Absentee Investor: One who puts money into real property with the intention of earning income or making a profit.

Adjusted Cost Base: The acquisition price of a property with adjustments for deductions and additions pursuant to the Income Tax Act most often used to determine capital gains arising from the sale of the property.

Agency: The relationship between principal and agent, wherein an agent is employed and authorized by the principal to represent the principal in business transactions with a third party.

Agent: One who is authorized by a principal to represent the principal in business transactions with a third party. In the real estate profession, it refers to a broker.

Agreement of Purchase and Sale: A contract by which one party agrees to sell and another agrees to purchase.

Agreement to Lease: A contract by which one party agrees to rent real estate to another party for a rental fee or other compensation.

Amortization: The number of years it would take to repay the entire amount of the mortgage loan.

Appraisal: The act or process of estimating value.

Appurtenance: Something that is outside the real property itself, but belongs to the land and is joined thereto. It adds to greater enjoyment of the land. A right-of-way is an appurtenance.

Assessed Value: A valuation placed upon property as a basis for municipal taxation.

Assessor: An official who has the responsibility of determining assessed value for tax purposes.

Assumption of Mortgage: The taking of title to property by a Purchaser wherein he assumes liability for an existing mortgage against a property and becomes personally liable for the payment of such mortgage debt.

Balance Due on Completion: The amount of money the purchaser will be required to pay to the vendor to complete the purchase, after all adjustments have been made.

Basis Point: When calculating a mortgage rate, the equivalent of 1/100ths of 1%

Building Codes: Regulations established by local governments providing for structural requirements for building.

Building Line: A line fixed at a certain distance from the front and/or sides of a lot, beyond which no building can project.

Building Permit: A document issued by the municipal authority certifying the blueprints for construction and allowing work to commence.

Bundle of Rights: A concept in which rights of possession, use, enjoyment, and disposition comprise the rights of ownership.

Capital Gain: a financial gain on the sale or exchange of investment real estate that meets criteria as set out in the Income Tax Act.

Capitalization Rate: the percentage of return on an investment when purchased free and clear on a cash basis.

Cash Flow: The income received during a specified period on rents or other fees, gross operating income, or the disposition proceeds of the investment at the point of sale

Charge: The name given to a mortgage document when title is registered under the Land Titles Act.

Chattel: Personal property that is tangible and moveable.

Closing: See Date of Completion.

Cloud on Title: Any encumbrance or claim that affects title to real property.

Commission: Remuneration paid to an agent on sale or lease of property, usually as a percentage of the amount involved.

Common Area: The area in a rental property that are shared by all or some of the tenants, such as elevators, hallways, foyers, etc.

Common Law: That part of the law formulated, developed and administered by the common law courts, based originally on common customs and mostly unwritten.

Compound Interest: Interest on both the original principal and on interest accrued.

Condominium: The fee ownership of a specified amount of space with tenancy-in-common ownership of portions used jointly with other owners (the common elements).

Consideration: Something of value given by a promisee to a promisor to make the promise binding.

Construction Lien: See Mechanics’ Lien.

Contract: A contract is a legally binding agreement between two or more capable persons for consideration or value, to do or not to do some lawful and genuinely intended act. If for the sale of real estate, it must be in writing.

Contractor: an individual or firm used in performing work on construction projects.

Conveyance: The transfer of an interest in property from one person to another.

Covenant: An agreement contained in a deed and creating an obligation. It may be positive, stipulating the performance of some act. It may be negative or restrictive, forbidding the commission of some act.

Custodian: see Superintendent

Damages: Compensation or indemnity for loss owing for breach of contract, or a tort (civil wrong).

Date of Completion: The date specified in the agreement of purchase and sale, when the purchaser is to deliver the balance of money due and the vendor to deliver a duly executed deed and vacant possession of the property (unless otherwise agreed).

Debt Coverage Ratio: Used by lenders, the relationship between net operating income and debt service.

Debt Obligation: Any amount one person owes to another individual or institution.

Debt Service: The payment of mortgage payments.

Deed: An instrument in writing, duly executed and delivered, that conveys title or an interest in real property.

Deed Restriction: An imposed restriction in a deed for the purpose of limiting the use of the land.

Default: Failure to fulfill an obligation.

Deposit: Payment of money or other valuable consideration as pledge for fulfillment of contract.

Depreciation: A loss in value due to any cause, or more specifically the decline in the value of a real estate investment resulting from physical deterioration (ordinary wear and tear), and functional obsolescence.

Description: A legal identification of land or premises.

Developer: One who participates in the subdivision or improvement of land.

Duplex: A two-family dwelling or house.

Easement: A right enjoyed by one landowner over the land of another.

Encroachment: The unauthorized extension of the boundaries of land.

Encumbrance: Outstanding claim or lien recorded against property or any legal right to the use of the property by another person who is not the owner.

Equity: The interest an owner of real property has in its total assets after allowing for encumbrances and creditors’ claims.

Equity Return: The percentage ratio between the equity in a property and the total of cash flows plus mortgage principal reduction.

Escheat: The reversion of property to the state in the event the owner thereof dies leaving no will and having no legally qualified heir to whom the property may pass by lawful descent.

Escrow: A neutral third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.

Estate: An interest in land.

Exclusive Listing: The giving of the sole right to offer the described property for sale according to the terms of the agency agreement.

Extras: Chattels included in the sale.

Fee Simple: The highest estate or absolute right in real property.

Fixtures: Permanent improvements to property that may not be removed at the expiration of the term of lease or tenure.

Foreclosure: Remedial court action taken by a mortgagee, when default occurs on a mortgage, to cause forfeiture of the equity of redemption of the mortgagor.

Gross Debt Service (GDS) Ratio: Lender’s allowable ratio of gross monthly payment to gross monthly income of mortgage applicant.

Gross Operating Income: the total income from an investment property based on 100% occupancy less vacancy and credit losses plus other all other income

Highest and Best Use: That use which allows an investment property to earn the maximum market rent

Income Property: Property that is used to generate income by renting or leasing all or a portion thereof.

Injunction: A judicial process or order requiring the person to whom it is directed to do, or refrain from doing, a particular thing.

Instrument: A form of written legal document.

Interest Rate: The percentage that is charged for the use of borrowed money.

Irrevocable: Incapable of being recalled or revoked; unchangeable, unalterable.

Joint Tenancy: Ownership of land by two or more persons whereby, on the death of one, the survivor or survivors take the whole estate.

Landlord: The person from whom another holds tenancy.

Lease: Contract between landlord (lessor) and tenant (lessee) for the occupation or use of the landlord’s property by the tenant for a specified time and for a specified consideration (rental).

Legal Description: A written description by which property can be located, definitely.

Lessee: Tenant under a lease.

Lessor: The person who grants use of property under lease to a tenant (i.e. the landlord).

Leverage: The use of financing or other people’s money to control large pieces of real property with a small amount of invested capital.

Lien: A right, given to a creditor, creating an interest in the real property until the debt is discharged.

Listing: An oral or written agreement between a property owner and a broker authorizing the broker to offer the owner’s real property for sale or lease.

Market Value (Formal Definition): The highest price in terms of money, which the property will bring to a willing seller if exposed for sale on the open market allowing a reasonable time to find a willing purchaser, buying with the knowledge of all the uses to which it is adapted and for which it is legally capable of being used, and with neither party acting under necessity, compulsion or peculiar and special circumstances.

Mechanics’ Lien (Construction Lien): A claim filed in the land registry office by an individual, or company, for labour or material, or both, supplied for the improvement of the property.

Metes and Bounds: A system of land description whereby all boundary lines are set forth by use of terminal points and angles – “mete” referring to a limit or limiting mark, and “bounds” referring to boundary lines.

Mill: One-tenth of one cent, a measure used to indicate the property tax rate, e.g. a tax rate of one mill per dollar is the same as 0.10 per cent of the assessed value.

Mortgage: A conveyance of property to a creditor as security for payment of a debt with a right of redemption upon payment of the debt.

Mortgagee: The one to whom property is conveyed as security for the payment of a debt; the lender or creditor.

Mortgagor: The one who gives the mortgage; the borrower or debtor.

Mortgage Commitment: A formal indication by a lending institution that it will grant a mortgage loan on property, in a certain specified amount and on certain specified terms.

Mortgage Principal: The amount of money that is to be repaid to a lender before interest payments.

Multiple Listing: An arrangement among brokers who are real estate board members, whereby each broker shares information regarding his listings with the other members, who may negotiate the transaction.

Multiplex: A multi-family dwelling or house.

Net Operating Income: Income derived from a real estate investment after deducting all fixed and variable expenses from gross operating income but before deducting annual debt service and tax liability.

Open Listing: A listing given to any number of brokers without liability to compensate any except the one who first acquires a buyer ready, willing and able to meet the terms of the listing, or secures the acceptance by the seller of a satisfactory offer; the sale of the property automatically terminates the listing.

Option: A right given by the owner of property to another (for valuable consideration) to buy certain property within a limited time at an agreed price.

Owner Occupied Investor: An investor who lives in a property that provides them with additional revenue

Power of Attorney: Delegated written authority to a person to legally act on behalf of another.

Power of Sale: The right of a mortgagee to force sale of the property without judicial proceedings should default occur.

Prepayment Clause: A clause inserted in a mortgage, which gives the mortgagor the privilege of paying the mortgage debt in advance of the maturity date, on stipulated terms.

Principal: The employer of an agent or broker, who gives the agent or broker the authority to do some act for him.

Quit Claim Deed: A general release of all claims or rights to a parcel of land.

Real Estate: “Real Estate” includes real property, leasehold and business whether with or without premises, fixtures, stock-in-trade, goods or chattels in connection with the operation of the business. (Real Estate and Business Brokers Act)

Real Estate Broker: A person who represents a principal in a real estate trade.

Real Property: The real estate, plus the rights that go with it.

Realtor: A registered word that may only be used by an active member of a real estate board affiliated with the Canadian Real Estate Association.

Residential Income Property: A non-commercial property that provides an investment opportunity, whether by living in a portion of it and leasing the remainder (owner-occupied) or by renting out the premises entirely (absentee investment)

Restrictive Covenant: A limitation placed upon the use of property, contained in the deed.

Return on Investment: The proceeds of an investment expressed as a percentage representing net income (including annual debt service) divided by initial capital invested

Reversion (Sale of Investment Property): the cash proceeds (cash flow) received from the sale of an investment property, involving the return of capital to the investor at the end of the investment period.

Right-of-Way: The right to pass over another’s land, more or less frequently, according to the nature of the easement.

Risk: The uncertainty, chance, exposure, and vulnerability imposed on an investor with particular regard to any financial loss that may accrue from a real estate investment.

Running with the Land: A covenant is said to run with the land when it extends beyond the original parties to the agreement and binds all subsequent takers to either liability to perform it or the right to take advantage of it.

Salesperson: An employee of a broker authorized to trade in Real Estate (as defined within the Real Estate and Business Brokers Act). Also can be referred to as a Sales Representative.

Special Assessment: An assessment which is not customarily levied and which is made against those specific parcels of property directly benefiting there from.

Statement of Adjustments: A statement prepared by the solicitor for the vendor setting out, in balance sheet form, the credits to the vendor (e.g. purchase price, prepaid taxes, prepaid insurance, etc.) and the credits to the purchaser (e.g. deposits, arrears in taxes prior to the date of closing) and the balance due on closing, so that both the purchaser and the vendor will have a record, at the date of closing, of the financial breakdown of the transaction.

Sub-agent: An agent authorized by the listing agent to assist in transacting the affairs of the principal (with express or implied consent of principal).

Superintendent: A person responsible for the maintenance of a building.

Survey: The accurate mathematical measurement of land and buildings thereon, made with the aid of instruments.

Syndicate: An association of individuals formed for the purpose of owning, operating and managing large parcels of real property for the mutual benefit of all, and organized as a corporation, limited partnership or joint venture.

Tax Shelter: The tax write-off possible through the depreciation benefits available on investment real estate ownership.

Tenancy-in-Common: Ownership of land by two or more persons; unlike joint tenancy in that interest of deceased does not pass to the survivor, but is treated as an asset of the deceased’s estate.

Tenant: One who occupies land or tenement under a landlord.

Term: In a mortgage “term” is the actual length of time for which the money is loaned.

Time is of the Essence: Requires punctual performance of a contract on closing date and is indicated by so stating as in an Agreement of Purchase and Sale.

Time Value of Money: The value of a future sum of money if it is paid today.

Title: The means of evidence by which the owner of land has lawful ownership thereof.

Triplex: A three-family dwelling or house.

Trust Account: An account separate and apart from one’s personal monies, as required by law in the case of a broker.

Vacancy Rate: A snapshot indicator of a rental market calculated by dividing the amount of vacant space by the total inventory of existing space to arrive at a rate expressed as a percentage

Variable Rate Mortgage: A mortgage in which the interest rate fluctuates during the term and either payments or balance outstanding are adjusted accordingly.

Vacant Possession: The state whereby a property is conveyed to a new owner(s) without any tenants or inhabitants

Vendor: A seller of real property.

Vendor Take-back Mortgage: A vendor retains an interest, by way of a mortgage from the purchaser, for the balance of funds owing to the vendor upon closing.

Yield Rate: The rate of return on capital realized from all future benefits arising out of ownership of an investment property.

Zoning By-law: A by-law passed by a municipality and approved by the Ontario Municipal Board, prohibiting the use of land in certain areas for any purpose other than as set out in the by-law. In the Planning Act, it is called a Restricted Area By-law.

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