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Real Estate Terms
S - Z

SALE AND LEASEBACK - A transaction in which, typically, an owner sells his improved property and as part of the same transaction signs a long-term lease and remains in possession.

SCHEMATICS - Preliminary architectural drawings and sketches; basic layouts not containing the final details of design.

SECOND MORTGAGE - A mortgage which is junior or subordinate to a first mortgage; typically, an additional loan imposed on top of the first mortgage, which is taken out when the borrower needs more money.

SECONDARY MORTGAGE MARKET - A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; also called secondary money market.

SECURITY AGREEMENT - A security document which creates a lien upon chattels, including chattels intended to be affixed to land as fixtures; known as a chattel mortgage prior to the adoption of the Uniform Commercial Code.

SECURITY DEPOSIT - Money deposited by or for the tenant with the landlord, to be held by the landlord for the following purposes: to remedy tenant defaults for damage to the premises (be it accidental or intentional), for failure to pay rent due, or for failure to return all keys at the end of the tenancy.

SEPTIC TANK - A sewage settling tank in which part of the sewage is converted into gas and liquids before the remaining waste is discharged by gravity into a leaching bed underground.

SETBACK - Zoning restrictions on the amount of land required surrounding improvements; the amount of space required between the lot line and the building line.

SETTLEMENT - The act of adjusting and prorating the various credits, charges and settlement costs to conclude a real estate transaction.

SEVERALTY - Sole ownership of real property.

SHELL LEASE - A lease wherein a tenant leases the unfinished shell of a building, as in a new shopping center, and agrees to complete construction himself by installing ceilings, plumbing, heating and air conditioning systems, and electrical wiring.

SHORELINE - The dividing line between private land and public beach on beachfront property.

SIMPLE INTEREST - Interest computed on the principal balance only.

SPECIAL ASSESSMENT - A tax or levy customarily imposed against only those specific parcels of realty which will benefit from a proposed public improvement, as opposed to a general tax on the entire community.

SPECIAL WARRANTY DEED - A deed in which the grantor warrants or guarantees the title only against defects arising during the period of his tenure and ownership of the property and not against defects existing before the time of his ownership.

SPECIFIC PERFORMANCE - A legal action brought in a court of equity to compel a party to carry out the terms of a contract.

SPOT LOAN - A loan on a particular property, usually a condominium unit, by a lender who has not previously financed that particular condominium building.

STANDING LOAN - A commitment by the interim or construction lender to keep the money already funded in the project for a specified period of time after the expiration of the interim loan, usually until permanent take-out financing is secured.

STATUTE OF FRAUDS - That law which requires certain contracts to be in writing and signed by the party to be charged therewith in order to be legally enforceable.

STATUTE OF LIMITATIONS - That law pertaining to the period of time within which certain actions must be brought to court.

STEP-UP LEASE - A lease with fixed rent for an initial term and provision for pre-determined rent increases at specified intervals and/or increases based upon periodic appraisals; sometimes called a graduated lease.

STRAIGHT NOTE - A promissory note evidencing a loan in which "interest only" payments are made periodically during the term of the note, with the principal payment due in one lump sum upon maturity.

SUBJECT TO MORTGAGE - A grantee taking title to real property "subject to mortgage" is not personally liable to the mortgagee for payment of the mortgage note. In the event the grantor-mortgagor defaults in paying the note, the grantee could, however, lose property, and thus his equity, in a foreclosure sale.

SUBORDINATION AGREEMENT - An agreement whereby a prior mortgagee agrees to subordinate or give up their priority position to an existing or anticipated future lien.

SUMMARY POSSESSION - A legal process used by a landlord to regain possession of the leased premises if the tenant has breached the lease or is holding over after the termination of tenancy.

SURRENDER - A premature conveyance of a possessory estate to a person having a future interest, as when a lessee surrenders the leasehold interest to the owner of the reversion interest, the lessor, before the normal expiration of the lease.

SURVEY - The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions, and position of houses in a lot including the determination of any existing encroachments or easements.

SURVIVORSHIP - The right of survivorship is that special feature of a joint tenancy whereby all title, right and interest of a decedent joint tenant in certain property passes to the surviving joint tenants by operation of law, free from claims of heirs and creditors of the decedent.

T

TAKE-OUT FINANCING - Long-term permanent financing.

TAX LIEN - A general statutory lien imposed against real property for failure to pay taxes. There are federal tax liens and state tax liens.

TAX SHELTER - A phrase often used to describe some of the tax advantages of real estate investment, such as deductions for depreciation, interest, taxes, etc., which may offset the investor's other ordinary income to reduce the investor's overall tax payment.

TENANCY AT SUFFERANCE - A tenancy which exists when a tenant wrongfully holds over after the expiration of a lease, without the landlord's consent, as where the tenant fails to surrender possession after termination of the lease.

TENANCY AT WILL - A tenancy in which a person is in possession of real estate with the permission of the owner, for a term of unspecified or uncertain duration, as when an owner permits a tenant to occupy a property until it is sold.

TENANCY BY THE ENTIRETY - A special joint tenancy between a lawfully married husband and wife, which places all title to the property into the marital unit, with both spouses having an equal, undivided interest in the whole property.

TENANCY FOR YEARS - A less-than-freehold estate in which the property is leased for a definite, fixed period of time, be it for 60 days or any fraction of a year, a year, ten years, etc.

TENANCY IN COMMON - A form of concurrent ownership of property between two or more persons, in which each has an undivided interest in the whole property; frequently found when the parties acquire title by descent or by will.

TENANCY IN SEVERALTY - Ownership of property vested in one person alone, and not held jointly with another; also called Several Tenancy or Sole Tenancy.

TENANT - In general, one who holds or possesses property, such as a life tenant or a tenant for years; commonly used to refer to a lessee under a lease.

TIME IS OF THE ESSENCE - The clause in a contract which emphasizes that punctual performance is an essential requirement of the contract.

TIME SHARING - A modern approach to communal ownership and use of real estate which permits multiple purchasers to buy undivided interests in real property (which is usually in a resort condominium or hotel) with a right to use the facility for a fixed or variable time period.

TITLE INSURANCE - A comprehensive contract of indemnity under which the title company agrees to reimburse the insured for any loss if title is not as represented in the policy.

TITLE SEARCH - An examination of the public records to determine what, if any, defects there are in the chain of title.

TOWNHOUSE - A type of dwelling unit normally having two floors, with the living area and kitchen on the base floor and the bedrooms located on the second floor.

TOWNSHIP - A piece of property, used in the government survey system of land description, which is 6 miles square, and contains36 sections, each 1 mile square; and consists of 23,040 acres.

TRADE FIXTURES - Articles of personal property annexed to leased premises by the tenant, as a necessary part of the tenant's trade or business.

TRIPLE NET LEASE - A net, net, net lease, where in addition to the stipulated rent, the lessee assumes payment of all expenses associated with the operation of the property.

TRUST DEED - A real property security device (also called a deed of trust) very similar to a mortgage, except that there are three parties, the trustor, the trustee, and the beneficiary (the lender).

TRUST FUND ACCOUNT - An account set up by a broker at a bank or other recognized depository, into which the broker deposits all funds entrusted to him by his principal or others.

TURNKEY PROJECT - A development term meaning the complete construction package from ground breaking to the completion of the building. All that is left undone is to turn over the keys to the buyer.

U

UNILATERAL CONTRACT - A contract in which one party makes an obligation to perform without receiving in return any express promise of performance from the other party, such as an open listing contract, where the seller agrees to pay a commission to the first broker who brings in a ready, willing and able buyer.

UPSET PRICE - A minimum price set by a court in a judicial foreclosure, below which the property may not be sold by a court appointed commissioner at public auction; the minimum price which can be accepted for the property after the court has had the property appraised.

USEFUL LIFE - That period of time over which an asset, such as a building, is expected to remain economically feasible to the owner.

USURY - Charging a rate of interest in excess of that permitted by law.

V

VACANCY FACTOR - An allowance or discount for estimated vacancies (unrented units) in a rental project. The vacancy rate is the ratio between the number of vacant units and the total number of units in a specified project or area.

VALUE - The power of a good or service to command other goods in exchange for the present worth of future rights to income or amenities; the present worth to typical users and investors of future benefits arising out of ownership of a property.

VARIANCE - Permission obtained from governmental zoning authorities to build a structure or conduct a use which is expressly prohibited by the current zoning laws; an exception from the zoning laws.

VENDEE - The purchaser of realty; the buyer. The buyer under an agreement of sale.

VENDOR - The seller of realty. The seller under an agreement of sale.

VOID - Having no legal force or binding effect; a nullity; not enforceable. A contract for an illegal purpose (i.e. gambling) is void.

VOIDABLE - A contract which appears valid and enforceable on its face, but is subject to rescission by one of the parties who acted under a disability, such as being a minor or being under duress or undue influence; that which may be avoided or adjudged void but which is not, in itself, void.

W

WAIVER - To voluntarily give up or surrender a right.

WAREHOUSE - A building used to store merchandise and other materials or equipment.

WAREHOUSING - A term used in financing to describe the process which loan correspondents employ, assembling into one package a number of mortgage loans which the correspondent has originated and selling them in the secondary mortgage market.

WARRANTY - A guaranty by the seller, covering the title as well as the physical condition of the property.

WARRANTY DEED - A deed in which the grantor fully warrants good clear title to the premises. Also called a general warranty deed.

WASTE - An improper use or abuse of property by one in possession of land, who holds less than the fee ownership, such as a tenant, life tenant, mortgagor, or vendee.

WEAR AND TEAR - The gradual physical deterioration of property, resulting from use, passage of time and weather. Only property subject to wear and tear is depreciable.

WRAP-AROUND MORTGAGE - A method of refinancing in which the new mortgage is placed in a secondary or subordinate position. In essence, it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount, without cashing out or distributing the existence of the first mortgage.

Y

YEAR-TO-YEAR TENANCY - A periodic tenancy in which the rent is reserved from year to year.

YIELD - The return on an investment or the amount of profit, stated as a percentage of the amount invested.

Z

ZONING - The regulation of structures and uses of property within designated districts or zones. Zoning regulates and affects such things as use of the land, types of structure permitted, building heights, setbacks, and density (the ratio of land area to improvement area).