Glossary

Acre
A measure of land. One acre is equal to 43,560 square feet, or 4,047 meters.

Addendum
A legal document that adds to or amends the terms of a standard form lease.

Affidavit
A voluntary statement in writing, sworn to before a notary public or other officer.

Amenities
Tangible and intangible features that enhance and add to the subject property's desirability and perceived value, e.g. cafeteria, indoor parking, special janitorial services.

Amortization
The process of paying off a debt, together with interest, usually with equal payments at regular intervals over a period of time i.e. 15, 20 or 25 years required to reduce a debt to zero when payments are made regularly.

Annual Budget
Although not legislated, conscientious development of an annual budget is an important duty (normally required by bylaw) of a condominium board. It is the basis upon which contributions are levied and funds are collected for the control, maintenance and repair of the common property and the administration of the condominium corporation.

Annual General Meeting (AGM)
Once a year, a condominium board is required to convene an Annual General Meeting of unit owners. At the meeting, the retiring board provides owners with operational and financial reports for the year past. Owners then elect a new board and deal with any unfinished business, including (if required) appointment of auditors.

Appraisal
A process used for estimating the market value of a particular property. It can help the purchaser determine what price to offer. It can also be used by the lender for mortgage purposes. The appraised value seldom matches the actual purchase price exactly as other factors influence price.

Approved Lender
A lending institution authorized by the Government of Canada through CMHC to make loans under the terms of the National Housing Act. Only approved lenders can negotiate mortgages which require mortgage loan insurance.

Appreciation
The increase of a property's value over time.

Assessment
The value of a property set by the local municipality, for the purposes of calculating property tax.

Assumable Mortgage
A mortgage held on a property by the seller that can be taken over by the buyer, who then accepts responsibility for making the mortgage payments.

Assumption Agreement
A legal document signed by a homeowner that requires the buyer to assume responsibility for the obligations of a mortgage by the builder or the original owner.

Atrium
The central area of a building, equipped with a ceiling of translucent material that allows natural light to fall on the interior.

Audit
An inspection of accounting records and procedures, conducted by a trained person to check their accuracy, completeness and reliability.

Bare Land Condominium
In an ordinary condominium, both the master lot and the walls and roof of buildings are common property. Today, many townhouse and villa projects are developed as bare land condominiums in which structures are entirely privately owned and only the land is held as a condominium.

Bay Depth
The distance from a buildings corridor wall to the outside window or wall.

Blended Mortgage
A combination of two mortgages, one with a higher interest rate than the other, to create a new mortgage with an interest rage somewhere in between the two original rates.

Blended Mortgage Payments
A mortgage payment that includes principal and interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases.

Board of Mangers (Directors)
In Alberta, a corporation's executive is called a board of managers (with proposed revisions, directors). The Condominium Property Act's initial Appendix 1 bylaws, although replaceable, stipulate a board of no fewer than three people (except where there are only one or two owners), and not more than seven.

Broker
An individual authorized to represent and act on behalf of another person or entity, (referred to as principal)

Building Codes
Ordinances that specify minimum construction standards. These ordinances are enforced for the protection of public safety and health.

Building Core
The central or arterial part of a multi-storey building that integrates functions and service needs for established occupants. Such areas are normally composed of toilet facilities, elevator banks, janitor's closets, utilities, mechanical facilities, smoke shafts and stairwells.

Building Module
A unit of length and width by which a building's plan is standardized facilitating office space design and layout.

Building Permit
A certificate must be obtained from the municipality by the property owner or contractor before a building can be erected or repaired. It must be posted in a conspicuous place until a job is completed and passed as satisfactory by a municipal building inspector. Drawings and specifications must be filed with the legal authorities in control of building operations.

Building Shell
The skeleton of a building to which the finished exterior and interior are applied. It includes the building foundation.

Building Standards
The specific items of construction which a developer or owner decides to use throughout a building; for example, in an office building, building standards would include a certain type of carpeting, wall and floor coverings.

Bylaws
A set of rules and procedures for the administration of the condominium corporation and the management and conservation of the common property. An initial set is provided by statue. However, conscientious developers will provide and appropriate site-specific set. Considered a contract between unit owners, bylaws may be amended by a special (75%) majority.

Canada Mortgage and Housing Corporation (CMHC)
A crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also creates and sells mortgage loan insurance products.

Capitalization
The process of ascertaining the value of a property by the use of a proper investment rate of return and the net income expected to be produced by the property. The formula of net annual income divided by proper capitalization rate is expressed: Income: % Rate = Value

Capitalization Rate
A rate used to calculate an estimate of a property's value based on that property's income.

Cash Flow
The amount of spendable income form real estate investment; cash available after all payments have been made for operating expenses and mortgage principal and interest.

Cash Flow after Taxes
A calculation which subtracts the levied taxes and the annual debt service from the net operating income. (N.O.I.)

Cash Flow before Taxes
A calculation produced on the A.P.O.D. form which subtracts the annual debt service form the net operating income (N.O.I)

Cash-on-Cash Return
A percentage figure arrived at by dividing the cash flow form a property by the total investment in the property and multiplying by 100. Also called Cash Yield.

Caveat Emptor
Let the buyer beware

Ceiling Plenum
A totally enclosed area above the ceiling used for the handling of air.

Certificate of Insurance
A certificate issued by an insurance company or its broker. It verifies that a certain insurance policy is in effect for stated amounts and coverage's and names those insured.

Certified Property Management (CPM)
The professional designation conferred by the institute of Real Estate Management on those who distinguish themselves in the areas they serve and the numbers of stores they operate.

Change Order
An order issued any time there is a change in the specifications, price, or time set forth in the building contract as authorized by the owners, architect or engineer.

Closing
After all final negotiations and obligations have been met, the signing of a lease.

Closing Costs
Costs in addition to the purchase price of a home such as legal fees, transfer fees and disbursements, that are payable on the closing date. Closing costs typically range from 1.5 to 4 percent of a home's selling price.

Closing Date
The date on which the title and keys to the property are transferred from the seller to the buyer and the money is paid.

Co-insurance Clause
A clause found in the property insurance policies intended to encourage insuring the full value of a property. A co-insurance clause states that if you are insured for less than a certain percentage of the replacement value of your property, you suffer a penalty in the case of a claim.

Collateral Mortgage
A mortgage which secures a loan by way of a promissory note. The money, which is borrowed, can be used to buy a property or for another purpose such as home renovation or for a vacation.

Commitment Letter/Mortgage Approval
Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

Common Property
Every part of a condominium plan that is not a unit is common property. The condominium common property supports and services the individual units and its ownership is proportionality distributed among the unit owners in accordance with their unit factors.

Compounding
How much a dollar will grow over a given period at a fixed rate of interest when the accrued interest is re-invested.

Concession
A benefit granted by the owner to encourage the leasing of new space or to retain a tenant; usually related specifically to the rental rate or improvement allowance.

Condemnation
The taking of private property for public use under the right of eminent domain, with adequate compensation to the owner, otherwise referred to as expropriation.

Conditional Offer/Conditions of Sale
An offer to purchase that is subject to specified conditions, for example, the arranging of a mortgage. There is usually a stipulated time limit within the specified conditions must be met or waived.

Condominium
Shared ownership of property. Owners have title (ownership) to individual units and a proportionate share in the common elements.

Condominium Corporation
When a plan is deposited with a land titles office, an administrative body is automatically created. Membership in the condominium corporation is made up of the owners of the individual units. Its purpose is the management of the affairs of the condominium in the best interests of all owners.

Condominium Property Act
The name of the Alberta statue that defines directs and regulates condominium ownership. Since provinces have jurisdiction over land titles, each jurisdiction has its own condominium legislation. Fundamental concepts are essentially identical. However, form one province to the next, administrative technicalities may vary significantly.

Consideration
Anything of value given by one party to induce another to enter into a contract.

Construction Cost
Total expense plus normal overhead and profit, which must be paid for the job in question.

Construction Cost Estimate
A figure submitted in advance of construction, not binding unless submitted as a bid. It is used to help arrive at a decision concerning the feasibility of a proposed project.

Contingency Fund
A fund established by a developer to cover unforeseen construction costs.

Convector
A heating unit in which air, heated by contact with a heating device in a casing, circulates by convection. This term is often used by the layperson in identifying what is really an induction unit or system which it resembles. It is usually taken for granted that all systems are the same and thus it is often used as a generic term when identifying either system.

Conventional Mortgage
A mortgage loan that is not insured or guaranteed by any government agency.
A first mortgage issued for up to 75% of the property's appraised value or purchase price, whichever is lower.

Conveyance
A written instrument by which title or an interest in real estate is transferred; a deed.

Co-operating Broker
A broker who brings a suitable prospect for a particular location to the broker who represents the owner of the site, or vise versa, thereby qualify for a portion of the commission fee; also called an outside broker.

Corridor
A hallway or a passageway which provides a common way of travel to an exit, another office, etc.

Cost Approach
The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the replacement cost of the building, less depreciation.

Cost-plus Method
The method a general contractor uses to estimate costs based on costs of labour (time) and materials plus a percentage fee; also referred to as time-and-material method.

Counteroffer
One party's written response to the other party's offer during negotiation of a real estate purchase between the buyer and seller.

Covenant
An agreement, written into deeds and other instruments, promising performance or non-performance of certain acts or stipulating certain uses or non-uses of the property.

Credit Rating
Evaluation of a company or individual's financial trustworthiness, particularly with regard to meeting obligations.

Curb Appeal
The aesthetic image and appearance a building projects; the first impression it creates.

Debt Service Raito
The periodic payments (principal and interest) made on a loan. The percentage of a borrower's gross income that can be used for housing costs, including mortgage payment and taxes (and condo fees when applicable)

Deed of Trust
Also known as a trust deed, an instrument used to create a mortgage lien by which the mortgagor conveys a title to a trustee who holds it for the benefit of the noteholder (the lender).

Default
Failure to make either a mortgage or lease payment; non- performance of the terms of a loan or lease.

Deferred Maintenance
Ordinarily, unperformed maintenance on a property that noticeably affects its use, occupancy, welfare and value.

Demand
In marketing terms, the willingness and ability to purchase a commodity or service.

Demised Premises
Premises, or parts of real estate in which an interest or estate has been transferred temporarily, such as an interest in real property conveyed in a lease.

Demising Wall
A partition or wall separating one tenant's willingness and ability to purchase a commodity or service.

Demographic Profile
The social and economic statistics of a specific population, including population density, age, education, occupation and income.

Depreciation
Loss of value due to all causes. Deprecation usually includes: (1) physical deterioration (ordinarily wear and tear); (2) functional depreciation (see Obsolescence); and (3) economic obsolescence (causes to the property).

Discharge of Mortgage
A document signed by the lender and given to the borrower when a mortgage land has been repaid in full.

Discounting
A value paid today for an investment, the principle to be received in the future.

Down Payment
The portion of the house price the buyer must pay up front from personal resources, before securing a mortgage. It generally ranges from 5 to 25 per cent of the purchase price.

Easement
A right to use the land of another for a specific purpose, such as a right-of-way or for utilities. An easement appurtenant passes with the land when it's sold e.g. a utility company's right to run wires or lay pipe across a property.

Economic Obsolescence
Impairment of desirability or useful life or loss in the use and value of property arising form economic forces outside the building or property, such as changes to optimum land use, legislative enactments that restrict or impair property rights and changes in supply-demand relationships.

Effective Gross Income
The scheduled gross income of a property, minus the vacancy rate.

Egress
The right to leave a tract of land. Often used in connection with access.

Encroachment
A building or some portion of it, or a wall or fence that extends beyond the land of the owner and illegally intrudes upon land of an adjoining owner, a street, or an alley.

Encumbrance
Any lien, such as a mortgage, tax or judgement lien. It can also be an easement, a restriction on the use of the land, or an outstanding dower right that may diminish the value of property. A registered claim for debt against a property such as a mortgage.

Equity
The difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.

Equity Financing
Capitalization of a retail project through partnerships or other investment entities that acquire an interest in the project.

Estoppels Certificate
A certificate issued by a condominium corporation stating whether a particular unit's condominium fees are paid up to date. A clear estoppel certificate is important for a new owner to have, because it forestalls any claim of unpaid fees by the condominium corporation.

Exclusive Agency Listing
A listing contract under which the owner appointees a real estate broker as the one exclusive broker for a designated period of time to sell the property on the owners stated terms, under which the owner agrees to pay the broker a commission.

Exclusive Use
Although forming part of the common property, patios, balconies, parking, storage and other spaces are usually designated as exclusive-use areas for residents of a particular unit only. Most bylaws provide the board with authority to manage such assignments. Any presumed or represented tenure, permanent or long-term should be verified and documented.

Fee Simple
The absolute right of ownership of real property. It can be held without time limitation and is freely transferable and inheritable.

Fiduciary
A Person to who power or property is entrusted of the benefit of another.

First Mortgage
The first security registered on a property. Additional mortgages secured against the property are "secondary" to the first mortgage.

First Right of Refusal
A lease concession that gives the tenant the first right, within a limited period of time, to a designated additional area or space vacated for renovation or rebuilding.

Foreclosure
A legal process by which the lender takes possession and ownership of a property when the borrower doesn't meet ('defaults on') the mortgage obligations.

General Lien
A lien on all property, both real and personal, of a debtor.

Grantee
A person to whom an interest in land is conveyed by deed, grant or other written instrument.

Gross Debt Service Ratio (GDS)
The percentage of the borrowers gross monthly income that will be used for monthly payments of principal, interest, taxes, heating costs and half of any condominium maintenance fees.

Guarantor
A person that endorses a 3rd party agreement to guarantee that promises made by the first party (the principal) to the second party (lender) will be fulfilled, and assumes liability if the principal fails to fulfill then (default).

Hard Construction Costs
The costs of constructing a building shell plus most of the covering materials.

Hardware
General term that includes the following: (a) hinges, (b) lever handles, knobs, or pulls (c) latch set, lockset, magnetic and friction catches and (d) door closers, door holds, and door bumpers.

Hectare
Metric area measurement being 100 x 100 meters (2.4711 acres)

Highest and Best Use
The possible use of land that will produce the greatest net income and thereby develop the highest land value.

High-Ratio Mortgage
A mortgage loan in excess of 75 per cent of the lending value of the property. This type of mortgage must be insured for example by CMHC, against payment default.

Holdback
An amount of money withheld by the lender during the process of construction of a house to ensure that construction is satisfactorily at every stage. A standard holdback amount is 10% of the total cost of the building project.

HVAC
A building's heating, ventilating and air conditioning system

Income Approach
The process of estimating the value of an income producing property by capitalization of the annual net income expected to be produced by the property during its remaining useful life.

Inflation
An increase in the prices of goods and services as a reflection of increased spending in relation to the supply of goods.

In-House Agents
Leasing representatives who work for a particular developer, owner, or retailer who are paid a salary and normally do not receive commissions as part of their compensation.

Institute of Real Estate Management (IREM)
A professional association affiliated with the National Association Of Realtors for persons who meet professional standards of experience, education and ethics with the objective of continually improving their managerial skills by mutual education and exchange of ideas and experiences.

Insured
The indemnified person (s) or company (ies) who receive the proceeds of insurance in the event of insurable loss or damage.

Interest
The cost of borrowing money.

Interest Adjustment Rate (IAD)
A date form which interest on the mortgage advance is calculated for your regular payments. This date is usually one payment period before the regular mortgage payments begin. Interest due from the date your mortgage is advance to the IAD is due on closing.

Interest Rate
The percentage of the principal sum charged by a lender for its use, usually for a yearly period.

Interim Loan
Short-term, generally higher interest financing for new or existing projects. (see also permanent loan)

Joint Tenancy
A form of ownership in which two or more individuals (often spouses) have an equal share in the ownership of a property. In the event of one owners death, his or her share is automatically transferred to the surviving owner(s), apart from the deceased's will.

Leasehold
The interest or estate that a lessee of real estate holds under the provisions of a lease.

Lending Value
The purchase price or market value of a property, whichever is less.

Leverage
Controlling a large asset with a relatively small amount of cash. For example, in real estate, $25,000 down payment (or less) can be used to purchase (control) a $100,000 home.

Levy
To impose or assess a tax on a person or property. The amount of taxes to be imposed in a given district.

Lien (Builders)
A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid. A lien must be properly filed by a claimant. It has a limited life, prescribed by a statue that varies form province to province. If the lien holder takes action within the prescribed time, the homeowner may be obliged to pay the amount claimed by the lien holder. Alternatively, the lien holder may force a sale of the property to pay off the debt.

Listing Contract
An agreement between landowner (as principal) and a licensed real estate broker by which the broker is employed to sell the real estate on the landowners terms within a given time for which service the landowner agrees to pay a commission.

Listing Agreement
The contract between the listing broker and an owner, authorizing the REALTOR® to facilitate the sale or lease of a property.

Listing Broker
The REALTOR® who signs a contract with an owner to sell the property.

Maintenance
Care and work necessary to keep a property in good physical and operating condition and appearance.

Maintenance Fee
A monthly fee paid by condominium owners for maintaining the development's common areas.

Market Data Approach
The process of estimating the value if property through the examination and comparison of actual sales of comparable properties.

Mechanics' Lien
A lien established by law in favour of those who provide labour or material for the improvement of real estate.

Mixed-Use Development (MXD)
A type of real estate project often found in central business districts that develops a single property for several different purposes, including hotel, office, residential and entertainment.

Mortgage
A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt.

Mortgage Payment
A regularly scheduled payment that is blended to include both principle and interest.

Mortgage Insurance
Government-backed or privately-backed insurance protecting the lender against the borrowers defaults on high-ratio (and other types) of mortgages.

Mortgage Life Insurance
Insurance that pays off the mortgage debt, should the insured borrower die.

Mortgage Term
The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six months to 5 years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term.

Mortgagee
The lender who provides the mortgage.

Mortgagor
The borrower, who pledges the property as security for the loan.

Multiple Listing Service® - (MLS® system)
A system for relaying information to REALTORS® about properties for sale.

Net Worth
Your total financial worth, calculated by subtracting your total liabilities form you total assets.

Notary Public
An officer appointed by the Province with authority to take the acknowledgement of persons executing documents and to sign the certificate and affix a seal.

Offer to Purchase
A written contract setting out the terms under which the buyer agrees to buy. If accepted by the seller, it forms a legally binding contract subject to the terms and conditions started in the document.

Offices
From its members, the board elects an executive - usually a president, a vice-president, a secretary and a treasurer. The president chairs meetings and often has a casting vote. The vice-president performs the president's duties in his or her absence. The secretary ensures minutes of proceedings are kept and the treasurer ensures that proper financial records are maintained.

Open Mortgage
A mortgage that can be prepaid or renegotiated at any time and in any amount without penalty.

Option Agreement
A document stipulating that, in exchange for a deposit, a specified individual is to be given the first chance of buying a property at or within a specified period of time. An option holder who does not buy at or within the specified period loses the deposit and the agreement is cancelled.

Partially Open Mortgage
Allows the borrower to repay a specific portion of the mortgage principal at certain times with or without penalty. (Also called a 'partially closed' mortgage)

P.I.T.
Principal, Interest and Taxes - payments due on a regular basis under the terms of the mortgage agreement. Generally, payments are made monthly and include one-twelfth of the estimated annual municipal and school taxes. Since these taxes change form year to year, this section of the mortgage will change accordingly.

P.I.T.H.
Principal, Interest, Taxes and Heating - costs used to calculate the Gross Debt Service Ratio (GDS).

Portability
A mortgage feature that allows borrowers to take their mortgage with them without penalty, when they sell their present home and buy another one.

Prepayment Privilege
A mortgage feature that allows the borrower to prepay a portion or all of the principal balance with or without penalty. This privilege is frequently restricted to specific amounts and times.

Principal
The mortgage amount initially borrowed or the portion still owing on the mortgage. Interest is calculated on the principal amount.

Proxy
Written authorization given by a unit owner to another so that person can act for the owner and exercise the unit's voting share at a general meeting.

Rate (Interest)
The return the lender receives for advancing the mortgage funds required by the borrower to purchase a property.

REALTORS®
Real Estate Professionals who are members of a local real estate board and the Canadian Real Estate Association. Only these professionals can call themselves REALTORS®.

Refinancing
The process of obtaining a new mortgage, usually at a lower interest rate, to replace the existing mortgage.

Reserve Fund
A fund of money set aside to provide for the repair and replacement of major parts of the common property. The "replacement" reserve fund is usually held in secure, fairly liquid investments. It is not intended to be used to cover regular or annually recurring maintenance.

Second Mortgage
A second financing arrangement, in addition to the first mortgage, also secured by the property. Second mortgages are usually issued at a higher interest rate and for a shorter term than the first mortgage.

Secondary Financing
Second, third, fourth etc, mortgages secured by a property "behind" the first mortgage.

Special Assessment
If a major repair or replacement is urgently needed and the reserve fund cannot cover it, the condominium board can impose a special assessment on unit owners to raise the necessary money.

Sub-Prime Mortgage
A sub-prime mortgage is granted to borrowers whose credit history is not sufficient to get a conventional mortgage. Often these borrowers have impaired or even no credit history. These can also include interest-only loans.

Take-Back Mortgage
See Vendor-Take-Back Mortgage

Tenancy in Common
Condominium unit owners collectively co-own the common property as tenants in common. The arrangement is a long-established, businesslike system for administering undivided interests. In the absence of a written co-ownership agreement, common law provides for the accounting, allocation and collection of operating expenses and for the reimbursement of expenditures that result in capital enhancement. With condominiums, the plan and bylaws (and the declaration in provinces that use this alternated document) are considered a contract between individual unit owners and the condominium corporation.

Term
See Mortgage Term

Title
A freehold title gives the holder full and exclusive ownership of land and buildings for an indefinite period of time. In condominium ownership, land and common elements of buildings are owned collectively by all unit owners, while the residential units belong exclusively to the individual owners. A lease-hold title gives the holder a right to use and occupy the land and buildings for a defined period of time.

Title Search
A detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property, and no questions regarding the seller's ownership claim.

Unit
Term used to describe the individual home or apartment held by the owner within a condominium development.

Variable-Rate Mortgage
A mortgage for which payments are fixed, but whose interest rate changes in relationship to fluctuating market interest rates. If market rates go up, a larger portion of the payment goes to interest. If rates go down, a large portion of the payment is applied to the principal.

Vendor-Take-Back Mortgage
When sellers use their equity in a property to provide some or all of the mortgage financing in order to sell the property.

Weekly Payments
Mortgage payments made weekly or 52 times per year.

Zoning Regulations
Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used.