that buys mortgages and thereby creates a flow of funds to mortgage lenders.

Consideration

This real estate terminology, simply expressed, is the legal concept of something of value that is given in exchange for something else.  People often think of consideration erroneously as being just the money exchanged by the parties. Legally, however, consideration is actually the obligation that each party makes to the other to make the contract enforceable. Each party to the contract must obligate themselves by including some type of consideration in the Agreement of Purchase and Sale (APS).

Valuable consideration, on the other hand, is more specific; it's the money or a promise of something that can be measured in terms of money. And good consideration is a promise that cannot be measured in terms of money, such as love and affection.

Either type of consideration is sufficient to enforce a contract. The law doesn't usually concern itself with the fairness of the consideration, nor does whatever is exchanged need have the same measurable value. Courts will accept that the parties thought the consideration fair because they freely agreed to the exchange.

A common misconception is that the good-faith deposit submitted with a real estate contract is the consideration. However, the deposit is made by a buyer only to assure the seller that the buyer is serious about the transaction and intends to purchase the property, provided, of course, all conditions are fulfilled.

Construction Advance

Moneys advanced by a lender to the borrower under the terms of a short-term construction loan. When someone is building a new home, for example, their lender will typically advance the loan by way of periodic, predetermined installments based on the progress of the construction project. The final advance is usually made on its completion, at which time, it is converted into a regular mortgage loan and registered against the subject property.

Contingency

This real estate terminology, more common in the USA, is a condition that must be met before a contract becomes a valid legally binding contract. The condition provides an escape from performing if the condition is not fulfilled. Upon the buyer satisfying their condition, they would sigh a Notice of Fulfillment or a Waiver. If the condition is not fulfilled, the buyer would sign a mutual release. And after the seller has affixed their signature to the release, normally the deposit is returned to the buyer.

Conventional Mortgage

This common real estate terminology refers to a mortgage loan which does not exceed 75% of the lending value, or appraised value, of the property. Mortgages that exceed this limit are known as high ratio loans and must be insured by CMHC or similar insurance provider.

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Conveyance

The transfer of property ownership. Also, the written instrument whereby such a transfer is effected. Conveyance includes a mortgage, charge, lease and others.

Cooperating Brokerage

In most real estate transactions, there are two brokerages involved - the listing brokerage representing the seller and the cooperating brokerage acting for the buyer. Sometimes, the same brokerage represents both parties, as a dual agency (multiple representation). In such a situation, there is no cooperating brokerage involved in the transaction.

Co-operative

The ownership of a separate space in a multiple-unit dwelling or complex with proportioned tenancy and common ownership of common elements, which are used jointly with all owners. However, unlike a condominium, the owner does not have clear title to a specific unit, but becomes a shareholder of the corporation which owns all the property. The occupant has a tenancy agreement subject to shareholders agreement which is administered (like a condo) by an elected board of directors.

Counter-Offer

If the offer recipient makes any changes to the original offer from the other party, it is considered a rejection of the initial offer and thus, becomes a counter-offer. If this 'new' offer is acceptable to the other party, it must be accepted prior to the expiry of the irrevocable date of the counter-offer.

Covenant

An agreement contained in an instrument, such as an Agreement of Purchase and Sale or a lease, creating an obligation by one party to the other. Such a promise may be positive, stipulating the performance of some act, or negative or restrictive, forbidding the commission of some specific act.

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Damages

Compensation or indemnity by one party to the other for loss owing to breach of contract.

Deed

A document signed by the seller and buyer transferring ownership. This document is then registered against the property in the local Land Titles Office. A deed restriction is sometimes included to limit or govern the use of the land.

In the USA, a Deed of Trust is used in some states to convey property being held as security for a loan. This document is then conveyed to a trustee and can be used  to sell, mortgage or subdivide the subject property.

Deposit vs Down Payment

This real estate terminology refers to monies submitted with or upon acceptance of an offer. Sometimes referred to as Earnest Money, it is often confused with the monies paid by the buyer on closing. It is not the down payment. It's usually made payable to the listing brokerage, held in their trust account, sometimes referred to as Escrow Account, and normally credited to the buyer on closing as part of their purchase price.

The deposit provides a level of comfort to the seller that the buyer will honour the terms of the agreement and close on the date agreed for completion.

Some brokerages insist on bank drafts or certified cheques, but non-certified is often acceptable. However, if a buyer fails to satisfy a condition in the APS and a mutual release is executed, the return of their deposit may be delayed because the listing brokerage must await the clearing of the cheque before they can issue their own. Thus, it's a good idea to pay by certified cheque, bank draft or money order.

Discharge of Mortgage

A document executed by the mortgagee (lender) and given to the mortgagor (borrower) when a mortgage loan has been repaid in full before, at or after the maturity date.

Dominant Tenement

This more obscure real estate terminology refers to the estate which derives benefit from an easement over a subservient estate, as in a right-of-way.

Dower Interest

Another obscure real estate terminology refers to a wife's interest in the lands of her husband accruing to her by virtue of the marriage. Oh, the times, they are a-changin'.

Dual Agency

Occasionally, a brokerage will represent both buyer and seller in the same transaction. Both parties must provide written consent to this arrangement prior to entering into any Agreement of Purchase and Sale (APS). Since the brokerage's loyalty is divided between each of the parties, who obviously have conflicting interests, it's absolutely essential that a dual representation relationship be properly explained, documented and acknowledged by all parties.

Normally, under a dual agency situation, an agent can discuss all the contractual terms with both parties - except for price and motivation, which must be kept confidential with each respective party. And of course, the agent must be fair and honest with each party without disclosing confidences.

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Easement

Since easements are extremely common, this real estate terminology rarely crops up in the home trading business. An easement, which is registered on title, is a non-possessory interest in real property owned by someone else to use for a specific purpose. Often, for example, utility companies have easements so they may enter onto a property to service their equipment. Unlike a lease, an easement doesn't give the holder a right of possession of the property.

A license, which is a lesser interest than an easement, gives a holder a personal privilege to only use the land of another for a limited purpose. For example, a license, which can be terminated more easily than an easement, is granted when a landowner gives his neighbor verbal permission to park his car in the landowner's driveway.

An easement also differs from a license in that the benefits of most easements flow to an adjacent parcel of land - not to a specific person. As such, the owner of the adjacent land that benefits from the easement will continue to enjoy the easement, even if he's not the initial owner of that property. A right-of-way, easement of support (pertaining to excavations), easement of light and air, and rights pertaining to artificial waterways are examples of easements.

Encroachment

This real estate terminology refers to the unauthorized intrusion onto the lands and property of another.

The right to an encroachment by one landowner over an adjoining owner's property is sometimes granted by express written agreement. Examples are when a window sill, eave, deck, porch or chimney extends over a side yard area. This is particularly common in older urban areas with narrow side yards. When the overhang is no longer present, the encroachment ceases to exist. Except by further agreement, no right to substitute an encroachment exists if one is lost.

An agreement permitting the encroachment of an improvement onto an adjoining parcel of land may be registered against the title of both properties affected by the encroachment.

Under an encroachment agreement, the owner whose land has been encroached upon by the improvement, essentially forebears from exercising his/her legal right to require the improvement be removed from the land. Encroachment agreements are often encountered where one owner has inadvertently constructed a building, fence or driveway over adjoining land.

An encroachment agreement may contain provisions that call for the removal of the offending improvement upon the occurrence of some future event, such as destruction by fire or wind or by a specific time. The market value of the property may be adversely affected to the extent that a risk exists and/or that the offending improvement might have to be removed at a certain time or in the event of partial or full destruction by fire or other cause.

Encumbrance

An outstanding claim or lien recorded against a property, or any legal right to the use of the property, by another person who is not the owner.

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Environmental Issues

Environmental issues, commonly referred to as environmental hazards, are significant factors in real estate transactions. Agents must ensure accurate information is provided to clients and customers, and that due care is taken by advising them to seek expert advice from environmental auditors and specialist lawyers. No easy method exists to categorize significant hazards. In some instances, hazardous conditions have not gained widespread public awareness or condemnation. Consequently, agents are challenged with everyday marketplace negotiations complicated by vagueness and ambiguity.

Hazardous waste depots are provided in most urban areas for dropping off such items as spray paints, glues, cement, paint strippers, enamel and latex paints and stains, insecticides and herbicides, rodent poisons, thinners, unused medicines, nail polish remover, wood preservatives, rust removers and compact fluorescent light bulbs (which contain mercury, a highly toxic substance). Hazardous products should not be disposed of as ordinary garbage or down drains. Considerable literature is available at the federal, provincial/state and municipal levels (Toronto) to provide guidance on such matters.

Equity

This real estate terminology refers to the value of real estate over and above the mortgage(s) registered against the property.

Equity of Redemption

The right of the mortgagor to reclaim clear title to the real property upon full repayment of the debt.

Escape Clause

If you happen to come across this bit of real estate terminology, you're either a buyer offering on a property, conditional on your house selling, or a seller who has been presented with an offer from a buyer with a house to sell.

Basically, this clause provides the opportunity for a buyer, who currently owns a home,  to offer on a property without the risk of owning two homes if their current property fails to sell. It also allows a seller to accept such an offer and to continue marketing and entertaining offers.

For a more detailed explanation of this common real estate term, click here.

Escheat

The reversion of property to the state (yes - the government) in the event that the owner thereof dies , leaving no valid Last Will and Testament, and having no legally qualified heir to whom the property may pass by lawful descent. You definitely don't want this to occur; get a will made!

Escrow Account

An account held by an agent on behalf of his or her principal for the payment of money due to a third party on the event of specified incidents. For example, a seller's solicitor or real estate brokerage can hold funds on the seller's behalf until a property title deed has been delivered, the property is registered and keys delivered to the buyer. Another example is an account maintained by a mortgagee (lender) for the payment of property taxes or life insurance premiums.

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Exclusive Listing

Before the introduction of the Multiple Listing Service (MLS)®, whenever a homeowner wanted to sell their home, they hired a real estate brokerage to list their property. A listing contract was signed by the homeowner that included the address, asking price, expiry date of the contract and all the usual real estate terminology. The brokerage installed a lawn sign and began an advertising campaign, usually in the newspaper. Eventually, it would sell or the contract would expire.

Occasionally, an real estate sales person from another brokerage saw the ad or sign and asked if the listing brokerage would cooperate by allowing him or her to show that listing, and if an offer was generated, pay a cooperating brokerage commission. This express permission would be necessary because all listings during those times were exclusive to just one brokerage.

Nowadays, exclusive listings are rare because homeowners want the huge exposure offered by the MLS® system and the Internet.

When an exclusive listing is created, it's usually because the agent already has a prospective buyer for the property. Thus, there's no need to share the listing. Of course, the seller must agree to this limited method of marketing their home.

Sometimes, a seller may prefer a quiet sale because they're in no rush, or they prefer their own agent sell it themselves. In any case, the exclusive agent, who is in no way compelled to cooperate with another brokerage, must share the listing with fellow sales people of their own brokerage. All listing contracts actually belongs to the brokerage and not solely the sales person who obtained the exclusive (or MLS®) listing.

Exculpatory Clause

Another rare bit of real estate terminology refers to the clause in a contract which excuses one party to a contract from personal liability to the other in the event of a default by the former.

Expropriation

Simply expressed, this is the legal term for the act of forcefully taking privately owned property for public use. Eminent domain, land acquisition, compulsory purchase, resumption, resumption/compulsory acquisition or expropriation are all terms meaning the power of a state, provincial or national government to take private property for public use.

Eminent Domain is the right of government to buy private property for public uses such as for schools, roads, parks, hospitals and other public buildings.  Owners receive compensation based on fair market value and sometimes additional funds for the inconvenience of moving. Bottom line - the victim still loses their property!

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Fee Simple

In English law, a fee simple or fee simple absolute is an estate in land, a form of freehold ownership. It is a way that real estate may be owned in common law countries, and is the highest possible ownership interest that can be held in real property. Thus, it's the highest absolute right in real property - after the government's really absolute right to levy property taxes on you. of course.

Freehold vs Leasehold

Freehold is the oldest and most common type of ownership of a tract of land and the building(s) thereon. Leasehold, the other common type of interest in a property, differs in that certain possession is only granted for a specified period of time as described in the contract, typically a lease.

Fully Amortized Loan

A mortgage loan wherein the stipulated repayments repay the loan in full by its maturity date. Such loans are quite rare these days. But many years ago, it was common to have a mortgage loan that was amortized over 25 years to also have a 25-year term. In other words, the terms, including the interest rate, remained the same until the loan was finally paid off. Often, such loans were assumed by the buyer.

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Gale Date

The dates on which interest is charged or compounded on a mortgage loan.

Graduated Amortization Mortgage

A special method of repayment on a mortgage loan whereby repayments in the initial period are low and incrementally increased to a higher rate over the term of the loan. This type of loan was devised to enable lower income families to become home owners. The negative aspect of such loans was that initially, while the payments were lower, the outstanding debt increased incrementally.

Grant

A technical term used in deeds of conveyance to indicate a transfer of an interest or estate in land. The Grantee is the party to whom an interest in real property is conveyed, normally the buyer, and the Grantor is the person who conveys an interest in real estate by deed, normally the seller.

Gross Debt Service

GDS is the percentage of gross (total) annual income required to qualify to carry the payments of a mortgage loan. GROSS DEBT SERVICE RATIO is the allowable percentage ratio of payments for principal, interest and taxes to gross income. GROSS INCOME is the total income of the mortgagors (borrowers) from all sources, customarily stated on an annual basis.

Gross Rent Multiplier

This real estate terminology refers to a method of appraising the fair market value of property by multiplying the gross rents by a factor, which varies according to the type and location of the property.

Guarantor

A third party without interest in the subject property who agrees to assume responsibility for the debt in the event of default by the mortgagor (borrower). In my experience, parents often fill this role for their adult children when their kids want to buy a car or qualify for a mortgage loan.

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Highest and Best Use

This real estate terminology is typically used with respect to commercial or industrial property. It's defined as the use which, at the time of the appraisal, is most likely to produce the greatest net return in money or amenities to the land over a given period. Net return may be monetary, as with an income property. Or in the case of a single-family dwelling, it may take the form of amenities such as pride of ownership, comfort and convenience. In cases where a site has existing improvements, the present use may fail to meet the criteria of this definition. The highest and best use may be determined to be different from the existing use. The present use will typically continue, however, unless and until land value in its highest and best use meets or exceeds the total value of the property in its existing use.

In estimating market value, the appraiser must consider not only the current use, but also the likely uses to which it is adapted and is capable of being used in the reasonably foreseeable future. Purely speculative future uses may not be considered.

Since property owners normally utilize their property as advantageously as possible, and since economic pressures usually dictate the optimum or most profitable use, the highest and best use of a property will most often be its present use. However, this is not always the case. Instances exist where owners, for various reasons, do not use their property at its highest and best use. This is especially true along major new highways and rapidly expanding areas where sudden changes in demand occur and appropriate uses are necessitated. Also, the passage of time typically causes radical changes in optimum land usage.

High Ratio Mortgage

A mortgage loan that exceeds 75% of the lending value of the property, which is not necessarily equal to the market value or purchase price. Such a loan must be insured against default of payment by the mortgagor (borrower). The loan ratio is the general term referring to the ratio of the principal amount of the loan to the lending value of the property.

Hold Back

An amount of money retained by a construction lender or property owner until satisfactory completion of the work performed by a contractor. To learn more about hold backs, I invite you to read this Globe and Mail column.

Holdover Period

This bit of real estate terminology is from a listing contract with a seller. It refers to the period following the expiry of the contract.

The duration is agreed upon between the agent and the seller(s), but a typical period is 60 days. During this time, if the seller or someone on behalf of the seller agrees to or accepts an offer to purchase the subject property from a buyer who had been introduced to or shown the property by the listing brokerage from any source during the term of the listing, the seller must pay the brokerage the contractually agreed commission.

After the expiry date of the listing, if the seller enters into a new listing agreement with another brokerage, his liability to pay commission to the first brokerage is reduced by the amount of commission due to the second brokerage.

For example, if the original brokerage commission was to be 5%, and the seller signs a new contract with a competing brokerage at 4%, and the property subsequently sells to a previously introduced buyer as described, then the seller may still be liable to pay the first brokerage a commission of 1% of the sale price (plus applicable HST in Ontario).

This clause is included in all listing contracts to discourage the practice of an unscrupulous buyer, who was introduced to a listed property by an agent during the term of the contract, usually near the expiry date, from returning after the expiry date to attempt to buy the property privately, and to dishonourably exclude the brokerage and deprive it of its rightful commission.

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Income Property Loan

A loan which is secured on a property with an existing source of income, such as rents from a basement apartment or other secondary unit, which will be sufficient to service the payments on the loan.

Indenture

A document of deed expressing certain objects between the parties, such as a debt or purchase obligation. It specifically refers to two types of practices: in historical usage, an indentured servant status, and in modern usage, an instrument used for commercial debt or a real estate transaction.

Injunction

This terminology refers to a judicial process or order requiring the person to whom it is directed to do or refrain from doing a particular thing.

Interest Adjustment

The date from which interest on the mortgage loan advanced is calculated for the regular payments. This date is usually one payment period before regular mortgage payments begin, as interest payable is due from the date the mortgage loan funds are advanced.

Interest Escalation

The rate of interest on a loan is increased periodically during the term of the loan, thereby encouraging early repayment of the outstanding loan balance.

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Interest Only Loan

The mortgagor (borrower) makes payments of interest only on a loan, usually on the depreciating balance, with no amortization of the loan until a later date, possibly the end of the term. Such loans are popular when a buyer plans to re-sell the subject property soon after closing on the purchase, or if they prefer to develop income from the property before amortization.

Interim Financing

Interim loans are used to bridge the gap between the construction loan and the permanent loan. Such loans are often referred to as bridge loans.

Intestate

A person who dies without a Last Will and Testament, or leaves one which is defective in form, in which case the estate descends by operation of law to the next of kin.

Irrevocable Date

An irrevocable date is always included in an offer to purchase or an amendment to an existing contract. If the recipient of the document fails to accept it during this open period by affixing their signature(s), and prior to the expiry of the irrevocable date and time, then the 'offer' effectively will expire. The offer cannot be legally revoked or withdrawn by the party making the offer once they sign it. But it is automatically revoked if not accepted by the recipient prior to this date and time. This is a prime example why in any contract situation, time is of the essence.

Having said this, sometimes, a conditional offer might be withdrawn by a buyer prior to the stated irrevocable date in the offer because they simply changed their mind about buying the property. In such a case, unless special circumstances exist, since the buyer could easily not fulfill their conditions, thereby ultimately escaping the transaction anyway, it's practical to permit them to revoke their offer and save everyone a lot of time and effort. There's no point in removing the listing from the market for an offer that is doomed to fail anyway.

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Joint and Several Note

A promissory note on which there are two or more promisors who are jointly and severally liable. In other words, either party individually, or both parties, are responsible for repayment of the debt.

Joint Tenancy vs Tenants in Common

Joint Tenancy is a category of land ownership by two or more persons whereby, on the death of one, the survivor or survivors assume ownership of the whole estate. This is the most common type of ownership in use for matrimonial homes.

The other category sometimes found is referred to as Tenants in Common. This type of ownership provides that the interest of the deceased does not automatically pass to the surviving named property owner(s). Instead, it is treated as an asset of the deceased's estate.

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Kitec Plumbing


Kitec® plumbing has become somewhat controversial in the marketplace. One alleged issue is with fittings that contain high levels of zinc, resulting in corrosion and weakness over time. The results could be leaks and water damage to the home, clogging, poor water pressure and flow or dark spots and/or blisters forming on the pipe.

The products most often involved in lawsuits are usually blue on cold water pipe and red or orange on hot water pipe. It may also be black, white or grey. Heating system piping is most often orange. Check for it near the hot water tank or the boiler, under the kitchen sink or bathroom vanities. Or there may be a notice on the electrical panel stating that Kitec® is used in the home, warning electricians not to ground the electrical system to it. Arguably the best way to determine if such plumbing is installed is to ask a professional home inspector or a plumber.

If you find Kitec® plumbing in your house, and would like to explore the possibility of reimbursement, as a precautionary measure, it's advisable to register with the class action website www.kitecsettlement.com prior to 2020.

In the meantime, watch for white corrosion on brass fittings, any discolouration or a drop in water pressure, particularly on the hot water pipes, and for black spots or blisters on the pipe, especially near the water heater.

For more information, visit the Carson Dunlop website page that addresses the subject in more detail. There's also an informative article by Bob Aaron, a local real estate lawyer, who writes a column for the Toronto Star.

Knob and Tube

This real estate terminology is rarely seen nowadays, unless you're buying an old house. Knob and tube wiring was used extensively in residential construction prior to 1950. The name derives from the ceramic knobs by which the wire is secured and the ceramic tubes through which it passed through wood-framing members such as studs and joists. Wire insulation breakdown is the most frequent reason for replacement.

Your realty agent must be aware of recent concerns regarding knob and tube electrical systems. In particular, insurance companies are increasingly cautious both about 60-amp services and older buildings with knob and tube wiring. While some insurers will renew existing policies on such properties, a change of ownership and/or selection of a new insurer can mean a declined application.

Older systems may not be inherently dangerous, but problems can arise with overloading due to new higher demand appliances and other modernization. A fire inspection of an older building might expose the need for expensive  electrical system repairs.

Thus, if you're offering on an older house that might be wired with this antiquated wiring system, it would be wise to include a condition in your offer allowing you to obtain written confirmation that you'll be able to obtain an insurance policy.

No insurance = no mortgage loan = no closing

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Lawyer's Title Opinion

This real estate terminology refers to the service provided by a lawyer, normally in the form of a letter, stating the lawyer's view of whether or not a buyer has good and marketable title to the property. It includes search and inquiry results, along with any outstanding issues that may affect future title to the property.

Title insurance can be arranged to safeguard a buyer or a seller, and is particularly important if there is even a remote possibility of an issue arising regarding title to a property. In my experience, the growing popularity of title insurance policies have been rendering lawyer title opinions redundant.

In any real property transfer, the legal description must be included in any and all documents pertaining to the transfer. This entails adding the municipal lot and plan numbers, possibly a block or reference plan number, or in the case of a condominium, the corporation, level and unit numbers. For a rural property, it would be the concession and lot or part lot numbers, possibly east or west half or something similar, approximate acreage and the frontage, depth and any irregularities of the lot or parcel.

I also normally included a brief description of the property using phrases such as detached brick dwelling with an attached double garage and paved private driveway. I realize many agents don't follow this practice anymore. So, call me a bit old fashioned, but it doesn't hurt, and may help clarify what is actually being purchased. It's best, though, to use concise, unambiguous real estate terminology.

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Lending Value

An independent appraiser's opinion of value and interpreted by the lender regarding the worth of a property in the current market, given a reasonable time period to sell the property. This value doesn't always coincide with the purchase price, or even what might be considered fair market value.

Lessee vs Lessor

A lessee is an individual or corporate tenant under a lease agreement. A lessor is the person or corporation, commonly referred to as a landlord, who grants use of the property under a lease to a tenant.

Letter of Commitment

A letter written and issued by a lender, which includes the face amount of the loan, the specified interest rate, the term and any specific conditions. Such letters are often issued subject to the confirmation of income, down payment and satisfactory credit report of the buyer(s).

Letter of Credit

A letter issued by a lending institution promising payment to a third party in accordance with the terms of an agreement. Such letters may be used in situations where a deposit or a security is required, such as when a builder is about to sign a contract and must provide security that the job will be completed.

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Liens and Encumbrances

A lien is a form of non-possessory security interest granted over a property to secure the payment of a debt or performance of some other obligation. There are many types of liens, but most common are mortgages, secured credit lines, mechanics liens or those granted as security for installed rental equipment such as a furnace or home security system.

An encumbrance is legal real estate terminology for anything that affects or limits the title of a property, such as a mortgage, lease, easement, lien or restriction. Also, those considered as potentially making the title defeasible (voidable) are also encumbrances. For example, charging orders from a court on behalf of a creditor, or a work order from the local municipality, can result in a title transfer not being fulfilled unless such order is satisfied. In other words, the debt must be paid before title can transfer.

A lien hold-back is a percentage of the contract price or estimated cost of work to be done which is held back from a mortgage advance.

Lis Pendens

A legal document giving notice that an action or proceeding is pending in the courts which affects the title to the subject property.

Listing Agreement

This is a contract that establishes an agreement between a brokerage and a seller (vendor) and creates an agency between the parties. It basically details services to be provided by the brokerage, the fee for said services and any seller obligations.

A listing agent must share with their seller any knowledge about a prospective buyer, including, if known, whether or not a buyer will pay more for the seller's property. The exception to this rule, however, is if the buyer is also a client of the same brokerage under a Buyer Representation Agreement (BRA). Then, the dual agent must maintain confidentiality on behalf of both clients in the transaction. A buyer working as a customer with a listing agent can expect fair and honest service from the seller's agent, and disclosure of pertinent information about the subject property.

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Listing Brokerage

A real estate brokerage that enters into a contract with the titled owner or someone legally authorized to act on the owner's behalf, such as someone with power-of-attorney, to market a particular property in exchange for a commission, is referred to as the listing brokerage. Typically, the choice is to list the property on the MLS® system, but occasionally, a property owner chooses to list exclusively with one brokerage.

The listing brokerage can act as the 'selling' brokerage, but is not referred to as such.

Usually, in the successful marketing of a property, there are two brokerages involved - the listing brokerage, representing the interests of the homeowner, and the cooperating brokerage which does the same for the buyer. Usually, only the listing brokerage has the right to advertise the listing, including the placement of a for sale and sold sign on the property.

Occasionally, a seller and listing brokerage grant the right to advertise to a competing brokerage, but this permission must be in writing. And nowadays, many brokerages are members of listing advertising exchange groups wherein property listing details and photos are advertised by all members of that group on a common marketing website.

Loan to Value Ratio

LTVR is the ratio of the mortgage loan to the lending value of a property, expressed as a percentage.

Lock-In Clause

A clause which restricts prepayment of loan principle during a specified period of the whole term of the mortgage. The inclusion of this arguably onerous clause ensures that the lender receives a stipulated return on its investment since it discourages a borrower from "shopping around" for another loan with more attractive terms. (Personally, I believe such Draconian policies should be outlawed.)

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Marketable Title

A property title which a court of equity will consider to be so free from defect that it will enforce acceptance of the title transfer by a buyer.

Market Value

Market value is defined as the highest price in terms of money, that a property will bring to a willing seller if exposed for sale on the open market, allowing a reasonable time to find a willing buyer who is buying with the knowledge of all the uses to which the property is adapted and for which it can be legally used, and with neither buyer nor seller acting under necessity, compulsion nor peculiar and special circumstances.

Market value is not to be confused with market price, which is an accomplished or historic fact, as the amount paid or to be paid for a property in a particular transaction. Market price tends to closely align with market value in an efficient market system involving willing, informed parties acting rationally and prudently and given reasonable periods of time with no undue influences. Successive market prices in the sale of comparable homes form the basis of estimating the market value of a particular property.

Matrimonial Home

This legal real estate terminology refers to any property in which a person has an interest and that is or has been occupied by the person and his or her spouse as their family residence. Such designation could include freehold detached, semi-detached and townhouses, condominium apartments and townhouses, co-operatives and leasehold properties.

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Maturity Date

The last day of the term of a mortgage loan agreement, at which time a mortgage loan must be paid in full or the agreement renewed by agreement between the mortgagee (lender) and the mortgagor (borrower).

Mechanics Lien

A claim against the state or interest of the owner in a property for labour, services or materials supplied to it.

Metes and Bounds

A system of land description whereby all boundary lines are set forth by use of terminal points and angles. Mete refers to a limit or limiting mark, and bounds refers to the boundary lines. Such real estate terminology is used on surveys.

Moratorium

Legislation enacted to assist debtors by postponing or suspending their contractual payments.

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More or Less

A term typically found in a property's legal description. Its use is intended to cover slight, unimportant or insubstantial inaccuracies contained in the description to which both parties are willing to assume risk.

Mortgage

Since the correct usage of this word includes the word "loan", this is arguably the most misused real estate terminology anywhere.

A mortgage loan is a loan secured by real property through the use of a document which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word 'mortgage' alone is most often used in everyday usage to mean mortgage loan. It's not unlike the common misuse of the term "condo" for a condominium apartment.

More simply stated, when someone with insufficient cash to pay the full price wants to purchase property, they must borrow the needed balance from a credit union, bank or trust company (mortgagee). Mortgages can also be arranged with the services of a mortgage broker or agent.

This loan becomes a mortgage and is registered on the title of the property, with monthly or weekly payments of blended principle and interest being made by the borrower (mortgagor). The amount of the payment is determined by the principle amount of the loan and interest rate, and the amortization period or the number of years it would take before the loan is fully paid. The rate of interest remains constant for the term of the loan, often one to 5 years or longer, or unless it's a variable rate mortgage, which usually varies directly with the bank prime lending rate or other pre-selected index.

A mortgage is the transfer of an interest in property (or the equivalent in law - a charge) to a lender as a security for a debt (loan of money)

While a mortgage in itself is not a debt, it's the lender's security for the debt. This transfer of interest from the owner to the lender is made on the condition that such interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, when the debt is finally paid in full, the borrower truly owns the property.

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Mortgage Broker

A person, acting as intermediary between a lender and a borrower, originates real estate loans and allocates mortgage funds. They typically seek the best possible arrangement and satisfaction of all concerned. Such people, licensed by the Financial Services Commission of Ontario, are also known as underwriters, correspondent or investment dealers. And often, they're licensed as mortgage agents operating under the supervision of a licensed mortgage broker.

Mortgage Postponement

The process whereby a mortgagee (lender) may permit the mortgagor (borrower) to renew or replace an existing mortgage that falls due prior to the maturity date of the subject mortgage. A postponement clause is a common clause in second and subsequent mortgages.

Mortgaging Out

The term applied to a mortgage loan which exceeds the current market value of a property on which it is secured. This type of mortgage may be obtained on improvable property where the security is based on a future value and/or future earnings which are expected to exceed construction costs.

For example, when a buyer purchases a dilapidated house, and with construction plans and budget in hand, along with a Comparative Market Analysis, can apply to a lender for a loan greater that the original purchase price of the property. S/he can then use the extra funds to finance the project.

Multiple Representation

This is synonymous real estate terminology for dual agency. It's possible for a brokerage to represent multiple parties, as happens when numerous buyers, who are not represented by their own agent under a Buyer Representation Agreement (BRA), submit offers on the same listing. If a buyer is represented by an agent from the same brokerage who has the listing on the property, or if the listing agent also represents the buyer, a multiple agency is created. Technically, the brokerage is the 'agent', and not the individual salesperson.

Mutual Release

Hopefully, since it means a failure, you'll not come across this real estate terminology very often.

When the parties to a contract, whether an Agreement of Purchase and Sale (APS), listing contract, BRA or lease, wish to terminate and release each other from the contract, they enter into a mutual release. When fully executed by all parties to the contract, this legally binding document, which sometimes includes the brokerage(s), effectively puts an end to the agreement.

In the case of an APS, instructions to the deposit holder (usually the listing brokerage) are included for the disposition of any deposit paid previously by the buyer. Usually, but not always, the deposit is returned to the buyer from the trust (escrow) account without interest or deduction. For more details, click here.

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Negative Cash-Flow

This is what one experiences when operating costs and regular expenses, including mortgage loan payments and property taxes, exceed the gross rental income of the subject property. Obviously, positive cash flow is the opposite situation, when gross revenue exceeds the regular expenses.

Net Operating Income

NOI is the balance remaining after deduction of operating expenses from gross receipts and gross rental, but not including the deducting of debt service on mortgage loans. Free and clear return on property is calculated by the ratio of NOI to total investment including mortgages and equity. This gives a direct means of comparing the return on different properties.

Non-Recourse Loan

This real estate terminology refers to a clause in a loan which waives personal liability of the borrower on the loan. Frankly, I doubt this is oft used since lenders prefer to minimize their risk, thus demand as much security as possible

Notice of Desire of Opportunity to Redeem

A DOR notice is filed in court by a mortgagor (borrower) under foreclosure proceedings when the mortgagor desires an opportunity to redeem, that is to say, bring the arrears up to date and keep their property.

Notice to Conditional Buyer

If a buyer submits an offer on a property that is conditional upon the sale of their present property, it'll include an escape clause for the seller. The seller will continue to market the property while the buyer is busy trying to sell their present home.

If the seller receives another acceptable offer, the seller can accept it, conditional upon being released from the Agreement of Purchase and Sale (APS) they have with the first buyer. Through their agent, they deliver a Notice to Conditional Buyer (NCB) to the buyer, the buyer agent or to the buyer's address.

Once delivered, the buyer will typically have 48 hours (or whatever time period was established in the APS) to either waive (remove) the condition or conditions (depending on how the clause was phrased in the APS) or execute a mutual release. If the buyer signs a waiver, they've bought a house. If they release, they're out and will usually receive a refund of any deposit paid.

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Notice of Fulfillment

When a buyer submits an offer, it usually contains at least one condition and probably more, especially if they're buying a rural property. For example, time is needed to arrange a new mortgage or a home inspection. Once a firm written commitment from the lender or a satisfactory report from the home inspector is received, the document to sign is called a Notice of Fulfillment (NOF). This is delivered to the seller, and once signed by them, acknowledges the condition(s) has been fulfilled and the purchase is now firm and binding.

In common practice, however, many agents mistakenly use a form called a waiver. This form actually just removes the condition from the APS and fails to state that the condition was fulfilled. The two forms ultimately accomplish the same result, but in a different way. If there's any conflict later, such as a misunderstanding regarding mortgage approval, a buyer agent might regret not having had the buyer execute the proper form in which the buyer confirmed they actually fulfilled the condition and didn't simply remove it. If I were the listing agent for the property involved, I'd also prefer to know that the buyer did indeed fulfill it.

It may be a mute point, but to be clear, use the correct form.

Null and Void

In law, the real estate terminology of 'null' and 'void' means of no legal effect. A transaction which is void is of no legal effect whatsoever or an absolute nullity. The law treats it as if it had never existed or happened. For example, when a condition for the benefit of a buyer contained in an Agreement of Purchase and Sale (APS) is not fulfilled, the buyer declares the contract null and void or as having never existed.

Other commonly used terms for such action are cancelling or aborting the agreement.

In practice, once an APS is so declared (which is accomplished by a clause in the contract), a mutual release is normally prepared by the buyer agent, signed by the buyer and delivered to the listing sales person for the seller to execute. The two authorized representatives of the brokerages involved will also affix their signatures. And unless there are extenuating circumstances, the deposit is normally returned to the buyer in full without interest.

The term 'voidable' applies when one party to a contract is entitled to rescind the contract at their sole option.

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Open End Mortgage

A mortgage loan wherein the lender has the option of advancing more funds when, for example, the market value of the subject property is anticipated to increase in excess of the original appraised value.

Open Listing

A listing contract of real property under which the principal (owner/seller) reserves the right to list their property with other brokerages, yet grants the real estate agent the right to advertise and sell the property.

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POLARIS

The Province of Ontario Land Registration Improvement System is a simplified method of registration of transfer, charge, discharge, etc.

Power-of-Attorney

A power of attorney or letter of attorney is a written authorization to represent or act on behalf of another person in private affairs, business or some other legal matter. The person authorizing the other to act is the principal, grantor or donor. The one authorized to act is the agent or, in some common law jurisdictions, the attorney-in-fact.

When such an instrument is executed for real estate, it's usually granted when a homeowner, such as an elderly or mentally incompetent parent, is unable to act for themselves. They're also created when a property owner is living away from the subject property and prefers to assign this right to a trusted person, be they a lawyer or family member, for convenience sake.

Power-of-Sale

A Power of Sale (POS) is the process used by a lender (mortgagee) as their primary debt recovery method in Ontario, Newfoundland, New Brunswick and PEI. A method called judicial sale, which is more costly and time consuming because it requires the commencement of a legal action against the mortgagor (borrower), has been adopted as the primary debt recovery method in BC, Quebec and the prairie provinces. In Nova Scotia, the most popular method is foreclosure, but is still considered judicial as the court must still be involved.

POS proceedings in Ontario are fairly fast because of the rights of the lender documented in the mortgage.

POS is also referenced in the Ontario Mortgages Act, which refers to two different types - contractual and statutory. It's contractual if the mortgage document includes this provision. It's statutory (rarely used) if a mortgage document does not include a power of sale clause and the mortgagor has defaulted for at least 3 months.

When a homeowner with a mortgage defaults by more than 15 days on their responsibility to make the monthly or weekly payments as agreed in the mortgage document, the lender has the right to deliver a written Notice of Sale under Mortgage, which contains details of the mortgage along with a payment demand by a certain date, to anyone with an interest in the property. This group might include subsequent encumbrancers (i.e. second mortgagees), statutory lien holders and those who have informed the lender in writing of their interest. The notice must contain a warning that if the mortgagor fails to redeem (bring the debt current) by a certain date, the lender intends to sell the property. The lender cannot proceed any further during this redemption period.

For a contractual power of sale, the mortgagor has 35 days (45 days for statutory) to redeem the mortgage. If the mortgagor (borrower) fails to do so, the lender can seize the property and evict the mortgagor.

Once the redemption period expires and the mortgagor has failed to rectify the default, the lender can sell the property. Under POS, the property can be sold by auction, private contract or tender. Typically though, the property is listed with a real estate brokerage on the Multiple Listing Service (MLS®), sometimes after obtaining appraisals.

The lender has a duty to obtain the best possible price for the property

Once the property is sold, the lender must account to the mortgagor as well as all subsequent encumbrancers. The Mortgage Act requires that the sale proceeds first be applied to the cost of conducting the sale (legal and property management fees, real estate commissions, etc), then to debt interest and costs owing under the mortgage, then to the outstanding principle, then to monies due to subsequent encumbrancers and finally, to return tenants’ security deposits if the property had been rented during the marketing period.

After all of these priority responsibilities have been fulfilled, any remaining balance must be returned to the mortgagor.

And since municipal governments have first claim for property tax arrears, they demand to be paid before everyone else. In most cases, I suspect that there's little left of the pie for the original borrower.

For more information on buying a Power of Sale, click here.

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Prepayment Clause

A clause inserted in a mortgage, which gives the mortgagor (borrower) the privilege of paying off all or part of the mortgage loan in advance of the maturity date.

Usually, the lender will charge a prepayment penalty which is a sum of money (the amount of extra interest as set out in the mortgage document) a mortgagee (lender) may require from a mortgagor to exercise this option. The penalty is typically calculated as the interest rate differential between that of the existing loan amount being discharged and the lender's current lending rate for a similar product, plus an administrative fee.

Prior Charge

An encumbrance ranking in priority to the mortgage in question. For example, a first mortgage takes priority over a second mortgage. And municipal property taxes hold a prior position over every other encumbrance. Surprised?

Property Assessment

Periodically, a homeowner receives a Notice of Assessment with a value applied to their property. The local municipality or tax authority determines the tax (mil) rate, which in conjunction with this assessed value, establishes the amount of property taxes payable for that property.

In Ontario, the organization for establishing this value is the Municipal Property Assessment Corporation (MPAC). In arriving at this value, they consider the improvements to the property, as well as the sale prices of comparable homes in the area, much the same as what a realty agent would do to establish an estimate of Fair Market Value (FMV).

An assessment increase doesn't necessarily translate into higher taxes. And there are appeal options if the homeowner disagrees with the assessment increase. In Ontario, it's called a Request for Reconsideration.

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Quantum Meruit

This term, more a general legal term than just real estate terminology, refers to the amount of money that should be paid as merited by the service performed.

Quit Claim Deed

This real estate terminology refers to the general release by the grantor of all claims or rights to a parcel of land when transferring real property to a new owner, the grantee. The grantor terminates any rights to claim the property, thus allowing all rights to be transferred to the grantee.

However, unlike other property deeds, a quitclaim deed contains no title covenant. Thus, it offers no warranty to the grantee that the property title is free and clear at the time of transfer. The grantee is entitled only to the interest the grantor possesses, if any, at that specific time. Since there's no warranty or legal recourse to recover any losses, it's possible that the grantee will receive no actual interest.

A quit claim deed is unlike many other types of deeds used for real estate sales that have warranties, wherein the grantor assures the grantee of clear title, that the property being transferred is free of encumbrances. Nevertheless, it is a common method of inexpensively conveying interest in a matrimonial home, for example, from one spouse to another during a divorce, or adding a new spouse to the title, without the expense of a title search

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Radon

This real estate terminology refers to an invisible, odourless and tasteless gas produced by the decay of uranium that occurs naturally in the earth's crust. The gas itself is not dangerous, but becomes hazardous when it breaks down into progeny that cling to dust and soil particles. These radioactive particles also attach themselves to lung tissue when the radon gas is inhaled. Though radon is diluted outdoors, indoor levels of concentration can reach hazardous levels. Basements, particularly an older house,  are often tested for the presence of this gas.

If a particular building is suspect, some home inspectors have the necessary equipment to test for the presence of such gas. For more information, visit The Government of Canada. In the USA, visit The Environmental Protection Agency (EPA).

Redemption Period

A period of time allowed by law during which a mortgagor (borrower) may redeem his property, hence stop a power-of-sale proceedings or foreclosure, by paying off the entire debt, or at least the arrears.

Registration and Discharge Dates

These terms refer to the registration by number and date in the local Registry and/or Land Titles Office and then given to the mortgagee (lender). When the loan has been paid in full at or after the maturity date, the mortgagee executes the discharge or cessation of charge and registers same to liquidate the mortgage, thereby allowing the mortgagor (borrower) to redeem the mortgage.

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Release of Covenant

This real estate terminology refers to a release given to the mortgagor (borrower) of a property that has been sold to a buyer who is acceptable to the mortgagee (lender). It's usually given after the new mortgagor has signed an assumption agreement with the lender to assume the existing mortgage registered on the subject property.

Make note, however, that the action of a buyer taking responsibility for a mortgage debt by way of a legal agreement does not release the original covenantor(s) responsibility pursuant to the mortgage obligation; it remains intact in such arrangements as long as the existing documentation remains registered against title.

For this reason, I suspect that for the vast majority of sales of real property, the buyers are forced to arrange their own mortgage loans, allowing the seller to discharge their own existing loans and escaping any responsibility for the debt.

Rent Economic

The income that real estate can command in the open market at any given time for its highest and best use.

Representations and Warranties

All contracts contain representations and warranties, which are basically the underlying matters or facts as they're being presented in terms of the contract.

When selling real estate, the sellers represents themselves to be the owners who possess the legal authority to sell the property, and warrant that the property is as they represent it to be.

A representation is defined as an account or statement of facts, allegations or arguments. They present everything from its past to present status and are created to induce someone to enter into a contract.

On the contrary, a warranty moves from the present to the future. In real estate, when a seller warrants something, they're promising that the item is free of defects and will repair or replace it if found otherwise for a specified amount of time into the future. Often, the warranties are simply expressed as a 'reasonable period of time'. If a conflict arises after a closing, if calm minds and honest hearts do not prevail, the decision would depend on a judge's interpretation of the written contract. Nevertheless, the warranty obligates the seller to the terms of the contract.

Warranties can be either expressed (written) or implied (verbal or assumed), though implied have less force in court. Thus, a buyer should insist on any warranty being expressed, that is written into the Agreement of Purchase and Sale.

Used together, 'representations and warranties' is real estate terminology that provides assurance from the seller to the buyer on which the buyer can rely as factual. It should be noted, however, that warranties would be moot if they do not survive closing.

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Requisition Date

This real estate terminology involves the lawyer or closing service. A closing or completion date is the date when funds are exchanged for a transfer/deed and possession of the property.

A requisition date, often referred to as a title search deadline date, is the last date upon which a buyer's lawyer can require the seller to clear up any title problems. This may be important, especially if the buyer intends to mortgage the property. The lender will require clear title before advancing any funds.

Right of Survivorship

The distinguishing feature of joint tenancies which provides that, where land is held in undivided portions by co-owners, such as spouses, upon the death of any joint owner, his/her interest in the land will pass to the surviving co-owner, rather than his/her estate.

Right-of-Way

A ROW is real estate terminology that refers to the right to pass over land owned by another party, more or less frequently, according to the nature of the easement. If such a right exists, a reference to it must be included in any Agreement of Purchase and Sale (APS.) For example, a piece of land without road frontage might have a ROW over the adjacent parcel owned by another party. Otherwise, the owner of the inaccessible land would not be able to use it.

Riparian Rights

Generally, this real estate terminology refers to the rights of the owners of land on the banks of watercourses, such as rivers and lakes, to take advantageous use of the water on, under or adjacent to their land. Such rights do not normally extend to ownership of the physical property under the water, but only to the property up to the shoreline, and sometimes not even that far.

The existence of a public easement along a shoreline indicates that the Crown still owns the shoreline property. And such a public easement permits anyone to walk the shoreline and make ordinary recreational use of it.

In Ontario and most of Canada, one cannot actually privately own the shoreline, except where the Crown has sold the shoreline rights to the abutting landowners.  But even landowners in most jurisdictions who so own the shoreline property cannot generally build any structures or modify the shoreline due to the environmental impact, at least without obtaining specific and express permission from the proper authorities. Erosion, a natural process, is deemed acceptable.

Having said this, I've heard that some municipalities are permitting limited shoreline modification. However, it's advisable to verify the policy of the local municipal government for your particular property. Being fully informed of the rules could include consulting with a local lawyer from your area.

Running With the Land

A covenant is said to run with the land when it extends beyond the original parties to the agreement and binds all subsequent owners to either liability to perform it or the right to take advantage of it. For example, easements and rights-of-way normally run with the land.

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Sale and Lease-Back

A method of financing where a property is sold to a buyer who simultaneously enters into a long-term lease of the property with the seller. The seller (now lessee/tenant) remains in possession of the property for the specified term of the lease and covenants to pay the rental to the buyer (now lessor/landlord). This enables the seller/tenant to liquidate his cash investment in the real property for some other purpose.

Sealed and Delivered

A term indicating that a conveyor (transferor of real property) has received adequate consideration as evidenced by their voluntary delivery. The word "sealed" adds more strength, since under old conveyancing law, an official seal was used as a substitute for consideration.

Seller Property Information Statement

A Seller Property Information Statement (SPIS) (different monikers in different areas) is a highly controversial document. It's designed in part to protect sellers by establishing that correct information concerning a property is being provided to prospective buyers of their property.

Because such disclosure statements are completed and signed by the seller, they assists buyers in the decision-making process. However, since more and more buyers are relying on home inspection reports, such statements are not universally employed.

For more information about the SPIS, visit The Real Estate Council of Ontario (RECO) or its counterpart in your area.

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Setback

This real estate terminology refers to the distance from the curb or other established property line/boundary within which, according to local municipal bylaws, no buildings may be erected. This would apply to houses, garages, farm buildings, bunkies and large garden sheds.

Severance

This real estate terminology refers to the act or process of severing a piece of land, that is to say, dividing a portion from the whole of the lot. For example, if one owned a wide enough lot, one could make application to the local municipality to divide the original lot into 2 parcels, upon each of which could be build separate houses. Prior to submitting such an application, a survey would have to be performed.

This vital function is performed by the law office or closing service handling a closing. It's done for the current owners (soon to be previous), as well as all named buyers of the property, and discloses any unsatisfied judgments (claims) that may have been filed which may create a lien or interest in the subject property. If any of the parties to the transaction are aware of any judgments against them, they should inform their lawyer as early as possible in the buying/selling process.

Single Family Dwelling

A residential property designed for occupancy by one family and situated on land zoned specifically for that purpose. Such a property would exclude, for example, any house containing a basement apartment or any secondary, self-contained unit.

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Specific Performance

A remedy available at a court of equity compelling a defendant to carry out the terms of an agreement or contract. It is available only where the remedy of damages cannot afford adequate relief to the plaintiff. For example, if a seller of a house refuses to complete an Agreement of Purchase and Sale, though the buyer is ready, willing and able to close as agreed, the buyer can apply to court for specific performance order to force the seller to close the deal.

Under the Family Law Act, if a spouse is not named on the title to the matrimonial home,  before a sale can be valid, the non-named spouse must expressly consent to the sale. To give the sale full force and effect, they must affix their signature to the Agreement of Purchase and Sale where appropriate, and to all other pertinent documents.

It refers not only to married couples, but also common-law relationships, provided the non-titled spouse has resided in the property for a certain period of time as described in the act. Any transfers without such consent would be considered fraudulent.

No Spousal Consent = No Sale

Status Certificate

Once known as an Estoppel Certificate, this is real estate terminology used in the purchase and sale of condominium property. When a buyer makes an offer on a condominium, they want assurance that they're not buying shares of a legally or financially unhealthy corporation. Since buying a condo and explaining the significance of the Status Certificate is a rather lengthy topic of great importance, I've created a separate page with more details.

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Statute of Frauds

A law which provides that certain contracts, which includes real estate contracts, must be in writing in order to be enforceable at law.

Step-Up and Step-Down Lease

A step-down lease provides for decreases in rental payment at specified dates, and a step-down is, obviously, the opposite.

Survey

The term 'survey' is loosely used - sometimes erroneously - to refer to a Survey, Surveyor's Real Property Report (SRPR) or a Reference Plan (RP).

An SRPR is a legal document that shows the location of all improvements, such as buildings, decks, pools and fences, relative to the boundaries of the subject property. It usually includes an illustrated plan along with a written report of the surveyor's opinion regarding any concerns. In a real estate transaction, it may be relied upon by all parties to the transaction as an accurate representation of the property

An RP is a graphical representation of a description of land and is necessary for a severance. It shows the boundary and dimensions and any physical or documentary evidence that could affect property title, such as the location of fences, hedges, retaining walls or overhead wires in relation to the boundaries. Evident or registered easements and rights-of-way would also be shown. Buildings and any improvements would generally not show unless they were used for boundary positioning or encroach on the subject property. For further information on this topic, visit The Association of Ontario Land Surveyors.

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Survive and Not Merge on Closing

In an Agreement of Purchase and Sale (APS) of real property, a buyer usually wants assurance that any chattels or fixtures included in the agreement will be in good working order when they take possession. They want to know that what they're paying for will be as represented by the seller.

However, once a transaction is closed, when the transfer/deed has been exchanged for the closing funds, the realty sale is completed, along with all the obligations by both parties. Under the Doctrine of Merger, unless some provision was included in the contract, all obligations have merged or have been fulfilled, completed and satisfied.

To provide a buyer with assurance that any seller warranty in the contract will be effective, the buyer must insist that some reference for a warranty to survive closing be included in the real estate contract.

The usual clause states that the 'warranties and representations shall survive and not merge on completion of this transaction, but apply only to the state of the property at completion of this transaction'.

For example, if a seller warrants that the kitchen appliances will be in good working order and there's no reference in the APS to such warranty surviving closing, then once the deal is completed and the appliances turn out to be malfunctioning, the buyer is out of luck.

In this example, if the buyer's agent had included the correct real estate terminology, that is the survival clause, the buyer would have a 'reasonable' time following closing to ensure they're in good working order. After closing, if the appliances were found otherwise, the buyer would have a remedy, and could make a claim against the seller for the cost of repairing or possibly replacing the defective appliance. Normally, though, these situations can be cleared up through the assistance of the real estate agents involved.

Another example: A buyer enters into an APS in winter to buy a home with an in-ground swimming pool, and a spring completion date. Obviously, the buyer can't test the pool in winter, but prefers to be guaranteed that the pool will be in good working order when opened in the spring. To provide the buyer with reasonable time to satisfy themselves of its proper operation when the pool is opened, it would be prudent to add a future spring date following completion of the APS to the warranty clause. The warranty will not merge on closing and will survive until said date. If there's a problem, there's a remedy for the buyer.

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Tax Lien

A lien imposed by a taxing authority on real estate for failure to pay property taxes within the time required by law.

Termites

These insects feed on wood and moisture and are found chiefly in tropical climates, but have been known to exist in North America since the mid 20th century.

They live in sophisticated social colonies in the soil - not in wood, as is commonly believed. In colder climates, their colonies are usually located below frost level and close to a moisture source. They travel through wood (following the grain) and soil or via shelter tubes that they construct to avoid their bodies drying due to exposure to open air. Such tubes, small fragile, sandy-coloured tunnels across open surfaces, are made of earth and debris, with excretion to hold the tubes together. Termites tend to eat in parallel galleries inside any type of wood, preferably damp or rotted, and leave a smooth honey-combed appearance.

Time is of the Essence

This common real estate terminology is a phrase which demands punctual performance of all terms contained in a contract, including conditions and the agreed completion (closing) date.

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Title

The means of evidence by which the owner of land, including all structures thereon, has lawful ownership thereof.

Title Insurance

An insurance policy typically offered to a buyer by their lawyer, it is designed to protect against certain undesirable situations that might limit or affect the use, marketability or forced removal from the property. Since it's a very important topic, I've created a detailed page on the topic here.

Title search is real estate terminology that refers to the process normally performed on a purchase of real property, or when an owner wishes to mortgage their property, primarily to ensure that a seller has the right to sell or transfer a property. It provides information regarding any restrictions or allowances pertaining to the use of the land, such as real covenants or easements. Also, if any liens exist on the property which need to be discharged at closing, such as mortgages, municipal tax arrears or mechanic's liens. This search is completed prior to closing and before the Requisition Date included in the Agreement of Purchase and Sale (APS).

Since documents concerning conveyances of land are a matter of public record, anyone can perform a title search. However, it's advisable to hire a title company or lawyer to conduct an exhaustive search. A title report may show recorded legal rights to the property, such as a right to share a driveway given by a previous owner to a neighbour. Or the municipality may have the right to strips of the property for installation of power or communication lines or water or sewer pipes. The fee paid to the lawyer is normally included in closing costs.

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Torrens System

This real estate terminology, also known as the Land Titles System, refers to the system of title recording provided by provincial law. It's a system for the registration of land title, indicating the state of the title, including ownership and encumbrances, and without the necessity of an additional search of the public records.

Total Debt Service

TDS is the percentage of gross annual income required to cover payments associated with housing and all other debts and financial obligations.

Transfer of Charge

This real estate terminology refers to the assignment of a mortgage under the Land Titles System.

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UFFI

Urea Formaldehyde Foam Insulation is a colourless, chemical compound found in certain resins, glues and bonding agents, and most commonly associated with insulation. It's a low density foam made from plastic resins, a foaming agent and compressed air. At time of installation, it has the appearance and consistency of shaving cream. While normally identified as a white or cream-coloured substance, at least one such product contained blue dye.

A controversy arose from the curing process when the product was injected into walls and other areas in residential property, and formaldehyde gas was released. Because of potential health concerns after an estimated 100,000 Canadian homes were insulated, mostly between 1975 and 1979 under government homeowner incentive programs, the product was banned in Canada in 1980.

Nowadays, the general consensus is that UFFI presents a minimal health concern. However, The Canadian Real Estate Association (CREA) has urged its members to stay informed, not to treat it as a non-issue and maintain UFFI references in listing documents and agreements.

For more information about UFFI, visit The Real Estate Council of Ontario (RECO).

Umbrella Mortgage

Also referred to as a wraparound mortgage, this real estate terminology refers to a special arrangement whereby one document encompasses one or more already existing mortgages registered on the same property. The mortgagee (lender) is responsible for remission of payment(s) to lender(s), while the mortgagor (borrower) makes one payment to the mortgagee.

Underwriter

A person employed by a mortgage lender or mortgage broker who approves or declines loan applications based on the quality of the real property, credit-worthiness and ability to pay of the applicant and the guidelines of the lender with regard to ratio of mortgage loan to value of property.

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Vacant Possession

This real estate terminology refers to a property, usually occupied by the homeowner or tenant, that is for sale on the understanding that the present occupants will vacate (move out) prior to completion. The seller must remove all chattels not included in the Agreement of Purchase and Sale (APS), and the buyer can move into the property immediately upon closing. The same applies at the end of a tenancy.

When a property is sold subject to an existing tenancy, such as when an investor buys a tenanted property and agrees to assume the tenant, then vacant possession will not apply. Or there may be part vacant possession with only certain rooms, levels or a basement apartment occupied by a tenant.

Landlord and tenant legislation is complex and can occasionally change. Thus, landlords should thoroughly understand their responsibilities and tenants their rights before committing to any course of action.

If a buyer wants vacant possession of a property that is currently tenanted, they may not be able to evict the tenant - and certainly not prior to closing - since the buyer is not the landlord. The buyer will have to appoint the seller - in writing - to act as their agent to provide the tenant with appropriate notice to vacate. Even then, the tenant may not comply.

Valid

With respect to law, this real estate terminology means to have force or binding force, legally sufficient and authorized by law.

Valuable Consideration

The granting of some beneficial right, interest or profit, or suffering of some detrimental forbearance, loss or default by one party to a contract in exchange for the performance of the other party. Click here for more information.

Variable Interest Mortgage

Often referred to as a Variable Rate Mortgage or Adjustable Rate Mortgage, it's a loan where the interest rate may vary during the term of the mortgage. The variance is usually tied to a specific factor such as the lender's prime lending rate or the guaranteed investment certificate rate for a designated lender. It could also be related to a time period. The applicant should ensure that the fluctuations have a comfortable cap. Such loans are often convertible to a fixed interest rate after a period of time.

Vendor Take-Back Mortgage

Now more often referred to as a Seller Take-Back Mortgage, it's a loan which a seller of real property takes from the buyer usually as part payment of the purchase price for that property.

In a low-interest rate economy, with financing easily obtained by buyers, this is a rare occurrence. Such practice was more often employed when rates were very high, and a seller would offer a lower rate to entice a buyer to offer on their property. Of course, a seller agreeing to such a a loan mustn't have any immediate need of the funds from their home equity, for all they would receive would be the down payment in addition to the regular payments from the loan until the maturity date. Sometimes, the seller might agree to include a renewal clause in the mortgage document, but in my experience, this was not common. Thus, the seller would have their cash at the agreed maturity date of the loan.

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Waiver

When a buyer purchases real property, the offer often includes conditions to facilitate such requirements as arranging satisfactory financing, a home inspection, well water potability test or to sell their present property. When such conditions are fulfilled, they may sign a waiver form which effectively removes the condition(s) from the Agreement of Purchase and Sale. Technically, if the condition has actually been fulfilled, the correct form to execute would be a Notice of Fulfillment of Condition, but waivers are often used erroneously in its place.

A waiver would be used correctly if the buyer wanted to remove a condition if that particular condition had not yet been fulfilled. For example, if the buyer decided not to pursue a home inspection even though they had the contractual  right to do so, they would sign a waiver.

Generally, a waiver is an international relinquishment of some right or interest, the renunciation, abandonment or surrender of some claim under a contract.

Wrap-Around Mortgage

Sometimes erroneously referred to as a blanket mortgage, and not unlike an umbrella mortgage, this uncommon method of financing involves a new mortgage, registered on title, which includes a prior existing mortgage. The new mortgagee (lender) undertakes the responsibility as mortgagor (borrower) under the original mortgage.

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Zero Lot Line

This mysterious real estate terminology refers to a situation wherein a building is positioned so that it rests either directly on the subject lot boundary line, or so close to it that there is minimal yard or space between the structure and adjacent structure.

Zoning

This real estate terminology refers to rules established by various levels of government for controlling the usage of specific parcels and individual lots of land and set aside land for certain predefined purposes.

In an urban area, for example, some land is zoned residential and some commercial. If one wishes to sell or buy property, how the property is zoned, be it commercial or residential, could be an integral component in the decision process.

Each zone type, sometimes referred to as a zoning district, has its own set of restrictions regulating how such type may be used and what kind of activity can occur within its boundaries. Also, the use of adjacent lands must be compatible. Most people would not want a noisy, unsightly factory or pig farm next to their home. 

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Are you wondering about the meaning of a particular real estate term that's not on the above list?

I've included on this page many common real estate terms and phrases used in Ontario, Canada, at least those I recall that clients sometimes found confusing.

If you're curious about a particular term missing from the list, maybe one I may not be familiar with, here's your chance to ask and learn. Share your experience with other guests who may have suffered from the same calamitous confusion.

I invite guests from your home country or province/state - consumer or professional - to offer their personal interpretations or definitions and to tell their stories or ask questions. (If professional, please state your credentials.)

To help, in what context did you hear this term? Do you have a funny or interesting story to tell about it? For example, what were you lead to believe it meant? Did you make decisions based on a misunderstanding that proved disastrous or comical?

I invite you to submit your story, article, commentary or questions about your experience - successful or otherwise.

This support forum is not intended as an opportunity to complain. It's a chance to express yourself and hopefully help others who may be faced with similar challenging situations. Maybe they can learn from your story. Please provide respectful remarks and advice only. Profanity, disrespectful or abusive comments will not be tolerated.

I implore you to treat this as a soft place for friendly people to land, share and learn from each other. I'll do my best to respond when appropriate in a supportive and encouraging manner, and answer any questions within the realm of my expertise.

Submissions and Inquiries of Other Guests

Click the links below to see story contributions from other visitors.

Giving and Receiving Notices 
"Where a Brokerage represents both the Seller and the Buyer (multiple representation), the Brokerage shall not be entitled or authorized to be agent for …

Cash Buyer Changing to Financing Condition After Acceptance 
What phrase could be used instead of "through no fault of the buyer" in connection with a lost opportunity cost agreement if buyer fails to perform on …

Texas Real Estate 
I want to sell my home. I had remodeling done in the last two years, and all the work has been paid off except for the cost of the back deck. How can I …

As Is, Where Is 
What does "as is, where is" mean? Does that mean no negotiating the asking price?

The Escape Clause 
I went to make an offer on a building and was told there was a 'no escape clause' offer already there, and was therefore rejected until it ran out in 18 …

Oklahoma Clause 
What is an Oklahoma Clause in real estate?

What does CPPS stand for? 
I am going to list a house for sale in ontario within the next 2 weeks. In a previous sale of a home in Toronto (2001), the realtor included the following …

Click here to write your own.


If you're considering selling or buying a home - with or without the assistance of an agency - check out my book The Happy Agent. Though written for agents, it's also a great resource for consumers interested in increasing their knowledge of real estate terminology and about real estate in general. It contains the sum total of the professional knowledge, philosophies and techniques that I've accumulated, practiced and polished during a highly successful 40-year realty career.

As a buyer, you'll learn how to more efficiently search for a home, what to watch out for in city, suburban and rural real estate, whether freehold, condominium or vacant land, how to choose and work with an agent, how to negotiate an offer and more.

As a seller, learn how to effectively evaluate your home and prepare it for market to maximize the ultimate sale price, how to market and advertise effectively, how to handle showings and open houses like a pro, techniques for successful offer negotiation and more. And if you're trying to sell privately, you'll learn how to recognize when it's time to hire a professional - and what to expect from them.

When you consider the huge possible savings in real estate commission with a private sale attempt and the fact that, whether buyer or seller, you're dealing with your largest single financial asset, a small investment of your time and a pittance of your money could save you thousands of dollars and a ton of heartache. At the very least, sellers will be encouraged to try it alone, at least for awhile. Remember - knowledge is power.

Available virtually everywhere print and e-books are sold.


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It’s also designed as an insightful resource for home buyers and sellers curious about the ins and outs of buying and selling real estate.


"An inspiring and candid tale of one man's journey to success as a real estate agent and achieving inner freedom.  This book is sure to ignite the passion and holds the key to unlocking the power  that lies within us all." Gina Ceci, Real Estate Lawyer


Ross Wilson, EzineArticles Basic Author