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Abstract of Title - A compilation of the recorded documents relating to a parcel of land, from which an attorney may give an opinion as the condition of title.


Acceleration Clause - Clause used in an installment note and mortgage (or deed of trust), which gives the lender the right to demand payment in full upon the happening of a certain event, such as failure to pay an installment by a certain date, change of ownership without the lender’s consent, destruction of the property or other event which endangers the security of the loan.


Accrual Accounting - Accounting method in which income and expenses are charged to the periods for which they are applicable, rather than when actual payment is received or made.


Acquisition Cost - The total cost of acquiring an investment property, consisting of the purchase price plus other costs of acquisition such as closing costs, legal fees, title insurance, acquisition fees and due diligence costs.


Acre - A measurement equal to 43,560 square feet.


Ad Valorem Taxes - From the Latin meaning "according to value." In the United States, local property taxes are Ad Valorem taxes, being assessed in accord with property value.


After Tax Yield - For taxable investors, the yields, expressed as an annual percent, computed by dividing the Net After Tax Cash Flow by the total Equity Investment in a property. The After Tax Yield is computed for a specific period such as the first full year of ownership or the anticipated holding period.


Agent One who is authorized to act on

behalf of another.


Aggregate Rent The arithmetic sum of

all base rent payments, but not expense

pass-throughs or escalations, to be paid by

the tenant over the entire term of the lease.


Alienation Clause A type of acceleration

clause, calling for a debt under a mortgage

or deed of trust to be due in its entirety

upon transfer of ownership of the secured

property. Also called a "due-on-sale"



American Institute of Real Estate

Appraisers A professional institute to

promote the quality of the appraisal

industry through education of its members.


Amortization The liquidation of a

financial debt through regular periodic

installment payments.


Appraised Value An opinion of value

formally expressed in writing by an

independent appraiser based upon one or

more of the three traditional analytic

approaches: the cost approach, the market

approach, the income approach.


Appreciation An increase in value of an



Assessed Valuation The value placed

upon a property by the local taxing

authority for the purpose of assessing ad

valorem property taxes.


Asset Management The various

disciplines involved with managing real

property assets from the time of

investment through the time of disposition.


Asset Managert A person involved with

managing real property assets from the time of

investment through the time of disposition.


Assignment The transfer of title, right or

interest in a contract, lease or other

tangible or intangible item of value.


Assumption The act of assuming the

obligations of another person or entity in a

contract or lease.


- B -


Backup Offer A secondary offer to buy

property, used in case the first (primary)

offer fails.


Betterment An improvement to real

property, such as a sidewalk or a road, that

enhances the value of a property. The term

is frequently applied to public

improvements, although in appraisal

terminology it is equally applicable to any

fixed improvement which enhances value.


Blind Offer When a purposed Buyer submits a

contract offer to purchase a property without

ever visiting the property.


Bridge Loan A form of interim loan,

generally made between a short term loan

and permanent (long term) loan, when the

borrower needs to have more time before

taking the long term financing.


Broker One who acts as an intermediary

between parties to a transaction. A broker

may or may not be acting as an Agent of

one or more of the parties.


Broom Clean A term used to describe the

condition of a building, delivered to a

buyer or tenant. As the term indicates, the

floors are swept and free of debris.


- C -


Capital Gain The amount by which the

net proceeds from resale of a capital item

exceed the book value of the asset.


Capital Improvements Expenditures that

remedy a property’s deterioration,

appreciably prolong a property's useful life,

or add to the value of the property.


Capitalization Rate In real estate, the

yield of a property computed by dividing

the net operating income by the property

value and commonly expressed as percent.


Carrying Costs Expenses such as taxes,

interest and insurance which must be

absorbed by ownership during

development or on idle property.


Cash Accounting An accounting method

calling for income and expenses to be

recognized when payment is received or



Cash Flow The cash remaining after

various expenses and expenditures are

deducted from income.


Closing In real estate sales, the final

procedure in which documents are

executed and/or recorded, and the sale (or

loan) is completed.


Closing Costs Expenses incidental to a

sale of real estate, such as loan fees, title

fees, appraisal fees, etc.


Closing Statement The statement that

lists the financial settlement between buyer

and seller, and also the costs each must



Cloud On Title An invalid encumbrance

on real property, which, if valid, would

affect the rights of the owner.


Collateral Asset(s) pledged to the lender

to secure repayment of the loan in case of



Commission Money due a broker for the

sale or leasing of a property.


Comparable Used as a noun to denote

examples of recent sales or leases

which are similar to a subject property

being analyzed.


Concessions Items of economic value

usally cash back for improvement allowances

and other expense allowances, as an

inducement to enter into or extend a contract.


Condemnation The act of a government

unit exercising its power of eminent

domain to acquire a property.


Cost Approach In appraisal, one of the

Three Approaches to Value. The cost

approach considers what it would cost to

reconstruct the subject property as of the

appraisal date.


Cross-collateralization A grouping of

mortgages or properties that serves to

jointly secure one debt obligation. Any

deficiency in income or loss on the sale of

one property, can be made up by the

income, or sale of another property.


- D -


Debt Service Interest payments on debt

and principal payments to retire debt. For

accounting purposes, interest payments are

considered to be expenses while principal

payments are treated as capital



Deed in Lieu of Foreclosure A voluntary

transfer of a property from borrower to

lender, usually in complete satisfaction of

all obligations owed by the borrower to

lender which are secured by the property.

Typically, a Deed in Lieu of Foreclosure is

given when the value of the property is less

than the outstanding secured debt.


Deed of Trust A mortgage instrument

commonly used in the western United

States whereby a trustee holds nominal

title to a secured property under a trust

agreement which instructs the trustee to

convey title to the lender in the event of

default under the note or to the borrower

in the event of the satisfactory discharge of

the note.


Default The failure to fulfill a duty or to

discharge an obligation, such as the failure

of a borrower to make timely payments on

a loan or a tenant to pay rent and abide by

the terms of its lease.


Deficit An insufficiency of funds; the

amount by which the total cash inflow of

an investment falls short of its total cash



Depreciation A decrease or loss in

property value due to wear, age or other



Due-on-Sale A covenant that makes a

mortgage due if the property is sold.


- E -


Easement A partial interest in a property

allowing the holder of that interest certain

limited rights to the use or enjoyment of

that property.


Egress A term concerning a right to go

out or go across the land (public or private)

of another. Usually part of the term



Eminent Domain The right of a

governmental entity to acquire property

for public purpose by the exercise of

condemnation powers.


Encumbrance, Incumbrance A claim,

lien charge, or liability attached to and

binding real property. Any right to, or

interest in, land which may exist in one

other than the owner, but which will not

prevent the transfer of fee title.


Escrow Delivery of a deed by a grantor to

a third party for delivery to the grantee

upon the occurrence of a contingent event.

In some states, all instruments necessary

to the sale (including funds) are delivered

to a third (neutral) party, with instructions

as to their use.


Estoppel Certificate A document

executed by a tenant wherein the tenant

reaffirms that the existing lease is in full

force and effect and that no defaults exist

unless so noted on the certificate.


Exclusive Listing A contract between

owner and broker giving the broker the

right to be the only broker representing

the owner's specific property for sale or for



Exit Strategy Strategy available to

investors when they desire to liquidate all

or part of their investment.


- F -


Fair Market Value The highest price in

terms of money which a property will bring

in a competitive and open market under all

conditions requisite to a fair sale, the buyer

and seller each acting prudently,

knowledge-ably, and assuming the price is

not affected by undue stimulus.


Fannie Mae Federal National Mortgage

Association (FNMA) -A quasigovernmental

corporation authorized to sell debentures in

order to supplement private mortgage funds

by buying and selling FHA and VA loans at

market prices.


Fee Simple Interest In real property,

that ownership interest being the

maximum interest which one can possess if

one holds 100% of all ownership rights.


Foreclosure The process by which the

trustee or servicer takes over a property

from a borrower on behalf of the lender.


Freddie Mac (FHLMC) Federal Home

Loan Mortgage Corporation. A

corporation established by the Federal

Home Loan Bank to issue mortgagebacked



Free and Clear Real property against

which there are no liens, especially

voluntary liens (mortgages).


- G -


Gross Potential Rental Income The

income which a property would produce if

all spaces were leased at market rent.


- H -


Hard Money Mortgage A mortgage

given in return for cash, rather than to

secure a portion of the purchase price, as

with a purchase money mortgage.


Highest and Best Use The reasonably

probable and legal use of vacant land or an

improved property, which is physically

possible, appropriately supported,

financially feasible, and which results in the

highest value.


Hold Vs. Sell Recommendation A

recommendation made periodically based

upon an analysis of the benefits of nearterm

sale of an asset compared with

continued longer term hold, such analysis

must take into account the objectives of the

investor client as well as alternative

investments available at that time in the



- I -


Improvements Buildings or other

permanent construction, such as paving

and lighting, on or attached to the land.


Improved Land Developed land with

added infrastructure such as streets,

utilities and drainage. See: Developable

Land; Raw Land.


Income Approach One of the three

standard appraisal approaches, the income

approach applies a capitalization rate to the

net operating income of a property to

estimate its value.


Ingress and Egress The right to enter

and pass though land.


Interest Only Mortgage A mortgage

under which the principal amount

borrowed is repaid in one payment.

Periodic interest payments are made.


Investment Strategy The investment

parameters used by the manager in

structuring the portfolio and selecting the

real estate assets for a fund or account.

This includes a description of the types,

locations, and sizes of properties to be

considered, the ownership positions that

will be used, and the stages of the

investment lifecycle.


- J -


Joint Tenancy A form of ownership of

real estate by two or more individuals with

right of survivorship. In a joint tenancy,

the death of one of the owners does not

change the ownership unit other than to

reduce the number of persons who jointly

own the property. The last survivor in a

joint tenancy takes title in "severalty"

which is fully inheritable by his or her

heirs upon death.


Joint Venture The joining of two or more

individuals or entities in a specific business

enterprise such as the development of a

project or the acquisition of an investment.


Judgment The formal decision of a court

upon the respective claims of the Parties in

an action or a suit. A judgment, once

entered, may be recorded with the local

registry of deeds and then becomes a lien

upon the property of the defendant.


Judicial Foreclosure A method by which

a secured lender may foreclose on a

property by means of a court ordered sale.


- K -


Kick-Out Provision The provision in a

lease which allows a landlord to terminate

the lease upon the occurrence of some

specified event. An example of a Kick-Out

Provision would be the termination of a

retail lease if certain sales figures are not

achieved by the tenant or the termination

of an office lease to make room for the

expansion of a preferred tenant.


- L -


Latent Defect A hidden or concealed

defect. One which could not be discovered

by inspection, using reasonable care. In

legal descriptions, a latent defect may be



Lease An agreement, usually in written

form, transferring the right to the

exclusive possession and use of real estate

for a defined period of time.


Lease Holdover A tenant who remains in

possession and occupancy of a space

beyond the expiration of the lease term.

Frequently, commercial leases specify

penalty rents of 150% or more of the

ending lease rent in order to pressure a

holdover tenant to negotiate and enter into

a new lease.


Lease Option Usually an agreement

within a lease which gives the tenant the

right to purchase the property at a

specified or formula price at a future date.

Lease options may also provide the tenant

with the right to lease additional space in a

property or to extend the current lease



Leasehold Improvement An

improvement to a property made by a

tenant for its own use and purposes during

the term of its lease. The tenant owns the

leasehold improvement during the term of

the lease.


Legal Description A verbal and/or

cartographic description of a piece of

property that is sufficiently complete that a

surveyor could locate that property and its



Lessee The tenant under a lease.


Lessor The landlord under a lease.


Letter of Credit An agreement of a bank

on behalf of its customer that the bank will

honor drafts or other demands of payment

from third parties upon compliance with

conditions specified in the letter of credit.

Letters of Credit have become an

alternative form of partial lease guarantee

whereby the bank issuing the Letter of

Credit agrees to pay the landlord a

specified sum of money if the tenant should

default on its payments under the lease.


Letter of Intent A document expressing

an intent to invest, develop or purchase

without creating any firm legal obligation

to do so. Letters of Intent are frequently

used to negotiate the business points of a

transaction before preparing a formal

binding contract.


Leverage The use of credit to finance a

portion of the costs of purchasing or

developing a real estate investment.

Positive leverage occurs when the loan

constant (interest rate of principal

amortization) than the capitalization rate

(or lower than the projected IRR).


Lien A claim which one person has upon

the property of another as security for a

debt or obligation.


Lien, Tax A lien placed on a piece of

property by a taxing authority for the

nonpayment of taxes assessed. Liens do not

transfer title to a property until



Like-Kind Exchange A provision in the

federal income tax law which allows an

individual to trade a piece of real property

for another without incurring immediate

tax obligations due to any increase in

market value of the new property above

the historic cost basis of the old. Typical

like kind exchanges involve the seller

identifying to the buyer the property which

the seller would like in trade, the buyer

then taking title to that property and

immediately trading it to the seller.


Limited Partnership An entity consisting

of one or more general partners and one or

more limited partners. The general partner

manages the partnership's business and has

liability for its actions; the limited partners

have limited approval rights and limited

liability. In real estate, limited

partnerships almost always have a finite

life, at the end of which any unsold

investments are liquidated and the

proceeds are distributed to the investors.


Liquidity The availability of cash and

short-term assets to satisfy short-term

obligations. Also, the ease to which assets

can be converted to cash without loss of



Liquidated Damages An amount

predetermined in a lease or contract that

will be paid as compensation to the injured

party should the other party breach a

specified part of the lease or contract.

Liquidated damage provisions are

commonly used to avoid disputes over the

actual dollar value of damages which are

caused by a breach.


Lis Pendens A legal notice recorded to

show pending litigation relating to real

property, and giving notice that anyone

acquiring an interest in said property

subsequent to the date of the notice may be

bound by the outcome of the litigation.


Listing A written employment agreement

between a property owner and a real estate

broker authorizing the broker to find a

tenant or buyer for the property and

agreeing to pay the broker a specified sum

should the property be leased or sold.

Common forms of listings are open listings

and exclusive listings.


Loan Commitment A letter of intent

issued by a lender setting forth the terms

and conditions under which the lender will

agree to make a specific loan. Loan

commitment letters, like letters of intent,

are typically non-binding.


Loan-to-Value Ratio The ratio of debt to

total value of a property. Loan-to-Value

Ratio and Coverage Ratio are the two most

significant loan underwriting criteria.


Lock Out Period during which a loan may

not be prepaid. For example, a 10-year loan

that may not be repaid during the first five

years is said to have a five-year lock-out.


Lot and Block 1) A form of legal

description of a property which references

the lot number and block number shown

on maps and plats of a recorded

subdivision. 2) A system of reference

commonly used by local taxing authorities

to identify each specific parcel within the

taxing authority's jurisdiction.


- M -


MAI Member of the Appraisal Institute, a

professional designation granted to

appraisers by the American Institute of

Real Estate Appraisers. The designation is

earned through experience, education and



Market Approach In appraisal practice,

one of the three approaches to value

wherein comparable property transactions

are analyzed and adjusted for differences in

timing, location, circumstance and other

parameters to arrive at an indication of

value of a subject property. See: Cost

Approach; Income Approach.


Market Comparable An example of a

recent sale or lease of a property which is

similar to the subject property being



Market Rent The typical amount of rent

being paid under new leases at properties

of comparable size, location and quality.


Maturity 1) The length of the term of a

loan. 2) When a leaseback provides for

repurchase, the length of the leaseback



Mezzanine Financing Somewhere

between equity and debt. Mezzanine

capital is that piece of the capital structure

that has senior debt (or a first mortgage)

above it (up to about 50 or 60 percent of

value) and equity below it (about 15 to 30

percent). Usually it's has a LTV ratio of 70

to 85 percent. There is both equity and

debt mezzanine financing, and it can be

done at the asset level, entity or company

level, or it could be unrated tranches of

CMBS. Returns are generally in the midto

high-teens. Cycle considerations are

very key (if values drop, the mezzanine

position can be wiped out), as is real estate

due diligence.


Mortgage A document used to secure the

performance of a debt obligation whereby

real property is pledged as security for that

debt. See: Mortgagee; Mortgagor; Deed of



Mortgage Banker A company providing

mortgage financing with its own funds

rather than simply bringing together

lender and borrower, as does a mortgage

broker. Although the mortgage banker

uses its own funds, these funds are

generally borrowed and the financing is

either short term or, if long term, the

mortgages are sold to investors (many

times insurance companies) within a short



Mortgage Broker One who, for a fee,

brings together a borrower and lender, and

handles the necessary applications for the

borrower to obtain a loan against real

property by giving a mortgage or deed of

trust as security. Also called a loan broker.


Mortgagee The lender pursuant to a

mortgage document.


Mortgagor The borrower pursuant to a

mortgage document.


- N -


Net Operating Income (NOI) Effective

gross income less all operating expenses,

but before debt service and capital



Net Sales Proceeds Proceeds from the

sale of an asset less brokerage

commissions, closing costs, and marketing



Nonconforming Use A property which

does not conform to the zoning of the area.

Usually, the property was built in

conformity and then the zoning was



Non-Performing Loan A loan that is

presently unable to meet its contractual

principal and interest payments.


Non-Recourse Loan A secured loan

wherein the lender may look only to the

value of the security and not to the



- O -


Obsolescence An appraisal concept of the

decline in value of a property due to

outmoded design or condition (functional

obsolescence) or external changes such as

surrounding land use patterns or market

demand for a property of its type

(economic obsolescence).


Open Listing A listing arrangement

under which any broker may bring a

tenant or buyer to the owner of a property

and be compensated directly if a lease or

sale results. See: Exclusive Listing.


Original Loan Amount The original

funding amount of a loan on a property.


Origination Fee A fee charged by a

mortgage lender for negotiating and

making a loan.


Option An agreement to keep open, over a

set period, an offer to sell, purchase or lease

a property under certain circumstances or



Originator A company that sources and

underwrites commercial and/or

multifamily mortgage loans.


- P -


Partial Release The release of some of the

assets securing a mortgage loan, usually

occurring upon the partial retirement of

the loan. An example of a partial release

would be the release of one building within

a complex so that it can be sold.


Participating Broker A broker other that

the listing broker who procures a tenant or

buyer and shares in the commission paid to

the listing broker.


Permanent Financing A long-term loan

used to finance the purchase and operation

of a completed structure; as distinguished

from temporary loans, e.g., land and

construction loans.


Permanent Loan A long-term loan,

typically of five to ten years, financing real

estate following the completion of

construction and lease-up. See:

Construction Loan.


Personal Property Any property which is

not Real Property; things which are

tangible and moveable; also called

personalty or chattel.


Plat (Plat Map) A map dividing a parcel

of land into lots, as in a subdivision.


Portfolio A collection of assets held by a

single investor or group of investors. See:



Prepayment Provision The provision in a

loan document which governs the

borrowers right to prepay the outstanding

balance of the loan prior to its maturity. A

loan is said to be "closed" to prepayment

during those portions of the loan term

when prepayment is prohibited, and "open"

to prepayment during those periods when

prepayment is allowed, whether or not

such prepayment requires the borrower to

pay an additional fee or penalty for the

privilege of discharging the loan prior to

its maturity. See: Yield Maintenance.


Prescripted Easement The granting of

an easement by a court, based on the

presumption that a written easement was

given (although none existed), after a

period of open and continuous use of land.


Present Value The value of a stream of

payments, discounted at some discount

rate, to their cumulative value as of a

certain date. See: Net Present Value.


Principal 1) The main party to a

transaction acting for its own benefit

rather than as an agent for another. 2) The

balance of a loan upon which interest is



Procuring Cause An essential concept in

the law of real estate brokerage,

recognizing that a broker must have

brought about a transaction through his or

her efforts in order to be entitled to

commission payment. As this may be open

to dispute, brokers generally prefer listing

agreements granting an exclusive right to

sell which specify that the listing broker

will be paid commission regardless of how

the transaction comes about.


Promissory Note An unconditional

written promise of one person or entity to

pay a specified sum of money to another at

a future date. Promissory notes may be

assigned to another party or entity who

becomes a "holder in course" and who then

has the right to collect any sums due under

the promissory note. See: Uniform

Commercial Code.


Property Tax A tax assessed against real

property, usually by a county or municipal

taxing authority but sometimes also by

special purpose districts and agencies, in

proportion to the assessed value of the

property. See: Ad Valorem Tax; Mil Rate;

Tax Lien.


Purchase and Sale Agreement An

agreement between a buyer and seller of

real property, setting forth the price and

terms of the sale.


Purchase Money Mortgage A mortgage

or note secured by a deed of trust held by

the seller of a property and secured by the

property which is accepted by the seller as

partial payment of the purchase price.


- Q -


Quitclaim Deed A form of deed whereby

the grantor relinquishes any claim which

the grantor may hold in the property.

Typically, the grantor makes no

representations or warranties about claims

which may be held by others. See:

Warranty Deed.


- R -


Rate of Return The income and realized

or unrealized gain on an investment

expressed as a percentage of the



Real Estate Investment Trust (REIT) A

corporation of trust formed for the

ownership of real estate which is owned in

share units by investors. These shares may

be traded either publicly, if registered with

the SEC, or privately. A typical REIT has

a board of directors and may have

employees or may hire an investment

manager to conduct its business. Unlike

an ordinary corporation, a REIT is not

taxed on the income which it distributes to

its shareholders.


Real Estate Owned (REO) Real estate

owned by a savings institution as a result

of default by borrowers and subsequent

foreclosure by the institution.


Realized Gain or Loss Gain or loss

resulting from the disposition of an

investment, calculated by subtracting the

investments cost basis from the net sales



Real Property Includes the interests,

benefits and rights inherent in the

ownership of physical real estate including

land, and generally whatever is erected

upon or affixed to land but usually does not

include personal property (movable items).


Recourse Note A secured note under

which the lender may look to other assets

of the borrower to make up any deficiency

which might occur in the event of a

foreclosure wherein the value of the

secured asset were to be less than the

outstanding principal balance of the note.

See: Non-recourse.


Refinancing Obtaining a new loan on a

property, usually with new terms.

Sometimes used to describe the

replacement of a construction loan with

permanent financing.


Rent Payment made by a tenant to a

landlord in consideration of the right to

use and occupy a specified unit of real



Replacement Cost The cost to construct

a building or improvement of equal

economic utility, including both the cost of

construction and related costs such as

architectural fees, permits and interest

during construction.


Right of First Refusal A form of option

agreement by a landlord to allow a tenant

or purchaser the opportunity to match or

exceed an offer to lease or purchase a

property received on the open market. The

right of first refusal seriously encumbers a

property because it must be disclosed in

offering a property on the market and

potential tenants and purchasers are

reluctant to go to the effort to negotiate a

transaction with the landlord only to have

to wait while the holder of the right of first

refusal is given the opportunity to match

the negotiated transaction terms and to

snatch the deal away.


- S -


Seasoned Having an operating history;



Security Interest That interest in real or

personal property created by a lease,

mortgage or promissory note, under which

a landlord or lender may take ownership to

such personal or real property in the event

that the tenant or borrower fails to fulfill

its obligations under the lease, mortgage

or promissory note.


Servicer An organization that acts on

behalf of the trustee for the benefit of

security holders. The servicer typically

collects debt service from the borrowers

and deposits them into a distribution

account administered by a trustee. The

servicer also provides regular delinquency

and collateral reports to the trustee for

distribution to bondholders.


Short Sale The sale of securities with the

expectation of their repurchase at lower

prices. They are not in the seller’s

possession, but are usually borrowed for

delivery to the buyer.


Single-Family Residential Buildings

designed to house one family; with the

exception of condominiums and

townhouses, the individual units are

detached from one another and are each

sited on its own lot. Units may share

neighborhood amenities and are frequently

developed under a master plan.


Specific Performance A legal action

brought to compel a party to carry out the

terms of a contract. A person or entity

damaged by failure of a contracting party

may sue for specific performance, for

monetary damages, or for both.


Statute of Frauds State laws, requiring

certain contracts to be in writing. All

contracts for the sale of real property must

be in writing. Leases (personal property)

for more than one year must be in writing.


Survey The process of measuring land

area and determining boundaries,

Professional engineers and registered land

surveyors abide by standards which have

been accepted by the Title Insurance

Companies for the issuance of title

insurance covering the boundaries and

improvements shown by a survey done to

such standards. A survey complying with

these standards is called an "ALTA

survey," the initials being those of the

American Land Title Association.


- T -


Tax Lien A lien of a municipality or

county which attaches to real property for

non-payment of property taxes.


Tenant at Sufferance A tenant who holds

over at the end of its lease without the

landlords consent or approval.


Tenant at Will A tenant who is in

possession of real estate with the consent

of the owner but for an unspecified or

uncertain term. Such a tenancy may be

terminated by either landlord or tenant at

will. See: Month-to-Month Tenant.


Term The lifetime of a loan.


Time is of the Essence An expression

used in leases and contracts to indicate that

timely performance of the requirements of

the contract is an essential component of

the contract. If either party to the contract

fails to punctually perform, that party is in

default of the contract.


Title The right to ownership of real



Title Insurance An indemnity contract

under which a title insurance company

agrees to compensate an owner of real

property for any losses which that owner

may incur due to defects in the title to that

property, including liens and

encumbrances. Unlike other forms of

insurance which protect the policy holder

from some future occurrence, title

insurance protects from something which

has already happened but has not been

discovered in the examination of the title.


Title Insurance Company A company

which issues a policy of insurance which

indemnifies the holder of any loss sustained

by reasons of defects in the title.


Title Report A report prepared by a title

examiner stating the current condition of

title to a property and listing and recorded

encumbrances such as mortgages or liens.

See: Preliminary Title Report.


Title Search An examination of the public

records to determine what defects, if any,

may exist in the title to specific real



Triple Net Lease A lease which requires

the tenant to pay all taxes, insurance,

operating expenses, repairs and

replacements. In reality, few leases provide

for totally triple-net rent, although many

industrial and retail leases come close. The

term "triple" refers to 1) operating

expenses; 2) insurance premiums; and; 3)

property taxes. It is not uncommon to hear

the term "net lease" used interchangeably

with "triple net lease." While there are

double net leases where the tenant pays

operating expenses and insurance, and

single net leases where the tenant pays

only operating expenses, these are less

common and the terms are less frequently

heard in everyday real estate parlance.


Trustee An individual or other entity who

holds title to plan assets and is responsible

for managing the assets or for selecting

and retaining an investment manager or

consultant for such management.


- U -


Underimprovement An improvement

which is deficient in size or quality in

relation to the site on which is built.


Undeveloped Land Land with no added

improvements, undivided, and without

zoning regulations which would permit

higher use. Also known as Raw Land.


Unimproved Land Land which may have

been taken through the subdivision and

regulatory process but without physical

improvements such as street, drainage and



Unit Cost In relation to real estate, a cost

per square foot. Also called unit price.


Uniform Commercial Code (UCC) A

body of law which attempts to make

standard throughout the country certain

commercial transactions such as

conditional sales contracts, pledges and

chattel mortgages secured by personal

property. The UCC is most relevant to

real property transactions in the area of

furniture, fixtures and equipment including

such matters as a landlord's lien rights in

the trade fixtures and inventory of a



Unrealized Gain or Loss Gain or loss

resulting from changes in market value as

determined by appraisal or other indication

of value other than sale of the asset.

Calculated by subtracting the investment's

book basis from market value.


Usury The act of charging a rate of

interest in excess of that permitted by law.


- V -


Vacancy Allowance An allowance, usually

a percentage of gross income, which is

deducted from gross income to arrive at

effective gross income. The vacancy

allowance is used to adjust pro forma and

appraisal analyses of properties for an

assumed background level of vacancy

which normally occurs.


Vacancy Factor See: Vacancy Allowance.


Value The price at which products,

commodities of services exchange. See:

Fair Market Value.


Variable Rate A loan interest rate that

varies over the term of the loan; the rate is

usually tied to a predetermined index. Also

called adjustable rate.


Variance 1) The difference between actual

operating results to budget expectations or

to prior years results. 2) Permission

granted to an owner by a zoning board or

board of appeals to depart from some

requirement of the zoning ordinance.


- W -


Warranty Deed A form of deed wherein

the grantor agrees to warrant and defend

the title to the property from any claim

that may arise to the grantors right to

have conveyed clear title.


Waste A legal concept of the destruction

of the economic value of a property. Most

leases contain specific prohibition against

the tenant committing waste to the

property. While the intent of this

provision in older leases may have been to

prohibit abnormal wear and tear on the

property, some courts have held that the

waste provision of a lease can extend to

claims for environmental damage caused

by a tenant's use.


Wear and Tear The gradual physical

deterioration of a property resulting from

normal use, the passage of time, weather,



Workout The process by which a

borrower attempts to negotiate with a

lender to restructure the borrower's debt

rather than go through foreclosure



Without Recourse The provision in a

loan document which limits the lender's

security to the value of the asset and

prohibits the lender from seeking a

deficiency from the borrower in the event

that a foreclosed asset's value is less than

the outstanding loan amount at the time of

the foreclosure. See: Non-recourse debt.


Wrap-around Loan A form of secondary

financing wherein a junior loan is created

by a second lender to refinance an existing

loan by lending an amount over and above

the existing first mortgage. The borrower

then makes payments on the junior "wrap

around" loan and the junior lender uses a

portion of those payments to continue to

make payments on the first mortgage loan.


Write-off The accounting procedure

used when an asset has been determined to

be uncollectible and is therefore charged

off as a loss.


- X -


- Y -


Yield The dollar amount of income

realized after deducting all expenses,

including the amortization of tenant

improvements and commissions. Yield is

expressed as a percentage of principal.


Yield Maintenance The specific language in a loan document which references amounts the borrower must pay to extinguish the debt during time periods where the loan is open for prepayment. The calculation of yield maintenance fees will vary by loan, but usually is tied to the current loan rate for similar maturities of some type of Treasury obligation. Yield maintenance fees are a deduction from market value in the calculation of equity value.


Yield Spread The difference in yields

between, say, a commercial mortgage and a

benchmark value, typically U.S. Treasuries

of the same maturity.


- Z -


Zero Lot Line A zoning provision which

allows one or more walls of a building to

be built upon the lot line without setback.


Zoning The division of communities into

zones or districts according to present and

potential uses to which properties may be

put for the purpose of controlling and

directing the use of land, size of lots,

heights, bulk, type, and use of buildings,

the proportion of a lot that a building may

occupy and the density of development.

Zoning laws and regulations are enacted

by local governmental entities under

enabling legislation of the state and

constitute an exercise of police power by

the municipality.


Zoning Ordinance A local ordinance

which regulates land use, building

dimensions, set backs, density, parking

ratio and other design other criteria. See:

Building Code.