Glossary C

October 19, 2006 — Leave a comment

Terms to know in Real Estate Investing – C

We are not lawyers, we are real estate investors!

This is an exhaustive glossary for USA, Canada, Australia and New Zealand

USA

Deeds of Trusts and Mortgages, Title Companies and Lawyer Closings, lots to know. We place great terms here.

Canada

The provinces have different terms and procedures from each other. We do our best to list terms to know in canada.

Australia

The states, especially in Lease Options, have unique differences.

New Zealand

The North Island and the South Island have close similarities, but Lease Options are brand new, and Wraps are not favored by the banks.

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CALIFORNIA BUNGALOW:
Compact, early twentieth-century single-storey house.

CALIFORNIA RANCH:
One-storey house, in a post-Second-World-War style, known for its ground hugging design and low, pitched roof.

CALL OPTION (PROVISIONS, RIGHTS):
A lender’s right to demand payment of the outstanding balance of the loan at a time specified in the loan agreement.

CANADA MORTGAGE AND HOUSING CORPORATION (CMHC):
A federal body set up to insure mortgages of up to 95% of the purchase price for home buyers.

CANCELLATION CLAUSE:
Provision in a contract that gives one or more parties the right to terminate the contract if a specific event occurs.

CAP:
A limit. In variable rate mortgages, a limit as to how high periodic payments may go or how much the interest may change within a given time period or over the life of the mortgage.

CAP RATE:
Short form for capitalization rate.

CAPACITY OF PARTIES:
Legal competence to sign and be bound by a contract. One might lack capacity as a result of being a minor, being mentally challenged or not being of right mind. A contract signed by an incapable person is not binding.

CAPE COD COLONIAL:
A one-storey house, compact in design and in an early-American style. Symmetrical layout with a central entrance. Steep, gable-type roof, usually shingled, with a low central chimney.

CAPITAL ASSET:
A property to which certain tax rules (capital gains and capital losses) apply.

CAPITAL EXPENDITURE:
Money spent to improve a property and enhance its value over an extended period of time (as opposed to a repair). May be added to the adjusted cost base of the property improved or depreciated over the useful life of the improvement.

CAPITAL GAIN:
Increase in value of a capital property (a property other than a principal residence) upon which tax is payable, either upon disposition of the property or the deemed disposition of the property under tax rules.

CAPITAL IMPROVEMENT:
Value enhancing work carried out on a capital property.

CAPITAL LOSS:
Decrease in value of a capital property (a property other than a principal residence). May be set off against capital gains or against regular income according to the tax rules.

CAPITAL:
The working money in a business venture.

CAPITAL GAIN or LOSS : The difference between the basis price (cost plus purchase expenses) of a capital asset and its sales price.

CAPTURE RATE:
A comparison of the sales or leasing rate of a particular real estate development to the sales or leasing rate of all developments in the same market.

CARRYING CHARGES (COSTS):
The expense required to maintain a property over a given period of time, including property taxes, maintenance, insurance payments, interest charges on financing, etc.

CASH EQUIVALENT:
The amount a vendor would have realized on the sale of a property had she not accepted unfavourable (or favourable) financing of the purchaser but received cash instead.

CASH FLOW:
Description of the net income from a property after all expenses of holding and carrying the property are paid.

CASH METHOD:
An accounting method, based on actual cash moving in and out of the company over a given period. See accrual method.

CASH RESERVE:
An amount of money that the purchaser of a property still has after the transaction closes. Some lenders require a certain level of cash reserve (equal to two payments) before granting a mortgage.

CASH THROW-OFF:
See cash flow.

CASH-OUT REFINANCE:
When an owner renegotiates or negotiates a new mortgage and the proceeds of the new financing exceed the money required to pay out the old mortgage and any other costs, liens or expenses, leaving money for the borrower.

CAUTION:
An instrument registered on title to a property which serves notice of a competing interest in the property and, thus, blocks dealings with that property.

CAVEAT EMPTOR:
Latin, meaning “Let the Buyer beware”. Maxim which applies to real estate transactions where the onus is on the Purchaser to satisfy herself as to the suitability and condition of the property she is considering for purchase. Vendor is not responsible to the Purchaser for the condition of the property and, unless he is specifically asked, does not generally have an obligation to reveal problems to the Purchaser (except where the defect is hidden, serious and could not be discovered by the Purchaser after reasonably prudent inquiries and investigations); Let the buyer beware. The buyer must examine the goods or property and buy at his or her own risk.

CC&R’S:
Short form for “covenants, conditions, and restrictions”, which are the rules of general application governing the relations between land owners in a specific subdivision, development, condominium development or cooperative housing facility. May be registered on title.

CEILING:
The limit over which the interest rate on a variable rate mortgage may not rise over the life of the loan.

CENTRAL BUSINESS DISTRICT (CBD):
The business and commercial “core” of a municipality (also known as “Downtown”).

CERTIFICATE OF APPOINTMENT OF ESTATE TRUSTEE WITH A WILL:
Formerly “Letters Probate”, the document issued by the court giving the Estate Trustees (formerly “executors”) named in a will the power to administer the estate under the will.

CERTIFICATE OF APPOINTMENT OF ESTATE TRUSTEE WITHOUT A WILL:
Formerly “Letters of Administration”, the document issued by the court giving the Estate Trustees (formerly “administrators”) the power to administer, according to the applicable laws, the estate of a person who died without leaving a will.

CERTIFICATE OF INSURANCE:
A document, issued by the insurance company, setting out the particulars of the insurance coverage for a particular property.

CERTIFICATE OF OCCUPANCY:
Document issued by the local municipality indicating that a new dwelling is suitable for occupation. Generally confirms that the dwelling complies with local building, safety and health by-laws.

CERTIFICATE OF TITLE:
A written opinion of the quality of a person’s ownership of property, issued by a lawyer or a title insurance company after a search of the title records has been conducted. May contain qualifications to the certification regarding defects found or potential defects not investigated.

CERTIFIED COPY:
A copy of a document which bears some form of declaration (usually by the holder of the original document) that it is a true copy of the original.

CERTIFIED GENERAL APPRAISER:
A person who has met the requirements to be licensed to appraise the value of property. Qualification requirements may vary from one jurisdiction to the next.

CERTIFIED HOME INSPECTOR:
A person who has met the requirements to be “certified” to inspect the physical condition of homes. Qualification requirements may vary from one jurisdiction to the next.

CESTUI QUE TRUST:
The beneficiary of a trust, the person who is the beneficial/equitable owner of the property held in trust for which the trustee holds legal title.

CHAIN OF TITLE:
A part of a title search. A listing, in chronological order, of successive legal owners of a property, often listing as well the registration particulars of the document by which title is transferred from each owner to his successor in title; A history of the conveyances and encumbrances affecting a title from the time the original patent was granted or as far back as records are available.

CHAIN:
An old unit of measurement of land, measuring 66 feet in length. A chain equals 100 links, each 0.66 feet in length.

CHANGE FREQUENCY:
Term describing the period of time between changes in the interest rate and/or payments of a variable rate (adjustable rate) mortgage or loan (i.e. one week, one month etc.).

CHARGE:
Also known as Mortgage. Indebtedness secured by real property and registered as an encumbrance on title to that property.

CHARGEE:
Also know as Mortgagee. The lender of money in a loan secured against property (often a Bank, Trust Company or Credit Union).

CHARGOR:
Also known as Mortgagor. The borrower of money under a charge and, usually, the owner of a property on title to which a charge is registered.

CHATTEL:
An item of personal property which is not affixed to the land or building (as opposed to a fixture, an item which is a part of the land or building). Chattels are generally not included in the sale of property unless specifically included in the Agreement of Purchase and Sale.

CHATTEL MORTGAGE:
A debt secured against items of personal property rather than against land, buildings and fixtures.

CLEAR TITLE:
Ownership of land which is marketable and free of competing claims, liens, mortgages or other encumbrances.

CLAIM:
A right asserted against another party. One might register a claim on title to the property to which the claim applies, file a claim under an insurance policy or file a Statement of Claim in court to assert one’s rights.

CLASS ACTION:
A legal proceeding which presents the related or similar claims of an identifiable group against a single or group of defendants, usually by using one representative claimant to assert the claims on behalf of the group.

CLIENT:
Customer. The person who hires a professional (broker, banker, lawyer, investment counsellor, etc.); The principal: the one who employs a broker and who compensates a broker.

CLOSED MORTGAGE:
A land loan that cannot be prepaid or re-negotiated before the end of its term without the payment of an interest penalty.

CLOSED-END MORTGAGE:
A mortgage with a set principal amount which cannot be increased or extended during the life of the mortgage.

CLOSING:
The culmination of any transaction in which the interested parties (or their representatives) meet to exchange documents, funds, and property and, if necessary, to register the transfer of title.

CLOSING CENTRE:
A business run by a Title Insurance Company that performs law clerk functions in a purchase and sale transaction. May offer the client Title Insurance policies, deferred closing costs, chattels insurance and other products as part of the service. Role in transaction may be expanded with the introduction of electronic registration.

CLOSING COSTS:
Moneys expended by a party in completing a transaction, over and above the purchase price, including: legal fees, taxes, mortgage application charges, interest adjustments, registration fees, appraisal fees, etc.

CLOSING DATE:
Also known a Completion Date. The date set in the Agreement of Purchase and Sale upon which the transaction is to be completed, the purchase price paid and the transfer of title registered; The date on which the buyer takes over the property.

CLOUD (ON TITLE):
Any unresolved claim against ownership of all or part of a property, affecting the owner’s title to the property and marketability of that title; An outstanding claim or encumbrance that, if valid, would affect or impair the owner’s title.

CODE OF ETHICS:
A set of rules governing the behaviour of members of the organization that has established the Code. Lawyers and real estate brokers/agents both have their own Codes.

CODICIL: An addition to or amendment of a will.

COINSURANCE:
A technique used to share the risk of a larger development between several insurance companies, each company covering a certain percentage of the total value of the insured property. Each policy may include a clause setting a minimum percentage of the total value of the insured property which the owner must keep insured in order to be eligible for payment under the policy.

COLD CANVASS:
Also known as “Cold Call”. Contacting home owners out of the blue to solicit business or, in the case of a real estate broker or agent, listings.

COLLATERAL:
Property (real or personal) which is pledged to secure a loan or mortgage. If the debt is not paid, the lender has the right to sell the collateral to recoup the outstanding principal and interest on the loan; Additional security pledged for the payment of a debt.

COLLATERAL MORTGAGE:
A loan which is secured by some sort of written note of indebtedness (such as a Promissory Note) which is secondarily secured by a mortgage registered against a property.

COLLECTION:
The act of pursuing a debtor who is delinquent on his loan payments.

CO-MAKER:
Also known a “Guarantor”. Someone who signs a loan document along with the principal borrower, pledging to be responsible for the loan should the borrower fail to pay it.

COMMERCIAL BROKER:
A real estate professional who deals in properties with commercial (business, retail, etc.) uses.

COMMERCIAL PROPERTY:
As opposed to residential or industrial property. Property zoned, designed or intended for use retail, office, or similar users.

COMMINGLE:
To allow to mix, as in money belonging to two or more people deposited to the same account and used by each person regardless of the amount they have deposited.

COMMISSION:
Payment to a salesperson (a listing real estate agent or broker) for her efforts in marketing and selling a property, usually expressed as a percentage of the purchase price; A fee charged for brokerage servIces. Commitment: A pledge; a promise; an affirmation agreement;

COMMISSION SPLIT:
The division of the payment made to the listing agent between that agent and her broker, or between the listing agent and agent representing the Purchaser (the selling agent).

COMMITMENT:
A promise, usually in writing, to provide a mortgage or other loan. May also be used in insurance field. Sets out details of mortgage, insurance. Often referred to as Commitment Letter or Binder.

COMMITMENT FEE:
The fee charged by the lender to commit itself to a mortgage or loan on specific terms.

COMMITTEE OF ADJUSTMENT:
Municipal body created to administer Zoning and Planning By-Laws, responsible for granting minor variances of Zoning By-laws and, in some municipalities, consenting to severances under the Ontario Planning Act (this second function may be handled by a Land Division Committee).

COMMON AREA ASSESSMENTS:
Also known as Common Element Fees. A periodic charge levied against all of the owners of units in a condominium or planned unit development (PUD) project which is used by the condominium corporation or homeowner’s association to pay for repair, maintenance and other expenses of the common areas in the development.

COMMON AREAS:
Portions of the property and buildings owned by a condominium corporation or planned unit development (PUD) homeowners’ association, or a cooperative development’s association that are available for the use of all unit owners. Also used in rental properties to refer to those facilities for the use of all tenants.

COMMON ELEMENTS:
A common area in a condominium project which is owned by the condominium corporation and for the use of all unit owners.

COMMON LAW:
As opposed to statute law. Laws or legal principles that have been established by courts over the years. May be codified into a statute or overruled by a statute passed by the government.

COMMUNITY ASSOCIATION:
Any organization established and run by property owners in a particular area, often to represent the common interests of the owners in dealings with government, planning bodies, developers or other outside parties.

COMPARABLES:
Used in assessing or establishing the fair market value of a property, a property which has been sold recently that is similar in size, condition, location and amenities to the subject property.

COMPETENT PARTIES:
People who are legally capable of entering and being bound by a contract (i.e. of age, mentally capable).

COMPLAINT: 1. In civil law , the initial statement of the facts on which a complaint is based. 2. In criminal law, the preliminary charge made against the accused.

COMPLETION DATE:
See Closing Date.

COMPONENT DEPRECIATION:
For tax purposes, allocating a portion of the total cost of renovation to each component of the renovation (roof, plumbing, electrical, foundation, etc.) and then depreciating the cost of each component separately.

COMPOUND INTEREST:
As opposed to simple interest. The accumulation of interest on a loan over time where interest is charged not only on the principal of the loan but also on all interest accrued against the principal to the end of the last compound period.

COMPS: See Appraisal by Comparison.

CONCESSIONS:
1) In the early surveying of land in Ontario, concession roads were plotted and laid out at a distance of 100 chains (6,600 feet or 1.25 miles) from each other) across the width of the township. Some properties are still legally described as Lots or part of Lots on a particular Concession.
2) Sacrifices made by a party to convince another party to enter a contract.

CONDEMNATION:
An order made by a health or building department barring the use of a dangerous or hazardous property; the acquisition of private property for public use with fair compensation to the owner. See also Eminent Domain.

CONDITION(S):
Clauses in the Agreement which must be fulfilled before the Agreement becomes firm and binding. If the condition is not fulfilled, the Agreement will usually become null and void and any deposit paid returned to the Purchaser.

CONDITIONAL SALES CONTRACT: A contract for the sale of property stating that although delivery is to be made to the buyer, the title is to remain vested in the seller until the conditions of the contract have been fulfilled.

CONDITIONAL OFFER:
An offer to purchase a property which is contingent on the fulfillment of certain conditions before it becomes firm and binding. Also known as “Conditional Sales Contract”.

CONDOMINIUM:
A development where individuals own dwelling units but share common areas with the other unit owners of the complex. The maintenance of the common areas etc. is taken care of by the Condominium Corporation in which every unit owner owns a share and has voting rights. The Condominium Corporation is created by the registration of a Declaration and by-laws on title to the property and all individual units.

CONDOMINIUM OWNERS ASSOCIATION:
An organization made up of unit owners in a condominium development established to govern relations between the owners and to administer the rules, by-laws and covenants of the condominium

CONFORMING:
Complying with the requirements of a certain statute, by-law or organization.

CONSIDERATION:
The value, asset, service, information etc. which is offered to another party in a contract in exchange for that party’s agreeing to enter the contract. A contract is not binding if each party does not offer at least some consideration to the other party(ies); Anything given as an inducement to enter into a contract, such as money or personal services. Any contract, lease, obligation, or mortgage may subsequently be modified without consideration provided that the change is made in writ­ing and signed.

CONSTANT PAYMENT LOAN:
A type of loan which requires equal, periodic payments over a certain term, at the end of which the amount owing under the loan will be completely paid out.

CONSTRUCTION LIEN:
A statutory lien in favour of any person who supplies services or materials for the improvement of real property which arises as soon as those services and materials are first supplied. The lien, which secures the value of the services or materials supplied, may be registered on title to property (“preserved”) and subsequently the subject of a law suit (“perfected”).

CONSTRUCTION LOAN:
A structured, short-term loan to a builder or developer to allow for the development of land. Funds are advanced at certain stages of the development project to pay for specific expenses, fees or costs.

CONSTRUCTIVE EVICTION:
Actions of a landlord (or third party) which interfere with a tenant’s use and enjoyment of the rented premises to such an extent that the tenant is, at law, considered to have been improperly forced out of the premises.

CONSTRUCTIVE NOTICE:
The legal principle that deems that a person has knowledge of a certain fact once that fact is made a part of a public record. The registration of a lien on title to a property represents constructive notice to all persons interested in that property of that lien, whether they have investigate the title records or not.

CONSUMER REPORTING AGENCY (OR BUREAU):
Also known as Credit Bureau. The source to which the banks or other lenders turn for information on the credit history of an applicant.

CONTIGUOUS:
See also Abutting. Sharing a common boundary, touching.

CONTINGENCY:
An event which may (or may not) happen in the future, a condition that must be fulfilled before a contract becomes firm and binding.

CONTRACT:
A legally binding agreement (oral or written) between two or more persons regarding an exchange of some sort. A legally binding contract must include consideration passing between the parties, an intention on the part of all parties to be bound to the contract, a meeting of the minds of the parties as to the contents of the contract, and an element of clarity such that the terms of the contract may be interpreted, understood and enforced by a court; a legally enforceable agreement.

CONTRACT RENT:
The periodic rental payment as set out in the lease contract.

CONTRACTOR:
A tradesman who works in the construction industry under a contract with the owner of the property. See also “sub-contractor“.

CONVENTIONAL LOAN:
1. A loan or mortgage to which the normal rules of such transactions apply without the inclusion of a government program (i.e. CMHC, VA or FHA insurance).
2. A loan or mortgage with a fixed interest rate, fixed payments and a fixed term.

CONVERSION CLAUSE:
A provision in a variable rate mortgage (adjustable rate mortgage) which allows the borrow to change the mortgage to a fixed rate mortgage upon the occurrence of certain events.

CONVERSION:
1. a change in the use of a property, or in the way a property is owned (i.e. from private to condominium ownership)
2. the improper taking of the property of another for one’s own use;
3. In Ontario, the transfer of a property from the Registry System of land registration to the new Land Titles Conversion Qualified (LTCQ) computerized system by the agents of the Ontario government.CONVERTIBILITY CLAUSE:
See “Conversion Clause“.

CONVEY:
To transfer title to (or any other interest in) a property to someone else.

CONVEYANCE:
The act of transferring an interest in property to someone else or the document which effects the transfer.

CO-OP:
Short for Cooperative, a mode of land ownership where the occupiers of individual units in a building own an interest in the Cooperative Corporation that owns the whole property.

COOPERATING BROKER:
A Broker who is involved in a real estate transaction and is, therefore, entitled to share in the commission from the transaction.

COOPERATIVE (CO-OP):
See “Co-op“.

CORPORATE RELOCATION:
The movement of an employee of a corporation to a new city (or other location) as part of the normal business of the corporation. The employee’s moving expenses (including the costs of selling and buying a home) may be paid by the corporation and are tax deductible.

CORPORATION:
A legal entity created by the registration of appropriate incorporating documents with the supervising government office. May be private (ownership held by specific individuals and not traded on a public stock exchange) or public (shares traded on stock exchange). Shareholders are protected from liability for the actions of the corporation. Corporations may enter contracts and own property.

CORPOREAL:
Tangible.

CORRECTING DEED:
A legal instrument registered specifically to amend an earlier deed by correcting errors in that earlier deed.

COST APPROACH:
An appraisal method where a property’s value is estimated using the cost of the property plus cost of all improvements, minus depreciation.

COST ESTIMATING:
Predicting the total cost of a construction project by estimating, in advance, the actual costs of all elements in the project, including legal fees, labour, permits, materials etc.

COST PLUS CONTRACT:
An agreement with a contractor or builder which sets the contractor’s compensation for the project as a percentage of the total cost of all labour and materials.

CO-TENANCY:
When more than one person owns a piece of property. Title will be held by the owners as Joint Tenants (each owns the land equally and, in the event of the death of one of the owners, the survivors continue to share title equally by right of survivorship) or as Tenants in Common (each owner has title to a specific percentage of the land and may sell, mortgage, or bequeath her interest to a third party without consent of the other owners).

COUNTEROFFER:
An answer to an offer. If a prospective Purchaser presents an offer to purchase a property to the owner of the property, that owner may accept the offer as it stands, reject it outright or respond with a “counteroffer” which changes certain terms of the original offer. Making a counteroffer, at law, entails rejection of the original offer. The Purchaser may then counteroffer back, making changes to the owner’s counteroffer. Sometimes, the process of counteroffering is referred to as “signing back” the offer.

COUNTY:
A territorial division of land in a geographic region (state or province). Similar to Regions and Regional Municipality.

COVENANT:
A promise contained in a contract or agreement; agreements written into deeds and other instru­ments promising performance or non-performance of certain acts or stipulating certain uses or restrictions on the property.

COVENANT RUNNING WITH THE LAND:
A covenant that is literally attached to the land and binds present and future owners to the requirements of the covenant. In new developments, such covenants may be restrictive: the owner is not allowed to alter grading patterns of the land, or erect new fences, or put up TV aerials, or to change the colour of the exterior of the house. Such restrictive covenants may be enforced by a Homeowners’ Association.

CREATIVE FINANCING:
An arrangement for the financing of the purchase of a property which is outside the normal practice of residential financing.

CREDIT:
1. The ability to access money, to use money prior to earning it.
2. The accounting term for a liability or for equity, entered on the right side of the ledger.
3. As a verb, to allot for the benefit of a person (i.e. You must credit the Purchaser on closing for the deposit paid).

CREDIT HISTORY:
A statement of the debts and obligations, whether current or past, of a person which helps a lender to assess the risk of a loan to that person.

CREDIT LIFE INSURANCE:
A form of insurance which is designed specifically to pay out the debts of the insured person in case of their death.

CREDIT LIMIT:
The maximum amount available to a person under a loan, credit card or other borrowing arrangement.

CREDIT RATING:
Based on an analysis of a person’s credit history, an evaluation of that person’s ability to manage a new debt or debts overall.

CREDIT RISK:
The potential for a borrower to fail to live up to her obligations under a loan arrangement.

CREDITOR:
Any person to whom money is owed. May be secured (the debt has been registered against the property of the debtor) or unsecured.

CROWN GRANT (CROWN PATENT):
The original grant of a tract of land from the Canadian Government to a land owner. May contain reservations to the Crown which still bind the land and all subsequent owners.

CUL-DE-SAC:
French term for a “dead-end street”. A street which meets another street at one end but is closed at the other, such that little traffic will travel down it and the property owners enjoy excellent privacy.

CUMULATIVE INTEREST:
The total amount charged as interest on a loan or mortgage to a certain date.

CUSTOM BUILDER:
A builder or developer who specializes in creating homes to the specifications and requirements of individual land owners.

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