Real Estate Glossary

The aim of this glossary is to provide guidance on the vocabulary generally used in property. It is not exhaustive and the definitions are not 'technical' but are in plain English.

Glossary Of Legal Terms

  • Abstract of Title
    A summary of the deeds and documents showing title to property and all incumbrances affecting it
  • Act of God
    An unpreventable destructive occurrence of the natural world.
  • Affidavit
    A document, the contents of which are confirmed on oath by its maker as being true
  • Arm’s Length Transaction
    A transaction among parties, each of whom acts in his own best interest
  • Asking Price
    The list price that an owner would like to receive.
  • Assign
    To transfer property or legal interest
  • Banker's Draft
    Similar to a cheque but cannot be cancelled or countermanded once drawn. Payment is guaranteed by the Paying bank
  • Break Clause
    The lease may contain an option by which one or both parties may determine the lease at a particular time
  • Brownfield
    A site whose former use involved hazardous materials
  • Caution
    A person having an interest in the land may register a caution with the land registry, requiring it to notify him of any proposed dealings with the land
  • Caveats
    Warnings, often written to a potential buyer, to be careful; often offered as a way for the seller or the broker to minimize liability for what otherwise might be a deceptive trade practice
  • Collateral Security
    Security for the payment of a loan in addition to the principal security e.g. deposit of share certificates or a life insurance policy in addition to a mortgage
  • Common Land
    A piece of land subject to rights of common e.g. the rights in common with others of pasture, fishing, cutting wood or graze
  • Commission
    1. An amount earned by a real estate broker for services performed
    2. The official body that enforces real estate license laws
  • Completion
    When a seller gives possession or rights to a buyer of a property in exchange for the purchase price
  • Conditions of Sale
    The terms on which the buyer is to take the property
  • Consideration
    The amount that the buyer pays for the property in money or other items
  • Contract
    An agreement enforceable by law. Unlike most contracts, a contract for the sale of an interest in land must be in writing. A valid written contract can be created inadvertently
  • Conveyance
    A deed that passes an interest in property from one to another
  • Covenant
    An agreement creating an obligation contained in a deed. Some covenants are said to 'run with the land'; in these cases the liability or benefit of the covenant is passed to the buyer of the land on transfer of the title
  • Dedication
    The grant of a right of way to the public over private property
  • Deed
    A formal document that is 'signed, sealed and delivered' to prove and testify the agreement of the parties whose deed it is to the terms set out
  • Deposit
    A sum of money that is paid by the buyer on formation of the contract to buy as security for the fulfillment of the bargain
  • Development of land
    Actions such as building works or change of use of property which in most cases may not take place without planning permission from the local authority
  • Distressed property
    Real estate that is under foreclosure or impending foreclosure because of insufficient income production
  • Dwelling
    A place of residence
  • Easement
    A right one landowner has over land of someone else (e.g. right of way, right of light, right of support, right to a flow of air or water)
  • Expiry
    A fixed term will terminate at the end of that term
  • Fee Simple
    A freehold estate in land (as opposed to a leasehold) where the owner of the land has no time limit to his/her period of ownership
  • Freehold
    See 'fee simple'
  • Forced Sale
    A circumstance where a seller is under compulsion to sell and/or a proper marketing period is not available
  • Forfeiture
    Forfeiture is the landlord's right to re-enter the premises and determine the lease on breach by the tenant of any of his covenants or upon the happening of certain specified events. However the right to forfeiture is not automatic it exists only where the lease expressly includes such a right
  • Goodwill
    A business asset of intangible value created by customer and supplier relations
  • Encumbrances
    Obligations and restrictions etc affecting property
  • Intestacy
    See 'letters of administration'
  • Interest
    A person has an 'interest' in land when he has rights, titles, advantages, duties or liabilities connected with it
  • Joint Tenancy
    Joint ownership of land where on the death of a joint tenant his/her title passes to the survivor(s) - Compare with tenant in common
  • Key Money
    Amounts paid to initially lease a property, especially in countries where there is a scarcity of the type of property desired
  • Land Bank
    The activity of purchasing land that is not presently needed for use
  • Land Charges
    Certain pending actions, court orders, deeds of arrangement, mortgages, restrictive covenants, easements and other interests that a person may have over property of someone else can be registered as land charges in the land charges registry.
  • Landlord and Tenant
    The relationship between landlord and tenant depends on the contract made between them. The landlord grants exclusive possession of premises or land to the tenant for a defined period of time and receives payment ("rent") in return. This area of law is heavily regulated by acts of parliament such as rent acts and landlord and tenant acts etc
  • Lease
    The contractual document setting out the agreement reached between landlord and tenant
  • Leasehold
    The limited tenure by which a tenant only has rights to property for a limited period of time, as opposed to freehold
  • Listed Buildings
    Record of officially designated historic properties that are not allowed to be demolished, extended or altered without special permission from the local planning authority. Not all historic properties are necessarily listed
  • Mortgage
    The method by which money is lent and the lender obtains an interest in property of the borrower: - for the purpose of securing the repayment of the loan (also called a "legal charge ")
  • Mortgagee
    The person to whom the property is mortgaged; the lender.
  • Mortgagor
    The person who mortgages his/her property as security for the debt; the borrower
  • Notice to Quit
    A periodic tenancy may be determined by service of a notice to quit by either party
  • Party
    A person who takes part in a transaction or legal proceeding
  • Party Wall
    A wall adjoining property to different owners. It is treated as being severed vertically between the owners I each of whom has the necessary rights of support and use over the rest of the structure
  • Power of Attorney
    A formal document by which one person empowers another to represent him/her or act for him/her for certain purposes
  • Pre - emption
    A right to purchase property before or in preference to others, sometimes called a 'right of first refusal'
  • Probate
    A certificate granted by the high court stating that a deceased person's will has been proved and registered in the court and that the executor may administer the estate of the deceased in accordance with the terms of the will
  • Rent Review
    The legal mechanism whereby the agreed rent on the property is changed (normally increased) at a predetermined date(s) during the term of the lease. In the UK, rent reviews are normally "upwards only" and are every 5 years
  • Right of Way
    The right one person has to pass over land of another. The right can be either public or private
  • Stamp Duty
    A form of taxation levied by the government by means of stamps impressed on certain documents. The rate of duty is either fixed in amount or ad valorem, i.e. proportionate to the value of the property dealt with in the document
  • Sublease
    A lease from a lessee to another lessee. The new lessee is a sub lessee or subtenant
  • Surrender
    Surrender occurs where a tenant relinquishes his lease to his immediate landlord with his landlords consent. An express surrender must be created by deed
  • Tenancy in Common
    Joint ownership of land where the owners have joint possession, but hold the freehold to their own share. On the death of a tenant in common his/her share passes under the terms of his/her will or on intestacy and not to the surviving tenants in common ¬Compare with Joint tenants
  • Tenant
    See landlord and tenant
  • Title Deeds
    Documents conferring or showing title to land. In areas of compulsory registration of title, title deeds are replaced by either a land or charge certificate
  • Transfer
    The passing of a right or title from one person to another

Glossary Of Appraisal Terms

  • All-Risk Yield (ARY)
    This is sometimes known as the property yield. It is a very simple benchmark used to indicate the attractiveness of a Particular freehold property. If an investor considers a property has good growth prospects, they will pay more for the property to reflect this potential. As the ARY is the initial rent divided by purchase price, then the better the property, the lower the ARY
  • Capitalisation Rate
    The ARY is the capitalisation rates for a fully let property. It is the rate of return used in a traditional valuation to derive the YP (years purchase) that is then used to multiply the rental into a capital value figure
  • Capital Return
    The increase or decrease in value over a given period, after allowing for capital expenditure, expressed as a percentage of the capital employed over the period
  • Cash Flow
    The actual or estimated, periodic net income produced by the revenues and expenditures in the operation and ultimate resale of an income-producing property
  • Depreciation
    Decrease in value of real property caused by obsolescence, deterioration in its condition or other factors
  • Discounted Cash Flow (DCF)
    Technique used in investment and development appraisal whereby future inflows and outflows of cash associated with a particular project are expressed in present-day terms by discounting with a specific discount rate.
  • Discount Rate
    The rate or rates of interest selected when calculating the present value of some future costs or benefits
  • E.B.I.T.D.A.
    Earnings Before Interest, Taxes, Depreciation and Amortization
  • Exit Value
    The capital value of the investment property at the end of the period of analysis
  • Equated Yield
    The overall yield either achieved or required from a property investment based on explicit growth in the rental cash flow.
  • Façade
    The outside front wall of a building
  • Feasibility Study
    A comprehensive study for the determination of the likelihood that a proposed development will fulfill the objectives of a particular investor
  • Gross Present Value (GPV)
    The discounted or present value of a series of future cash flows where the initial outlay is NOT included as an outflow
  • Income Return
    The net income receivable in a given period expressed as a percentage of the capital employed over the same period
  • The Initial Yield
    The initial yield is the ratio of the initial rent over the capital value (price). It is the Yield that the investor achieves initially, and each year until the rent changes
  • Internal Rate of Return (IRR)
    The rate of interest (expressed as a percentage) at which all future cash flows (positive and negative) must be discounted in order that the net present value of those cash flows should be equal to zero. The IRR reflects both the return on the investment capital and the return of the original investment, which are basic considerations of potential investors
  • Market Value
    The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after property market wherein the parties had each acted knowledgably, prudently and without compulsion
  • Net Present Value (NPV)
    The discounted or present value of a series of future cash flows where the initial outlay is included as an outflow. The NPV is therefore the surplus or deficit present valued monetary sum above or below the initial outlay (purchase price)
  • Nominal Return
    The return on an investment calculated by reference to cash flows expressed in monetary or actual terms. (See also real return)
  • Obsolescence
    This is the causes of depreciation. It may be a decline in utility (economic obsolescence), physical usage (physical obsolescence) or due to changes in user preference over time (functional obsolescence)
  • Opportunity Cost
    The return or other benefit foregone in pursuing one particular investment opportunity rather than another.
  • Rack - Rented Freehold
    A property let at Market Rental (MR) on either a new lease or at rent review. MR is the best rent readily achievable in the market today
  • Rateable Value
    The nominal value of the commercial property on which rates are assessed. In theory this value is the rent that a tenant might reasonably be expected to pay.
  • Real Return
    The investment return remaining after the effects of inflation have been stripped out of the performance calculation being used
  • Rental Growth
    The rate of change, increase or decrease, applied to current market rental values to derive a forecast level of rental value at a date in the future
  • Required rate of return
    The Target rate of return
  • Risk Free Rate of Return
    The interest rate on the safest investments. Often quoted with reference to a fixed interest gilt, this is the guaranteed nominal annual return (redemption yield) that can be obtained by holding such an asset to its redemption date
  • Risk Premium
    This is the addition made to the risk free rate of return to reflect the extra return required by an investor over and above the risk free rate, which fully compensates for the extra risks associated with a given investment
  • Target Rate of Return
    A criterion rate selected in a particular instance to reflect the opportunity cost of money. This is often based on the redemption yield of government stock with a percentage addition or a discount to reflect the nature and risks of the project, but it may be comparative with other potential property investments
  • Total Rectum
    The sum of capital return and income return as defined above
  • Vacancy Rate
    The percentage of all units or space that is unoccupied or not rented
  • Years Purchase (YP)
    The YP is the multiplier used to capitalise a rental figure into a capital value

Glossary Of Investment Terms

  • Accounting Standards Board (ASS)
    Sets accounting standards in the UK. A subsidiary of the Financial Reporting Council.
  • American Stock Exchange
    The second largest floor-based securities exchange in the US, specialising in equity derivative products, particularly options. Known as the (New York) Curb Exchange until 1953 - its roots go back to 1849 - the Amex merged with the Nasdaq Stock Market in 1998 to form the Nasdaq-Amex Market Group.
  • Amortization
    A gradual paying off of a debt by periodic installments
  • Annual Percentage Rate (APR)
    The true rate of paying interest on a loan.
  • Annuity
    The provision of a guaranteed income for life in return for a lump sum payment. Often bought with a pension fund on retirement. Annuity rates are linked to yields on gilt-edge securities.
  • Arbitrage
    Taking advantage of small price differences (of securities or goods) in different markets to make a profit. It involves buying something to sell in another market or at another time
  • Assets
    Fixed assets are land, machines and buildings; current assets consist of cash, money owed, stock, investments and work in progress; intangible assets are goodwill, trade marks, patents, etc; liquid assets are funds kept in cash or in a form that can be quickly and easily turned into cash.
  • Asset Stripping
    Buying a business and then realising a profit by selling off the assets separately.
  • Balance sheet
    A balance sheet is a summary of an organisation's financial position. It lists the values, in the books of account on a particular date, of all the organisation's assets and liabilities. The assets and liabilities are grouped in categories, to paint a picture of the organisation's strengths and weaknesses.
  • Bears, Bulls and Stags
    These are traditional names given to certain investors in the market. A Bear is someone who believes that the price of a share or other commodity will go down. When he takes this view he is 'bearish'. A Bull believes that the price of a share or other commodity will go up and when he takes this view, he is 'bullish'. A Stag is an investor who buys a share at the time of its issue at the issue price in anticipation that the share will’ have an opening market price at a higher level so that he can make a short-term profit. A Bull who buys shares and is left holding them when the price, contrary to his expectation, goes down is called a stale Bull.
  • Blue Chip
    Originally an American expression to denote the shares of companies which are well established, usually large and highly regarded. A leading share in a large company.
  • Bond
    A bond is a written promise to repay a debt at an agreed time and to pay an agreed rate of interest on that debt
  • Book Value
    This is the value of a fixed asset, such as a building or machine, as recorded in an organisation's books. It is usually the amount paid for the asset less an amount for depreciation.
  • Buyout
    Arrangement by the owner of a building to acquire the remaining lease term of a tenant in a different building. This frees the tenant from the old lease obligations and permits him to negotiate a lease in the new building.
  • Capital Return
    The capital return is the return obtained by an investor through the movement of share, property or bond prices, without taking any accounting of dividends, rent or interest received.
  • Current Assets
    These are short-term assets that are constantly changing in value, such as stocks, debtors and bank balances.
  • Current Liabilities
    These are short-term liabilities which are due to be paid in less than one year, such as bank overdrafts, money owed to suppliers and employees' PAYE.
  • Dividend
    The distribution to shareholders out of company profits.
  • Dividends and interest
    Traditionally, the word ‘dividend’ has been used for the payments made to shareholders in securities which, as in the case of most ordinary shares, own the company; so the dividend is variable, upwards or downwards, according to the success of the company. 'Interest', on the other hand, is a term normally used for the payments made on cash deposits or bonds. The interest on a bond is sometimes called the 'coupon', a name which results from the fact that, for some securities, the interest is claimed from the company by sending in a coupon detached from the share certificate.
  • Inflation
    A loss in the purchasing power of money; an increase in the general price level. Generally measured by the consumer price index
  • Joint Venture
    An agreement between two or more parties who invest in a single business or property
  • Price/Earnings Ratio
    The ratio of the price of a share to the earnings per share is termed the price/earnings ratio. This is the most important measure of how expensive a share is. The price/earnings ratio (for example 7, or 15) gives the ratio between the price which investors are prepared to pay in the market and the earnings produced by the company in question and due to that particular share. So the higher the ratio, the more investors are prepared to pay for participation in the company's earnings.
  • REIT
    A real estate investment trust, or REIT, is a company that owns, and in most cases, operates income-producing real estate and enjoys special tax benefits. It sells shares of ownership and must invest in real estate or mortgages.
  • Sale and Leaseback
    A simultaneous sale of real estate and lease of the same property to the seller
  • Share Capital
    Share capital is the money invested directly in a company by its members (shareholders).
  • Share Certificate
    This document certifies who owns shares in a company. It gives the type and number of shares owned by the shareholder and lists the serial numbers of the shares.
  • Stamp Duty
    Transfer Stamp Duty, imposed by the Government, is payable by the buyer only. It is an ad valorem (ie based on value) duty. It is not levied on gilt¬-edged stocks, company debentures and loan stocks, and certain other securities. Higher rates are payable on some property transactions.
  • Trust
    A body set up, under the law governing trusts, to look after the property or investment of other persons. This does not necessarily entail the management of the assets but responsibility for such management.
  • Unit trust
    A unit trust is a legal vehicle used for investment purposes, in which the money subscribed by unit holders is invested for some common investment aim, usually in ordinary shares. Investors may subscribe to units, which can be created if necessary, at some subsequent date the investor may sell the units back to the managers, In which case they are cancelled or sold on to another investor. The fund is therefore 'open ended' and the amount of money under management can vary according to the confidence which investors have in that particular unit trust's future.
  • Yield
    The yield on a share or bond is the Income paid to the investor (dividend or interest) as a percentage of the capital value of the investment.

The Southeast Group at a Glance:

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  • Coldwell Banker Commercial No 1Int'l Real Estate Franchise
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