The surrender or release of a right, claim, or interest in real property.
Often and commonly referred to as free rent or early occupancy and may occur outside
or in addition to the primary term of the lease.
Above building standard
Upgraded finishes and specialized designs necessary to accommodate a tenant’s requirements.
Giving up or nullifying one’s rights. In the uniform Landlord Tenant law, tenants
may not be required to give up any of their rights in advance of signing the lease
The rate, expressed as a percentage, at which available space in the marketplace
is leased during a predetermined period of time. Also referred to as "Market Absorption".
A part of a septic system, it is a system of narrow trenches through which the discharge
from the septic tank infiltrates into the surrounding soil.
When analyzing demand for office space, the total number of vacant square feet of
office space in the market area divided by the square footage historically leased
per year. For example, 750,000 square feet leased per year divided by 3 million
square feet of available vacant office space in a city, the absorption rate is 4.
Abstract of title
A history of a title and the current status of a title based on a title examination.
Abstract or title search
The process of reviewing all publicly recorded transactions to determine whether
any title defects exist that could interfere with a clear transfer of property ownership.
Parcels of land next to each other, which share a common border.
Accelerated cost recovery system
A tax calculation that provides greater depreciation in the early years of ownership.
A bookkeeping method that provides faster property depreciation in the early years
A clause that provides the mortgagee (lender) the right to demand immediate repayment
of the loan balance upon default of the mortgagor (borrower). "Acceleration" is
also triggered by the due on sale clause (demands immediate repayment if the home
Voluntary expression by the person Receiving the offer to be bound by the exact
terms of the offer; must be unequivocal and unconditional.
The right to go onto and leave a property.
Property owners' rights to all the land produces or all that is added to the land,
either intentionally or by mistake.
Accessory apartment uses
Uses that are incidental or subordinate to the main use of the building, such as
Accord and satisfaction
A new agreement by contracting parties that is satisfied by full performance, thereby
terminating the prior contract as well.
The gradual building up of land in a watercourse over time by deposits of silt,
sand, and gravel.
The periodic rate at which interest is charged or due on a mortgage. This may differ
from the pay rate.
Expenses seller owes on the day of closing but for which the buyer will take responsibility
(such as property taxes).
Interest which is charged or due on a loan but has not yet been paid. Frequently
the accrued interest is added to the principal balance and commonly must be paid
before any principal reductions are allowed.
see Alternative Credit Enhancement Structure.
see American Council of Life Insurers.
A formal statement before an authorized official (e.g., notary public) by a person
who executed a deed, contract, or other document, that it was (is) his free act.
The act of acquiring a property.
The basis used by the FHA to calculate the loan amount.
A land area containing 43,560 square feet.
For specific Performance – A court action to compel a defaulting principal to comply
with the provisions of a contract.
Action to quiet title
A lawsuit to clear a title to real property.
Act of waste
A violation of the right of estovers.
In the event of a breach of contract, the award of money to compensate for the actual
loss caused by the failure of the non breaching party. Unpaid rent or a bill for
a hole in the wall could be considered actual damages. The Uniform Landlord Tenant
Law generally requires that the landlord document actual damages when deducting
from the security deposit.
The removal of a tenant by the land lord because the tenant breached a condition
of a lease or other rental contract.
The knowledge a person has of a fact.
see Americans with Disabilities Act, 1990.
An addition or change to an existing contract between two (2) or more parties.
Additional bonds test
A test or screening mechanism to assess the amount of new bonds that can be issued
by a firm or entity. Since bonds are secured by assets or revenues of a corporate
or governmental entity, the underwriters of the bond must insure that the bond issuer
can meet the debt service requirements of any additional bonds. The test usually
is based on the issuer meeting specific financial benchmarks, such as what portion
of the issuer's revenues or cash flow can be devoted to paying interest.
Additional principal payment
Additional funds outside of the scheduled loan payment to reduce the principal balance
and shorten the term of the loan.
Often referred to as the Loss Factor or Rentable/Usable (R/U) Factor, it represents
the tenant’s pro-rata share of the Building Common Areas, such as lobbies, public
corridors and restrooms. It is usually expressed as a percentage which can then
be applied to the usable square footage to determine the rentable square footage
upon which the tenant will pay rent.
Lying Near to but not necessarily in actual contact with.
Continuous, attaching, in actual contact with.
Lands sharing a common boundary line.
Adjustable rate mortgage (ARM)
A mortgage in which the interest rate changes according to changes in a predetermined
Value of property used to determine the amount of gain or loss realized by an owner
upon sale of the property; equals acquisition cost plus capital improvements minus
Adjusted sales price
The amount realized minus fix-up expenses.
Additions or subtractions of dollar amounts to equalize comparables to subject property
in the sales comparison approach to estimating value.
The amount of time between interest rate adjustments in an adjustable-rate mortgage.
The annual rate of the servicing fee and trustee fee, expressed as a percentage
of the outstanding principal balance of each loan.
Administrative law judge (ALJ)
A judge who hears complaints and makes decisions regarding statutory violations
A directive by the Department of State which may result in fines or the suspension
or revocation of a license.
Laws which address administrative directives in the form of rules, regulations,
and orders to carry out regulatory powers.
A male appointed by a court to administer the estate of a person who has died intestate.
One executed by an administrator to convey title to estate property.
A female appointed by a court to administer the estate of a person who has died
Latin meaning "according to value"; real property is taxed on an ad valorem basis.
Payments made by the servicer on behalf of delinquent loans (special servicer) or
performing loans (master servicer) so that payments on the certificates can be paid
as scheduled. Advances can be required not only for principal and interest but also
for property protection, taxes, insurance and foreclosure costs. The servicer has
a proxy claim to subsequent collections and foreclosure proceeds as reimbursement
for advances up to an amount that was stipulated as "recoverable." Servicers do
not have to advance fees that are deemed "non-recoverable" by the trustee or an
officer of the servicers; also see no recoverable advance. Servicers are usually
paid prime plus one per cent for their advances.
A method of acquiring title to real property by conforming to statutory requirement;
a form of involuntary alienation of title.
space in a newspaper, magazine or other medium used to attract public attention
to a commodity for sale or lease.
A policy expressed in some form of legislative act with respect to the handling
of certain public or private acts of conduct.
A legal requirement that a servant owner permit a right of use in the servant land
by the dominant owner.
The fiduciary relationship between a principal and an agent.
When a lender uses a title company or other firm as an agent to complete a loan.
Most states require agents who act for both buyers or sellers to disclose who they
are working for in the transaction.
Securities issued by government or quasi-government agencies such as the Fannie
Mae (Federal National Mortgage Association), Freddie Mae (Federal Home Loan Mortgage
Corporation), or Ginnie Mae (Government National Mortgage Association). Agency securities
are not rated by rating agencies but nonetheless have an implied triple-A rating.
A person hired by another to act on his or her behalf.
The risk assumed while mortgages are being warehoused during the process of pooling
them for ultimate securitization. The mortgage holder faces the risk that the value
of the mortgages will decline before the securitization can be executed due to factors
such as adverse interest rate movements or credit losses.
A contract requiring mutual assent between two or more parties.
Agreement of sale
A legal document the buyer and seller approve detailing the price & terms of the
Created and protected by New York statute, these areas are used for animal grazing
and crop production.
The units are either tenant controlled and or owner supplied. The tenant is usually
responsible for having an annual maintenance contract. The constant use of the A/C
unit will translate into a high electricity bill. There are cases where the A/C
unit is shared between two or more offices. In this situation the tenant will be
charged a per sq. ft. fee for the use of the A/C for ex/ $1.25 per sq. Ft. and the
electricity will be submetered.
Rights in the air space above the surface of land.
The citizenship or immigration status of any person who is not a citizen or national
of the United States.
Transfer of title to real property.
A statement in a mortgage or deed of trust entitling the lender to declare the entire
principal balance of the debt immediately due and payable if the borrower sells
the property during the mortgage term. Also known as due-on-sale clause.
The term applied to the total costs of a securitization. Usually quoted in basis
points to reflect what would have been added to the yield if the expenses had not
been applied to the creation of a security.
Allocated loan amount
The portion of the principal amount of a blanket mortgage associated with each individual
property. This term is applicable when several properties are financed under one
blanket mortgage with each property allocated its share of the total mortgage balance.
Allocation of realized losses
A CMBS provision that defines how realized losses will be allocated to each class
of certificate holders.
The type of land ownership existing in the United States whereby individuals may
hold title to real property absolutely.
Allowance over building shell
Most often used in a yet-to-be constructed property, the tenant has a blank canvas
upon which to customize the interior finishes to their specifications. This arrangement
caps the landlord’s expenditure at a fixed dollar amount over the negotiated price
of the base building shell. This arrangement is most successful when both parties
agree on a detailed definition of what construction is included and at what price.
Increased soil, gravel, or sand on a stream bank resulting from flow or current
of the water.
A home loan program that does not conform to standard fixed-rate mortgage terms.
American council of life insurers (ACLI)
A trade association for life insurance companies based in Washington, DC. They collect
data from a number of participating life companies on commercial real estate portfolios,
including data on mortgage delinquencies, and disseminate those data. The data on
delinquencies represent approximately 85% of all mortgages held by life insurance
Americans with disabilities act (ADA)
A law that requires that property that is open to the public include features that
facilitate access to the building. The ADA is designed to eliminate discrimination
against individuals with disabilities by providing equal access to jobs, public
accommodations, government services, public transportation and telecommunications.
The process of paying the principal and interest on a loan through regularly scheduled
Designation of periodic payments of principal and interest over a specific term
to satisfy a mortgage loan.
Mathematical tables used to calculate a borrower's monthly payment.
The length of time required to amortize the mortgage loan expressed as a number
of months. For example, 360 months is the amortization term for a 30-year fixed-rate
One in which uniform installment payments include payment of both principal and
The amount of current or electricity flowing though a wire.
Major department store in a shopping center, such as a national chain store. Also
called key tenant. These tenants are important as they are meant to draw in many
customers who may also shop at the smaller stores.
The major or prime tenant in a shopping center, building, etc.
Addition of an area into a city.
Annual mortgagor statement
An annual statement to borrowers detailing the remaining principal balance and amounts
paid for taxes and interest throughout the year.
Annual percentage rate (APR)
The actual cost of borrowing money, expressed in the form of an annual interest
rate. It may be higher than the note rate because it represents full disclosure
of the interest rate, loan origination fees, loan discount points, and other credit
costs paid to the lender.
The payment of a fixed sum at regular intervals.
The principle that property value is based on expectations or hopes of the future
benefits of ownership.
Laws designed to preserve free enterprise of the open marketplace by making illegal
certain private conspiracies and combinations formed to minimize competition. Most
violations of antitrust laws in the real estate business involve either price-fixing
(brokers or managers agreeing to set fixed compensation rates) or allocation if
customers or services (brokers or managers agreeing to limit their areas of trade
or dealing to certain areas or properties).
Any business activity where there is a monopoly, a contract, a conspiracy, or a
combination that negatively impacts an individual's or a company's ability to do
Apartment information vendor
A licensed individual who is paid to provide information concerning the location
and availability of residential real property.
Apartment sharing agent
A licensed individual who is paid to arrange and coordinate meetings between current
owners of real property who wish to share their housing with others.
Security classes, or tranches, that are rated as investment grade, therefore appropriate
for regulated institutional investors (i.e., triple-A, double-A, single-A, and triple-B).
Also called senior pieces.
An application fee is charged by some lenders and may include charges for items
such as property appraisal and/or a credit report unless those fees are reported
Division of property and school tax monies so that school districts, counties, towns
and cities in the different municipalities all pay their fair share of the tax levy.
A professional opinion of the value of a property by a licensed real estate appraiser.
Appraisal by capitalization
Income approach to appraisal of income-producing real estate.
The fee that a professional real estate appraiser charges to appraise, or estimate
the market value of, a property.
An organized and systematic program for estimating real property value.
Following certain events based on loan delinquency, an appraisal will be performed
to determine if the property value justifies any further advances by the master
servicer. If the value is reduced below the loan balance plus authorized advances,
the master servicer will stop or reduce principal and interest payments on that
loan to the Trustee. The Trustee will then reduce principal and interest payments
to the certificate holders in order of their priority, beginning with the firstloss
A written report on the value of a property based on recent sales of comparable
property in the area.
A professional opinion of the current market value of a property.
An increase in the value of a home or other property.
Approaches to value
Methods of estimating real property value: sales comparison, income, and cost.
Approved assessing unit
A division of local government that has completed a property reevaluation and been
certified by the New York State Office of Real Property Services.
All rights or privileges that result from ownership of a specific property and move
with the title.
A right of use in the adjoining land of another that moves with the title to the
property benefiting from the easement.
APR (annual percentage rate)
A measure of interest that expresses the cost of a mortgage as a yearly rate on
the loan balance. The APR assumes the loan is held for its full term. For adjustable-rate
loans, the APR assumes the loan's index doesn't change from its initial value.
A form of resolving a dispute that includes two or more opposing parties and a neutral
third party; the neutral third party makes a judgment after hearing both sides.
Area management broker (AMB)
A property manager who works directly for the Federal Housing Administration managing
subsidized housing under a contract.
Permission to use land in a manner not normally allowed by the dimensional or physical
requirements of the zoning ordinance.
Argus is used for discounted cash flow valuation. It is a transaction based software
that can be used to determine the buying or selling value of a property. Cash flow
reports can summarize the investment value of a property. For lease analysis, individual
tenant cash flow can be determined directly from rent roll; as well as net present
value of lease proposals for a space. For a broker, Argus is the most popular software
because it is transaction based.
ARM (adjustable rate mortgage)
A home loan with an interest rate that periodically adjusts to reflect changes in
a specified financial index.
A publicly published number used as the basis for adjusting the interest rates of
adjustable rate loans (ARM).
Delinquency in meeting an obligation; or, paid at the end of a period (e.g., at
the end of the month) for the previous period; payments in arrears include interest
for using the money during the pre-vious period.
A section of the New York State law addressing regulations for certified and licensed
real estate appraisers.
A section of the New York Real Property Law addressing the purchase or lease of
vacant subdivided lands sold through an installment contract in or outside of New
The section of the New York Real Property Law pertaining to real estate salespersons
Article 78 proceeding
An appeal brought forth because of a ruling by a government agency.
A mineral fiber, classified as a carcinogen. Found in asbestos containing materials
(ACMs), it is often found in older properties where it was used in insulation, shingles,
siding, concrete, floor and ceiling tiles, plasters and more.
The acceptance by the tenant of the existing condition of the premises at the time
the lease is consummated. This would include any physical defects.
Rental rate offered by the landlord to a prospective tenant. The rent paid can be
less than the asking rent after tenants negotiate for an actual rental rate and
The dollar amount of worth to which a local tax rate is applied to calculate the
amount of real property tax.
Local counties, cities, towns, villages, school districts, and special districts
that raise money through real property taxes.
A fee imposed on property, usually to pay for public improvements such as water,
sewers, streets, improvement districts, etc.
Yearly list that contains all real property in a jurisdiction, with information
about each parcel including its assessed value and exempt status.
An official of local government who has the responsibility for establishing the
value of property for tax purposes.
The assembly, management and disposition of a portfolio of investment properties.
Items of value which include cash, real estate, securities, and investments.
One to whom contractual rights are transferred.
The transfer of rights to pay a debt from one party to another, with the original
party remaining liable for the debt if the second party defaults.
Assignment of lease
Transfer by a lessee of the entire remaining term of a lease without any reversion
of interest to the lessee.
A person who transfers rights and interests of a property.
Associate real estate broker
A licensed real estate broker woo wishes to work under the name and supervision
of another licensed broker.
A mortgage that can be transferred to another borrower. One that does not contain
an alienation clause.
A provision that allows a buyer to take responsibility for the mortgage from a seller.
A fee the lender charges to process new records for a buyer who assumes an existing
To turn over or transfer to another money or goods. To agree to recognize a new
owner of a property and to pay him/her rent. In a lease, when the tenant agrees
to attorn to the purchaser, the landlord is given the power to subordinate tenant's
interest to any first mortgage or deed of trust lien subsequently placed upon the
A person appointed to perform legal acts for another under a power of attorney.
A form of property sale in which people bid against one another.
Bankruptcy court order that suspends certain actions of creditors against the debtor
or the debtor's property.
All funds available or collected from borrowers, including regular payments of principal
and interest, prepayments or servicer advances.
Available funds cap
A limit on the amount of interest payable to certificate holders, to the extent
of interest accrued on a group or pool of mortgage loans.
An economic characteristic of land denoting that land is a commodity with a fixed
The time until all scheduled principal payments and unscheduled principal payments
(i.e., prepayments) are expected to have been made. The average life of a CMBS is
typically compared to the comparable Treasury (often an interpolated Treasury) to
determine the expected yield on the CMBS.
Sudden loss or gain of land as a result of water or shift in a bed of a river that
has been used as a boundary.
A term applied to the classes or tranches of CMBS rated double-B and lower. Also
called "B.I.G.," or below-investment grade.
Back title letter
A letter that a title insurance company gives to an attorney who then examines the
title for insurance purposes.
A calculation used by lenders to compare a borrower's total debt to their gross
A statement providing the assets, liabilities and net worth of an individual.
Method of construction that uses a single system of wall studs that runs from the
foundation through the first and second floors to the ceiling support.
A mortgage loan where the monthly payments are not large enough to repay the loan
by the end of the term resulting in a lump sum due on the final payment date.
One in which the scheduled payment will not fully amortize the loan over the mortgage
term; therefore, to satisfy the debt fully, it requires a final payment called a
balloon payment, larger than the uniform payments.
A large principal payment that typically becomes due at the conclusion of the loan
term. Generally, it reflects a loan amortized over a longer period than that of
the term of the loan itself (i.e. payments based on a 25 year amortization with
the principal balance due at the end of 5 years). See "Bullet Loan".
The risk that a borrower is unable to make a balloon or lump-sum payment at maturity.
Also see Refinance Risk.
Bank insurance fund (BIF)
A fund administered by the FDIC which insures deposits of BIF member institutions,
thereby protecting depositors from losses in the event of bank failure. The BIP
is funded by premiums paid by member institutions, primarily commercial banks, and
was established by FIRREA in 1989 along with the Savings Association Insurance Fund
(SAIF). While the FDIC is not a government agency backed by the full faith and credit
of the u.s. Treasury, depositors and financial markets treat the BIP as if it had
an implicit guarantee.
The condition or state of a person (individual, partnership, corporation, etc.)
who is unable to repay it's debts as they are, or become, due.
Proceedings under federal statures to relieve a debtor who is unable or unwilling
to pay its debts. After addressing certain priorities and exemptions, the bankrupt’s
property and other assets are distributed by the court to creditors as full satisfaction
for the debt. See also: "Chapter 11".
Bankruptcy remote entity (BRE)
A legal entity devised to hold identifiable assets (e.g., mortgages) and/or individual
borrowers in such a way as to insulate them from the effects of bankruptcy in a
larger pool of assets. For example, a developer might segregate selected mortgages
in a BRE that are destined for a CMBS; if other of the developer's mortgages were
to default, the cash flow from the segregated assets would then not be interrupted
or seized by a bankruptcy court, hence assuring a continuous cash flow to bondholders
of a CMBS. Also see Special Purpose Entity.
A form of deed with or without covenants of title.
Base loan amount
The loan amount upon which payments are based. If the borrower chooses to finance
closing costs or other fees these costs will be added to the base loan amount and
payments adjusted to reflect the larger loan balance.
A set amount used as a minimum rent in a lease with provisions for increasing the
rent over the term of the lease. See also "Escalation Clause", "Operating Expense
Escalation" and "Percentage Lease".
Actual taxes and operating expenses for a specified base year, most often the year
in which the lease commences. Once the base year expenses are known, the lease essentially
becomes a dollar stop lease.
The value of property for income tax purposes; consists of original cost plus capital
improvements less accrued depreciation.
A basis point is one one-hundredth of one percentage point. For example, the difference
between a home loan at 5.25 percent and one at 5.37 percent is 12 basis points.
The risk that the cash flow from the underlying mortgage loans does not mirror the
required payouts to bondholders because the offered certificates are tied to different
indices than are the mortgages (e.g., mortgages are at fixed rates but bonds are
at floating rates). This raises the possibility of the certificates accruing interest
at higher interest rates than the underlying mortgage loans. Also see Basis Risk
Basis risk shortfall
When the aggregate amount of interest on the certificates is greater than on the
collateral, the difference is known as the basis risk shortfall. Also see Basis
Walls that support the ceiling and/or roof.
Total income before any taxes are deducted.
Any structure or a portion of a structure located underground or below the surface
grade of the surrounding land.
Below investment grade
see "B" Pieces.
(a) Recipient of a gift of personal property by will; (b) Lender in a deed of trust.
A gift of personal property by will.
Business Improvement District. A Business Improvement District (BID) delivers supplemental
services such as sanitation and maintenance, public safety and visitor services,
marketing and promotional programs, capital improvements and beautification in a
designated area. BIDs are funded by a special assessment paid by property owners
within the district.
see Bank Insurance Fund.
An agreement based on mutual promises that provide the consideration.
Bill of sale
A legal document transferring ownership of personal property.
A report detailing the condition of a property's title. Usually issued by a title
insurance company to provide guidelines for issuing a title insurance policy.
A preliminary agreement between buyer and seller.
A mortgage that requires payments every two weeks and helps repay the loan over
a shorter term.
An ad for real property placed by a real estate broker that does not indicate that
the advertiser is a broker.
A single mortgage collateralized by more than one property with the same owner.
Also see Cross-Collateralization and Cross-Default.
For profit, to induce or attempt to induce any person to sell or rent any dwelling
by representations regarding the entry into the neighborhood of individuals of
a particular race, color, religion, sex, or national origin.
A building plan that is a detailed architectural rendering of the structure.
Blue sky laws
Federal and state securities laws and regulations to protect investors from fraud.
Board of assessment review
An appointed body consisting of three to five members that hears and decides upon
grievances from taxpayers.
Board of directors
Governing and decision-making board of a cooperative.
In good faith.
A lease in which a credit tenant assumes nearly all of the obligations of ownership,
therefore making the lease payments net of any offsets or deductions to the lessor
or owner. With a credit tenant, the lease becomes an obligation of the corporation,
thus offering greater assurance of payment.
The value of a property based on its cost plus any additions, minus depreciation.
Also known as historic value.
Cash received in a tax-free exchange.
Bottom-up approach to investing
An investment strategy which begins by searching for outstanding performance among
individual securities or tranches of securities before considering the impact of
macro-level economic trends. This approach assumes that an investment in an individual
CMBS will perform well, even if the industry does not perform well. Also see Top-Down
Approach to Investing.
Breach of contract
Failure, without legal excuse, to perform any promise that forms the whole or part
of a contract.
The point in which the owner's rental income matches expenses and debt.
A short-term loan for borrowers who need more time to find permanent financing.
Anyone who acts as a go-between between a buyer and seller. For example, a real
estate broker is licensed to handle property transactions and negotiate between
a buyer and seller. A mortgage broker acts as a go-between with the lender and the
The act of bringing together two or more parties in exchange for a fee or commission.
Common brokerage companies include real estate brokerage and mortgage brokers.
One who is hired through a broker to work for that broker.
Abbreviation for British thermal unit. It stands for the amount of heat required
to raise the tempera-ture of one pound of water by one degree Fahrenheit.
A grouping of loans by a single, shared attribute. For example, an issuer might
speak of loans satisfying a term bucket (meaning that all the loans have the same
or nearly the same average life).
Building classifications in most markets refer to Class "A", "B", "C" and sometimes
"D" properties. While the rating assigned to a particular building is very subjective,
Class "A" properties are typically newer buildings with superior construction and
finish in excellent locations with easy access, attractive to credit tenants, and
which offer a multitude of amenities such as on-site management or covered parking.
These buildings, of course, command the highest rental rates in their sub-market.
As the "Class" of the building decreases (i.e. Class "B", "C" or "D") one component
or another such as age, location or construction of the building becomes less desirable.
Note that a Class "A" building in one sub-market might rank lower if it were located
in a distinctly different sub-market just a few miles away containing a higher end
The various laws set forth by the ruling municipality as to the end use of a certain
piece of property and that dictate the criteria for design, materials and type of
The materials of a building that enclose the interior.
Building or "core" factor
Represents the percentage of Net Rentable Square Feet devoted to the building's
common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed
for an entire building or a single floor of a building. Also known as a Loss Factor
or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square
footage by the usable square footage. See also "Rentable/Usable Ratio".
Permission from the appropriate local government authority to construct or renovate
any type of property.
Written narratives that explain the building plan.
A list of construction materials and finishes that represent what the Tenant Improvement
(Finish) Allowance/Work Letter is designed to cover while also serving to establish
the landlord's minimum quality standards with respect to tenant finish improvements
within the building. Examples of standard building items are: type and style of
doors, lineal feet of partitions, quantity of lights, quality of floor covering,
Building standard plus allowance
The landlord lists, in detail, the building standard materials and costs necessary
to make the premises suitable for occupancy. A negotiated allowance is then provided
for the tenant to customize or upgrade materials. See also "Workletter".
The space improvements put in place per the tenant's specifications. Takes into
consideration the amount of Tenant Finish Allowance provided for in the lease agreement.
See also "Tenant Improvement Allowance"
An approach taken to lease space by a property owner where a new building is designed
and constructed per the tenant’s specifications.
Any short-term, generally five to seven years, financing option that requires a
balloon payment at the end of the term and anticipates that the loan will be refinanced
in order to meet the balloon payment obligation. Essentially, should the refinancing
not be available, often due to the property not performing as anticipated, the borrower
is "shot" and the property is subject to foreclosure. An example of this is when
a developer borrows to cover the costs of construction and carry-costs for a new
building with the expectation that it would be replaced by long-term (or "permanent")
financing provided by an institutional investor once most of risk involved in construction
and lease-up had been overcome resulting in an income-producing property.
A mortgage that requires monthly payments of interest only until the final mortgage
payment, or bullet payment, when full payment of principal is due.
Bundle of rights
The rights of an owner of a free hold estate to possession, enjoyment, control,
and disposition of real property.
A real estate agent who works in the best interests of a buyer.
An agency relationship between a buyer and a broker.
Buy down mortgage
A home loan program where the lender receives a premium as an enticement to reduce
the interest rate during the early years of the mortgage.
An emotion felt by first-time homebuyers after signing a sales contract or closing
the purchase of a house.
A loan clause allowing a lender to ask for repayment of the entire balance at any
Protection against early prepayment of mortgages. If mortgages prepay early, then
the bonds collateralized by those mortgages would be called or paid down, thereby
affecting the total yield on the original bonds. Also see Prepayment Penalty.
A lease clause granting the tenant the option to cancel at the end of a predetermined
A limit on the amount the interest rate or monthly payment can increase in an adjustable
This type of expense is most often defined by reference to generally accepted accounting
principles (GAAP), but GAAP does not provide definitive guidance on all possible
expenditures. Accountants will often disagree on whether or not to include certain
A method of determining value of real property by considering net operating income
divided by a predetermined annual rate of return. See "Capitalization Rate".
The rate that is considered a reasonable return on investment (on the basis of both
the investor's alternative investment possibilities and the risk of the investment).
Used to determine and value real property through the capitalization process. Also
called "free and clear return". See "Capitalization".
Occurs when an investment property or other type of investment is sold at a loss.
Markets in which capital funds, both debt and equity, are traded. Included are private
placement sources of debt and equity as well as organized markets and exchanges.
Also see Primary Market.
Another name for capitalization rate.
Capital reserve budget
Projected budget over the economic life of improvements on the property for repairs,
decorating, remodeling, and capital improvements.
Caps (Interest rate caps)
Consumer safeguards which limit the amount the interest rate on an adjustable rate
mortgage which may change per year and/or the life of the loan.
Financing in which a seller agrees to hold back a note for a set amount of the sales
Costs incidental to property ownership, other than interest (i.e. taxes, insurance
costs and maintenance expenses), that must be absorbed by the landlord during the
initial lease-up of a building and thereafter during periods of vacancy.
Legal precedent derived through court decisions.
Cash flow is examined at the level of both the security and the individual property.
At the security level, the certificate holders of CMBS receive all principal and
interest cash flow from a pool of mortgages in a sequential, defined manner. Early
prepayments or extended maturities change those cash flows and therefore can have
a material effect on how and when some certificate holders receive their sequential
payments, hence affect the total yield on the bonds. The cash flow on a CMBS is
thus unlike that in the direct commercial mortgage market, wherein the cash flow
contract is divided between receipt of principal payments and interest payments.
In assembling the assets in a CMBS, the cash flow of an individual property is carefully
scrutinized to calculate the ability of the property to generate sufficient revenue
to service the debt that is in effect the collateral for the security.
Cash flow investment
Any investment of funds received under qualified mortgages for a temporary period
before distribution to holders of an interest in the REMIC. Amounts invested typically
are placed temporarily in passive assets, i.e., investments limited to producing
passive income characterized as interest-payable at the next regularly scheduled
Cash flow note
An indebtedness which is repaid on a periodic basis directly by all or a portion
of the cash flow derived by the collateralized real property and not specifically
based on an interest rate.
Cash flow statement
A yearly financial report showing the bottom-line return after taxes.
The refinancing of a mortgage in which the money received from the new loan is greater
than the amount due on the old loan.
A check the bank draws on itself rather than on a depositor's account.
A property damaged or destroyed by an unexpected or unusual event.
A warning or caution such as a disclosure that a property lies in an agricultural
district that is attended to a contract of sale.
Latin meaning: let the buyer beware; this theory no longer applies to real estate
transactions in New York.
Cease and desist list
A list of homeowners compiled by dos in a cease and desist zone who do not wish
to be solicited by real estate agents.
Cease and desist zone
A designation given by dos to certain geographic areas that have been subject to
intense and repeated solicitation by real estate agents. See cease and desist list.
Small geographical areas established through cooperation between the local community
and the bureau of census.
see Comprehensive Environmental Response, Compensation Liability Act, 1980.
An actual certificate that defines the beneficial ownership in a trust fund.
The owner of record that actually owns a certificate (security).
Certificate of deposit
Note containing an acknowledgment by a bank that a sum of money has been received;
the bank must repay the money together with interest at an agreed-upon rate when
the cd expires.
Certificate of deposit index (CODI)
An index based on interest rates of six-month CDs. Commonly used to determine interest
rates for some adjustable rate mortgages.
Certificate of eligibility
A document issued by the Veterans Administration that verifies the eligibility of
a veteran for a loan program.
Certificate of occupancy (CO)
A document stating that a home or other building has met all building codes and
is suitable for habitation.
Certificate of reasonable value (CRV)
An appraisal issued by the Veterans Administration showing a property's current
Certificate of title opinion
A report, based on a title examination, setting forth the examiner's opinion of
the quality of a title to real property.
Certificate of veteran status
The document given to veterans or reservists who have served 90 days of continuous
active duty (including training time).
A deed used to relinquish real property to a municipality for a road or something
of that nature.
In land measurement, a distance of 66 feet.
Chain of title
The official record that details the ownership history of a piece of property.
The principle stating that change is continually affecting land use and therefore
Chapter 7 bankruptcy
Liquidation form of bankruptcy in which the debtor's nonexempt property is sold
Chapter 11 bankruptcy
Reorganization form of bankruptcy that provides a method for reorganizing the debtor's
financial affairs under the supervision of the bankruptcy court.
Chapter 13 bankruptcy
A consumer debt adjustment form of bankruptcy that permits the court to supervise
the debtor's plans for the payment of unpaid debts by installments.
A type of draft and three-party negotiable instrument containing an order to pay.
Chemical insecticide and termiticide that was banned in the early 1980s.
Man-made chemical substances that were used in hundreds of applications, including
refrigerators and air conditioners.
Actual age of an item.
The underwriter's way of designating potential purchasers and the amounts that they
might purchase of a securities issue during the registration period, before actual
selling is permitted. Registered representatives canvas prospective buyers and report
any interest to the underwriters, who then "circle" the names on their list and
the possible amounts of the purchases.
A device that trips or switches the electrical power off for a given circuit if
the current increases beyond the capacity of the system.
Interior space required for internal office circulation not accounted for in the
Net Square Footage. Based upon our experience, we use a Circulation Factor of 1.35
x the Net Square Footage for office and fixed drywall areas and a Circulation Factor
of 1.45 x the Net Square Footage for open area workstations. See also "Net Square
Footage and "Usable Square Footage.
A lawsuit between private parties.
Laws which address the private rights of citizens to sue and seek remedies through
the courts for a wrongful action against them.
Civil rights act of 1866
A Federal law that guarantees that citizens of all races have the same rights as
white citizens to inherit, purchase, lease, sell, hold and convey real and personal
property. Reaffirmed by the Jones v. Mayer decision in 1968.
Civil rights act of 1968
See fair housing act of 1988.
Inexpensive line ads, most widely used when advertising residential property.
Some office buildings include 5 days of office cleaning in the rent. If you need
this service it can be added. There can be charges for the following:
• Trash removal
• Fuel Surcharge
• Guard or Extra Security
• Business Improvement Tax (BID)
• Landlords Improvements to the building
A building, most often a warehouse or parking garage, with vertical columns on the
outside edges of the structure and a clear span between columns.
A title to property that does not have liens, defects or other legal encumbrances.
The principal of the agent.
A mortgage bond issued with an indenture that prohibits repayment before maturity
and the repledging of the same collateral without the permission of the bondholders.
Also called a closed mortgage. It is distinguished from an open-end mortgage which
is reduced by amortization and can be increased to its original amount and secured
by the original mortgage.
One that imposes a prepayment penalty.
The final procedure in which loan and title documents are signed between the buyer
and seller and their respective representation.
Expenses related to the sale of real estate including loan, title, and appraisal
fees. These costs are above and beyond the price of the property and are paid at
closing. Most closing costs are one-time expenses however a few are recurring.
A document which details the final financial details of a property sale between
a buyer and seller and the costs paid by each party.
The process by which the manager guides the prospect to accepting the space and
signing the lease. The best leasing agents use a variety of techniques to "close"
Cloud on title
A claim against a title to real property
A type of development that provides for planned unit developments (puds), which
create a neighborhood of cluster housing and supporting business establishments.
A form of zoning providing for several different types of land use within a zoned
see Commercial Mortgage Backed Security.
Commercial Mortgage Securitization Association, a CMBS trade association.
Coastal zone management program
A program coordinated by DOS to preserve and protect New York's coastline.
Code of ethics and standards of practice
Guide-lines for conduct required by license laws and by the National Association
A supplement or appendix to a will either adding or changing a bequest.
COFI index (Cost of funds index)
This index reflects the weighted-average interest rate paid by 11th Federal Home
Loan Bank District savings institutions for savings and checking accounts, advances
from the FHLB, and other sources of funds. The 11th District represents the savings
institutions (savings & loan associations and savings banks) headquartered in Arizona,
California and Nevada. The COFI index is a popular index used for determining interest
rates on adjustable rate mortgages.
A common provision in property insurance policies that limits the liability of the
insurance company to that proportion of the loss that the amount of insurance bears
to a percentage of the value of the property.
In a new issue underwriting, the lowest rate acceptable to a buyer of bonds or the
lowest price acceptable to the issuer. Also refers to the index level at which a
circuit breaker is triggered.
Property pledged as security for payment of a debt.
Gross income from a property minus vacancy and other types of rent loss. Also called
gross adjusted income.
An account established by the master servicer in the name of the trustee for the
benefit of the certificate holders. Usually all payments and collections received
on the mortgages and from advances made by the servicers are deposited into this
Color of title
A defective claim to a title.
1. An independent auditor's letter, required in securities underwriting agreements,
to assure that information in the registration statement and prospectus is correctly
prepared and that no material changes have occurred since its preparation. It is
sometimes called a cold comfort letter - cold because the accountants do not state
positively that the information is correct, only that nothing has come to their
attention to indicate that it is not correct.
2. Letter from one to another of the parties to a legal agreement stating that certain
actions not clearly covered in the agreement will or will not be taken. Such declarations
of intent usually deal with matters that are of importance only to the specific
parties and do not concern other signers of the agreement.
Laws that are applicable to the rights and relations of persons engaged in commerce
or trade carried on for profit.
A mortgage usually made to a business that may include an assignment of leases,
personal guarantees, and a substantial down payment.
Commercial mortgage backed security (CMBS)
Securities collateralized by a pool of mortgages on commercial real estate in which
all principal and interest from the mortgages flow to certificate holders in a defined
sequence or manner.
Commercial mortgage broker
A mortgage broker who specializes in commercial mortgage applications.
Commercial mortgage lender
A mortgage lender who specializes in the funding of commercial mortgage loans.
Income-producing properties; public accommodations.
Areas that are zoned for structures that house retail stores, restaurants, hotels,
and service businesses.
An agent's mixing money or property of others with the agent's personal or business
funds or other property.
A fee paid for the performance of services, such as a broker's commission.
A form of judicial deed executed by a commissioner.
A fee charged by the lender to guarantee a specific set of loan terms to be honored
at some future date.
There are two components of the term "common area". If referred to in association
with the Rentable/Usable or Load Factor calculation, the common areas are those
areas within a building that are available for common use by all tenants or groups
of tenants and their invitees (i.e. lobbies, corridors, restrooms, etc.). On the
other hand, the cost of maintaining parking facilities, malls, sidewalks, landscaped
areas, public toilets, truck and service facilities, and the like are included in
the term "common area" when calculating the tenant's pro-rata share of building
Common area maintenance (CAM)
This is the amount of Additional Rent charged to the tenant, in addition to the
Base Rent, to maintain the common areas of the property shared by the tenants and
from which all tenants benefit. Examples include: snow removal, outdoor lighting,
parking lot sweeping, insurance, property taxes, etc. Most often, this does not
include any capital improvements (see "Capital expenses") that are made to the property.
Parts of a property that are necessary or convenient to the existence, maintenance
and safety of a condominium or are normally in common use by all of the condominium
residents. Each condominium owner has an undivided ownership interest in the common
Law by judicial precedent or tradition as contrasted with a written statute.
A form of land use control originating in the grassroots of a community.
A shopping center of about 100,000 to 250,000 square feet (20 to 70 retail spaces)
providing convenience shopping to about 5,000 families within a 1.5-mile radius.
A master plan for the orderly growth of a city or county to result in the greatest
social and economic benefits to the people.
A form of co-ownership limited to husband and wife; does not exist in New York
Lease rates and terms of properties similar in size, construction quality, age,
use, and typically located within the same sub-market and used as comparison properties
to determine the fair market lease rate for another property with similar characteristics.
Comparative income and expense analysis
A financial study of the projected income from a property in as-is condition versus
financial returns from that property if suggested capital improvements were implemented.
Property managers use the analysis to demonstrate to owners the return on proposed
Comparative market analysis
An analysis of the competition in the marketplace that a property will face upon
The amount of money actually lost, which will be awarded by a court in case of a
Persons and organizations legally qualified to manage their own affairs, including
entering into contracts.
The principle stating that when the net profit a property generates is excessive,
very strong competition will result.
Work estimates submitted to the property manager by service contractors, suppliers,
Trades people or construction contractors.
Execution of a contract by virtue of all parties having fully performed all terms.
A guarantee by a developer that ensures a municipality that off-site improvements
to a subdivision will be made upon completion of the total project; also known as
a subdivision bond.
The interest paid on the principal balance of a mortgage plus accrued interest.
Comprehensive environmental response, Compensation liability act (CERCLA), 1980
Legislation that outlines environmental problems and potential legal liabilities
attendant to environmental contamination, e.g., asbestos, RCB, radon, or leaking
underground storage tanks (LUSTS). The act establishes potential lender liability
for environmental clean-up on a mortgaged property. Also see Phase I.
A relief or reduction in total payments for a period of time, used as an incentive
to attract or retain tenants in lease agreements. Concessions can include reduced
or free rent for a portion of the lease period and/or above-market tenant improvement
and work letters. The use of concessions in leasing is a response to current market
conditions, but the existence of concessions in a building's leases makes it more
difficult to calculate net cash flow and, therefore, debt service coverage ratios.
A trend in the property management field that provides personal, secretarial, catering
or other services to the occupants of office or residential buildings.
Successful result of mediation between the parties in a discrimination complaint.
The process of taking private property, without the consent of the owner, by a governmental
agency for public use through the power of eminent domain. See also "Eminent domain".
Market value of condemned property.
Any fact or event that, if it occurs or fails to occur, automatically creates or
extinguishes a legal obligation.
A promise by a lender to make a loan if the borrower meets certain conditions.
A contract for property sale stating that the title will remain invested in the
seller until all the conditions of the contract have been fulfilled.
Conditions, covenants and restrictions declaration (CC&RS)
A set of private restrictions on the use of a specific parcel of real property;
often used with a condominium development.
A form of property ownership in which each occupant of a multiunit building owns
his or her dwelling unit separately and an undivided interest with other owners
in the property's common elements (lobbies, hallways, etc.).
The document that, when recorded, creates a condominium; also called a master deed.
The financial intermediary that functions as a link, or conduit, between the lender(s)
originating loans and the ultimate investor(s). The conduit makes loans or purchases
loans from third party correspondents under standardized terms, underwriting and
documents and then, when sufficient volume has been accumulated, pools the loans
for sale to investors in the CMBS market. Also see Real Estate Mortgage Investment
A home loan that meets qualifications to be purchased by Fannie Mae or Freddie Mac.
Homogeneous uses of land within a given area, which results in maximizing land value.
Called nolo contendere in criminal cases, it is a compromise in civil lawsuits where
the accused party agrees to stop the alleged illegal activity without admitting
guilt or wrongdoing.
Minor repair, renovation and restoration of residential buildings that have substantial
economic use remaining. Also called blight prevention.
Anything of value, as recognized by law, offered as an inducement to contract.
Constant prepayment rate (CPR)
A percentage of the outstanding collateral principal that is expected to prepay
in one year. A CPR represents an assumed constant rate of prepayment each month
(expressed as an annual rate), rather than a variable rate of prepayment. Also see
PSA Standard Prepayment Model.
Laws which address the role of the Supreme Court and its authority as relates to
the President, Congress and the states; also deals with the powers of Congress and
the executive branch.
Drawings and specifications from an architect and/or engineer providing detailed
requirements for the construction of a project.
A short term loan for construction secured by a mortgage. Lenders usually disburse
funds from construction loans in draws according to completion of defined stages
throughout the construction process.
The actual construction process is overseen by a qualified construction manager
who ensures that the various stages of the construction process are completed in
a timely and seamless fashion, from getting the construction permit to completion
of the construction to the final walk-through of the completed leased premises with
A temporary mortgage used to borrow money to construct an improvement on land.
A construction loan that is converted to a longer term traditional mortgage after
construction has been completed.
A situation in which a tenant must abandon the premises because of the landlord's
negligence in providing essential services.
One in which all affected parties are bound by the knowledge of a fact even though
they actually have not been notified of such fact.
Consumer price index ("CPI")
Measures inflation in relation to the change in the price of a fixed market basket
of goods and services purchased by a specified population during a "base" period
of time. It is not a true "cost of living" factor and bears little direct relation
to actual costs of building operation or the value of real estate. The CPI is commonly
used to increase the base rental periodically as a means of protecting the landlord's
rental stream against inflation or to provide a cushion for operating expense increases
for a landlord unwilling to undertake the record keeping necessary for operating
A condition in a contract relieving a party of liability if a specified event occurs
or fails to occur.
(1) Multiple suites/spaces within the same building and on the same floor which
can be combined and rented to a single tenant. (2) A block of space located on multiple
adjoining floors in a building (i.e., a tenant leases floors 6 through 12 in a building).
An agreement between competent parties upon legal consideration to do, or abstain
from doing, some legal act.
Contract buyer's policy
Title insurance that protects contract buyer against defects in contract seller's
The complete set of design plans and specifications for the construction of a building
or of a building’s interior improvements. Working Drawings specify for the contractor
the precise manner in which a project is to be constructed. See also "Specifications"
and "Working Drawings".
A phase of the business cycle characterized by decreasing production.
Contract for deed
A contract of sale and a financing instrument wherein the seller agrees to convey
title when the buyer completes the purchase price installment payments; also called
installment land contract and installment plan.
The amount of rent agreed to in a lease.
Maintenance tasks performed by outside laborers on a regular basis for a specified
The principle that for any given part of a property, its value is the result of
the contribution that part makes to the total value by being present, or the amount
that it subtracts from total value as a result of its absence.
A tax imposed on a REMIC triggered by certain contributions of properties made to
a REMIC after the day on which the REMIC issues all of its interests. Each pooling
and servicing agreement will include provisions designed to prevent the acceptance
of any contributions that would be subject to such a tax.
A party designated in a CMBS that has the right to approve and direct certain actions
of the special servicer with respect to specially serviced loans.
A measurement of the rate of change of duration of a security. Convexity implies
that prices rise at an increasing rate as yields fall, and prices decline at a decreasing
rate as yields rise.
A guaranty made by the issuer (issuer guaranty) or a third party to cover losses
due to delinquencies and foreclosures up to the guaranteed amount. The rating of
the guarantor is commonly required to be, at a minimum, equal to the highest rating
of the securities. A form of credit enhancement.
Conventional life estate
One created by intentional act of the parties.
A long term loan a lender makes for the purchase of a home.
Conventional mortgage loan
One in which the federal government does not insure or guarantee payment to the
Change in a form of ownership, such as changing rental apartments to condominium
Convertible adjustable-rate mortgage
A mortgage which starts as an adjustable rate loan, but contains a provision that
allows the borrower to convert the loan to a fixed-rate mortgage during a specified
period of time.
A provision in a mortgage that gives the lender the option of converting the outstanding
balance into an agreed-upon percentage of ownership in the property.
To pass to another (as in title).
Most commonly refers to the transfer of title to property between parties by deed.
The term may also include most of the instruments by which an interest in real estate
is created, mortgaged or assigned.
A three-day right of rescission for certain loan transactions.
Cooperating broker or agent
One who participates in the sale of a property.
A residential multifamily building whose title is held by a trust or corporation
that is owned by and operated for the benefit of persons living within the building,
who are the beneficial owners of the trust or stockholders of the corporation, each
possessing a proprietary lease that gives them the right to occupy a certain unit
in the building.
Any loan related to a cooperative residential project.
Title to real property held by two or more persons at the same time; also called
Represents the percentage of Net Rentable Square Feet devoted to the building’s
common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed
for an entire building or a single floor of a building. Also known as a Loss Factor
or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square
footage by the usable square footage."
A form of organization existing as an entity.
Corporation franchise tax
A tax calculated on the net profit of the corporation. Corporation law Laws which
address federal and state formation and operation of corporations.
Corrected mortgage loan
A mortgage loan that had previously incurred a default or related event; been transferred
to the special servicer for handling, becoming a specially serviced mortgage loan;
had cured the default by any of a number of avenues available to special servicer;
finally becoming a corrected mortgage loan and being returned to the master servicer
for routine administration. Also known as a Reperforming Loan.
Actual repairs necessary to keep a property in good condition and operating smoothly.
A step in the appraisal process in which the appraiser weighs the appraisal approaches
to reach a rational conclusion as to the value of the subject property; also known
Growth of businesses or plants along major arteries connecting two large industrial
or commercial centers some distance from each other.
A second party who also signs a promissory note and takes responsibility for the
The total dollar expenditure for labor, materials, and other items related to construction.
An appraisal method whereby the cost of constructing a substitute structure is calculated,
depreciation is deducted, and land value is added.
Cost of living lease
Is a lease where yearly increases are tied to the cost of living index.
A method of paying construction contractors in which the contractor furnishes a
preliminary estimate for the proposed job and is paid the actual cost of the work
plus a percentage for profit.
A type of income tax deduction available for real estate and personal property that
allows the total cost of the property that is depreciable to be deducted over a
A new offer made by an offer or rejecting an offer.
Fee charged at closing to cover the delivery of documents between lenders, escrow
companies, and other third parties during a real estate transaction.
A written agreement inserted into deeds or other legal instruments stipulating performance
or non-performance of certain acts or, uses or non-use of a property and/or land.
Covenant against encumbrances
A promise in a deed that the title causes no encumbrances except those set forth
in the deed.
Covenant for further assurances
A promise in a deed that the grantor will execute further assurances that may be
reasonable or necessary to perfect the title in the grantee.
Covenant of quiet enjoyment
The old "quiet enjoyment" paragraph, now more commonly referred to as "Warranty
of Possession", had nothing to do with noise in and around the leased premises.
It provides a warranty by Landlord that it has the legal ability to convey the possession
of the premises to Tenant; the Landlord does not warrant that he owns the land.
This is the essence of the landlord's agreement and the tenant's obligation to pay
rent. This means that if the landlord breaches this warranty, it constitutes an
actual or constructive eviction.
Covenant of right to convey
A promise in a deed that the grantor has the legal capacity to convey the title.
Covenant of seisin
A promise in a deed assuring the grantee that the grantor has the title being conveyed.
Covenant of warranty
A promise in a deed that the grantor will guarantee and defend the title against
see Constant prepayment rate.
In a closing statement, money to be received or credit given for money or an obligation
Provisions in addition to the mortgage collateral to support a desired credit rating
on mortgage backed securities. Provisions made by issuers to compensate for default
risk in CMBS include subordination, reserve accounts, cross-collateralization, cross-default
provisions, and advance payment agreements.
Credit facility loan
A mortgage loan entered into for the purpose of providing the borrower flexibility
with respect to adding, releasing or substituting collateral. These loans generally
have lower L TV and higher DSCR requirements.
A file detailing an individual's current and past debt payments and financial obligations.
A lease signed by a lessee with an investment grade credit rating, which presumably
increases the assurance of timely rental payments for the duration of the lease.
Credit life insurance
Insurance that pays off a mortgage in the event of the borrower's death.
One to whom a debt is owed.
The degree of creditworthiness assigned to a person based on their credit history
and financial status.
A detailed account of an individual's credit, employment, and residence history.
A lender uses this report to determine a loan applicant's creditworthiness. The
three largest credit bureaus are Trans Union, Equifax and Experian.
Large companies that gather financial and credit information from various sources
about individuals who have applied for credit.
Credit risk score
A credit risk score is a statistical summary of the information contained in a consumer's
credit report. The most well known type of credit risk score is the Fair Isaac or
FICO score. This score represents the answer from a mathematical formula that assigns
numerical values to various pieces of information in a credit report.
A credit score is a statistical summary of the information contained in a consumer's
credit report. The most well known type of credit score is the Fair Isaac or FICO
score. This score represents the answer from a mathematical formula that assigns
numerical values to various pieces of information in a credit report.
Laws that declare what conduct is criminal and prescribes the punishment to be imposed
for such conduct.
A provision in a mortgage or deed of trust by which the collateral for one mortgage
also serves as collateral for other mortgagees). Thus, should the collateral on
the one mortgage fall short in repayment of the debt, the collateral of the other
mortgagees) could be claimed as well (but only in the event of such a shortfall).
CMBS backed by cross-collateralized properties have reduced delinquency risk; cross-collateralization
therefore adds value to the structure. A set of properties with the same owner might
be both cross-defaulted and crosscollateralized. A form of credit enhancement.
A provision in a mortgage or deed of trust by which a breach of terms or default
under the loan documents of one loan will automatically trigger a default under
other mortgagees). A set of properties with the same owner might be both cross-defaulted
and cross-collateralized. A form of credit enhancement.
is designed for property management for large companies. It is designed for the
needs of commercial real estate developers owners and managers.
A means of estimating reproduction or replacement cost using the volume of the
A dead-end street with a circular turn Around at the dead end.
Cumulative discount rate
The interest rate used in finding present values that when applied to the rental
rate takes into account all landlord lease concessions and then expressed as a percentage
of base rent.
A type of zoning permitting a higher-priority use even though it is different from
the type of use designated for the area.
A condition of property that exists when correction is physically possible and the
cost of correction is less than the value increase.
The impression gained, good or poor, of a property when it is first seen, usually
from the street while driving, hence "curb" appeal.
A delinquent mortgage is said to be cured when all missed payments have been made
and loan payments are current. The label also applies to a property that suffered
from some environmental problem or contamination that has been redressed.
The date on which the portfolio securing the CMBS is firmly identified, and the
numbers from that pool are used for the final calculations before issuing the securities.
A husband's interest in the real property of his wife.
The party whom the agent brings to the principal as sellers or buyers of the property.
See business cycle.
The amount of financial loss incurred as a result of another's action.
Vacated retail space for which the tenant is still paying rent despite having vacated
the space. "Induced" smaller tenants might exercise their right to cancel leases
when a major tenant "goes dark" or no longer occupies the space.
In a closing statement, an expense or money received against a credit.
Any amount one person owes to another.
The scheduled payments due on a loan. Payments include principal, interest and other
fees that are required by the loan agreement.
Debt service coverage ratio (DSCR)
A measure of a mortgaged property's ability to cover monthly debt service payments,
defined as the ratio of net operating income or net operating cash flow to the debt
service payments. A DSCR less than 1.0 means that there is insufficient cash flow
by the property to cover debt payments.
The ratio, expressed as a percentage, which results when a borrower's monthly payment
obligation on long-term debts is divided by his or her gross monthly income.
A deceased person.
Master deed containing legal description of the condominium facility, a plat of
the property, plans and specifications for the building and units, a description
of the common areas, and the degree of ownership in the common areas available
to each owner.
Declaration of restrictions
The instrument used to record restrictive covenants on the public record.
Declining balance depreciation
A method of computing accelerated depreciation that adjusts the straight-line depreciation
rate according to a percentage factor.
A court order.
To appropriate private property to public ownership for a public use.
An appropriation of land or an easement therein by the owner to the public.
Dedication by deed
The deeding of a parcel of land to a municipality.
Costs of operating property held for use in business or as an investment. These
expenses are subtracted from gross income to arrive at net income.
A legal instrument transferring title to real property from the seller to the buyer
upon the sale of such property.
Deed in lieu of foreclosure
Conveyance of title to the mortgagee by a mortgagor in default to avoid a record
of foreclosure; also called friendly foreclosure.
Deed of correction
A deed executed to correct an error in a prior deed; also called a deed of confirmation.
Deed of gift
A warranty or quitclaim deed conveying title as a gift to the grantee.
Deed of trust
An instrument used in many states in place of a mortgage by which real property
is transferred to a trustee by the borrower (trustier), in favor of the lender (beneficiary),
to secure repayment of a debt.
Limitation on land use appearing in deeds.
The general failure to perform a legal or contractual duty or to discharge an obligation
when due. Some specific examples are: 1) Failure to make a payment of rent when
due. 2) The breach or failure to perform any of the terms of a lease agreement.
The act of making an investment whole. The supplementing of existing investment
terms available (typically through a cash payment) to make the currently available
market yield equivalent to that of a pre-existing investment that is being terminated.
Most commonly used in bond finance. Synonymous with yield maintenance. A common
A statement in a mortgage or deed of trust giving the borrower the right to redeem
the title and have the mortgage lien released at any time prior to default by paying
the debt in full.
Subject to being defeated by the occurrence of a certain event.
A title subject to being lost if certain conditions occur.
With regard to a property, any condition that would: have a material adverse effect
on value; adversely impair the health or safety of the occupants; and/or if not
repaired, removed, or replaced would significantly shorten or adversely affect the
expected normal life of the premises.
The amount by which the interest a borrower is required to pay on a mortgage loan
is less than the amount of interest accrued on the outstanding principal balance.
This amount is usually added to the outstanding principal balance of the mortgage
Physical depreciation or loss in value of a building resulting from postponed maintenance
to the building.
Deferred maintenance account
A reserve account established by a borrower to cover repairs or future property
maintenance costs. Also called a replacement reserve account.
A court judgment obtained by a mortgagee for the amount of money a foreclosure sale
proceeds were deficient in fully satisfying the mortgage debt.
Failure to make mortgage payments on time. Severe delinquency can lead to foreclosure.
A mortgage that involves a borrower who is behind on payments. If the borrower cannot
bring the payments up to date within a specified number of days the lender may begin
The date on which the securities will be delivered to the purchasers, or to the
Trustee if the Trustee is the custodian for the Depository Trust Company (DTC).
The DTC handles the security certificates for purchasers by acting as custodian
of the certificates and issuing a form showing the "book entry" for safekeeping
to the certificate holder.
Delivery and acceptance
The transfer of a title by deed requires the grantor to deliver and the grantee
to accept a given deed.
Notes or loans that are short-term and might include a provision that repayment
can be "demanded," or the note called, at the discretion of the lender. Demand notes
often require all cash flow, net of debt service, to be used to amortize a mortgage
loan if the borrower fails to show progress towards refinancing (e.g., an appraisal,
engineering report, or environmental study) or is unable to obtain a signed commitment
or sales contract on the underlying property.
Demand notes (Fast pay)
If the balloon payment of a balloon mortgage is not met, the borrower is required
to apply all excess cash flows generated by the property to pay down the remaining
loan balance to accelerate amortization.
To convey an estate for years; synonymous with lease or let.
The partition wall that separates one tenant’s space from another or from the building’s
common area such as a public corridor.
The study of the social and economical statistics of a community.
Number of persons or structures per acre.
Department of housing and urban development (HUD)
A federal agency involved with housing.
Department of veterans affairs (VA)
An independent agency of the federal government which guarantees long-term, low
or no down payment mortgages to eligible veterans. Offers a 100% loan that guarantees
repayment of the top portion of the loan to the lender in the event the borrower
The original basis of a property less the amount of depreciation taken at any point
Spreading out the cost of a capital asset over its estimated useful life or a decrease
in the usefulness, and therefore value, of real property improvements or other assets
caused by deterioration or obsolescence.
Funds provided by the buyer with an offer to purchase property. Also referred to
as "earnest money".
The entity that accumulates the mortgages and transfers them to the Trust simultaneously
with the issuance of the securities to the certificate holders. The depositor can
be the seller of a portfolio of mortgages or an entity established just for the
purpose of holding the mortgages until the pool accumulation is completed.
Derived investment value (DIV)
A valuation procedure created for the RTC to price existing commercial mortgages.
DIV is based on expected cash flows and a discounted cash flow model to generate
an estimate of the price to be paid by an investor for an existing mortgage. Typically
used for R TC and bulk sales of non- or sub-performing loans. Expected cash flows
can include foreclosure costs and proceeds.
The distribution of property to legally qualified heirs of one who has died intestate.
Description by monument
A legal description sometimes used when describing multiple-acre tracts of land
and may refer to permanent objects such as a stone wall, large trees, or boulders.
Description by reference
A valid legal description that may be found on a deed which references a plat of
subdivision or other legal document.
A system in which a single entity is responsible for both the design and construction.
The term can apply to an entire facility or to individual components of the construction
to be performed by a subcontractor; also referred to as “design/construct”.
The date of the month (usually the 15th or the next business day) that is used as
a cut-off date for calculation of the payments due on the securities.
A gift of real property by will.
The recipient of a gift of real property by will.
The cost of labor and materials.
Direct management costs
Expenses that can be attributed directly to the operation of a management firm or
Any physical or mental impairment that substantially limits one or more of an individual's
major life activities, including caring for oneself, performing manual tasks, walking,
seeing, hearing, speaking and working.
A statement to a potential buyer listing information relevant to a piece of property,
such as the presence of radon or lead paint.
Disclosure and informed consent disclosure
Explanation by a real estate agent of his position in the agency relationship and
the verbal and written consent of the relationship by the client or customer.
Disclosure of information
The prompt and total communication to the principal by the agent of any information
that is material to the transaction for which the agency is created.
Disclosure regarding dual agency relationship form
Pursuant to Section 443 of the New York Real Property Law, this document must be
presented by a licensee and signed by all parties at the first substantive meeting
with prospective purchasers or sellers.
Disclosure statement-Regulation Z
An accounting of all financial aspects of a mortgage loan required of lenders to
borrowers in residential mortgage loans by Regulation Z of the Federal Reserve Board.
Discount department store
A specialized type of shopping center or large single store with emphasis on lower
prices as a merchandising technique. The "closed-door" discount house is open only
to qualifying members; the "open" discount house is open to the general public.
Discount margin (DM)
The difference between the price of a security and the face amount of the security.
Fees charged by a lender to provide a lower interest rate. One discount point equals
one percent (1%) of the loan amount.
The rate applied to each year's cash flow from a property to determine the net present
value (NPV) of a series of cash flows. Based on the periodic weighted average cost
of capital or the required return for a real estate investment.
Any advertising that states or indicates a preference, limitation, or discrimination
on the basis of race, color, religion, sex, national origin, disability, familial
status, age, or marital status in offering housing or commercial property for sale
The loss of funds available to lending institutions for making mortgage loans, caused
by depositors' withdrawal of funds for making investments that provide greater
Newspaper ads that cost more than classified ads offering graphics and more elaborate
designs. Display ads may be quarter-page or more in size and are used to market
all types of real estate.
"Workout fees" paid to a special servicer for making a loan current or liquidating
a problem loan or foreclosed property. Can also include late fees, modification
fees and loan administration charges. These fees are negotiated with each CMBS.
A suit brought by a landlord to evict a tenant for defaulting in the terms of the
lease. Also known as unlawful detainer actions or distraint proceedings.
The act of seizing (legally or illegally) personal property based on the right and
interest which a landlord has in the property of a tenant in default.
A part of a septic system, distributes the flow from the septic tank evenly to the
absorption field or seepage pits.
The date of the month (usually the 20th or the next business day) the payments on
the securities will be paid to the certificate holders.
The location of circuit breakers or fuses.
see Derived investment value.
see Discount Margin.
Document needs list
A list of documents required by a lender from a potential borrower submitting a
loan application. Documents requested can range from paycheck stubs to bank statements.
Documentation preparation fee
A fee charged by lenders, brokers and/or settlement agents to prepare the necessary
documents for closing.
An agreed dollar amount of taxes and operating expense (expressed for the building
as a whole or on a square foot basis) over which the tenant will pay its prorated
share of increases. May be applied to specific expenses (e.g., property taxes or
Land benefiting from an easement appurtenant.
See NN lease.
A wife's interest in her husband's real property.
The difference between the purchase price and the portion financed by a mortgage
A three-party negotiable instrument containing an order to pay.
A payment made to contractors, subcontractors, home builders or suppliers from the
proceeds of a construction loan.
A person ordered in a draft to make payment.
A person who signs a draft and is identified as the one ordering payment.
See Debt Service Coverage Ratio.
A broker/salesperson who attempts to represent both buyer and seller in the same
Legally, due diligence is a measure of prudence, activity or assiduity, as is properly
to be expected from, and ordinarily exercised by, a reasonable and prudent person
under the particular circumstances. The degree of prudence is not measured by any
absolute standard but depends on the relative facts of the special case. Prevailing
industry standards are used as the primary benchmark from which prudence is judged.
In CMBS, due diligence is the foundation of the process because of the reliance
securities investors must place on the specific expertise of the professionals involved
in the transaction. It is physically and financially impossible for most CMBS investors
to inspect properties or evaluate financial records, or to perform the many duties
required to prepare, analyze, deliver and service commercial mortgages. Due diligence
protects these investors from unethical improprieties and unprofessional practices.
Due diligence is said to be the cornerstone of securities law. Also see Up-Front
Due on sale clause
Standard language in a mortgage that states the loan must be repaid upon sale. See
Mandate that anyone involved in a legal matter is entitled to a legal proceeding
according to established rules and regulations.
Dun & Bradstreet
A credit-reporting agency that publishes credit ratings for many corporations and
The inability of a party to exercise his free will because of fear of another party.
An indication of the percentage change in the price of a security relative to a
change in interest rates. It provides a measure of the price volatility of the security;
the greater the duration, the greater the price volatility relative to a change
in interest rates. Positive duration means that the price of a security moves in
the opposite direction of a change in interest rates; conversely, negative duration
means that the price moves in the same direction as a change in interest rates.
Duration is the weighted average term-to-maturity of the security's cash flows when
the weights are the present values of each cash flow as a percentage of the present
value of all cash flows of the security.
Duty of disclosure
A responsibility for revealing all information that affects the agency agreement.
This program is similar to Argus yet it has additional features. It is designed
for long term portfolio analysis and valuation. For example, if I sell a building,
how would it affect my portfolio? “DYNA is used for preparing operating projections
for commercial office, retail, industrial, apartment, and hotel properties on a
cash, tax, or book basis.” DYNA’s additional features are designed for the management,
budgeting and forecasting aspects of the industry.
A deposit a buyer makes at the time of submitting an offer, to demonstrate the true
intent to purchase; also called binder, good faith deposit, or escrow deposit.
A loan agreement which provides that the original principal balance may be resized
by an additional advance as the operating performance of the property is able to
service additional debt. Earn-out loans are made on properties of which performance
is expected to improve in the near term due to such factors as renovations, retenanting
or repositioning. Earn-out loans specifY certain resizing criteria such as minimum
debt service coverage ratios (DSCRs) and, in some cases, minimum loan to value ratios
(LTVs). Also see Reverse Earn-Out Loans.
An insurance policy that provides coverage against damage to a home from an earthquake.
A right of use over the property of another created by grant, reservation, agreement,
prescription or necessary implication. It is either for the benefit of adjoining
land (“appurtenant”), such as the right to cross A to get to B., or for the benefit
of a specific individual (“in gross”), such as a public utility easement.
See appurtenant easement.
Easement by condemnation
Created by the exercise of the government's right of eminent domain.
Easement by grant
Created by the express written agreement of the landowners, usually in a deed.
Easement by implication
Arising by implication from the conduct of the parties.
Easement by necessity
Exists when a landowner has no access to roads and is landlocked.
Easement by prescription
Obtained by use of the land of another for the legally prescribed length of time.
Easement in gross
A right of use in the land of another without the requirement that the holder of
the right own adjoining land.
The lowest part of the roof, which projects beyond the walls of the structure.
Physical deterioration of property caused by normal use, damage caused by natural
and other hazards, and failure to maintain property adequately.
A building or project’s feasibility in terms of costs and revenue, with excess revenue
establishing the degree of viability.
The period of time during which a property is financially beneficial to the owner.
Loss in value caused by things such as changes in surrounding land use patterns
and failure to adhere to the principle of highest and best use.
A market condition in which available rental space is priced beyond the financial
capabilities of potential tenants.
Economic recovery tax act (ERTA), 1981
Tax reform which created tax incentives for construction of commercial real estate.
The practical effect was to fuel excess building, particularly of multifamily properties,
which were only economically viable in that tax-advantaged environment. Also see
Tax Reform Act, 1986.
The market rental value of a property at a given point in time, even though the
actual rent may be different.
The age of a property based on remaining economic life.
A desire for property accompanied by financial ability to satisfy the desire by
purchasing the property.
Effective gross income
Total potential income less deductions for vacancy and credit losses plus other
Effective interest rate
Actual rate of interest being paid.
The actual rental rate to be achieved by the landlord after deducting the value
of concessions from the base rental rate paid by a tenant, usually expressed as
an average rate over the term of the lease.
Represents the percentage of Net Rentable Square Feet devoted to the building’s
common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed
for an entire building or a single floor of a building. Also known as a Core Factor
or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square
footage by the usable square footage.
The right to leave a parcel of land entered (ingress) by law.
There are three ways you can be charged for the power that you use.
1. Direct: Direct charge from provider (ex. Con Edison)
2. Submetered: Landlord usually buys the power in bulk from the provider at a discount
and puts a markup such as 15% on top before you are billed.
3. Rent Inclusion: In this instance you are charged a set rate per square foot.
Usually $3.00 to $3.50 per sq. ft. if it is insufficient.
Created when electricity flows through a wire.
Emergency tenant protection act
A law in effect in New York City and other municipalities that gives tenants, in
most cases, entitlement to a one- or two year lease renewal.
A power of the state, municipalities, and private persons or corporations authorized
to exercise functions of public character to acquire private property for public
use by condemnation, in return for just compensation. See also “Condemnation”.
A worker whose work is directed and controlled by the person for whom he or she
works. The employer controls when, where and how the work is done as well as defining
the desired end result of the work. Usually the employer withholds taxes and pays
a portion of the employee's contribution into the Social Security retirement fund.
Employee retirement income security act of 1974 (ERISA)
Legislation which stipulates the standards of risk that are appropriate and acceptable
for private pension plan investments. A fiduciary of an employee benefit plan, i.e.,
a pension fund subject to ERISA, may invest in CMBS only if the certificates meet
specified investment guidelines.
The individual or company who pays people to work for them. State laws determine
the minimum number of persons hired, total amount of wages paid and working conditions
that must exist to classify an employer.
Laws passed by state legislatures authorizing cities and counties to regulate land
use within their jurisdictions.
The intrusion of a structure which extends, without permission, over a property
line, easement boundary or building setback line.
Any right to, or interest in, real property held by someone other than the owner,
but which will not prevent the transfer of fee title (i.e. a claim, lien, charge
or liability attached to and binding real property)..
The conversion from a construction loan to permanent financing
Additional coverage on an insurance policy to include a specific risk.
A contract in which the parties may legally be required to perform.
The VA home loan benefit is called an entitlement and often referred to as eligibility.
An investigation of a property to determine if there are any environmental hazards
or concerns that could affect the use of the property or impose future financial
liability. Preliminary research should be done prior to purchase in order to protect
the seller, buyer, lender and property managers.
Environmental impact statement
A requirement of the National Environmental Policy Act and the State Environmental
Quality Review Act prior to initiating or changing a land use that may have an adverse
effect on the environment.
Environmental protection agency (EPA)
A federal organization created by the National Environmental Policy Act. The EPA's
purpose is to centralize government's environmental responsibilities.
Environment policy act
A federal law that requires filing an environmental impact statement with the EPA
prior to changing or initiating a land use or development.
Lender liability and/or risk of loss of collateral value due to the presence of
hazardous materials, such as asbestos, RCB, radon, or leaking underground storage
tanks (LUSTS) on a property. Properties in a CMBS are required to have at least
a Phase I environmental clearance. Even when properties show no current environmental
problems, however, rating agencies sometimes in effect "price in" the possibility
that properties are at risk of not meeting future environmental standards. Also
see Comprehensive Environmental Response, Compensation Liability Act (CERCLA); Phase
Environmental Protection Agency
Equal Credit Opportunity Act (ECOA)
Federal law that prohibits a lender or other creditor from refusing to grant credit
based on the applicant's sex, marital status, race, religion, national origin or
Equal housing logo
A picture of a house containing an equal sign. This logo should be included in all
display ads, brochures and other forms of advertising indicating to the public
that the landlord/man-ager will not discriminate against individuals based on their
race, color, religion, national origin, sex, familial status or handicap.
One of the main credit-reporting bureaus.
Theory which governs the division of marital property in New York.
An interest in real estate such that a court will take notice and protect the owner's
The fair market value of an asset less any outstanding indebtedness or other encumbrances.
A loan or investment provision that allows the lender/investor to receive an equity-based
return in addition to normal rates upon some event. Typically this involves a lender/investor
receiving a disproportionate percentage share of the proceeds of refinancing or
Equity of redemption
The borrower's right to redeem the title pledged or conveyed in a mortgage after
default and prior to a foreclosure sale by paying the debt in full, accrued interest,
and lender's costs.
Equity Yield Rate
See Cash-on-Cash Return.
See Employee Retirement Income Security Act of 1974.
The wearing away of land by water, wind, or other processes of nature.
Errors and omissions insurance
A policy that insures against mistakes made by a builder or architect.
See Economic Recovery Tax Act, 1981.
A clause in a lease which provides for the rent to be increased to reflect changes
in expenses paid by the landlord such as real estate taxes, operating costs, etc.
This may be accomplished by several means such as fixed periodic increases, increases
tied to the Consumer Price Index or adjustments based on changes in expenses paid
by the landlord in relation to a dollar stop or base year reference.
When landlords rent space they want to make sure that If costs go up they don’t
take a beating on increased expenses. So they devised a complicated formula tied
in to the Consumer Price Index to raise your rent yearly based on things like inflation
and average market based costs. This increase generally does not take effect until
you have been a tenant for one year.
• Consumer Price Index (C. P. I.)
• Fixed Percentage: Some landlords will let you choose as an alternative to CPI
– an all inclusive set rate that your rent will be increased every year over the
base year – example : 2.5%, 3%, 3.5%, 4%, 5%
A deposit jointly held by a borrower and a lender which provides reserved funds
for key operating or capital expenses. Typical escrow accounts are held for real
estate taxes, insurance, tenant improvement, leasing commissions, necessary structural
repairs or environmental remediation, or reserves for replacement. Also called an
The power of government to take title to property left by a person who has died
without leaving a valid will (intestate) or qualified heirs.
(a) An account maintained by a real estate broker in an insured bank for the deposit
of other people's money; also called trust account;
(b) An account maintained by the borrower with the lender in certain mortgage loans
to accumulate the funds to pay an annual insurance premium, a real property tax,
or a homeowners' association assessment.
A neutral third party who ensures that all conditions of a real estate transaction
are met before any transfer of funds or property is recorded.
A written agreement made between the parties to a contract and an escrow agent.
The escrow agreement sets forth the basic obligations of the parties, describes
the monies (or other things of value) to be deposited in escrow, and instructs the
escrow agent concerning the disposition of the monies deposited.
Escrow closes when all conditions of a real estate transaction are met and the title
of the property is transferred to the buyer.
A firm that acts as a neutral third party to ensure that all conditions established
by the buyer, seller and lender in a real estate transaction are met.
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance
and other property expenses as they become due.
Funds that a mortgage servicer withdraws from a borrower's escrow account to pay
property taxes and insurance.
The total assets of a person, including real property, at the time of death
Estate at sufferance
Continuing to occupy property after lawful authorization has expired; a form of
Estate at will
A leasehold estate that may be terminated at the desire of either party.
Estate for years
A leasehold estate that continues for a specified period of time. It is not ordinarily
terminated by death of either party or by the sale of the property.
Estate from year-to-year
A leasehold estate that automatically renews itself for consecutive periods until
terminated by notice by either party; also called estate from period-to-period or
Estate in fee
An estate in fee simple absolute.
Estate in real property
An interest sufficient to provide the right to use, possession, and control of land;
establishes the degree and duration of ownership.
Estimated closing costs
An estimate of expenses related to the sale of real estate including title and appraisal
Estimated hazard insurance
An estimate of hazard insurance, also known as homeowners insurance, to cover physical
risks such as fire and wind damage.
Estimated property taxes
An estimate of property taxes payable on the property according to state and county
tax rates. The amount due is based on the property's assessed value which is based
on the most recent sale price plus any assessment updates.
A signed statement certifying that certain statements of fact are correct as of
the date of the statement and can be relied upon by a third party, including a prospective
lender or purchaser. In the context of a lease, a statement by a tenant identifying
that the lease is in effect and certifying that no rent has been prepaid and that
there are no known outstanding defaults by the landlord (except those specified).
The right of a life tenant or lessee to cut timber on the property for fuel or to
use in making repairs.
A system or code of professional behavior.
A study of the usefulness or utility of a property without reference to the specific
estimate of value.
A landlord's action that interferes with the tenant's use or possession of the property.
Eviction may be actual or constructive.
A landlord's legal notice to a tenant explaining the tenant's default under the
terms of the lease and informing him or her of a pending eviction suit.
Examination of title
An inspection by a title company of public records and other documents to determine
the chain of ownership of a property.
Excess Interest/Excess Spread
Interest received from repayments that is greater than the interest on the certificates.
It is defined as the difference between the interest paid on the mortgage loans
(net of servicing fees) and the interest accrued on the certificates.
Exclusive agency listing
A listing given to one broker only (exclusive), who is entitled to the commission
if the broker or any agent of the listing broker effects a sale but imposes no commission
obligation on the owner who sells the property to a person who was not interested
in the property by efforts of the listing broker or an agent of the listing broker.
Exclusive right to rent
This contract is between an owner or lessor and a broker or agent in the rental
of residential property.
Exclusive right to sell listing
A listing given to one broker only, who is entitled to the commission if anyone
sells the property during the term of the listing contract.
A type of zoning in which only the designated use may be made of property within
the zoned district.
A contract in which all parties have fulfilled their promises.
Signing a contract or other legal document.
Execution of judgment
Judicial proceeding in which property of a debtor is seized (attached) and sold
to satisfy a judgment lien.
A male appointed in a will to see that the terms of the will are carried out.
An agreement that has not been fully performed.
A female appointed in a will to see that the terms of the will are carried out.
Relieved of liability.
Exercise of option
Purchase of optioned property by the optional.
A phase of the business cycle characterized by increasing production.
A lease clause granting a tenant the option to lease additional adjacent space after
a specified period of time.
The ratio between operating expenses and operating revenues.
An agreed dollar amount of taxes and operating expense (expressed for the building
as a whole or on a square foot basis) over which the tenant will pay its prorated
share of increases. May be applied to specific expenses (e.g., property taxes or
Experian is one of the main credit reporting bureaus.
An agency relationship created by oral or written agreement between principal and
One created verbally or in writing by the parties.
An insurance term referring to the extension of a standard fire insurance policy
to cover damages resulting from wind, rain, and other perils.
Extensional Extension Option
A period of time given to a borrower to repay a mortgage loan through refinancing
or sale of the property past the contractual termination of the mortgage or an automatic
provision permitting extension of the original term of the mortgage. In order to
prevent placing a property in foreclosure, thereby incurring additional costs, servicers
may grant an extension to a borrower who has a balloon payment due.
A third party who has the right, or obligation, to approve loan extensions and modifications
recommended by the master servicer or special servicer. Not all CMBS have third
party extension advisors.
Potential inability to refinance balloon mortgages in a timely manner, thereby requiring
that the life of the security be extended beyond the expected life.
Amount of insurance coverage shown on the declaration page.
Face Rental Rate
The “asking” rental rate published by the landlord.
Commercial property specialists who are responsible for managing a team of other
specialists, for furnishing and maintaining leased space.
Fair Credit Reporting Act
Federal law designed to regulate procedures and prevent old or inaccurate information
from staying in consumer credit files. This act provides individuals the right to
inspect their own credit files, although the credit bureau may charge a fee.
Fair Housing Act of 1968
A federal prohibition on discrimination in the sale, rental, or financing of housing
on the basis of race, color, religion, sex, or national origin.
Fair Housing Act of 1988
A federal prohibition on discrimination in sale, rental, financing, or appraisal
of housing on the basis of race, color, religion, sex, national origin, handicap,
or familial status.
Fair Housing Amendments Act of 1988
A law adding to the Fair Housing Act provisions to prevent discrimination based
on mental or physical impairment or familial status.
Fair Market Value
The sale price at which a property would change hands between a willing buyer and
willing seller, neither being under any compulsion to buy or sell and both having
reasonable knowledge of the relevant facts. Also known as FMV.
A class of people protected by the Federal Fair Housing Act, which is defined as
the presence of at least one individual in the family who is younger than 18 or
the presence of a pregnant woman.
An individual, or two or more persons related by blood, marriage, or adoption, living
together in one dwelling; or a group of up to three people who are not married,
blood relatives, or adopted, living together as a single housekeeping unit; or one
or more persons living together in a single housekeeping unit as distinguished
from a hotel, club, and so on.
Fannie Mae, (Federal National Mortgage Association - FNMA)
A government sponsored enterprise (GSE) or a "corporate instrumentality" of the
government. Fannie Mae is a quasi-private corporation, with stock that trades. It
does not receive a government subsidy or appropriation and is taxed like any other
corporation. Fannie Mae purchases and pools conventional mortgages, i.e., those
not insured by the Federal Housing Administration (FHA), the Veteran's Administration
(VA), or the Farmer's Home Administration (FmHA), but also buys mortgages from FHA,
and then issues securities using the pool of mortgages as collateral. Fannie Mae
was the first agency to pool mortgages backed by adjustable-rate mortgages and created
the first pass-through collateralized by multifamily mortgages through a swap program.
Holders of Fannie Mae certificates are guaranteed full and timely payment of principal
Farmer's Home Administration (FMHA)
A U.S. Department of Agriculture agency that provides credit to farmers and rural
See Financial Accounting Standards Board.
In house construction, the area of material facing the outer edge of the soffit.
see Financial Asset Securitization Investment Trust.
A method under which construction of a building begins under a negotiated contract
before all plans and specifications have become final. Construction proceeds as
plans come off the drawing board.
see Federal Deposit Insurance Corp
A report on the potential profitability of a proposed real estate project. It includes
considerations such as land area, physical features of the land, requirements of
the project, estimated cost and the comparison of the data with other similar projects.
Federal Deposit Insurance Corp. (FDIC)
The FDIC oversees the insurance fund for both commercial banks (the BIF) and saving
institutions (the SAIF) and assures the viability and liquidity of retail financial
institutions. The FDIC is also the principal regulator for some banks, while the
Comptroller of the Currency is the regulator for other banks.
Federal Financial Institutions Examination Council (FFIEC)
An interagency body of regulatory agencies that establishes standards and reporting
requirements to which depository institutions are subject. The FFIEC includes five
regulatory agencies: the Comptroller of the Currency, the chairman of the FDIC,
a member of the Board of Governors of the Federal Reserve System, the Office of
Thrift Supervision, and the Chairman of the National Credit Union Administration.
Federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)
Defines minimal requirements governing the licensure and certification of appraisers
and mandates and empowers individual states to license and certify appraisers.
Federal Home Loan Mortgage Corporation (FHLMC)
The Federal Home Loan Mortgage Corporation is commonly known as Freddie Mac. This
corporation buys mortgages from lending institutions, pools them with other loans
and sells shares to investors.
Federal Housing Administration (FHA)
This government agency provides low-rate mortgages to buyers who make a down payment
as small as 3 percent.
Federal Insurance Contributions Act (FICA)
A federal regulation requiring employers to pay retirement fund taxes (social security)
Federal National Mortgage Association (FNMA) also know as "Fannie Mae"
A tax-paying corporation created by Congress that purchases and sells conventional
residential mortgages as well as those insured by FHA or guaranteed by VA.
Federal Reserve System
The U.S. agency that regulates monetary policy and, thereby, the money supply and
Federal Trade Commission
An administrative body that has the power to declare trade practices unfair, particularly
with regard to antitrust legislation.
Federal Unemployment Tax Act (FUTA)
A regulation requiring employers to file federal unemployment tax returns for employees.
Fee simple absolute
An inheritable estate in land providing the greatest interest of any form of title.
Fee simple on condition
A defensible fee (title), recognizable by the words "but if."
Any serious crime above a misdemeanor which is generally punishable by imprisonment.
see Federal Financial Institutions Examination Council.
see Federal Housing Administration.
Mortgages that are insured by the Federal Housing Administration (FHA). The FHA
operates loan plans for investors and purchasers of rural property, and provides
low-rate mortgages to buyers who make a down payment as small as 3 percent.
FHA Mortgage Insurance
Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure
the loan with the Federal Housing Administration (FHA). In addition to the one time
fee, the FHA also requires an additional insurance fee of up to 0.5 percent of the
current loan amount, paid in monthly installments. The lower the down payment, the
more years the fee must be paid.
A person, such as an agent, placed in a position of trust in relation to the person
for whose benefit the relationship is created; essentially the same as a trustee.
The duties of an agent to the principal to maintain the greatest trust and confidence
generally including care, obedience of lawful instructions, accountability, loyalty,
and disclosure of material facts.
Properties in neighborhoods that were once middle income or upper income decline
Financial Asset Securitization Investment Trust (FASIT)
A REMIC-like tax structure intended to permit the securitization of a wide variety
of asset classes, including mortgages. This new vehicle expands and improves upon
the existing REMIC rules. With respect to CMBS, it permits the replacement of pre-paid
loans after initial sale of the security, permits the inclusion of hedging investments
and permits the pooling of mixed asset types. The legislation was passed in 1996
as part of the "Small Business Job Protection Act of 1996" (HR 3448).
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), 1989
Legislation which created the Resolution Trust Corporation (RTC) to restructure
the losses experienced by failed financial institutions. Also created the Bank Insurance
Fund (BIF) and Savings Association Insurance Fund (SAIF) under the administration
of the FDIC. FIRREA required thrifts to meet risk-based capital requirements, in
which "risk" was equated with credit risk. Title XI of FIRREA sets forth appraisal
guidelines which are frequently followed in the appraisal of commercial real estate
assets for CMBS.
An amount imposed on the borrower in a mortgage loan, consisting of origination
fee, service charges, discount points, interest, credit report fees, and finders'
Financial Accounting Standards Board (FASB)
An industry group that establishes the prevailing standards for the accounting treatment
of assets and liabilities. F ASB decisions that seem arcane can have an important
effect on investment behavior. For example, F ASB 144 stipulates the accounting
treatment of impairment and the disposal of impaired assets such as repriced real
estate. A ruling that requires writing-down assets to current fair market value
and reporting the loss on income statements means that companies holding real estate
cannot hide behind the book value of those assets. This ruling thus makes it more
costly to hold real estate for banks and insurance companies.
Fire insurance policy
See homeowner's policy.
A written promise made by a lender to loan money for the purchase of property.
see Financial Institutions Reform, Recovery and Enforcement Act.
First Generation Space
Generally refers to new space that is currently available for lease and has never
before been occupied by a tenant. See also "Second Generation Space.
First Loss Piece
The lowest class or tranche of a CMBS which will absorb credit losses from a pool
of mortgages first before any other classes are affected.
The senior mortgage which, by reason of its position, has priority over all junior
encumbrances. The holder of the first or senior mortgage has a priority right to
payment in the event of default.
First Refusal Right or Right Of First Refusal (Purchase)
A lease clause giving a tenant the first opportunity to buy a property at the same
price and on the same terms and conditions as those contained in a third party offer
that the owner has expressed a willingness to accept.
First Refusal Right or Right Of First Refusal (Adjacent Space)
A lease clause giving a tenant the first opportunity to lease additional space that
might become available in a property at the same price and on the same terms and
conditions as those contained in a third party offer that the owner has expressed
a willingness to accept. This right is often restricted to specific areas of the
building such as adjacent suites or other suites on the same floor.
First substantive meeting
The first contact or meeting when some detail and information about the property
is shared with parties who express some interest in the real estate transaction.
A long-term projection of estimated income and expense for a property based on
Costs, such as rent, which do not fluctuate in proportion to the level of sales
Expenditures such as property taxes, license fees, and property insurance; subtracted
from effective gross income to determine net operating income.
Also called flat fee bids, the contractor estimates his/her costs including profit
and submits one fee to do the job. Most construction contracts are negotiated on
this type of fee.
One in which the rental amount remains the same for the entire lease term; also
called flat, straight, or gross lease.
A home loan with an interest rate that will remain at a specific rate for the term
of the loan.
The specific weeks in a year that an owner of a timeshare arrangement has access
Personal property that has become real property by having been permanently attached
to real property.
Costs incurred by the seller of a principal residence in preparing it for sale.
A metallic material that is used in certain areas of the roof and walls to prevent
water from seeping into the structure.
A property management fee expressed as a dollar amount per year or per month.
One in which the rental amount does not change during the lease term.
A large building or open area in which space is sold to individuals for the sale
of merchandise, usually used or of a collectible nature.
Flexible payment mortgage
A loan that allows smaller mortgage payment in the first years of purchase and then
increases the amount of payment later on.
A building providing its occupants the flexibility of utilizing the space. Usually
provides a configuration allowing a flexible amount of office or showroom space
in combination with manufacturing, laboratory, warehouse distribution, etc. Typically
also provides the flexibility to relocate overhead doors. Generally constructed
with little or no common areas, load-bearing floors, loading dock facilities and
A double top plate used to tie the walls together and provide additional support
for the ceiling and roof system.
A type of foundation constructed by pouring the footing first and then pouring the
The process of determining whether a property is located within a known flood zone.
Insurance coverage that is required in designated flood areas.
Floor Area Ratio (FAR)
The ratio of the gross square footage of a building to the land on which it is situated.
Calculated by dividing the total square footage in the building by the square footage
of land area.
The concrete base below the frost line that Supports the foundation of a structure.
The act of refraining from taking legal action for payment of a mortgage despite
the fact that it is due.
A force that cannot be controlled by the parties to a contract and prevents said
parties from complying with the provisions of the contract. This includes acts of
God such as a flood or a hurricane or, acts of man such as a strike, fire or war.
The process by which a lender takes back title to a property on which the mortgagee
has defaulted. A servicer may take over a property from a borrower on behalf of
a lender. A property usually goes into the process of foreclosure if payments are
more than 90 days past due.
Foreign trade zone (FTZ)
An area designated under federal law that permits manufacture, shipping or storage
of goods duty-free.
A statement in a contract for deed providing for giving up all payments by a buyer
A colorless, organic chemical with a strong pronounced odor. One of the indoor air
pollutants that contributes to sick building syndrome.
A will, in writing, signed by the testator or testatrix in front of two witnesses.
For Sale By Owner (FSBO)
A selling method whereas the owner of the property acts as the selling agent and
handles the sales process directly with the buyer or buyer's agent. This is most
commonly done y owners in order to avoid having to pay a listing commission.
Poured concrete, masonry block, or brick sides of a structure.
The wooden skeleton of the structure.
Lumber with a nominal dimension of two inches thick used for constructing the wooden
skeleton of the home.
An intentional false statement of a material fact.
Freddie Mac (Federal Home Loan Mortgage Corporation – FHLMC
A government sponsored enterprise (GSE) or a "corporate instrumentality" of the
government. Freddie Mac is a quasi-private corporation, with stock held by Federal
Home Loan Banks, under the regulatory control of the Department of Housing and Urban
Development (HUD). Under the direction of the Federal Home Loan Bank Board (FHLB),
Freddie Mac is charged to buy mortgages from S&Ls to enhance their role in and provide
liquidity to the secondary market for single family mortgages (i.e., mortgages not
backed by a government agency) and then issues securities using the pool of mortgages
as collateral. It also issues participation certificates (PCs), most of which are
backed by pools of conventional mortgages, but some pools are comprised of mortgages
that are insured by the Federal Housing Administration (FHA) and/or guaranteed by
the Veterans Administration (VA). Holders of Freddie Mac PCs are assured timely
payment of interest and eventual payment of principal.
A right of title to land.
An economic condition in which buyer and seller have ample time to negotiate a beneficial
purchase and sale without undue pressure or urgency.
A quality of some asbestos that causes it to crumble, allowing toxic particles to
escape into the air that may lodge in the lungs.
An absolute conveyance of title to the lender by the mortgagor in default to avoid
a record of foreclosure; also called deed in lieu of foreclosure.
A decorative and functional board that prevents wind and moisture from penetrating
the junction of the soffit and sheathing.
A lender calculation that compares a borrower's monthly housing expense (principal,
interest, taxes, and insurance) to gross monthly income.
A linear foot of property frontage on a street or highway.
Full covenant and warranty deed
A deed containing the strongest and broadest form of guarantee of title.
A loan on which an endorser or guarantor is liable in the event of default by the
Full Service Lease
see Gross Full Service Lease.
Full service rent
An all-inclusive rental rate that includes operating expenses and real estate taxes
for the first year. The tenant is generally still responsible for any increase in
operating expenses over the base year amount. See also "Pass Throughs".
Fully amortized ARM
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize
the remaining balance, at the interest accrual rate, over the amortization term.
Fully amortizing mortgage
One in which the scheduled uniform payments will payoff the loan completely over
the mortgage term.
Loss in value resulting from things such as faulty design, inadequacies, overadequacies,
and out-of-date equipment.
A device that is part of a wiring system that will melt and open the circuit when
overheating occurs, causing electrical power to stop.
The combination within one CMBS of conduits loans, small loans and large loans that
previously would have been disaggregated into separate securities.
The rights of an owner of an estate who will vest at some upcoming time.
Future proposed space
Space in a proposed commercial development which is not yet under construction or
where no construction start date has been set. Future Proposed projects include
all those projects waiting for a lead tenant, financing, zoning, approvals or any
other event necessary to begin construction. Also may refer to the future phases
of a multi-phase project not yet built.
The excess of the amount realized over the adjusted basis.
Usually a short-term loan to provide funds over and above an already existing loan
until more permanent financing is in place. See also bridge loan.
One with full authority over property of the principal, such as a property manager.
The prime contractor who contracts for the construction of an entire building or
project, rather than just a portion of the work. The general contractor hires subcontractors,
(e.g., plumbing, electrical, etc.), coordinates all work, and is responsible for
payment to subcontractors.
One that attaches to all of the property of a person within the court's jurisdiction.
General obligations law
See statute of frauds.
A member of a partnership who has authority to bind the partnership. A general partner
also shares in the profits and losses of the partnership. See also “Limited Partnership”.
The partners are personally liable for partnership debts exceeding partnership assets.
General warranty deed
A deed denoting an unlimited guarantee of title.
Funds a buyer receives from a relative or other source. Mortgage lenders usually
require a gift letter from the giver of this "gift money" stating that the money
does not have to be repaid.
See gross income multiplier.
Ginnie Mae (Government National Mortgage Association - GNMA)
A government-related agency that is part of the Department of Housing and Urban
Development (HUD) and uses the "full faith and credit" of the U.S. government in
borrowing. GNMA guarantees securities collateralized by mortgages initially issued
by approved lenders (thrifts, commercial banks, and mortgage banks) that pooled
the mortgages, using the mortgages for collateral for the security. In so doing,
GNMA supports the Federal Housing Administration (FHA) mortgage market as well as
mortgages from the Veterans Administration (VA) and the Farmers Home Administration
(FmHA). GNMA guarantees pass-throughs, but does not issue them, and will only guarantee
a pool in which the underlying mortgages are insured or guaranteed by either the
FHA, VA, or FmHA.
The main carrying beam of a house that spans the distance from one side of the foundation
to the other.
See Gross Leasable Area.
Going-In Cap Rate
The capitalization rate applied to the first year's income. Also see capitalization
rate and reversionary cap rate.
Good faith estimate
Lender's estimate of borrower's settlement costs, required by RESPA to be furnished
to borrower at time of loan application.
Government Sponsored Enterprise (GSE)
One of several agencies formed to provide a secondary market for residential real
estate loans, including Fannie Mae (Federal National Mortgage Association - FNMA);
Freddie Mac (Federal Home Loan Mortgage Corporation - FHLMC); and Ginnie Mae (Government
National Mortgage Association - GNMA).
Government National Mortgage Association (GNMA)
This government agency buys home loans from lenders, pools them with other loans
and sells shares to investors. However, unlike Fannie Mae and Freddie Mac, Ginnie
Mae only purchases loans backed by the federal government. (Commonly known as Ginnie
See Graduated Payment Mortgage.
Graduated Payment Mortgage (GPM)
An indebtedness whereby the individual payments on the loan are graduated based
on a pre-defined schedule. This may include an interest rate or principal payments
which change at fixed increments over the life of a loan.
A specified amount of time in which a borrower may make a loan payment after its
due date without penalty.
One in which the rental changes from period to period over the lease term, increasing
in stair-step fashion; used for new business tenants whose income increases over
Graduated Payment Mortgage
A mortgage that requires a borrower to make larger monthly payments over the term
of the loan. Payments are lower for the first few years but gradually rise until
year three or five, when payments become fixed.
One who receives title to real property by deed. One to whom a grant is made.
The statement in a deed containing words of conveyance.
A type of mortgage lending practice in which a disinterested third party holds
legal title to a property in security for the loan through a deed of trust; not
used in New York.
One who conveys title to real property by deed. The person making the grant.
A written complaint, filed by a property owner with the local board of assessment
review, protesting the validity of an assessment.
A measure of the total square feet leased over a specified period of time with no
consideration given to space vacated in the same geographic area during the same
time period. See also “Net Absorption”.
Gross building area
The total floor area of the building measuring from the outer surface of exterior
walls and windows and including all vertical penetrations (e.g. elevator shafts,
etc.) and basement space.
Gross building area
The total floor area of the building measuring from the outer surface of exterior
walls and windows and including all vertical penetrations (e.g. elevator shafts,
etc.) and basement space.
Gross floor area
A method of measuring industrial space in which area is the total of all floor space
within the exterior walls of the building, with no allowance made for structural
projections and with a required minimum ceiling height of 7.5 feet.
Gross Full Service Lease
Lease structure under which the landlord pays all building expenses. Also called
a full service lease or a gross rent lease.
The total household income before taxes or expenses are subtracted.
Gross income multiplier (gim)
A factor used in calculating estimated value of income property.
A common residential lease under which the tenant pays a fixed rental and the landlord
pays all operating expenses for the property.
Gross operating income
Gross scheduled rental income minus losses from vacancies and credit losses.
Gross rent multiplier (grm)
A method of estimating the value of income property.
The total sales made by a retail tenant at a leased premises. A proportion of gross
sales is charged as rental consideration under a percentage lease.
A type of net lease. usually used with industrial real estate, under which the owner
of a tract of land leases the property to a tenant who constructs his or her own
building on the site. Also called a land lease.
Rent paid to the owner for use of land, normally on which to build a building. Generally,
the arrangement is that of a long-term lease (e.g. 99 years) with the lesser retaining
title to the land.
Water obtained from underground.
A conspiracy wherein a person or group is persuaded or coerced into not doing business
with another person or group.
A residential facility for five or more adults who have been institutionalized and
A fixed rate mortgage that increases payments over a specific period of time. The
extra funds are applied to the principal.
see Government Sponsored Enterprise.
One who makes a guaranty. See also “Guaranty”.
Agreement whereby the guarantor undertakes collaterally to assure satisfaction of
the debt of another or perform the obligation of another if and when the debtor
fails to do so. Differs from a surety agreement in that there is a separate and
distinct contract rather than a joint undertaking with the principal. See also "Guarantor".
The statement in a deed beginning with the words "to have and to hold" and describing
the estate granted.
Suitable for the type of occupancy intended.
A casual expression for reducing the estimated income or cash flow expected to emerge
from a property. For example, one might speak of a rating agency giving a "haircut"
to a property or portfolio in lowering the expected cash flow on which the debt
service coverage ratio is calculated.
A disability is a physical or mental impairment; an impairment that substantially
limits one or more of an individual's major life activities. Persons who have AIDS
are protected by the fair housing laws under this classification, as are those participating
in addiction recovery programs, but current users 'of illegal drugs are not. For
example, a landlord may lawfully discriminate against a cocaine user, but not against
a member of Alcoholics Anonymous.
The cost of actually constructing the improvements (i.e. construction costs). See
also “Soft Cost”.
The physical parts of the computer that can be seen and touched, including the keyboard,
printer and display screen or terminal.
Hazard communication standard plan
An OSHA mandated plan to be compiled by property managers detailing protective
measures to be implemented when handling hazardous chemicals. See Occupational
Safety and Health Administration (OSHA).
Hazard insurance provides coverage for damage from items as fire and wind. Mortgage
lenders require coverage for at least the replacement value of the home. (Also known
as homeowner's insurance or fire insurance)
Waste that poses a threat to human health or the environment, including wastes that
are ignitable, corrosive, toxic, explosive, violently reactive, or specifically
named as hazardous.
Wooden reinforcements for the placement of doors and windows.
Owner supplies heat from October 15 through May 15th, usually at no charge, but
there are still some old buildings that are heated by propane and there is a heating
Persons legally eligible to receive property of a decedent.
A variety of dissimilar uses of property; no homogeneous.
Highest and best use
The use of land that will preserve its utility and yield a net income flow in the
form of rent that, when capitalized at the proper rate of interest, represents the
highest present value.
In the Central Business District, this could mean a building higher than 25 stories
above ground level but in suburban sub-markets, it generally refers to buildings
higher than 7 or 8 stories.
Holder in due course
Holder of a negotiable instrument who takes an instrument for value, in good faith,
and without notice that it is defective or over Due.
The length of time a property is owned.
A tenant who remains in possession of property after a lease terminates.
One handwritten by the testator.
Home Buyer's Guide
A booklet explaining aspects of loan settlement required by RESPA.
Home equity line
An open ended line of credit based on a homeowner's accumulated equity.
Home equity loan
A loan that allows owners to borrow against the equity in their homes however unlike
a home equity line this product provides a defined amount at closing without an
option to redraw in the future.
An examination of a home's condition by a licensed inspector prior to purchase.
A licensed professional who evaluates the structural soundness and operating systems
of a residence.
A small business or occupation that may be conducted only by the residents of the
dwelling and must be incidental and secondary to the use of the dwelling.
Insurance that includes coverage for any damages that may affect the value of a
house, in addition to personal liability and theft coverage.
Homeowners Association (HOA)
A group that governs a subdivision, condominium or planned community. The association
collects monthly fees from all owners to pay for common area maintenance, handle
legal and safety issues and enforce the covenants, conditions, and restrictions
set by the developer.
Homeowners Association dues
Monthly payments due to a homeowners' association to be used for maintenance and
communal expenses. Condominiums, townhouse complexes, and planned unit developments
(PUDs) may require monthly homeowners' association dues.
An insurance policy protecting against a variety of hazards.
Homeowner's warranty (HOW)
An insurance policy protecting against loss caused by structural and other defects
in a dwelling.
The price agreed upon by a buyer and seller, usually based on an appraisal of the
house's market value.
A parcel of land used by the owner as a primary residence.
Similar and compatible, as in land uses.
Hours of Building Operation
Note: Owners that supply A/C and Heat may shut these services off if it is not a
24/7 building. If you need to work on weekends be prepared for extra charges. Find
out what they are, or find a building that is opened 24/7.
Housing expense ratio
The percentage of gross monthly income devoted to housing costs.
Abbreviation of (the U.S. Department of) Housing and Urban Development. HUD is a
federal agency that oversees the Federal Housing Administration (FHA) and a variety
of housing and community development programs.
HUD-1 Uniform Settlement Statement
A closing statement or settlement sheet that outlines all closing costs on a real
estate transaction or refinancing for the buyer and seller.
HUD Form No.1
A standard settlement form required by RESPA.
A break-even debt service calculation that establishes the maximum interest rate
a mortgaged property can handle at maturity if the property must be refinanced.
It is calculated using current net operating income and an interest-only mortgage
with a reasonably short maturity of less than five years. The hurdle rate is usually
calculated to answer the question, Can all loans refinance at maturity if interest
rates are at a "disaster level?" Also called break even debt service analysis.
Heating, ventilation, and air conditioning. The capacity of HV AC systems becomes
an issue in office property because modem, competitive space requires significant
HV AC capability to accommodate intense computer utilization.
A process in a heating system in which liquids such as water are heated or cooled.
The accelerated pay down of a class in a CMBS or of an individual property loan
achieved by allocating the scheduled principal and interest to that class.
To pledge property as security for the payment of a debt without giving up possession.
An investment that is not easily convertible to cash.
One that does not obligate the offer.
Incapable of being moved, fixed in location; an important physical characteristic
Agency that exists as a result of actions of the parties.
One created by deduction from the conduct of the parties rather than from the direct
words of the parties; opposite of an express contract.
One presumed by law to exist in a deed, though not expressly stated.
A portion of the monthly mortgage payment that is placed in an account and used
to pay for hazard insurance, property taxes and private mortgage insurance( if applicable).
A deposit jointly held by a borrower and a lender which provides reserved funds
for key operating or capital expenses. Typical escrow accounts are held for real
estate taxes, insurance, tenant improvement, leasing commissions, necessary structural
repairs or environmental remediation, or reserves for replacement. Also called an
Land on which structures or roads exist.
In the context of leasing, the term typically refers to the improvements made to
or inside a building but may include any permanent structure or other development,
such as a street, sidewalks, utilities, etc. These typically increase the value
of a property, except in some cases of overimprovement. See also “Leasehold Improvements”.
See also “Leasehold Improvements” and "Tenant Improvements".
Offers incentives to developers and property owners to construct amenities that
would provide certain types of uses and enjoyment for the residents of the municipality.
The primary method for estimating the value of properties that produce rental income;
also called appraisal by capitalization.
Income and expense report
A monthly financial report showing the income from the property, operating expenses
and the amount remitted to the owner.
Describes a person who is not capable of managing his or her own affairs, under
Intangible things such as rights.
Increasing or diminishing returns
The cost of the improvement is compared to the increase in value to the property
after the improvement is completed. Under diminishing returns, the increase in value
is less than the cost of the improvement. Under increasing returns, the increase
in value is more than the cost of the improvement.
A building located in an industrial park and divided into small units of varying
sizes to accommodate young, growing companies that want to combine office and industrial
space at one location.
That which is not physically correctable or not economically practical to correct.
Reimbursement or compensation paid to someone for a loss already suffered.
Workers who control when, where and how they perform their own jobs and who are
responsible for paying their taxes and into the Social Security system.
A non-affiliated individual of the board of directors of a (borrowing) entity. The
vote of the independent director is required for certain actions by the entity,
e.g., declaration of bankruptcy, thus insulating the entity from deleterious control
by affiliated principals. This is often a key component of special purpose entity
(SPE) and bankruptcy remote structures.
A physical characteristic of land describing that land as a permanent commodity
that cannot be destroyed.
Financial tables used by lenders to calculate interest rates on adjustable mortgages.
Commonly used indexes are the Prime Rate, the LIBOR and Treasury bills.
The sum of the published index plus a margin. For example if the index were 5% and
the margin 2.75%, the "fully indexed rate" would be 7.75%.
A lease containing an escalation clause that is tied to an index.
Development costs, other than material and labor costs which are directly related
to the construction of improvements, including administrative and office expenses,
commissions, architectural, engineering and financing costs.
Indirect management costs
Expenses in the budget of a real estate agency or parent company that are partially
attributable to the operation of the management department.
The person who transfers or indorses a negotiable instrument to another.
A suburban industrial subdivision designed to offer comparatively small firms land
in outlying areas with good accessibility to transportation; now often called a
Property used for light or heavy manufacturing, research and development (R&D) or
warehouse space. Also includes office/warehouse space and flex space.
areas that are zoned for structures that are used for light or heavy manufacturing
Agreement by a buyer or seller to a type of agency relationship after considering
the various alternatives.
The manmade physical features of an urban area, such as roads, highways, sewage
and drainage systems and utility facilities necessary to support a concentration
The right to enter a parcel of land; usually used as "ingress and egress" (both
entering and leaving).
Initial interest rate
The original interest rate on an adjustable rate mortgage. This rate may be subject
to various adjustment at points throughout the mortgage.
Initial rate cap
A specific limit defined by some adjustable rate loans (ARMs) for the maximum amount
the interest rate may increase at the expiration of the initial interest rate.
Initial rate duration
Most adjustable rate loans (ARMs) offer an initial interest rate below the current
market rate. This initial or "teaser" rate expires after a period called the initial
rate duration, which may last months or years.
The fee paid to a licensed property inspector in order to determine the present
physical condition of the property.
A property used by special institutions, such as a university, hospital, or a government
agency. Institutional properties may be similar to other property types, but since
they are designed for a specific purpose, they can be difficult to adapt for other
A court instruction to discontinue a specified activity.
In ram legal proceeding
An action that is brought against the real property directly and not against an
individual and his personal property.
A licensed property inspectors; written report of the property's condition.
Installment land contract
See contract for deed.
A transaction in which the seller receives the sale price over a specified period
Office buildings owned and occupied by the same corporation.
A written legal document such as a contract, note, or mortgage.
The degree of interest qualifying for insurance.
A temporary insurance arrangement usually put in force until a permanent policy
can be obtained
Insured conventional loan
One in which the loan payment is insured by private mortgage insurance to protect
A mortgage that is insured (guaranteed) by the Federal Housing Administration (FHA)
or by private mortgage insurance (PMI).
The cost of replacing a structure completely destroyed by an insured hazard.
(a) money paid for the use of money; (b) an ownership or right.
Interest accrual rate
The rate at which interest accrues on a mortgage.
Interest Only Strip (I/O)
When the interest rate on the underlying mortgages(s) exceeds the interest rate
or coupon paid on the security backed by the mortgage(s), the excess interest is
"stripped" and sold as a separate payment stream, an interest only (I/O) strip.
The strip is usually described in the (notional) amount of the original security
class( es) from which it was stripped and then sold for a small fraction of the
price of the whole security or similarly rated class(es). I/Os can be very volatile
securities. For example, if several loans prepay earlier than expected, then there
may not be an interest stream from which to pay the interest on the strip, so the
I/O could end up with a much shorter life than originally expected.
Interest paid over life of loan
The total amount paid to the lender for the use of money during the time the money
Interest Paid vs. Interest Impacted
An important clause in the CMBS structure that determines how and when losses are
allocated, e.g., are losses allocated before principal is paid or after principal
is paid. This clause impacts the yield of the lowest class of certificate holders
The fee, expressed as a percentage, charged for a loan.
Interest rate buy-down plans
For buyers with limited cash reserves some sellers are willing to advance funds
from the sale of the home to buy down the interest rate and reduce the buyer's monthly
Interest Rate Cap
Limits the interest rate or the interest rate adjustment to a specified maximum
on either a periodic or lifetime basis. This protects the borrower from rising interest
rates and is typically purchased by the borrower.
Interest Rate ceiling
The highest interest rate a lender can charge for an adjustable rate mortgage
Interest Rate Floor
For an adjustable-rate mortgage (ARM), the minimum possible interest rate, as specified
in the mortgage note.
Interest only loan
The borrower pays only the interest that accrues on the loan balance each month.
Because each payment goes toward interest, the outstanding balance of the loan does
not decline with each payment.
The aggregate amount of interest payments from borrowers that is less than the accrued
interest on the certificates.
A "hypothetical" Treasury rate based on the relative rates of two other Treasuries.
For example, if a 4-year CMBS tranche (or any other bond) is priced to yield a rate
benchmarked to Treasuries, the price will be set at approximately the midpoint between
the 3-year and 5-year Treasury rates since there is no 4-year Treasury.
Short-term financing used by sellers to bridge the gap between the sale of one house
and the purchase of another (also known as bridge or swing loans). A construction
loan is also a form of interim financing.
Conveys real property from husband to wife or wife to husband.
Interstate land sales full disclosure act
A federal law regulating the sale across state lines of subdivided land under certain
A trust set up while the parties are living.
The condition of death without leaving a valid will.
Distribution of property by descent as provided by statute.
Not legally enforceable.
The total amount of rentable square feet of existing and any forthcoming space (whether
it be a tenant vacating space or new buildings coming on the market), in a given
category, for example, all warehouse space in a specified submarket. Inventory refers
to all space within a certain proscribed market without regard to its availability
or condition, and categories can include all types of leased space such as office,
flex, retail and warehouse space.
The outlay of money for income or profit.
Investments that are rated triple-A, double-A, single-A and triple-B are investment
grade, therefore appropriate for regulated institutional investors. Also see" A"
pieces and Senior Pieces.
Real estate that generates income, such as an apartment building or a rental home.
A joint venture, typically controlled by one or two persons, hoping for return to
The highest price an investor would pay in light of how well he believes a given
property would serve his financial goals.
Investor Reporting Package
The CMSA Investor Reporting Package is the established reporting standards for the
CMB S industry. The IRP is a standardized set of bond, loan and property level information
provided for all CMBS securitizations.
Transfer of title to real property as a result of a lien foreclosure sale, adverse
possession, filing a petition in bankruptcy, condemnation under power of eminent
domain, or, upon the death of the titleholder, to the state if no heirs exist.
An act wherein a creditor places a claim on real and/or personal property of another
to obtain payment of a debt.
Prepayment on a mortgage loan due to a default.
That which cannot be changed or canceled.
see Corporate Guarantee.
The responsibility of two or more people to fulfill the terms of a home loan or
other financial debt.
Ownership by two or more people that gives equal shares to a piece of property.
Rights pass to the surviving owner or owners.
Participation by two or more parties in a single undertaking.
Wooden framing members used in the construction of floors and ceilings.
The final decision of a court resolving a dispute and determining the rights and
obligations of the parties. Money judgments, when recorded, become a lien on real
property of the defendant.
An encumbrance that arises by law when a judgment for the recovery of money attaches
to the debtor’s real estate. See also "Lien".
One executed by an official with court authorization.
A court proceeding to require that property be sold to satisfy a mortgage lien.
Loans that exceed the conforming limits set annually by Fannie Mae & Freddie Mac.
A loan that is subordinate to the primary loan.
The extent of authority of a court.
Compensation which is fair to both the owner and the public when property is taken
for public use through condemnation (eminent domain). The theory is that in order
to be “just”, the property owner should be no richer or poorer than before the taking.
A major department store in a shopping center. Also called anchor store.
Payment by a broker of any part of a compensation to a real estate transaction to
anyone who is not licensed or who is not exempt from the license law.
A business with a low concentration of employees per acre.
A business with a high concentration of employees per acre.
A business that tends to locate near a low-cost labor pool.
Loss of legal rights because of failure to assert them on a timely basis.
The surface of the earth, the area above and below the surface, and everything permanently
(Contract for deed) A contract of sale and a financing instrument wherein the seller
agrees to convey title when the buyer completes the purchase price installment payments;
also called installment land contract and installment plan.
In industrial properties, expressed as a ratio of the number of principal shift
employees to total land area. Those which process raw materials often require fewer
employees, while electronics firms and others utilizing highly skilled workers will
have a higher ratio. This impacts on parking needs, for example.
Conveyance of land as a gift for the benefit of the public.
A type of lease that allows a lessee the right to use land for any purpose for a
specified period of time.
Describes property with no access to a public road.
A type of lien that can be created by contract or by operation of law. Some examples
are: (1) a contractual landlord’s lien as might be found in a lease agreement; (2)
a statutory landlord’s lien; and (3) landlord’s remedy of distress (or right of
distraint), which in not truly a lien but has a similar effect. See also "Lien".
Landlord’s lien or warrant
A warrant from a landlord to levy upon a tenant’s personal property (e.g., furniture,
etc.) and to sell this property at a public sale to compel payment of the rent or
the observance of some other stipulation in the lease.
Instrument conveying public land to an individual.
Type of trust in which title to land is held by a trustee for the benefit of others.
Land use controls
Governmental restrictions on land use (e.g., zoning laws and building codes).
A fee imposed by a lender when the borrower does not make a payment on time.
A payment a lender receives after the due date has passed.
Life insurance company, often shortened to life company. "LC" is also a common shorthand
for Letter of Credit.
A toxic metallic element found in some homes in paint, dust, and water.
The governmental agency that oversees the environment impact process and makes final
Lead Based Paint Hazard Reduction Act
The Federal Act that seeks to control exposure to lead-based paint hazards, specifically
mentioning protecting children under the age of six. It requires that landlords
of properties built before 1978 to make certain disclosures before entering into
The investment bank charged with the principal responsibility for coordinating the
issuance of a new security. This firm also typically has the largest role in the
underwriting of the security, and their name appears in the most prominent position
on the tombstone advertisement announcing the issuance of the security.
A written or oral contract between a landlord (lessor) and a tenant (lessee) that
transfers the right to exclusive possession and use of the landlord's real property
to the lessee for a specified period of time and for a stated consideration (rent).
Most state laws require that leases more than a certain amount of time must be in
writing to be enforceable.
The formal legal document entered into between a Landlord and a Tenant to reflect
the terms of the negotiations between them; that is, the lease terms have been negotiated
and agreed upon, and the agreement has been reduced to writing. It constitutes the
entire agreement between the parties and sets forth their basic legal rights.
An agreement between a commercial property owner and a lender that assigns lease
payments directly to the lender. Otherwise, lease payments would go to the owner,
who would then forward mortgage payments to the lender. In a CMBS, lease payments
would go directly to the servicer under a lease assignment. A form of credit enhancement.
A concession whereby a property owner agrees to take over the balance of payments
on a prospective tenant's current lease if he or she rents space in the owner's
Lease commencement date
The date usually constitutes the commencement of the term of the Lease for all purposes,
whether or not the tenant has actually taken possession so long as beneficial occupancy
is possible. In reality, there could be other agreements, such as an Early Occupancy
Agreement, which have an impact on this strict definition.
Lessor's interest in leased property.
The limited interest in a property held by a tenant; primarily the right to inhabit
it for a specified period of time. At the end of the lease, the property reverts
to the owner or landlord.
No freehold estate; of limited duration, providing the right of possession and control
but not title.
Improvements made to the leased premises by or for a tenant. Generally, especially
in new space, part of the negotiations will include in some detail the improvements
to be made in the leased premises by Landlord. See also “Tenant Improvements”.
One in which a leasehold (no freehold) estate is pledged to secure payment of the
The lease purchase contract sets the closing date and provides remedies to the seller
if the buyer defaults. (a type of delayed closing)
After the lease expires, signing a new lease with the existing tenant. Topics up
for renegotiation may include a new rental rate, repairs or alterations, expansion
or contraction of space.
Salespeople who are skilled in communications and telephone techniques, on-site
customer qualifying, merchandising themselves and their properties, and closing
A gift of personal property by will.
Blemishes on a piece of property such as a zoning violation or fraudulent title
The ability to contract.
A geographical description identifying a parcel of land by government survey, metes
and bounds, or lot numbers of a recorded plat including a description of any portion
thereof that is subject to an easement or reservation.
A person or organization with legal capacity.
Legality of object
The term is in technical contrast to equitable owner. The legal owner has title
to the property, although the title may actually carry no rights to the property
other than as a lien. See also “Lien”.
Recipient of the gift of personal property by will.
A bank, savings institution or mortgage company that offers home loans.
A tenant under a lease.
A landlord under a lease.
Letter of Credit (LOC or LC)
An obligation by a third party to cover losses due to delinquencies and foreclosure.
The rating of the third party is commonly required to be, at a minimum, equal to
the highest rating of the securities. A form of credit enhancement.
Letter Of Attornment
A letter from the grantor to a tenant, stating that a property has been sold, and
directing rent to be paid to the grantee (buyer). See also “Attorn”.
Letter Of Credit
A commitment by a bank or other person, made at the request of a customer, that
the issuer will honor drafts or other demands for payment upon full compliance with
the conditions specified in the letter of credit. Letters of credit are often used
in place of cash deposited with the landlord in satisfying the security deposit
provisions of a lease.
Letter Of Intent
A preliminary agreement stating the proposed terms for a final contract. They can
be "binding" or "non-binding". This is the threshold issue in most litigation concerning
letters of intent. The parties should always consult their respective legal counsel
before signing any Letter of Intent.
The use of borrowed funds; the larger the percentage of borrowed money, the greater
Imposition of a tax, executing a lien.
A borrower's debts and financial obligations.
An insurance policy that protects owners against claims of negligence, personal
injury or property damage.
Acronym for "London Interbank Offered Rate." An index used to determine interest
rate changes for adjustable rate mortgages. Very popular index for interest only
A personal privilege to do a particular act or series of acts on the land of another.
A claim or encumbrance against property used to secure a debt, charge or the performance
of some act. Includes liens acquired by contract or by operation of law. Note that
all liens are encumbrances but all encumbrances are not liens.
One whose property is subject to a lien.
Lien foreclosure sale
Selling property without consent of the owner who incurred the debt resulting in
a lien, as ordered by a court or authorized by state law, and title conveyed to
purchaser by judicial deed.
The one holding a lien against another.
A type of mortgage lending practice in which a mortgage loan constitutes a lien
against the real property; the theory of mortgage lending in New York.
Lien waiver (waiver of liens)
A waiver of mechanic’s lien rights, signed by a general contractor and his subcontractors,
that is often required before the general contractor can receive a draw under the
payment provisions of a construction contract. May also be required before the owner
can receive a draw on a construction loan.
Limits the amount a loan's interest rate can change during the mortgage term. For
example, if the rate on an adjustable-rate mortgage begins at 4 percent and has
a life cap of 6 percentage points, it can not go over 10 percent.
A freehold estate created for the duration of the life or lives of certain named
persons; a non-inheritable estate. Life estate in remainder a form of life estate
in which certain persons, called remaindermen, are designated to receive the title
upon termination of the life tenancy.
Life estate in reversion
A form of life estate that goes back to the creator of the estate in fee simple
Life estate pur autre vie
An estate in which the duration is measured by the life of someone other than the
life tenant. See also pur autre vie.
Life safety and security
A trend in property management that provides for the management of the total physical
protection of tenants. A typical life safety and security program consists of prevention,
detection, containment and counteraction.
Life safety control center
A security center found most often in large complexes, responsible for handling
various emergencies impacting complex workers. See life safety and security.
The ratio of rentable space to usable space on a multiple-tenancy floor of an office
One holding a life estate.
Lifetime payment cap
For an adjustable-rate mortgage (ARM), a limit on the amount payments can increase
or decrease over the life of the mortgage.
Lifetime rate cap
A maximum interest rate or "ceiling" that may not be exceeded under any circumstances
over the entire life of the loan.
see Low Income Housing Tax Credit.
A term used in an exchange of property held for productive use in a trade or business
or for investment. Unless cash is received, the tax consequences of the exchange
are postponed pursuant to Section 1031 of the Internal Revenue Code.
Limited liability corporation (LLC)
Business arrangement formed by two or more persons who are not personally liable
for the obligations of the llc; the llc is taxed as a partnership.
Limited liability partnership (LLP)
A business arrangement formed by professionals such as attorneys and accountants
who are all limited partners and are not personally liable for the obligations of
A type of partnership, created under state law, comprised of one or more general
partners who manage the business and who are personally liable for partnership debts,
and one or more special or limited partners who contribute capital and share in
profits but who take no part in running the business and incur no liability over
and above the amount contributed. See also "General Partner".
Cash and all other assets that can be converted to cash relatively quickly. Liquid
assets can include money in savings and checking accounts, money-market accounts
and most CD's.
Money to be paid and received as compensation for a breach of contract.
The sale of a defaulted mortgage loan or of the REO property that previously secured
That portion of the special servicer's compensation that is payable when the special
servicer obtains a full or discounted payoff on any specially serviced loan or obtains
any liquidation proceeds on any specially serviced loan or REO property. The fee
is calculated by applying the liquidation fee rate as stipulated in the pooling
and servicing agreement with regard to the related payment or proceeds.
A measure of the ease and frequency with which assets, e.g., CMBS, are actively
traded in the secondary market. Large-size CMBS issues with similarities in collateral
and structure are often traded more readily in the secondary market, thus increasing
the degree of liquidity of CMBS issues.
Latin, meaning "a lawsuit pending." See notice of lis pendens
An agreement between the owner of a property and a real estate broker giving the
broker the authorization to attempt to sell or lease the property at a certain price
and terms in return for a commission, set fee or other form of compensation. See
also “Exclusive Listing Agreement”.
A contract whereby a property owner employs a real estate broker to market the property
described in the contract.
Rights belonging to owner of land that borders a lake, ocean, or sea.
A document that details a borrower's income, debt and other obligations to determine
credit worthiness. Also includes information on the subject property.
Loan application fee
A fee charged by lenders to cover expenses incidental to reviewing a loan application.
A promise by a lender or other financial institution to make or insure a loan for
a specified amount and on specific terms.
An official lending institution representative who is empowered to act on behalf
of the lender within certain limits.
Loan origination fee
A fee charged by lenders to cover the direct costs of arranging the loan.
The time set by a lender for a buyer to pay a mortgage. Most conforming loans have
30 or 15-year terms.
Loan-to-value ratio (LTV)
The ratio of the total loan amount to the value of the property. For lending purposes,
the property value is equal to the purchase price or the appraised value, whichever
see Letter of Credit.
Local access network
A method of linking together personal computers within the same office to allow
communication between the computers.
An economic characteristic of land having the greatest effect on value in comparison
to any other characteristic.
A lender's commitment to a borrower to guarantee (or "lock in") a specific interest
rate for a limited amount of time.
A provision wherein the trustee is given control over the gross revenues of the
underlying properties in a CMBS. Property owners only have a claim to cash flows
net of expenses. Expenses include debt service, taxes, insurance and other operating
A period of time during which the borrower is guaranteed an agreed-upon interest
rate, even if market rates rise. The longer the period, the higher the cost (in
points) to the borrower.
A low-rent, multistory building located in the central business district, originally
used for a combination of manufacturing, office and storage space.
Long Term Lease
In most markets, this refers to a lease whose term is at least three years from
initial signing until the date of expiration or renewal option.
London Interbank Offered Rate (LIBOR)
The short-term (I-year or less) rate at which banks will lend to each other in London.
Commonly used as a benchmark for adjustable rate financing. LIBOR terms are usually
for one, two, three or six months or one year.
The ratio of rentable space to usable space on a single-tenancy floor of an office
Rate of loss on a liquidated mortgage. Defined as the ratio of (a) the outstanding
principal on the mortgage loans minus the realized loss, divided by (b) the outstanding
principal on the mortgage loans.
Loss to Lease
The difference between the market rental rate for a property and the rent being
paid for a similar property. It is an indicator of changing market conditions. For
example, if a property were leased for a one year term at $1,000 per month, and
the current market rate were $1,100 per month on similar properties, the loss to
lease would be $100 per month.
Generally, one of several contiguous parcels of land making up a fractional part
or subdivision of a block, the boundaries of which are shown on recorded maps and
Lot and block
A type of legal description used in a deed in addition to a metes and bounds description.
A home loan that requires only minimal verification of income and assets.
Low Income Housing Tax Credit (LIHTC)
A tax credit given to owners for the construction or rehabilitation of low income
housing. To qualify for the credit, the property must have (a) at least 20% of the
units occupied by individuals with incomes of 50% or less of the area median income,
or (b) at least 40% of the units occupied by individuals with incomes of 60% or
less ofthe area median income. Also called Section 42 properties after the section
of the Internal Revenue Code which authorizes the credit.
A building with fewer than 4 stories above ground level.
Signifies locus signilli, a Latin term meaning "in place of the seal."
LTV (loan-to-value ratio)
The ratio of the total loan amount to the value of the property. For lending purposes,
the property value is equal to the purchase price or the appraised value, whichever
A type of construction contract requiring the general contractor to complete a building
or project for a fixed cost normally established by competitive bidding. The contractor
absorbs any loss or retains any profit.
The monthly assessment paid by homeowners' association members for the repair and
maintenance of common areas.
A request from the tenant for repairs. A key to tenant satisfaction, it should be
in writing, and the tenant should be told when the repair will be made, or why it
will not be.
One who creates or executes a promissory note and promises to pay the note when
it becomes due.
A contract in which an owner employs a property manager.
The contract between an income property owner (principal) and a management firm
or individual property manager (agent) that outlines the scope of the manager's
authority, owner's responsibilities, and compensation.
The financial and operational strategy for the ongoing management of a property.
It is based on market analyses, a property analysis and the owner's goals and consists
of an operating budget, a five-year forecast and sometimes a comparative income
and expense analysis.
Management pricing worksheet
A method of computing management fees by itemizing management activities, calculating
the direct cost to the firm and adding a percentage for profit. This method is most
appropriate when managing condominium communities.
A program for operating a property submitted to the owner by a property manager.
A percentage added to the index and fixed for the life of the loan. When the initial
interest rate on an adjustable-rate loan has expired, the interest rate moves toward
the sum of its index plus a margin.
Property acquired during the marriage and distributed equitably, taking into account
Adjustments of estimated value or cash flows to reflect current market levels. In
a falling or weak market this is likely to create a downward adjustment of current
value based on lower expected future income streams if rental rates on existing
leases are greater than rental rates being charged for new leases in the market
(i.e., if there are several above-market leases in a building that are "burning
off"). The opposite is true in a strong or rising market.
In December, 1996 the IRS released final regulations relating to the requirement
that a securities dealer mark-to-market those securities that are being held for
sale to customers. This mark-to-market requirement applies to all securities owned
by a dealer, except to the extent that the dealer has specifically identified a
security as held for investment. The mark-to-market regulations provide that, for
purposes of this requirement, a REMIC Residual Certificate is not treated as a security
and thus generally may not be marked to market.
A title which is free from encumbrances and could be readily marketed (i.e., sold)
to a reasonably intelligent purchaser who is well informed of the facts and willing
to accept such title while exercising ordinary business prudence. See also “Encumbrance”.
Market allocation agreement
An agreement between competitors dividing or assigning a certain area or territory
Regional and neighborhood studies of economic, demographic and other information
made by the property manager to determine supply and demand, market trends and other
factors important in leasing and operating a specific property.
A business that tends to locate near industrial users and consumers of its products.
The rental income that a property would command on the open market with a landlord
and a tenant ready and willing to consummate a lease in the ordinary course of business;
indicated by the rents that landlords were willing to accept and tenants were willing
to pay in recent lease transactions for comparable space.
A forecast of future demand for a certain type of real estate project that includes
an estimate of the square footage that can be absorbed and the rents that can be
charged. Also called “Marketability Study”.
The highest price a property would command in a competitive and open market under
all conditions requisite to a fair sale with the buyer and seller each acting prudently
and knowledgeably in the ordinary course of trade.
The instrument that legally establishes a condominium; also called condominium declaration.
A primary lease that controls subsequent leases and which may cover more property
than subsequent leases. An Executive Suite operation is a good example in that a
primary lease is signed with the landlord and then individual offices within the
leased premises are leased to other individuals or companies.
A firm engaged to service the mortgage loans collateralizing a CMBS on behalf and
for the benefit of the certificate holders. Responsibilities vary according to the
servicing agreement. Common responsibilities include the following: (a) collect
mortgage payments and pass the funds to the trustee; (b) advance any late payments
to the trustee; (c) provide mortgage performance reports to bond holders; and (d)
pass all loans to the special servicer that are nonperforming or become REO.
Master Servicing Fee
The principal compensation paid to the master servicer for servicing activities.
The fee is payable monthly on a loan-by-1oan basis from interest on the loans. The
base fee is computed on the principal amount for the same period and accrued at
the applicable fee rate for a specific deal. Additional compensation to the master
servicer may include retainage of all assumption and modification fees, late payment
charges and similar fees to the extent actually paid by mortgagors for loans which
are not specially serviced mortgage loans.
Important information that may affect a person's judgment.
See mechanic's lien.
Maximum percentage lease
A type of percentage lease that sets a ceiling on the amount of rent to be paid.
A claim created by state statutes for the purpose of securing priority of payment
of the price and value of work performed and materials furnished in constructing,
repairing or improving a building or other structure, and which attaches to the
land as well as to the buildings and improvements thereon.
The use of a neutral third party to discuss and attempt to resolve a dispute.
Meeting of the minds
A condition that must exist for creation of a contract.
An organization of shopping center tenants intended to facilitate joint advertising,
promotion and other activities beneficial to the center as a whole.
Merged credit report
A report that draws information from the three (3) main credit-reporting agencies
including: Equifax, Experian and Trans Union.
The absorption of one thing into another.
Clause in a real estate contract in which the contract is fulfilled and the conveyed
deed supersedes the contract.
Metes and bounds
The boundary lines of land, with their terminal points and angles, described by
listing the compass directions and distances of the boundaries. Originally, metes
referred to distance and bounds referred to direction.
Any debt which is paid after a first mortgage. Often refers to a short-term second
or third mortgage which will be taken out (paid off or earned out) in the short
term upon changes in property performance. The term "mezzanine" implies temporary
indebtedness, but a long-term second mortgage is technically mezzanine debt.
A party who actively invests in mezzanine debt either by issuing such debt or pooling
mezzanine security classes.
Those security classes (or tranches) rated in the middle range ofa multi-class security,
i.e., more secure than the first-loss tranche but less secure than senior class(es).
A building with between four and eight stories above ground level although in a
Central Business District, this might extend to buildings up to twenty-five stories.
One-tenth of a cent.
A landowner's ability to take minerals from the earth or to sell or lease this right
Minimum-guaranteed percentage lease
A type of percentage lease that requires the tenant to pay either a fixed minimum
rental or a percentage of gross sales, whichever is greater.
Small, secure storage units rented to individuals and small businesses.
A person who has not attained the statutory age of majority.
A lesser crime than a felony which may be punished by a fine and/or imprisonment.
(a) A false statement or omission of a material fact; (b) In real estate, making
an intentionally false statement to induce someone to contract.
Space within a building or project providing for more than one use (i.e., a loft
or apartment project with retail, an apartment building with office space, an office
building with retail space).
Mixed-use development (MXD)
A development in the use of property combining retail, office-residential or industrial-office
Mobile home park
A popular, expanding form of residential living consisting of permanently or semi
permanently situated manufactured homes. The ground only, the home, or both, may
be rented from the owner.
Modeling/Cash Flow Modeling
When pools of loans are converted to securities, all payments, including balloon
maturities, are chronologically collated into a cash flow pool and then sequentially
allocated to the various classes of securities created with the issuance of CMBS.
Despite elaborate computer programs designed to estimate expected cash flows based
on multiple variables, rarely do all loans in a pool perform exactly as the primary
loan documents prescribe. Investment bankers have invested a great deal of time
and money to develop their cash flow modeling capability.
A change in the terms of a loan agreement.
Modified annual percentage rate (APR)
The modified APR is an index of loan cost based on the standard APR and adjusted
for the time the borrower expects to hold the loan.
A type of foundation where the footing and slab are poured at the same time.
Monthly association dues
A payment due monthly to a homeowners' association for maintenance and communal
A type of property description mainly used by surveyors; the description is drawn
from permanent objects such as a stone wall, large trees, or boulders.
A delay in allowing development of property within the municipality.
A written instrument creating an interest in real estate and that provides security
for the performance of a duty or the payment of a debt. The borrower (i.e., mortgagor)
retains possession and use of the property.
Mortgage acceleration clause
A clause that allows a mortgage lender to demand repayment of the entire loan balance
in a lump sum under certain circumstances, such as when the home is sold, title
is changed, the loan is refinanced or the borrower defaults on a scheduled payment.
The transfer of mortgage obligations to purchaser of the mortgaged property.
A company that provides home loans using its own money. The loans are usually sold
to investors such as insurance companies and Fannie Mae.
An individual that matches lenders with prospective borrowers who meet the criteria
of lenders the broker is approved to deal with.
Mortgage broker business
A company that matches lenders with prospective borrowers who meet the criteria
of lenders the broker is approved to deal with. The mortgage broker business does
not keep or make the loan, but receives payment from the lender for services.
Required by lenders on some loans to protect lenders from a possible default. Most
conventional loans with down payments or home equity percentages that are less than
20 percent of the home value require private mortgage insurance (PMI).
Mortgage life insurance
Insurance that will pay off a mortgage if the borrower dies before the debt is retired.
Mortgage Interest deduction
The tax write-off that the Internal Revenue Service allows most owners to claim
for annual interest payments made on real estate loans.
A bank or other financial institution that lends money to the borrower. The borrower
is considered the mortgagor.
Mortgagee's title insurance policy
A policy that insures a mortgagee against defects in a title pledged by a mortgagor
to secure payment of a mortgage loan.
Mortgage insurance premium (MIP)
A payment for insurance to protect the lender and/or insurer against loss if default
The amount of money (usually the loan amount) on which interest is either paid or
Full payment of a mortgage loan.
The value sufficient to secure payment of a mortgage loan.
The statement in a mortgage or deed of trust that demonstrates the mortgagor's intent
to mortgage the property to the mortgagee.
The borrower in a mortgage loan who executes and delivers a mortgage to the lender.
A building with five or more residential units or apartments. Multifamily properties
are usually distinguished as high rise, low rise, or garden apartments. Multifamily
properties are typically distinguished by quality as follows: (a) Class A: Properties
are above average in terms of design, construction and finish; command the highest
rental rates in the market; have a superior location in terms of desirability and/or
accessibility; and generally are professionally managed by national or large regional
management companies. (b) Class B: Properties frequently do not possess design and
fmish reflective of current standards and preferences; illustrate adequate construction
quality; command average rental rates in the market; are generally well-maintained;
have unit sizes that are somewhat larger than current standards; and are managed
by national or regional management companies. A majority of the apartments collateralizing
CMBS are of "B" quality. (c) Class C: Properties provide functional housing; exhibit
some level of deferred maintenance; command below-average rental rates; are usually
located in less desirable areas; are occupied by tenants who provide a less stable
income stream to property owners than Class A and B tenants; and are generally managed
by smaller, local property management companies.
A transaction in which more than two like-kind properties are exchanged.
Multiple listing service (MLS)
An organized method of sharing or pooling listings by member brokers.
The voluntary agreement of all parties to a contract as evidenced by an offer and
An error of material fact by both parties.
see National Association of Insurance Commissioners.
Narrative appraisal report
A statement of an opinion of value containing the element of judgment as well as
the data used in arriving at the value estimate.
National Association of Insurance Commissioners (NAIC)
Insurance companies are regulated by the states in which they are domiciled, and
these regulators have an association that is headquartered in Kansas City. Although
NAIC recommendations are not binding on members, they are generally followed and,
as a result, NAIC rulings can be important to the CMBS market. For example, the
NAIC determines the reserves that life companies are required to retain against
either mortgages or bonds. There was recently a controversy over whether a CMBS
collateralized by a single asset was really a mortgage (requiring higher reserve
levels) or a bond (with lower capital reserve requirements).
National association of realtors@ (NAR)
The largest and most prominent trade organization of real estate licensees.
National electric code
National standard for electrical installation and service.
National Environmental Policy Act (NEPA)
A federal act passed in 1970 that requires the processing of environmental impact
disclosures for major federal action affecting the environment.
The National Council of Real Estate Investment Fiduciaries (NCREIF) compile numerous
indices on commercial real estate performance based on data provided principally
by pension funds' equity real estate. Often used as a benchmark for real estate
Occurs when a borrower's monthly payment is too small to cover both the principal
and interest of a loan, so the outstanding balance of the loan actually grows larger
with each payment. Many adjustable rate mortgages are susceptible to this.
See restrictive covenant.
A right in the land of another prohibiting the servient owner from doing something
on the servient land because it will affect the dominant land.
Legal term describing failure to use the care that a reasonable person would use
in like cir-cumstances.
An joint proposal of costs based on collaboration among the plumbing, electrical,
hardware supplier and other trades people which often leads to a lower price than
if the manager solicited bids individually from each contractor.
An unconditional promise or order to pay a fixed amount with or without interest.
A part of formulating the management plan. an assessment of five factors in the
neighborhood market area of the subject rental property: boundaries and land usage,
transportation and utilities, economy, supply and demand, and neighborhood amenities
A shopping center of about 30,000 to 100,000 square feet (15 to 20 retail spaces)
on about 3 acres. Often anchored by a supermarket and small stores that serve about
The square feet leased in a specific geographic area over a fixed period-of-time
after deducting space vacated in the same area during the same period. See also
Net cash flow
Income from an investment property after expenses such as principal, interest, taxes
and insurance are subtracted.
Net Effective Rent
The actual revenue from rental payments after certain expenses are deducted. The
gross rent less operating expenses, rental concessions, tenant improvements, et
al. equals the net effective rent. Obviously, net effective rent can be negative,
and often was at the trough of the commercial real estate market.
Gross income less operating expenses; also called net operating income.
A common industrial lease form requiring the tenant to pay rent plus certain costs
incurred in the operation of the property. Generally, straight net leases require
the tenant to pay rent, utilities, real estate taxes and assessments. Net-net leases
require the tenant to pay rent, utilities, real estate taxes, assessments and insurance
premiums. Net-net or triple-net leases may require the tenant to pay all of the
above expenses plus agreed-on items of maintenance and repair.
A method that is illegal in New York of establishing the listing broker's commission
as all money above a specified net amount to the seller.
Net-Net Lease, or Double-Net Lease
see NN Lease.
Net-Net-Net Lease, or Triple-Net Lease
see NNN Lease.
Net Operating Cash Flow (NOCF)
The revenues earned by a property's on-going operations less the expenses associated
with such operations and the capital costs of tenant improvements, leasing commissions
and capital replacements costs (or reserves). Briefly, NOCF is net operating income
(NO!) less tenant improvements (Tl's), leasing commissions and capital repairs.
Net Operating Income (NOI)
Total income less operating expenses and adjustments but before mortgage payments,
tenant improvements, replacement reserves and leasing commissions. NOI is commonly
used as a basis for many financial calculations, e.g., debt service coverage ratios.
Net rentable area
The floor area of a building that remains after the square footage represented by
vertical penetrations, such as elevator shafts, etc., has been deducted. Common
areas and mechanical rooms are included and there are no deductions made for necessary
columns and projections of the building. (This is by the Building Owner and Manager
Association - BOMA, Standard).
Net square footage (S.F.)
The space required for a function or staff position. Also see "Circulation Factor
and "Usable Square Footage".
The worth of a person or company based on the difference between total assets and
New York state energy code
Regulation that sets minimum requirements for the design of energy efficiencies
for new buildings and renovations to existing buildings.
New York state human rights
Law created to eliminate and prevent discrimination in residential and commercial
real estate as well as in employment, public accommodations, places of amusement,
and educational institutions.
New York state office of parks, recreation, and historic preservation (OPRHP)
Oversees public recreational areas and administers federal and state preservation
programs authorized by federal and state law.
New York state uniform fire prevention and building code
Provides minimum standards for the construction and renovation of all types of buildings
in new York.
A lease that typically requires the tenant to pay for property taxes and insurance
in addition to the rent. Also called a net-net lease or a double-net lease.
A lease that typically requires the tenant to pay for property taxes, insurance
and maintenance in addition to the rent. Also called a net-net-net lease or a triple-net
When the amount of the new mortgage covers the remaining balance of the first loan
plus closing costs and any liens, and yields no more than 1 percent of the new loan's
principal in cash.
A loan application that does not require verification of income or assets and is
generally based on a combination of strong credit with a large down payment.
A loan provision that prohibits the transfer of a mortgage to another borrower without
A clause that can be inserted into a lease specifying that the business of the tenant
is exclusive in the property and that no other tenant operating the same or similar
type of business can occupy space in the building. This clause benefits service-oriented
businesses desiring exclusive access to the building’s population (i.e. travel agent,
Noncompeting tenant restriction
A lease clause granting a retail tenant an exclusive right to operate without competition
on the property.
A non-conforming loan is any loan that doesn't meet the qualifications or is too
large to be purchased by Fannie Mae or Freddie Mac.
Utilization of land that does not conform to the use permitted by a zoning ordinance
for the area; may be lawful or unlawful.
An attorney's statement which affirms that the assets of an entity would not be
substantially consolidated with those of its affiliates by a bankruptcy court per
Section 105 of the bankruptcy code. This is often a key component of special purpose
entity (SPE) and/or bankruptcy remote structures.
No advance is required to be made by a master servicer, special servicer or trustee
if, in their judgment, such advance would not be recoverable from related proceeds
or another specifically identified source.
Leaseholds; estates with a length determined by agreement or statute; establishes
possession of land as opposed to ownership in fee.
Classification of real property that is not for residential purposes and includes
commercial, industrial, special franchise and utility property, and some vacant
A physical characteristic of land describing that land as a unique commodity.
An asset such as a house that is not easily turned into cash.
A loan that is not paying principal and/or interest as stipulated. A non-performing
loan might be making payments but at a rate less than the full principal and interest
payments required in the mortgage note.
A loan which bars a lender from seeking a deficiency judgment against a borrower
in the event of default. The borrower is not personally liable if the value of the
collateral for the loan falls below the amount required to repay the loan.
A note in which the borrower has no personal liability for payment.
Nonrecurring closing costs
Fees that are only payable once such as appraisal, loan points, credit report, title
insurance and home inspection.
Nonrecurring variable expense
A type of variable property expense (e.g., capital improvements) that occurs only
An order issued by the secretary of state prohibiting licensees from soliciting
listings in certain areas of the state.
Normal wear and tear
The deterioration or loss in value caused by the tenant’s normal and reasonable
use. In many leases the tenant is not responsible for “normal wear and tear”.
A person authorized by a state to take oaths and acknowledgments.
A legal document that requires a borrower to repay a mortgage at a certain interest
rate over a specified period of time.
The interest rate specified in a mortgage note.
Notice of Default (NOD)
To initiate foreclosure proceeding involving a public sale of the real property
securing the deed of trust or a mortgage, the trustee under the deed of trust or
mortgage lender records in the public records a Notice of Default and Election to
Sell (NOD) the real property collateral. NOD also includes the right to be informed
of a borrower's default on a major contract such as a ground lease.
Notice of lis pendens
A statement on the public record warning all persons that a title to real property
is the subject of a lawsuit and any lien resulting from the suit will attach to
the title held by a purchaser from the defendant.
A stated dollar amount on which a calculation is based, such as the payment on an
Substitution of a new contract for a prior contract.
Null and void
Invalid; without legal force or effect.
One to whom an obligation is owed.
One who owes an obligation to another.
Loss in property value caused by economic or functional factors.
Physical possession of property.
Occupational Safety and Health Administration (OSHA)
A federal organization empowered to prescribe and legislate the use of potentially
toxic chemicals and compounds, and other safety rules for the workplace.
A promise made to another conditional upon acceptance by a promise or act made in
Offer and acceptance
Necessary elements for the creation of a contract.
One to whom an offer is made.
One making an offer.
See business park.
Property designed to be used principally as a place of business, ranging from major
multitenant buildings to single tenant buildings built to a tenant's specific needs.
Office properties include major multitenant-CBD, multitenant suburban, single tenant-built
to suit, or a combination office/showroom.
A specialized type of shopping center recognized by the Urban Land Institute; a
variation of the discount department store concept.
see Original Issue Discount.
One-year Adjustable Rate Mortgage
A mortgage whose interest rate changes yearly. The rate is usually based on movements
of a published index plus a specified margin.
Onsite job program
Employment of tenants occupying low-cost residential buildings to perform maintenance
work in these buildings.
Open-ended listing contract
One without a termination date.
One that may be refinanced without rewriting the mortgage.
A listing given to one or more brokers in which the broker procuring a sale is entitled
to the commission but imposes no commission obligation on the owner in the event
the owner sells the property to someone who was not interested in the property by
one of the listing brokers.
One that does not impose a prepayment penalty.
A provision which permits repayment of all or a portion of a loan during a specified
period without fee or penalty.
An unimproved area of land or water, or containing only such improvements as are
appropriate to the use and enjoyment of the open area, and dedicated for public
or private use or enjoyment or for the use and enjoyment of owners and occupants
of land adjoining or neighboring such open spaces.
A projection of income and expense for the operation of a property over a one-year
A calculation of yearly costs of operation based on operating expenses from comparable
properties and the maintenance needs of the subject property and used in preparing
an annual operating budget.
Operating cost escalation
Although there are many variations of escalation clauses, all are intended to adjust
rents by reference to external standards such as published indexes, negotiated wage
levels, or expenses related to the ownership and operation of buildings. During
the past thirty years, Landlords have developed the custom of separating the base
rent for the occupancy of the leased premises from escalation rent. This technique
enables the landlord to better ensure that the “net” rent to be received under the
lease will not be reduced by the normal costs of operating and maintaining the property.
The landlord’s definition of Operating Expenses is likely to be broad, covering
most costs of operation of the building. Most landlords pass through proper and
customary charges, but in the hands of an overly aggressive landlord, these clauses
can operate to impose obligations which the tenant would not willingly or knowingly
The actual costs associated with operating a property including maintenance, repairs,
management, utilities, taxes and insurance. A landlord’s definition of operating
expenses is likely to be quite broad, covering most aspects of operating the building.
Operating expense escalation
Although there are many variations of operating expense escalation clauses, all
are intended to adjust rents by reference to external standards such as published
indexes, negotiated wage levels, or expenses related to the ownership and operation
A report of receipts and disbursements resulting in net income of rental property.
Operation of law
The manner in which rights and liabilities of parties may be changed by application
of law without the act or cooperation of the parties.
Opinion of title
See certificate of title opinion.
Option Adjusted Spreads (OAS)
A representation of the incremental return (or risk premium) over comparable Treasuries
(as a risk-free base) that incorporates interest rate volatility and possible variations
in cash flow due to changes in rates. OAS does not, however, factor in credit quality.
The technique was first applied to residential mortgage backed securities (MBS)
to price the prepayment risk an investor assumes in residential MBS. In residential
MBS, borrowers have a legal "option" to payoff their loans when interest rates decline,
thereby creating reinvestment risk and possibly causing a reinvestment loss for
the investor. This option is significantly reduced in CMBS, however, due to commonly
used prepayment penalties.
A legal provision in a CMBS that defines who can liquidate a CMBS prior to the last
payment on the mortgages in the pool; the provision also addresses when and under
what circumstances this can occur.
The ideal rent for a specific type of unit in a defined market area that may need
to be adjusted to reflect specific advantages and disadvantages of the subject property.
A situation in which a buyer puts down money for the right to purchase a piece of
real estate within a set time period but does not have an obligation to buy.
Option Arm Loan
A home loan where the borrower has multiple payment options each month.
One who receives an option.
One who gives an option.
Option to purchase
A contract whereby a property owner (optionor) sells a right to purchase his or
her property to a prospective buyer (optionee).
Option to renew
A lease provision giving the tenant the right to extend the lease for an additional
period of time on specified terms.
A will usually restricted to the granting of personal property because it conflicts
with the statute of frauds, which states that the conveyance of real property must
be in writing.
A law enacted by a local government.
Original Issue Discount (OID)
The sale of a bond below, or at a discount to, the par price. The increase in value
of the bond as it approaches maturity is part of the total return calculation, but
various investors are required to treat this part of their total return differently.
The tax considerations of owning a CMBS REMIC are very complex, with at least part
of the issue subject to OlD tax considerations, and a violation of the REMIC qualification
for a CMBS can cause onerous tax penalties.
Original principal balance
The amount of principal owed on a loan before a borrower makes any payments.
A fee charged by most mortgage lenders to cover costs of arranging the loan.
Other Real Estate Owned (OREO)
A term used primarily by banks to identify real estate on the books that was taken
back through foreclosure of a mortgage loan. The term "Other" REO is used by banks
to distinguish foreclosed real estate from bank real estate owned, which is typically
corporate real estate assets. Nonetheless, the industry commonly uses the term REO
for foreclosed real estate. Also see Real Estate Owned (REO).
Land that is outside of the main area of development.
A percentage of gross sales over a certain amount paid to an owner in addition to
a minimum base rent; often required in percentage leases.
The outstanding collateral principal of a security in excess of the outstanding
certificate principal. A form of credit enhancement.
An improvement to land that results in the land not being able to obtain its highest
and best use.
A transaction in which the seller of a property agrees to finance all or part of
The right to use, control, possess, and dispose of property.
Ownership in severalty
Title to real property held in the name of one person only.
Owner's title insurance policy
A policy insuring an owner of real property against financial loss resulting from
a title defect.
One in which personal property as well as real property is pledged to secure payment
of the note.
Insurance coverage for property damage and liability loss all within one premium.
A specific portion of land such as a lot.
The right of government to litigate and therefore protect in the name of the public
Parking ratio or index
The intent of this ratio is to provide a uniform method of expressing the amount
of parking that is available at a given building. Dividing the total rentable square
footage of a building by the building’s total number of parking spaces provides
the amount of rentable square feet per each individual parking space (expressed
as 1/xxx or 1 per xxx). Dividing 1000 by the previous result provides the ratio
of parking spaces available per each 1000 rentable square feet (expressed as x per
Parol evidence rule
A concept allowing that oral explanations can support the written words of a contract
but cannot contradict them.
A situation in which the landlord's negligence renders all or part of the premises
unusable to the tenant for the purposes intended in the lease.
The taking of part (a portion) of an owner’s property under the laws of eminent
Proof of membership in a trust cooperative granted in a particular amount, usually
with the right to occupy a unit in property owned by the trust.
(a) one in which two or more lenders share in making the loan; (b) one in which
a lender shares in the profit produced by an income property pledged to secure the
loan payment in addition to receiving interest and principal payments.
A legal proceeding dividing property of co-owners so each will hold title in severalty.
A form of business organization in which the business is owned by two or more persons,
Laws that address the form of business organization composed of two or more individuals.
A common wall used by two adjoining structures.
Passive activity income
Any trade or business in which the taxpayer does not materially participate.
Refers to the tenant's pro rata share of operating expenses (i.e. taxes, utilities,
repairs) paid in addition to the base rent.
A security representing pooled debt obligations repackaged as shares that passes
income from debtors through an intermediary to investors. The most common type of
pass-through is a mortgage-backed certificate, many of which are government-guaranteed
(e.g., by Ginnie Mae), in which homeowners' principal and interest payments pass
from the originating bank or savings and loan through a government agency or investment
bank to investors, net of service charges. Pass-throughs representing other types
of assets, such as auto loans or student loans, are also widely marketed. Such securities
can be structured as straight pass-through, partially modified pass-through or modified
pass-through securities. (a) Straight pass-through: Pays principal and interest
to the investor as and when received from the underlying mortgage loan pool. (b)
Partially modified pass-through: Pays certain sums whether or not such sums have
been paid by the pool's mortgagors. (c) Modified pass-through: Involves a guaranty
of all scheduled principal and interest payments to investors whether or not such
payments have been paid by the mortgagors.
A recipient of money.
If the interest rate on the loan changes and therefore the monthly payments increase,
the lender allows a payment cap in which the monthly payment remains the same and
the money for the higher interest rate is added to the principal.
Payment Change Date
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage
(ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date
occurs in the month immediately after the adjustment date.
The periodic rate at which interest is paid on a mortgage. This may differ from
the accrual rate.
A property management fee expressed as a percentage of the gross collectible income
from a property.
Refers to a provision of the lease calling for the landlord to be paid a percentage
of the tenant's gross sales as a component of rent. There is usually a base rent
amount to which "percentage" rent is then added. This type of clause is most often
found in retail leases.
The movement of water through soil.
Percolation (perc) test
A test of soil to determine if it is sufficiently porous for installation of a septic
Interest charged or accrued daily.
A surety bond posted by a contractor guaranteeing full performance of a contract
with the proceeds to be used to complete the contract or compensate for the owner’s
loss in the event of nonperformance.
A type of fixed property expense (e.g., property taxes) that occurs on a regular
but infrequent basis.
See periodic tenancy.
Periodic Payment Cap
A limit on the amount that payments can increase or decrease during any single adjustment
Periodic Rate Cap
A limit on the amount that the interest rate can increase or decrease during any
one adjustment period, regardless of how high or low the index might be.
A lease that automatically renews for successive periods unless terminated by either
party; also called an estate from year to year.
Per se illegal
Legal doctrine stating that an activity is specifically not allowable under the
All property that is not land and is not permanently attached to land; everything
that is movable; chattel.
Personal property law
Laws that relate to ownership of other than real property.
A method of computing management fees based on the management firm's capabilities
and the direct cost of managing a specific number of units.
An assessment and report prepared by a professional environmental consultant which
reviews the property, both land and improvements, to ascertain the presence or potential
presence of environmental hazards at the property such as underground water contamination,
PCB's, abandoned disposal of paints and other chemicals, asbestos or a wide range
of other potential environmental contaminants. This Phase I Environmental Site Assessment
(ESA) provides a review and makes a recommendation as to whether further investigation
is warranted (a Phase II Environmental Site Assessment). The latter report would
confirm or disavow the presence of an environmental hazard and, should one be found,
will recommend additional review and/or mitigation efforts that should be undertaken.
Also see Comprehensive Environmental Response, Compensation Liability Act (CERCLA).
Loss in value caused by unrepaired damage or inadequate maintenance.
The slope of the roof.
PITI (principal, interest, taxes, and insurance)
A payment amount calculated by a mortgage lender to include the total payment of
all principal, interest, taxes and insurance due monthly.
Planned Unit Development (PUD)
A planning concept in the development of property, principally employed in housing
development to produce a high density of dwellings and maximum utilization of open
A program for the development of a city or county designed to provide for orderly
Plat (plat map)
Map of a specific area, such as a subdivision, which shows the boundaries of individual
parcels of land (e.g. lots) together with streets and easements, recorded on the
public record in plat books.
A record of subdivision maps generally filed with the county clerk.
The most common type of framing in residential construction in which the framing
of the structure rests on a subfloor platform.
To provide property as security for payment of a debt or for performance of a promise.
Pledged Account Mortgage (PAM)
A type of mortgage that is tied to a pledged savings account and this fund (plus
earned interest) is gradually used to reduce mortgage payments.
Combining two or more parcels of land into one tract that has more value than the
total value of the individual parcels.
see Probable Maximum Loss.
Fees charged by a lender to provide a lower interest rate. One point equals one
percent (1%) of the loan amount. Also referred to as a discount point.
The power of government to regulate the use of real property for the benefit of
Polychlorinated biphenyls (PCBs)
A manmade, odorless, liquid organic compound and carcinogen appearing in groundwater
The number of people within a given land area.
This increase is based upon the buildings workers collective bargaining contract
negotiated every three years and leaves a little space for bargaining. Ex. Porters
wage, Penny for penny porters wage, Penny for penny porters wage with fringes.
A person's actual statement that is false and known to be false.
When one either actively or constructively occupies a property; implies constructive
notice that the possessor has certain legal rights.
A type of construction in which the framing members are much larger than ordinary
studs and larger posts can be placed several feet apart instead of 16 or 24 inches
Potential gross income
The amount of rental income that would be received if all units were rented 100
percent of the time and there were no credit losses.
Power of attorney
An instrument appointing an attorney-in-fact; creates a universal agency.
Power of sale
Clause inserted in a mortgage or deed of trust giving the mortgagee (or trustee)
the right and power, on default in the payment of the debt secured, to advertise
and sell the property at public auction.
A thorough assessment made by a lender of a potential borrower's ability to pay
for a home and a confirmation of the amount to be borrowed. The completion of a
loan application is necessary to close the loan.
A letter from a lender that states the amount of money a potential buyer can obtain.
Concrete components (i.e. walls) of a building which are fabricated at a plant site
and then shipped to the site of construction.
Refers to space in a proposed building that has been leased before the start of
construction or in advance of the issuance of a Certificate of Occupancy.
A preliminary prospectus or private placement memorandum includes all (or nearly
all) of the information that will be included in the final prospectus but is subject
to amendment. It is identified by the red printing on the front cover, hence the
colloquial name of "red herring" or, more briefly, "the red." Despite the name,
there is no implication that the document is in any way diversionary (as the common
use of the term "red herring" might suggest). It is a valuable marketing tool for
securities transactions because it allows investors to make some preliminary assessment
of the utility of the particular security for meeting their investment goals. Also
Costs the seller pays in advance but were not fully used up (such as utility payments
or property taxes due), shown as a credit to the seller and a debit to the buyer.
Funds collected by the lender from the borrower to pay certain recurring items in
advance, including interest, property taxes, hazard insurance and, if applicable,
private mortgage insurance (PMI).
Interest paid before it is due.
Funds paid at closing to start an escrow account, as required in certain mortgage
loans; also called prepaids.
A whole or partial prepayment by the borrower greater than and/or earlier than a
scheduled payment on a mortgage loan. Estimating the probability or scale of prepayments
in a pool of mortgages is one of the more problematic risks in assessing the ultimate
yield on the security or any class in the security. Also see Involuntary Prepayment
and Voluntary Prepayment.
Prepayment Interest Shortfall
The difference between the interest accrued on the corresponding certificates and
the interest accrued from a prepayment. This commonly occurs when prepayments are
made prior to the payment due date, and interest received from the prepayment is
less than the interest on the certificates. To the extent that any such shortfall
is allocated to a certain class of offered certificates, the yield on that class
will be adversely affected.
Prepayment Premium or Prepayment Penalty
A stipulation in loan documents requiring a borrower to pay a penalty for any prepayments
made on a mortgage loan. Some prepayment premiums are structured as yield to maintenance.
Other prepayment premiums are set at a fixed rate, which often decreases in steps
as the loan matures. For example, a mortgage loan might have a prepayment premium
of 5% for the first seven years, which decreases at a rate of I % per year over
the next five years (4% in year eight, 3% in year nine, etc.), so that after year
twelve there is no prepayment premium.
Prepayment penalty clause
A financial charge imposed on a borrower for paying a mortgage prior to expiration
of the full mortgage term.
The risk that a borrower will repay the remaining principal or an amount other than
the scheduled payment on a mortgage prior to maturity, thus shortening the life
of the loan. In order to reduce prepayment risk, commercial mortgages commonly have
lockout periods, prepayment premiums and/or yield maintenance.
A lender's preliminary assessment of a buyer's ability to pay for a home and an
estimate of how much the buyer may borrow.
A method of acquiring an easement by continuous and uninterrupted use without permission.
One obtained by prescription.
A news release written by the manager or professional advertising agency highlighting
specific features of the rental property sent to local papers or real estate trade
journals. A press release can lend more credibility than paid advertising and provide
valuable, inexpensive advertising.
A program of regularly scheduled maintenance activities and routine inspections
of the interior and exterior of the buildings, equipment and grounds. Its objective
is to preserve the physical integrity of the property, eliminate corrective maintenance
costs and ensure uninterrupted service to the tenants.
The amount a purchaser agrees to pay and a seller agrees to accept under the circumstances
sur-rounding a transaction.
A violation of antitrust laws whereby brokers or managers conspire to fix (set)
rental or compensation rates.
Prima facie case
A suit that is sufficiently strong that it can be defeated only by contrary evidence.
The loan with the highest priority.
Loans directly from lenders to borrowers. When such loans are sold by the initial
lender to another investor, they constitute the secondary market.
Primary mortgage market
The activity of lenders' making mortgage loans to individual borrowers.
A construction supervisor who contracts with the property manager to oversee a job
and then sublets the work to various skilled tradespeople.
The interest rate a lender charges to the most creditworthy customers.
This typically refers to first generation (new) space that is currently available
for lease and which has never before been occupied by a tenant.
The major tenant in a building or, the major or anchor tenant in a shopping center
serving to attract other, smaller tenants into adjacent space because of the customer
(a) in the law of agency, one who appoints an agent to represent her; (b) amount
of money on which interest is paid or received.
Principal paid over life of loan
The sum of scheduled principal payments calculated by the lender to equal the face
amount of the loan.
Principle of conformity
The idea that a house will more likely appreciate in value if its size, age, condition
and style are similar to other houses in the neighborhood.
Special liens that receive preferential treatment (such as mechanic's liens).
Priority of Distributions
The CMBS provision that defines how, when and to whom the available funds will be
Private industry councils (PICs)
Using federal funds, groups operate employment and educational programs to train
the workforce to meet employment needs.
Private Label Securities
Securities backed by mortgages that are issued by the private sector, including
conduits, banks, thrifts and other financial institutions. These securities are
also known as non-agency securities and are not backed by agencies such as Fannie
Mae, Freddie Mac, or Ginnie Mae.
Private land use control
Regulations for land use by individuals or nongovernment organizations in the form
of deed restrictions and restrictive covenants.
Private mortgage insurance (PMI)
A form of insurance required by a lender when the borrower's down payment or home
equity percentage is less than 20 percent of the home value.
The sale of securities or bonds to institutional investors who meet specific criteria
of net worth and/or income and who are deemed to be sophisticated investors, e.g.,
insurance companies. Private placement securities are generally exempt from registration
requirements of the Securities Act of 1933. Investors are permitted to scrutinize
the financial data of private placements that would not otherwise be publicly released
due to confidentiality restrictions. As a result, private placements are particularly
suitable for the lower-rated tranches of CMBS because investors have access to more
information on which to base a decision. Also see SEC Rule 144A.
Private placement exemption
Allows issuers of securities to raise capital from an unlimited number of accredited
investors without having to register with the securities exchange commission.
That which is not owned by government.
Privity of contract
An agreement that exists only between lessor and lessee for the right to demand
and receive the specific benefit.
Probable Maximum Loss (PML)
An analysis generated by a computer model which determines the economic severity
of earthquake risk for a property by defining the damage ratio due to the worst
possible earthquake scenario. Generally, properties with PML's over a certain threshold
(perhaps 20%) are require to carry additional insurance coverage. PML levels are
typically required in earthquake-prone areas.
The judicial determination of a will's validity.
Laws that address the rules as to how a lawsuit proceeds through the court system
and also deals with the functions of administrative agencies.
A fee charged by some lenders for gathering information necessary to process the
The basis for a direct action that results in successfully completing an objective.
Profit the right to participate in profits of another's land.
Profit and loss statement
An annual financial report of a property's actual net profit before taxes.
An operating statement adjusted to reflect a potential change in income and expenses
based upon the investor’s knowledge of the real estate market.
A written promise to pay a debt as set forth in the writing.
To put in effect by public announcement.
A study made to familiarize a property manager with the nature and condition of
a building, its position relative to comparable properties and its estimated income
and operating expenses.
Property condition disclosure form (PCD)
A comprehensive checklist pertaining to the condition of the property, including
its structure and any environmental hazards in and around the property.
An accurate legal description of land.
A branch of the real estate profession that seeks to preserve or increase the value
of an investment property while generating income for its owners.
Property management report
A periodic financial report prepared for the owner by a property manager.
One who manages properties for an owner as the owner's agent.
Disclosure required under interstate land sales disclosure act.
Tax paid on privately owned property. Property taxes are usually paid semiannually,
or monthly if the lender requires. The amount is based on local tax rates and assessed
The right of a member of a cooperative to occupy a unit in the building subject
to certain conditions.
Any group of people that can be identified by a characteristic designated as such
by the U.S. Department of Housing and Urban Development (HUD) in consideration of
federal and state civil rights legislation. States may add groups for protection,
but may not delete any group designated by the federal laws.
Proportionately; according to measure, interest, or liability. In the case of a
tenant, the proportionate share of expenses for the maintainenance and operation
of the property. See also "Common Area" and "Operating Expenses".
Division of certain settlement costs between buyer and seller.
The document filed with the Securities and Exchange Commission (SEC) that stipulates
all the material information about a security. The final prospectus is commonly
called "the black" to differentiate it from the preliminary prospectus which had
been distinguished by red lettering on the cover to avoid confusion between the
preliminary and final prospectus. In the case of a CMBS, the prospectus lists various
details, including (but not limited to) the properties collateralizing the security,
the terms and conditions of payment to security holders, the payment sequence among
classes, the contingency plan in the event that mortgages are not paid as expected,
and the treatment of defaults and prepayments. ALL relevant information about a
security MUST be spelled out in the prospectus. Also see red herring.
PSA Standard Prepayment Model
A standard prepayment model for residential MBS developed in the 1980's by the Public
Securities Association (PSA) and various Wall Street firms. The PSA changed its
name to the Bond Market Association in 1997. The PSA model specifies a standard
prepayment percentage (in terms of an annual percentage) each month from origination
through the thirtieth month. Thereafter, the prepayment rate remains constant. The
base is at 100% PSA. Here the annual prepayment rate is 0.2% constant prepayment
rate (CPR) the first month, 0.4% CPR the second month, increasing each month by
0.2% CPR until the thirtieth month at 6% CPR (30 X 0.2%). Thereafter the prepayment
rate is held constant at 6% CPR. To determine the prepayment rate for any PSA scenario,
multiply the corresponding CPR at 100% PSA by the given PSA rate, e.g., for 200%
PSA at the fourth month, 4 X 0.2% CPR X 200% = 1.6% CPR. Also see constant prepayment
A grant of a power, license, or real property from the state or government to a
Editorial space in a newspaper, magazine or other medium that is not paid for but
serves to attract public attention to an individual. firm or commodity.
Public land use control
Regulation of land use by government organizations in the form of zoning laws, building
codes, subdivision ordinances, and environmental protection laws.
Public liability insurance
A type of insurance that covers the risks an owner assumes when the public enters
Public open space
Land that is not intensely developed for residential, commercial, industrial, or
That which is owned by government.
Constructive notice, for all to see, of real property conveyances and other matters.
An itemized list, typically prepared by the architect or construction manager, documenting
incomplete or unsatisfactory items after the contractor has notified the owner that
the tenant space is substantially complete.
In the event of fraud, damages awarded to one party to punish the other party for
his/her dishonest conduct to deter others from committing the same offense.
Pur autre vie
Translated, means for the life of another; a life estate measured by the life of
someone other than the life tenant.
Purchase-money mortgage (PMM)
A mortgage obtained by a borrower as partial payment for a property.
Qualified fee simple
A defensible fee (title), recognizable by words "as long as."
Qualified Institutional Buyer (QIB)
A QIB is defined within the meaning of Rule 144A under the Securities Act. A QIB
must have a minimum net worth and/or income and be knowledgeable of the risks of
the investment. Most CMBS can only be sold to QIBs.
A mortgage that can appropriately be included in a CMBS. Includes any obligation
(including any participation or certificate of beneficial ownership interest) which
is principally secured by an interest in real property and which is either (a) transferred
to the REMIC on the startup day, or (b) purchased by the REMIC within the three-month
period beginning as of the startup day, pursuant to a fixed price contract in effect
on the startup day. Additional obligations qualifying as secured by real property
for the purposes of being termed a qualified mortgage include (a) obligations secured
by stock held by tenants/stockholders in a cooperative housing corporation; (b)
debt securities backed by mortgages on timeshare ownership interests in a condominium
development; and (c) REMIC regular interests (not residual interests) transferred
to the REMIC on the startup day in exchange for any interest in the REMIC.
Determining the prospect's spatial needs, urgency to move, motives, and financial
ability in order to determine if the manager has a space appropriate for the prospect.
A ratio calculated by a lender to determine how much a potential buyer can borrow.
Qualified Reserve Asset
An intangible asset held for investment as part of a "qualified reserve fund," which
is defined as any reasonably required reserve to provide for full payment of expenses
of the REMIC or amounts due on regular interests in the event of defaults on qualified
mortgages or lower than expected returns on cash flow investments. The creditworthiness
of the qualified mortgages and the extent and nature of any guarantee are factors
to be considered in determining the reasonableness of the amount of reserve. The
reserve must be reduced in a timely manner as payments on the qualified mortgages
A method for estimating replacement or reproduction cost.
Rulings that are subject to review and change in the state and federal courts.
Use or possession of property that is undisturbed by an enforceable claim of superior
Quiet title action
A lawsuit to remove a cloud on a title.
A deed to relinquish or release a claim to real property.
A deed operating as a release that is intended to pass any title, interest, or claim
that the grantor may have in the property, but not containing any warranty or professing
that such title is valid.
Distance from the center of a circle to the perimeter; part of a metes and bounds
A naturally occurring, odorless, colorless, radioactive gas that is a known carcinogen
which has been found in every state and territory. Buildings with levels over the
EPA action level of 4 should be mitigated.
A wooden framing member used in the roof of a structure.
The maximum interest rate allowed on the monthly payment of an adjustable rate mortgage
during an adjustment period.
A lender's commitment to a borrower to guarantee (or "lock in") a specific interest
rate for a limited amount of time.
A loan with a clause that entitles a borrower to a one-time interest rate cut without
going through refinancing.
Rate of return
Percentage of net income produced by a property or other investment.
A pre-agreed upon increase in mortgage rates. Rate step-ups might be contractual
and expected at intervals or be triggered by certain events, e.g., if the borrower
(particularly with a balloon mortgage) fails to show progress towards refinancing
(such as an appraisal, engineering report, or environmental study) or is unable
to obtain a signed commitment or sales contract on the underlying property.
After-the-fact acceptance of an agency agreement.
To reaffirm a previous action.
The agency that examines the securities and their underlying collateral and rates
the securities based on its benchmarks. Ratings range from triple-A, the highest
rating, to triple-C, the lowest rating possible. They are a major influence on CMBS
structure and pricing. The four rating agencies of CMBS are Dominion Bond Rating
Service, FitchRatings, Moody's Investor Service and Standard & Poor's.
Unimproved land that remains in its natural state.
Unimproved shell space in a building.
see Risk Based Capital.
Ready, willing, and able
Describes a buyer who is ready to buy, willing to buy, and financially able to pay
the asking price.
Land and everything permanently attached to land.
Real estate broker
A person or an organization who negotiates real estate sales, exchanges, or rentals
for others for compensation.
Real estate cycle
A sequence of strengths and weaknesses that occurs in the real estate segment of
the general business economy; phases of the cycle are influenced by, but are not
identical to, those of the business cycle.
Real Estate Investment Trust (REIT)
A legislated tax election option which allows a corporation or partnership specially
formed to invest in real estate (e.g., by acquiring or providing financing for real
estate properties) and/or securities backed by real estate. REITs are required to
pass through 90% of taxable income to their investors but are not taxed at the corporate
level. The major types ofREITs are equity, mortgage, and hybrid; equity REITs are
the most common.
Real Estate Mortgage Investment Conduit (REMIC)
Legislated financial vehicle which allows for the issuance of multi-class securities
with no adverse tax consequences. A REMIC is a pass-through entity that can hold
loans secured by real property without the regulatory, accounting and economic obstacles
inherent in other forms of mortgage-backed securities. A REMIC is a bankruptcy-remote
legal entity which distributes the cash flow to bondholders of various classes (or
tranches) of securities without being taxed at the entity level. REMICs have facilitated
the sale of interests in mortgage loans in the secondary market. Embedded in the
Tax Reform Act, 1986.
Real estate market
A local activity in which real property is sold, exchanged, leased, and rented at
prices set by competing forces.
REO (Real Estate Owned)
Real estate that has come to be owned by a lender, including real estate taken to
satisfy a debt. Includes real estate acquired by lenders through foreclosure or,
in settlement of some other obligation.
Real estate salesperson
A person performing any of the acts included in the definition of real estate broker
but while associated with and supervised by a broker.
Real Estate Settlement Procedures Act (RESPA)
A federal law regulating activities of lending institutions in making mortgage loans
Real Estate Taxes
The landlords want to make sure that if his real estate taxes go up- that you pay
your proportionate share of the increase. This is based on the percentage of the
building that you occupy. This usually does not take effect until after you have
been in the space for one year.
Reality of consent
Mutual agreement between the parties to a contract; meeting of the minds; to exist
and be free of duress, fraud, undue influence, and misrepresentation.
Actual profit resulting from a sale.
The amount unrecovered from the sale of a foreclosed mortgage loan or REO property. It is equal to the amount of
(a) the outstanding principal balance of the loan,
(b) plus all unpaid scheduled interest,
(c) plus all fees applied to the sale of the property,
(d) minus the amount received from liquidation.
Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing and heating fixtures, or other items which would be personal property if not attached.
Real property law
Laws that address the acquisition, transfer, and possession of an interest in real estate and the rights attached to it.
A registered trademark of the National Association of REALTORS@; its use is limited to
Land and everything permanently attached to land.
(1) When the IRS recovers the tax benefit of a deduction or a credit previously taken by a taxpayer, which is often a factor in foreclosure since there is a forgiveness of debt. (2) As used in leases, a clause giving the lessor a percentage of profits above a fixed amount of rent; or in a percentage lease, a clause granting the landlord a right to terminate the lease if the tenant fails to realize minimum sales.
A provision in a percentage lease that grants the landlord the right to terminate the lease at the end of a certain period if gross sales have not reached the level anticipated during negotiations.
A clause within an assignment and subletting lease clause giving the landlord the right to recover any space that the tenant is unable to occupy or sublease.
The peak of the business cycle; the point at which supply equals and begins to surpass demand.
Mutual agreement by certain states to extend licensing privileges to each other.
The amount of profit that is taxable.
(a) The process of checking accounting of settlement statement; (b) The adjustment process in appraising, whereby comparables are adjusted to the subject property.
Written registration of an owner's title in public records to protect against subsequent claimants.
Registering a document on the public record.
A fee charged by real estate agents for conveying the sale of a piece of property into the public record.
The right of a lender, in the event of a default by the borrower, to recover against the personal assets of a party who is secondarily liable for the debt (e.g. endorser or guarantor).
A property designed for a recreational specialized use.Includes sports arenas, country clubs and marinas.
Rectangular survey system
A type of land description utilizing townships and sections.
Recurring variable expense
A type of variable property expense (e.g., redecorating costs) that occurs repeatedly on an irregular basis.
See equity of redemption.
Red Herring, or "Red"
A preliminary prospectus or private placement memorandum that is subject to amendment. It is identified by the red printing on the front cover, hence the name, and there is no implication that the document is in any way diversionary (as the common use of the term "red herring" might suggest). It is a valuable marketing tool for securities transactions. Also see prospectus.
The refusal of lending institutions to make loans for the purchase, construction, or repair of a dwelling because the area in which the dwelling is located is populated by minorities.
The owner's right to regain possession of real property.
A type of judicial deed allowing conveyance of real property through a court-appointed individual.
A percentage of a broker's commission paid to another broker for sending a buyer or seller to him or her.
The risk that borrowers are unable to refinance mortgages at maturity, thereby extending the life of a security collateralized by those mortgages. Also see Balloon Risk.
Obtaining a new mortgage loan to pay and replace an existing mortgage.
A large shopping center containing from 70 to 225 stores and more than 400,000 square feet of leasable area housing up to six major department stores and numerous satellite stores and supported by 50,000 to 150,000 families.
Regional market analysis
Used when drafting the management plan, a report detailing demographic and economic information on the regional or metropolitan area in which the subject property is located and used to interpret economic trends.
A filing statement required by the Securities Exchange Commission containing pertinent information about the securities offering.
Regular Interests, or Regular Certificates
A REMIC may be comprised of only two forms of interest or certificates: regular and residual interests. The terms and maturities of regular interests, the primary form of interest in a REMIC, must be fixed on the startup day and must state a specific amount to which the holder is ultimately unconditionally entitled. Generally, regular interests must provide for interest payments or other similar amounts at or before maturity at a fixed rate.
Regularly recurring cost
A type of fixed property expense (e.g., cleaning costs) that occurs consistently each month.
A federal code issued under the Truth in Lending Act that requires a borrower be advised in writing of all costs associated with the credit portion of a financial transaction.
Under its power of eminent domain, government may take and develop land for public use.
An extensive renovation of a building or project which is intended to cure obsolescence of such building or project.
A mortgage that provides for the costs of repairing and improving a resale home or building.
see Real Estate Investment Trust.
To refuse to accept an offer.
A provision in a mortgage to release certain properties from the mortgage lien when the principal is reduced by a specified amount.
1) A provision to release certain collateral under a mortgage for a pre-agreed upon amount.
2) If a borrower prepays the loan associated with one property in a pool of mortgages that are cross-collateralized and cross-defaulted (a "crossed" pool), the borrower must additionally prepay a portion of all other loans in the pool. This provides protection against a borrower "cherry picking" properties out of a crossed pool.
A future interest in a life estate.
One having a future interest in a life estate.
The amount of unpaid principal on a home loan.
The original loan term minus the number of payments made.
see Real Estate Mortgage Investment Conduit.
To release or give up.
A report sent to each certificate holder on each distribution date by the servicer which provides detailed information about the current distribution; copies of the remittance reports are also sent to the underwriter and trustee. There are no fixed standards for the information to be included in remittance reports and, in fact, there is a wide variety of formats - some have a minimal amount of typewritten information while others are computer generated and supply more detail.
A clause giving a tenant the right to extend the term of a lease, usually for a stated period of time and at a rent amount as provided for in the option language.
Compensation or fee paid, usually periodically (i.e. monthly rent payments, for the occupancy and use of any rental property, land, buildings, equipment, etc.)
A lease agreement in which the rent increases at given intervals for a fixed amount of time or for the life of the lease.
According to BOMA, the floor area of an office building minus allowances for stairs, elevator shafts, duct work and other areas not available to the tenant.
Rentable square footage
Rentable Square Footage equals the Usable Square Footage plus the tenant’s pro rata share of the Building Common Areas, such as lobbies, public corridors and restrooms. The pro-rata share, often referred to as the Rentable/Usable (R/U) Factor, will typically fall in a range of 1.10 to 1.16, depending on the particular building. Typically, a full floor occupancy will have an R/U Factor of 1.10 while a partial floor occupancy will have an R/U Factor of 1.12 to 1.16 times the Usable Area.
That number obtained when the Total Rentable Area in a building is divided by the Usable Area in the building. The inverse of this ratio describes the proportion of space that an occupant can expect to actually utilize/physically occupy.
A special leasing area located in a real estate development. It includes a display area, furnished models and a closing area.
Concessions a landlord may offer a tenant in order to secure their tenancy. While rental abatement is one form of a concession, there are many others such as: increased tenant improvement allowance, signage, lower than market rental rates and moving allowances are only a few of the many. See also "Abatement".
A record of the prospect's previous rental patterns that can influence the manager's decision to rent or not rent. Considerations include frequent moves, expensive modifications, and future expansion requirements.
Rent commencement date
The date on which a tenant begins paying rent. The dynamics of a marketplace will dictate whether this date coincides with the lease commencement date or if it commences months later (i.e., in a weak market, the tenant may be granted several months free rent). It will never begin before the lease commencement date.
A multiplier used to establish the rental rate for industrial properties, based on the rate of return the owner desires on the investment.
The number of rental units currently occupied in a building multiplied by the rental amount per unit.
That period of time, following construction of a new building, when tenants are actively being sought and the project is approaching its stabilized occupancy.
see Real Estate Owned.
The amount of money required to replace a structure with another structure of comparable utility.
Replacement cost insurance
The type of insurance that guarantees that partial damage to old, depreciated property will be fully replaced by new construction.
see Corrected Mortgage Loan.
A fund to replace assets when they wear out.
Regaining possession of property as a result of a breach of contract by another.
An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation. See also “Exclusive Listing Agreement”.
The amount of money required to build an exact duplicate of a structure.
Reps and Warranties
The representations (or "reps") and warranties made by a mortgage lender about the quality of the loans. Many reps and warranties survive the securitization process, i.e., are still enforceable once the mortgage has been included in a security.
Request for proposal (“RFP”)
The formalized Request for Proposal represents a compilation of the many considerations that a tenant might have and should be customized to reflect their specific needs. Just as the building’s standard form lease document represents the landlord’s “wish list”, the RFP serves in that same capacity for the tenant.
The cancellation of a contract by law or consent from the parties involved.
An expense category in the operating budget, monies are set aside for replacement expenditures not covered by insurance, such as roof or furnace repairs.
A manager who resides at the managed property who coordinates and executes maintenance operations for the building, and in some cases, interfaces regularly with tenants.
The type of property where people live. It includes privately owned dwellings as well as government and institutional ownership, and provides the greatest demand for professional property management.
Refers to any cash flow remaining after the liquidation (full pay-off) of all classes of securities in a CMBS. Multiple-asset, multiple-class CMBS frequently have a residual.
Income allocated to the land under the principle of highest and best use.
Residual Interests, or Residual Certificates
Every REMIC must have one and only one class of residual interests, although there may be multiple owners of residual interests. All distributions of residual interests must be prorated; however, a residual interest does not have to entitle the holder to any fixed or minimum distributions in order to qualify as such. Residual interests may accrue income or cash flow in several ways, including the following:
(a) the rate(s) differential(s) between the underlying mortgages and the REMIC
(b) income or cash flow resulting from over-collateralization;
(c) buy-down reserves, sinking funds or prepaid insurance; and
(d) income from qualified reserve funds or cash flow investments in excess of what
is required to service regular interests.
Also see regular interests.
Resolution Trust Corporation (RTC)
Created by the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), 1989. An agency designed to assume the assets of failed financial institutions, principally savings and loan institutions (S&Ls or thrifts) and dispose of those assets. The RTC can be credited with profoundly expanding the CMBS market by assuming a large volume of these securities, often with substantial credit enhancement to make them palatable to investors. The RTC charter expired in 1995, and all remaining assets and duties were transferred to the FDIC.
A business that locates near suppliers or raw materials necessary for its operations.
A clause in a deed or lease that limits the way that the real estate ownership or possession may be used.
Restriction placed on a private owner's use of land by a nongovernmental entity or individual.
Property types range from super-regional shopping centers with a gross leasable area greater than one million sq. ft. to small stores with single tenants. Also see Shopping Center.
Under the Uniform Landlord Tenant Law, landlords are not permitted to get even with a tenant who files a complaint with a government agency. Prohibited examples include singling out the tenant for a rental increase, unnecessary and frequent property inspections, removing a parking space.
An energy-saving program that calls for replacing or upgrading heating and air conditioning equipment, often at great expense.
Reverse annuity mortgage
A mortgage used by older people in which the lender makes payments to the borrower for a contracted period of time; upon the death of the homeowner or sale of the property, the money is paid back.
Reverse Earn-Out Loans
A mortgage loan that, like an earn-out loan, is made on a property or properties that do not yet possess stabilized cash flows. Unlike an eamout loan, a reverse earn-out is sized at origination on the basis of specific criteria (generally DSCR) not yet achieved, or achieved but not yet shown to be consistent. If specified criteria (generally a DSCR of 1.2x-l.4x) are not met by a specified date, the loan is resized down. The difference between the outstanding balance of the loan and the resized balance must be paid down by the borrower from other sources, which may not result in a further encumbrance of the property, or with an outside preferred equity investment. Also see Earn-Out Loan.
A special type of loan available to equity-rich, older home owners. Repayment is not necessary until the borrower sells the property. Many downsides exist to these loans.
Return of title to the holder of a future interest, such as the grantor in a life estate not in remainder.
Reversionary Cap Rate
The capitalization rate applied to the expected ultimate sale price/value of a building after a several year holding period. Typically about 50 basis points higher than a going-in cap rate.
Reversion is the ultimate or theoretical sale of a building after a several year holding period. The reversionary value is thus the expected value of the building at that time.
A provision stating the owner's interest: that possession of property will go back to owner at end of lease.
The lowest point, or nadir, of the business cycle; the point at which demand equals and begins to surpass supply.
Withdrawal of an offer.
Addendum to cover supplemental issues of an agreement.
Right of assignment
Allows lender to sell mortgage at any time and obtain money invested rather than wait for completion of loan term.
Right of first refusal
A statement in a lease or condominium articles of association that provides for a lessee or an association to have the first opportunity to purchase the property before it is offered to anyone else.
Right of inheritance
The right for property to descend to the heirs of the owner as set out by will or by intestate succession.
Right of redemption
Real property owners are given the opportunity to satisfy liens against their property prior to foreclosure proceedings.
Right of Substitution
The ability to replace collateral, parties or other components in a contractual obligation. For example, a mortgage may allow the release of certain property from the collateral as long as other acceptable collateral replaces it.
Right of survivorship
The right of an owner to receive the title to a co-owner's share upon death of the co-owner, as in the case of joint tenancy or tenancy by the entirety.
An easement allowing someone to use the land of another.
Right to Cure
In the event that a contractual obligation between two parties (e.g., a ground lease) is breached or defaulted, the right to cure permits a specified and interested third party (e.g., a lender) to assume the responsibilities of one of the parties (e.g., the borrower) to perform under the agreement (e.g., pay rent) on behalf of the defaulting party to preserve their interests (e.g., their lien position). Also see Cured.
Right to rescission
A provision in the federal Truth in Lending Act that allows borrowers to cancel certain kinds of loans within three (3) days of signing.
The rights of an owner of property adjoining a watercourse such as a river, including access to, and use of, the water.
Risk Based Capital (RBC)
The amount of capital (or net worth) an investor must identify and allocate to absorb a potential loss on an investment or investment class. This requirement was established by institutional regulatory bodies in the last few years because of losses at various types of financial institutions. The amount of risk based capital that is required varies among asset classes depending on perceived risk (e.g., is different for mortgages or rated bonds) and is typically expressed as a percent of the amount at risk.
The potential for loss.
That portion of property management that deals with minimizing or allocating risk of damage, such as utilizing insurance policies to transfer the risk of loss to a third party.
Regular upkeep aimed at finding structural and mechanical problems before major repairs are necessary.
see Resolution Trust Corporation.
see SEC Rule 144A.
Rule of reason
Legal doctrine that means if an activity is reasonable, then it is allowable under law.
Rights moving from grantor to grantee along with a title.
see Savings Association Insurance Fund.
An arrangement by which the owner occupant of a property agrees to sell all or part of the property to an investor and then lease it back and continue to occupy space as a tenant. Although the lease technically follows the sale, both will have been agreed to as part of the same transaction.
Sales comparison approach
The primary approach in estimating the value of vacant land and single-family, owner-occupied dwellings.
A contract signed by the buyer and seller detailing the terms of a property sale.
Satisfaction of mortgage
Legal instrument signifying a mortgage has been paid in full.
Savings Association Insurance Fund (SAIF)
A fund administered by the FDIC which insures deposits of SAIF member institutions, primarily thrifts or savings and loan associations (S&Ls), funded by premiums paid by member institutions. Established by FIRREA in 1989 along with the Bank Insurance Fund (BIF).
(a) an economic characteristic of real property; (b) in appraisal, supply of property in relation to effective demand.
Changes in the economy that recur at least once a year.
The length of time since origination of a mortgage loan. The longer a loan has been outstanding and performing to its terms, the better "seasoned" it is. The presumption is that more seasoned loans have a lower probability of default. A loan that has been outstanding for perhaps three years but shows a poor pay history (e.g., several late pays, particularly beyond 30 days), is not considered seasoned because of its performance.
see Securities and Exchange Commission.
Secondary mortgage market
The market in which lenders sell mortgages.
Second generation or secondary space
Refers to previously occupied space that becomes available for lease, either directly from the landlord or as sublease space. See also "First Generation Space.
The trading of securities that had been previously issued. Also see primary market.
A mortgage on property that ranks below a first mortgage in priority. Properties may have two, three, or more mortgages, deeds of trust, or land contracts as liens at the same time. Legal sequence priority, indicated by the date of recording, determines the designation first, second, third, etc.
Secondary Mortgage Market Enhancement Act (SMMEA), 1984
Originally passed to assist the residential mortgage market in accessing the capital market by eliminating legal restrictions that impeded certain investor groups from participating in residential MBS. At this time, if a security is rated double-A or better from at least one national rating agency, and if it is backed by a first-lien mortgage on residential property (including multifamily and congregate care), then the security is said to be "SMMEA eligible," and hence a permitted investment for S&Ls, federally-chartered banks, and state regulated financial institutions (life companies and state-chartered banks). Lobbying is underway to modify investment guidelines so that qualified investors are permitted wider access to the CMBS market as well as residential MBS.
SEC Rule 144A
The sale of bonds not registered with the Securities and Exchange Commission (SEC) is restricted to the conditions set forth by this rule of the SEC originally contained in the Securities Act of 1934. Unregistered certificates can only be sold to "qualified investors," principally institutional investors, who can demonstrate that they meet certain standards of net worth and/or income and are therefore deemed to be sophisticated investors. The rule under which some securities are privately placed. Also see Private Placements.
A federal subsidized housing program administered by HUD whereby a tenant pays up to thirty percent of his or her adjusted monthly income and HUD pays the difference between that figure and market rent. Income requirements vary regionally, and owners are not required to participate.
One who has filed a financing statement or who possesses a written security agreement as security for extending credit to a debtor.
In the CMBS market, securities are the generic term applied to Certificates of Ownership of the funds or assets of a trust fund. These undivided interests are issued by the trustee in amounts of $100,000 until less than $100,000 remains, then in amounts of $1 ,000. The certificates are usually issued in lettered classes starting with Class A, the highest-rated class. Each class is risk-rated by one or more of the major rating agencies. If the higher risk first-loss class is included in the security and sold rather than being held by the seller, the class is rated as "NR" (not rated). The "not rated" risk-rating is used for securities not qualifying for the minimum risk rate.
Securities act of 1933
Regulates securities offered by individuals, general or limited partnerships, and unincorporated associations, or individuals.
Securities exchange commission
Federal agency that requires the registration of securities offered to the public.
A term used to describe the process of raising funds through the sale of securities. It usually creates a new financial instrument representing an undivided interest in a segregated pool of assets such as commercial mortgages. The ownership of the assets is usually transferred to a legal trust or special purpose, bankruptcy remote corporation to protect the interests of the security holders.
A payment by a tenant, held by the landlord during the lease term and kept (wholly or partially) on default or destruction of the premises by the tenant. Individual states set forth rules for holding, retaining or returning security deposits.
A covered pit through which the discharge from the septic tank infiltrates into the surrounding soil.
Possession of real property under claim of freehold estate. This term originally referred to the completion of feudal investiture by which a tenant was admitted into the feud and performed the rights of homage and fealty. Presently it has come to mean possession under a legal right (usually a fee interest). As the old doctrine of corporeal investiture is no longer in force, the delivery of a deed gives seisin in law.
Loans for which the full amount of the principal will be completely paid off at the loan's termination pursuant to the loan's payment schedule.
A listing agent, subagent, or broker agent who works in the best interests of the seller.
An agreement where the seller provides financing for a home purchase.
The seller allows the borrower to use a portion of the equity in the property to finance the purchase.
Security classes, or tranches, that are rated as investment grade, therefore appropriate for regulated institutional investors (i.e., triple-A, double-A, single-A, and triple-B).
A common structure used in CMBS involving a prioritization of cash flows. For example, in a simple two class senior/subordinate structure (also known as an AIB structure),
(a) Class A will receive all cash flow up to the required scheduled interest and
(b) The subordinate class, Class B, provides credit enhancement to Class A, and
(c) Class B will absorb 100% of losses experienced on the collateral until cumulative
losses exceed Class B's amount; thereafter Class A will absorb all losses.
Also known as a sequential pay structure.
Sequential Pay Structure
see Senior/Subordinate Structure.
A study of how a change in one factor can affect the income to the property.
A household wastewater treatment system consisting of a house sewer, septic tank, distribution box, and absorption field or seepage pit.
Aboveground electrical cables, that come from the nearest pole connecting to the service entrance conductors of a structure.
Underground electrical wiring connecting to a structure.
Institution acting for the benefit of the certificate-holders in the administration of mortgage loans in a CMBS. Functions include reporting to the trustee, collecting payments from borrowers, advancing funds for delinquent loans, negotiating workouts or restructures (as permitted by the pooling and servicing agreement) and taking defaulted properties through the foreclosure process. Also see Master Servicer and Special Servicer.
Generally defined as customary, reasonable and necessary out-of-pocket costs and expenses incurred by the master servicer or special servicer in connection with the servicing of a mortgage loan after an event of default, delinquency or other unanticipated event or in connection with the administration of an REO property. These advances are paid by the master servicer or sometimes the special servicer and are generally reimbursable from future payments and other collections. In all cases, the required servicing advances are detailed in the pooling and servicing agreement.
Servicing Transfer Event
An event that triggers the transfer of the management of a mortgage loan from the master servicer to the special servicer. A servicing transfer event occurs when a borrower has defaulted or, in the reasonable judgment of the master servicer, is likely to default and be unable to cure within a reasonable time. In this event, the master servicer can transfer the day-to-day handling of the account to the special servicer until such time as the special servicer determines that the default has been cured and that the loan is now a corrected mortgage loan.
Land encumbered by an easement.
The distance from a curb, property line or other reference point, within which building is prohibited.
Setback requirements are normally provided for by ordinances or building codes. Provisions of a zoning ordinance regulate the distance from the lot line to the point where improvements may be constructed.
Settlement or closing fees
Fees paid to the escrow agent (often a title insurance company) for carrying out the written instructions of the agreement between buyer and seller and/or borrower and lender.
A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing for the buyer and seller.
Ownership by only one person.
Shadow Anchor Retail
A major retail tenant which provides significant drawing power to a retail center but which itself may not be part of the particular shopping center or the specific collateral. For example, imagine a shopping center for which a WalMart serves as anchor for a shopping center consisting of several in-line stores. If that WalMart is not owned by the shopping center, the store nonetheless serves as a shadow anchor to the other property and in-line stores.
Shared appreciation mortgage
(a) A mortgage that allows the lender to benefit from the appreciation of property value in exchange for a lower rate of interest to the borrower.
(b) A loan that allows a lender or other party to share in the borrower's profits when the home is sold.
A transaction in which two buyers purchase a property, one as a resident co-owner and the other as an investor co-owner.
Shared tenant services
When permitted by local utilities, building management can provide telephone and data transmission services to two or more unrelated tenants.
A material such as plywood or sheetrock that covers the framing members of a structure; also a type of insulation material.
Setback requirements are normally provided for by ordinances or building codes. Provisions of a zoning ordinance regulate the distance from the lot line to the point where improvements may be constructed.
A portion of rental rates that is intended to amortize the costs of extraordinary tenant improvements.
A short list of up to three available apartments ready for inspection at any given time. As one is rented, another is made ready and added to the list for showing and renting. Analysis of the show list can serve as a control guide for the marketing program.
Sick building syndrome
A physical condition caused by substances within a building that causes symptoms that disappear when the occupant leaves the building.
The first wooden member of a structure used as the nailing surface for the floor system.
An agent who works only for the buyer or the seller.
The study of a specific parcel of land which takes into account the surrounding area and is meant to determine its suitability for a specific use or purpose.
The installation of all necessary improvements, (i.e. installment of utilities, grading, etc.), made to a site before a building or project can be constructed upon such site.
A detailed plan which depicts the location of improvements on a parcel of land which also contains all the information required by the zoning ordinance.
Location of land.
The exposed wearing surface laid over the structural support beams of a building to form the floor(s) of the building or laid slab-on-grade in the case of a non-structural, ground level concrete slab.
A type of concrete flooring that is part of the foundation and is poured an a prepared and graded surface.
The razing of substandard and unsalvageable residential buildings for redevelopment.
see Secondary Mortgage Market Enhancement Act, 1984.
see Standard Prepayment Assumption.
Special Purpose Corporation. see Special Purpose Entity.
see Special Purpose Entity.
Special Purpose Entity (SPE)
A bankruptcy-remote entity established by the borrower(s) at the loan level and the issuer at the securities level whose sole asset is the property or properties being financed. The SPC protects the lender and, ultimately, the certificate holders of a security, from having the underlying property involved in bankruptcy proceedings against the borrower on the property; in the event of a bankruptcy or insolvency of the borrower or issuer, an automatic stay would apply and delay payments to investors. Rating agencies generally request counsel to provide "true sale" opinions on the sale from the transferor to the issuer and "non-consolidation opinions" confirming that the entity is indeed bankruptcy remote. Also called a special purpose corporation (SPC) or special purpose vehicle (SPV).
Special Purpose Vehicle. see Special Purpose Entity.
Some transactions have a separate special servicer, in addition to the master servicer, who is responsible for managing loans that go into default and conducting the "work-out" or foreclosure process, e.g., liquidating of loans and advancing the proceeds to the trustee. There are various types of special servicers: (a) Those that retain first-loss pieces;
(b) Those that invest in B-pieces in return for special servicing rights; and
(c) Those that are appointed solely because of their specialized asset-management expertise.
Special Servicing Fee
That portion of the special servicer's compensation that accrues with respect to each specially serviced mortgage loan and each mortgage loan that has become REO. The fee is calculated on a loan-by-Ioan basis per the applicable pooling and servicing agreement.
A reserve account funded on an on-going basis by collateral interest in excess of bond interest that is not directed to any particular class. This account absorbs mortgage losses up to a stated cap, providing additional credit support for the security, hence is a form of credit enhancement.
Standard Prepayment Assumption (SPA)
Prepayment rates on loans are commonly measured relative to a prepayment standard or model, such as the Standard Prepayment Assumption prepayment model or the Constant Prepayment Rate (CPR) prepayment model. SPA represents an assumed variable rate of prepayments each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of loans. Different prepayment assumptions than this baseline are often expressed as percentages of SPA. CPR, in contrast, represents an assumed constant rate of prepayments each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of loans for the life of such loans.
A wood, vinyl, or aluminum material placed under the roof extension of a structure.
That portion of an equity investment other than the actual cost of the improvements themselves (i.e. architectural and engineering fees, commissions, etc.) and which may be tax-deductible in the first year. See also “Hard Cost”.
Programmed instructions used to run the computer, including user programs saved on disks
A horizontal base plate that serves as the foundation for the wall system.
A business owned by one individual.
A graphic representation of a tenant’s space requirements, showing wall and door locations, room sizes, and sometimes includes furniture layouts. A preliminary space plan will be prepared for a prospective tenant at any number of different properties and this serves as a “test-fit” to help the tenant determine which property will best meet its requirements. When the tenant has selected a building of choice, a final space plan is prepared which speaks to all of the landlord and tenant objectives and then approved by both parties. It must be sufficiently detailed to allow an accurate estimate of the construction costs. This final space plan will often become an exhibit to any lease negotiated between the parties.
Agent with limited authority to act on behalf of the principal, such as in the situation created by a listing.
A levy by a local government against real property for part of the cost of making an improvement to the property, such as street paving, installing water lines, or putting in sidewalks.
Hotels, resorts, nursing homes, theaters, schools, places of worship and other businesses or organizations whose specialized needs dictate the design and operation of the building.
Special purpose real estate
The result of combining both the land and its improvements for a singular highest and best use.
A permit for a use that is not allowed in the zone without the approval of the planning board or other legislative body.
Special warranty deed
A deed containing a limited warranty of title.
A wavelike movement, similar to the business cycle, that occurs in certain sectors of the general economy.
One that attaches to one particular property only.
A court instruction requiring a defaulting party to a contract to buy and sell real property to perform his obligations specifically under the contract.
Any tenant space that has not been leased before the start of construction on a new building. See also "First Generation Space".
An individual or entity who develops an offering plan for a cooperative or condominium.
In New York, illegal rezoning of a certain property in a zoned area to permit a different type of use than that which is authorized. It is for the benefit of an individual and against the best interests of the health, safety, and welfare of the community.
A technique used to estimate the total cost of construction, in which the total number of square feet to be constructed is multiplied by a cost-per-square-foot figure to derive total cost.
A forecast of income and expense as may be reasonably projected over several years; prepared by a property manager.
Standard fire insurance
A basic form of insurance protecting a property against direct loss or damage.
That portion of the special servicer's compensation which accrues with each mortgage loan, including specially serviced mortgage loans and those which have been converted to REO. This fee accrues at the standby fee rate, is calculated in the same manner as the master servicer's fee and is payable by the master servicer from its master servicing fee.
The first day on which interests in the REMIC are issued.
State environmental quality review act (seqra)
A New York law requiring preparation of an environmental impact statement on any project that requires government approval and may have a significant effect on the environment.
State of New York mortgage association (sonyma)
An agency that raises money from the sale of New York tax-free bonds and uses these funds for mortgage loans.
Statute of frauds
That part of state law that requires certain instruments, such as deeds, real estate contracts, and certain leases, to be in writing to be legally enforceable.
Statute of Limitations
State laws establishing the time period within which certain lawsuits may be brought.
A foreclosure proceeding that allows a statutory time period after a foreclosure sale during which the borrower may still redeem the title.
A body of law which addresses everyday behavior.
Land with a slope that ranges from 30 percent to 45 percent or more.
The directing of members of protected classes to buildings or neighborhoods that are already occupied primarily by members of those same classes and away from buildings and neighborhoods occupied primarily by members of other classes in order to avoid altering the racial/ethnic make-up of these areas.
A loan that allows a gradual increase in the interest rate during the first few years of the loan.
A lease clause providing for rental rate increases of a definite amount at specific times over the term of the lease.
Step-up lease (graded lease)
A lease specifying set increases in rent at set intervals during the term of the lease.
Straight lease (flat lease)
A lease specifying the same, a fixed amount, of rent that is to be paid periodically during the entire term of the lease. This is typically paid out in monthly installments.
A method of computing depreciation that assumes that the wearing-out process proceeds at a stable rate over the useful life of a building.
Straight percentage lease
A type of percentage lease that bases rental rate solely on gross sales.
A loan in which the borrower pays interest only for a specified term and, at the end of the term, is required to pay the principal.
A series of tests performed by the rating agency which project the performance of the mortgage pool under varying scenarios or stress-related assumptions. The rating agency determines the likelihood of timely repayment using historical loan experience for the collateral type and its own statistical database concerning probability of default and severity of loss. The stress tests to which the pooled loans are submitted include analysis of the mortgage documents, real property collateral, tax structure, geographical distribution, loan servicing and administration issues. For example, a stress test might assess the impact of a change in interest rates on debt-service coverage ratios (DSCRs).
Also known as convenience centers, shopping centers located on the edge of urban areas or in the suburbs, consisting of about 10,000 to 30,000 square feet, four to ten retail spaces. They usually include parking spaces in front of the shops, and are often owner-managed.
Stripped Interest Certificates
Classes of securities that are entitled to distributions of interest with nominal or no distributions of principal.
Stripped Principal Certificates
Classes of securities that are entitled to distributions of principal with nominal or no distributions of interest.
The ratio of the total ground floor area of a building to the total land area of the site on which it is built.
Refers to the tax and legal structure of a CMBS, such as pass-through structure, a bond structure, a collateralized mortgage obligation (CMO), or a real estate mortgage investment conduit (REMIC). The structure can determine the tax benefits or penalties, and the rights of the CMBS holders and the issuer in the event of a failure or default within the terms of the security. Most CMBS are senior/subordinated, multiple class pass-throughs classified as REMICs.
The process of experimenting with various combinations of mortgages and security classes to achieve the highest price for a CMBS based on capital market factors prevailing at that time.
Wooden framing members used for forming the wall skeleton of a structure.
A person appointed by an agent with the permission of the principal to assist in performing some or all of the tasks of the agency.
Subchapter S corporation
Corporate formation whereby corporate income and expenses flow through to shareholders as if a partnership.
A contractor working under and being paid by the general contractor. Often a specialist in nature, such as an electrical contractor, cement contractor, etc.
One who formats land into lots for building purposes in accordance with state and local requirements.
A tract of land divided into lots or plots and eventually used for building purposes.
A detailed drawing which depicts the manner in which a parcel of land has been divided into two or more lots. It contains engineering considerations and other information required by the local authority.
Subdivision regulation (ordinance)
Public control of the development of residential subdivisions.
The transfer of only part of a lease term with reversion to the lessee; a lesser lease estate.
Partial transfer of a tenant's right in a rental property to a third party.
Lower in priority.
Subordinate Ground Lease
An agreement to occupy and use a parcel of land in which the rights attributable to such an agreement are junior, or secondary, to another indebtedness or obligation.
A lease that can be canceled by a lender if the borrower defaults on a mortgage loan.
A collateralized indebtedness in which the rights attributable to such indebtedness are junior, or subordinate, to another indebtedness or obligation, i.e., a second mortgage.
Structuring a security into classes, in which the risk of credit loss is disproportionately distributed. It is commonly recognized as a senior/subordinate structure. A form of credit enhancement.
A loan that is making payments, perhaps even the full principal and interest payments required in the mortgage note, but with a debt coverage ratio that would be unacceptable if underwritten at this time. Many investors also classifY a loan as sub-performing even if monthly payments are current if the loan-to-value ratio (L TV) or other primary value indicator suggests that the loan is unlikely to be able to pay off in full at maturity.
A second or third mortgage.
A junior mortgage that is lower in priority to another mortgage.
As used in a lease, the tenant generally accepts the leased premises subject to any recorded mortgage or deed of trust lien and all existing recorded restrictions, and the landlord is often given the power to subordinate the tenant's interest to any first mortgage or deed of trust lien subsequently placed upon the leased premises.
Subrogation of rights
The substitution of the title insurance company in the place of the insured for filing a legal action.
Subsequent rate adjustments
The interest rate for adjustable rate loans (ARMs) adjusts at regular intervals. This adjustment period could in some cases differ from the initial interest rate duration period.
Subsequent rate cap
A specific limit defined by most adjustable rate loans (ARMs) for the maximum amount the interest rate may increase at each regularly scheduled interest rate adjustment date. This limit may differ from the initial rate cap.
A servicer who contracts with master servicers and special servicers to perform some of the real estate services required under pooling and servicing agreements, such as property inspections, foreclosure services or individual loan administration. The master or special servicer is legally responsible for the activities of the sub-servicers. Sub-servicers are more likely to be engaged for specialized property types or if there is a small number of loans, a subset of the total portfolio, in a given area.
Residential developments for low-income families that are insured or (indirectly)
financed in part by a government agency.
The principle providing that the highest value of a property has a tendency to be established by the cost of purchasing or constructing another property of equal utility and desirability provided that the substitution can be made without unusual delay. also see Right of Substitution
Rights to the area below the earth's surface.
Many reps and warranties which are made by the lender survive the securitization process, i.e., are still enforceable once the mortgage has been included in a security.
Superfund Amendments and Reauthorization Act of 1986 (SARA)
The umbrella title given to various amendments to CERCLA. Amendments limit pesticide liability and provide for government reclamation of contaminated property.
Super jumbo mortgage
A mortgage that is over $650,000 or $1,000,000, depending on the lender.
Super regional shopping centers
Largest type of shopping center, housing as much as 1.5 million square feet of shops and appurtenant areas.
Supply and demand
(a) The principle that follows the interrelationship of the supply of and the demand for real estate, recognizing that real property is subject to the influences of the marketplace just as any other commodity.
(b) The principle stating that the greater the supply of any commodity in comparison to demand, the lower the value; conversely, the smaller the supply and the greater the demand, the higher the value.
One who at the request of another, and for the purpose of securing to him a benefit, voluntarily binds himself to be obligated for the debt or obligation of another. Although the term includes guarantor and the terms are commonly, though mistakenly, used interchangeably, surety differs from guarantor in a variety of respects.
A right or easement granted with mineral rights, enabling the possessor of the mineral rights to drill or mine through the surface.
The process by which a parcel of land is measured and its boundaries and contents ascertained.
The right of the surviving co-owner to receive the title automatically of a deceased co-owner immediately without probate.
The non-cash value added to a piece of property by the owner, such as do-it-yourself home improvements.
A type of interim loan wherein a borrower uses the equity that he has in one property to obtain the money necessary to buy another property.
A procedure used to preserve the adverse possession claim where the possession of the property is taken over from one person to another, sometimes through inheritance.
Permanent financing arranged to replace a short-term construction loan.
A common synonym for condemnation or any actual or material interference with private property rights but it is not essential that there be physical seizure or appropriation.
Taking title subject to a mortgage
Accepting a title pledged to secure a mortgage and with no personal liability for payment of the note.
Taxable status date
In New York, as of March I in towns, and January I in villages, real property is assessed with respect to its condition. The date may differ in other municipalities.
One of the powers of government to tax, among other things, real property.
The assessed valuation of all the real property that lies within the jurisdiction of a taxing authority, which is then multiplied by the tax rate or mill levy to determine the amount of tax due.
This consists of the price paid for the property, plus expenses incurred in acquiring the property (other than those incurred in arranging financing) plus the cost of any capital improvements. See basis.
Tax certiorari proceeding
A judicial review in state supreme court of a decision of the local assessment board of review.
An amount of money that may be deducted from a tax bill to arrive at the net amount of tax due.
An amount of money that may be deducted from gross income in arriving at net taxable income before depreciation, if any.
A deed conveying title to real property to a new owner that a municipality obtained as a result of the original owner's failure to pay real estate taxes.
A provision of tax law permitting a property to take an ordinary business deduction for the amount of annual depreciation.
Program that allows taxpayers relief from paying certain school or property taxes in whole or in part.
Trading of like-kind properties held as an investment or for use in business.
Inducements by states and cities to encourage companies that are a source of employment, income and tax revenues to locate in their areas.
The amount that a municipality must raise by taxing real property to meet budgetary requirements.
A statutory lien, existing in favor of the state or municipality, for nonpayment of property taxes which attaches only to the property upon which the taxes are unpaid.
Tax participation clause
A lease provision requiring the tenant to pay a pro-rata share of any increase in real estate taxes or assessments in addition to the basic rental.
The amount of dollars needed by the municipality to meet budgetary requirements divided by the taxable assessed and nonexempt value of all the real property within that jurisdiction.
Tax Reform Act (TRA) 1986
Reversed many of the tax reforms of 1981. Properties that were profitable in the tax environment of 1981-1986 were not economically viable after the TRA. Many markets had become oversupplied due to tax advantaged
construction of properties which the underlying economic and demographic demand could not support. As a result, TRA triggered a sharp drop in new construction, particularly of apartments. Also see Economic Recovery Tax Act, 1981.
A list or record containing the descriptions of all land parcels located within the county, the names of the owners or those receiving the tax bill, assessed values and tax amounts.
Tax service fee
A fee collected to set up third-party monitoring of the borrower's property tax payments. This is done to ensure that the payments are made on time and to prevent tax liens from occurring to the detriment of the lender.
A method of tax avoidance such as protecting income from taxation by allowable depreciation.
A low, short-term interest rate offered on a mortgage to entice the borrower.
A market condition in which available rental space exceeds tenant demand.
Tenancy at sufferance
A rental situation in which a tenant who originally obtained possession of the premises legally continues to occupy the property after the expiration of the leasehold interest and without the consent of the owner.
Tenancy at will
An estate that gives the tenant the right of possession for an indefinite period until the estate is terminated by either party or the death of either party.
Tenancy by the entirety
Ownership by a husband and wife in which they together hold title to the whole property with right of survivorship.
Tenancy in common
A form of ownership in which two or more owners hold an undivided (though not necessarily equal) interest in the property, with no right of survivorship.
Tenancy for years
See estate for years.
One who rents real estate from another and holds an estate by virtue of a lease.
Tenant alteration costs
Construction, remodeling and alteration expenses for work needed to make the premises usable by the tenant. These costs may be assumed by the tenant or the owner or both and are a major point of negotiation.
Tenant at will
One who holds possession of premises by permission of the owner or landlord, the characteristics of which are an uncertain duration (i.e. without a fixed term) and the right of either party to terminate on proper notice.
Tenant Improvements (TI)
The expense to physically improve the property or space, such as new improvements or remodeling. Often, tenants are provided with a market rate TI allowance (expressed in dollars per square foot) that the owner will contribute toward improvements; amounts above the TI allowance might be paid for by the tenant. In a soft real estate market, more generous TI allowances might be necessary to attract tenants, thus adding greater uncertainty to the expected cash flow from a building.
Improvements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvements to be made in the leased premises by the landlord. See also “Leasehold Improvements”, “Workletter”.
Tenant Improvement (“TI”) Allowance or Work Letter
Defines the fixed amount of money contributed by the landlord toward tenant improvements. The tenant pays any of the costs that exceed this amount. Also commonly referred to as "Tenant Finish Allowance.
see Tenant Improvements.
The combination of retail tenants occupying a shopping center; must be considered carefully to achieve maximum profit for each merchant and the center as a whole.
A person who arranges, for a fee, the relocation of commercial or residential tenants from buildings that are to be demolished, rehabilitated, or remodeled.
A local organization of residential tenants working for their common interests and rights.
Employees of tenant companies who are schooled in emergency procedures by the building staff to direct their fellow employees during routine drills and actual emergencies.
Right of ownership of real estate held by a person.
One that requires the mortgagor to pay interest only during the mortgage term, with the principal due at the end of the term.
A trust set up within a person's will and effective upon the death of the person who created the trust.
To have died leaving a valid will.
A male who has died and left a valid will.
A female who has died and left a valid will.
Volunteers from state or private agencies who enforce fair housing by claiming to be home seekers, thereby finding out if brokers deal fairly with all clients or customers.
Third Party Pool Insurance
Protects investors from any losses on the mortgage loans. The bond insurer, paid an annual fee by the issuer, will absorb the losses. The CMBS is usually never rated higher than the credit rating of the third-party issuer. A form of credit enhancement.
Agreement between a party selling a product or service with a purchaser that as a condition of the sale, the purchaser will buy another product from the seller or the purchaser will not buy a product or use a service of another.
“Time is of the essence”
Means that performance by one party within the period specified in the contract is essential to require performance by the other party.
Ownership that involves the acquisition of a specific period of time or percentage of interest in a vacation home or resort.
Ownership in vacation area residential property for an assigned period, usually two weeks. Also called interval ownership.
Time value of money
The determination of which particular investment would bring the greatest return on dollars invested for a given period of time.
The legal document conferring ownership of a piece of real estate.
The consummation of a real estate contract; a meeting in which the buyer, seller, and closing agent meet to execute documents and disburse funds.
A firm that ensures that the property title is clear and provides title insurance.
An examination of the public record to determine that the seller is the legal owner and there are no encumbrances (such as claims or liens) affecting the property.
A policy issued by a title company after searching the title and which insures against loss resulting from defects of title to a specifically described parcel of real property, or from the enforcement of liens existing against it at the time the title policy is issued.
Title insurance binder
A title insurance company's written commitment to insure title to the property subject to the conditions and exclusions shown on the binder.
Possible impediments to the transfer of a title from one owner to another.
The process of reviewing all recorded transactions in the public record to determine whether any title defects exist that could interfere with the clear transfer of ownership of the property.
A disinterested third party holds legal title to a property in security for the loan through a deed of trust; not used in New York.
Title transfer tax
A tax imposed on the conveyance of title to real property by deed.
The physical features and contours of land.
A system of title recordation.
Wrongful act that is committed either intentionally or unintentionally.
Total expense ratio
The percentage of monthly debt obligations relative to gross monthly income.
The total amount of square footage of a type of property (i.e. office, industrial, retail, etc.) within a geographical area, whether vacant or occupied. This normally includes owner-occupied space.
Total lender fees
Fees required by the lender to obtain the loan, apart from other fees associated with transferring a property between buyer and seller.
Total loan amount
The base loan amount plus any financed closing costs.
Total monthly housing costs
The sum of principal, interest, property taxes and, if applicable, private mortgage insurance (PMI) and either hazard insurance or homeowners' association dues.
Total of all payments
The total cost of the loan including repayment of the principal amount and the sum of monthly interest payments.
An attached home that is not a condominium.
Top-Down Approach to Investing
An investment strategy in which an investor first looks at large-scale trends in the general economy, then selects those industries and companies that are likely to benefit from those trends. For example, an investor who thinks that the general economic environment is favorable for real estate might further examine which specific real estate financial vehicles are most appropriate, then review and assess specific transactions that meet investor requirements. Also see Bottom-Up Approach to Investing.
see Tax Reform Act, 1986.
An online computer system being developed by HUD to help administer subsidized housing.
An area of land.
Personal property that is attached to a structure (i.e. the walls of the leased premises) that are used in the business. Since this property is part of the business and not deemed to be part of the real estate, it is typically removable upon lease termination.
A sole proprietorship that does business under an assumed name.
Buying a home that is less expensive than the one's current house.
Buying a home that is more expensive than one's current house.
A term applied to describe the discretely-rated classes of CMBS securities, e.g., the triple-A tranche. Each class or tranche is typically paid a coupon stipulated at the time of issue and principal based on a predetermined payment sequence. Typically, lower-rated tranches have higher coupons and longer lives, since they receive interest payments (the coupon) but no principal payments until the higher-rated tranches have been retired or paid off.
The ability to transfer property ownership from seller to buyer.
Transfer of development rights
A developer can buy the development rights to another property, such as a historic property, that cannot use them.
Trans Union Corporation
One of the major credit reporting bureaus.
An assessment by state or local authorities at the time a piece of property changes hands.
An index used to determine interest rate changes for adjustable rate mortgages.
Unlawful entry on the land of another.
see NNN Lease.
Triple net (NNN) rent
A lease in which the tenant pays, in addition to rent, certain costs associated with a leased property, which may include property taxes, insurance premiums, repairs, utilities, and maintenances. There are also “Net Leases" and “NN” (double net) leases, depending upon the degree to which the tenant is responsible for operating costs. See also “Gross Lease”.
A three-unit apartment building.
A legal relationship under which title to property is transferred to a person known as trustee.
A cooperative in which legal ownership of a building is held by a trust company.
One who holds title to property for the benefit of another called a beneficiary. The trustee for a CMBS holds the mortgage collateral documents, issues the certificates of beneficial ownership (the securities), passes all funds from the master servicer to the bondholders, and distributes statements on distributions and the status of the collateral. Acts as a supervisor to the master servicer and special servicer. Ensures that the servicers act in accordance with the pooling and servicing agreement. If there is a violation of the agreement, the trustee has the right to assume the authority of or appoint a new servicer. The trustee represents the trust that holds the legal title to the collateral for the benefit of all class holders of the security. Trustees must carry out their duties according to the indentures established within the trust indenture. Some trustees actually collect the proceeds from the master servicer and distribute them to the security holders while other trustees subcontract the distribution to "paying agents." Such a subcontract does not release the trustee from the legal obligation to protect the interests of the security holders. There are also bankruptcy trustees and trustee for deed of trust.
One who conveys title to a trustee.
Trusts and wills
Laws which address the succession to the ownership of an estate by inheritance or any act of law.
Truth-in-Lending Simplification and Reform Act (TILSRA)
See Regulation Z.
Turn key project
The construction of a project in which a third party, usually a developer or general contractor, is responsible for the total completion of a building (including construction and interior design) or, the construction of tenant improvements to the customized requirements and specifications of a future owner or tenant.
An adjustable mortgage with two interest rates: one for the first five or seven years of the loan, and the other for the remainder of the loan term.
Up-Front Due Diligence
The due diligence completed on individual loans and properties that are expected to be packaged for securitization.
U.S. Department of Housing and Urban Development
Also known as HUD. This federal agency oversees the Federal Housing Administration and a variety of housing and community development programs.
When construction has started but the Certificate of Occupancy has not yet been issued.
A property for which the seller has accepted the buyer’s offer to purchase is referred to as being “under contract”. Generally, the prospective buyer is given a certain period of time in which to perform its due diligence and finalize financing arrangements. During the period of time the property is under contract, the seller is precluded from entertaining offers from other buyers.
Underground storage tanks (USTs)
One or more combination of tanks, including the piping, used to contain an accumulation of regulated substances, and which is 10 percent or more underground. If a tenant's tanks leak petroleum products or hazardous or toxic materials, the landlord may be all or in part responsible for the cleanup.
A code-approved knot tied at the end of an electrical cord to prevent the wires from being pulled away from their connection to electrical terminals.
Use of land that is not its highest and best use and therefore does not generate the maximum income.
The act of reviewing loan documentation and evaluating a borrower's ability and willingness to repay the loan and sufficiency of the collateral value of the property.
A fee charged by mortgage lenders to verify information on the loan application and make a final decision about whether or not to approve the loan.
A principal whose identity may not be disclosed by an agent.
Ownership of fractional parts not physically divided.
Any improper or wrongful influence by one party over another whereby the will of a person is overpowered so that he or she is induced to act or prevented from acting according to free will.
Describes title to property that is free of liens and any other encumbrances. Free and clear. See also "Encumbrances.
One that appears to meet the requirements for validity but would not be enforceable in court.
Uniform Commercial Code (UCC)
A standardized and comprehensive set of commercial laws regulating security interests in personal property.
Uniform Irrevocable Consent and Designation Form
A document that allows a summons to be served upon out-of-state residents in New York.
Uniform Residential Landlord and Tenant Act
A model law drafted in 1972 by the National Conference of Commissioners on Uniform State Laws. It serves as a model statute for standardization and regulation of the residential landlord-tenant relationship.
An agreement in which there is a promise in return for a specific action, which together supply the consideration.
Most commonly refers to land without improvements or buildings but can also mean land in its natural state. See also, “Raw Land"
Conventional loan. One in which the loan payment is not insured to protect the lender.
An innocent false statement of a material fact.
Unities of title
Time, title, interest, and possession.
Technique used in appraising real estate under the cost approach, in which the cost of replacement or reproduction is grouped by stages of construction.
Agent who has complete authority over any activity of principal; for example, power of attorney.
A deed that transfers ownership from one party to another without being officially recorded.
One who has not filed a financing statement or who does not possess a written security agreement as security for extending credit to a debtor.
Renovation, rehabilitation and redevelopment of substandard urban residential properties.
Urea formaldehyde foam insulation (UFFI)
A type of foam containing formaldehyde, a gaseous compound that can cause illness, which was widely used for home insulating.
Floor area of an office building that can be used for tenant office space.
Usable Square Footage
Usable Square Footage is the area contained within the demising walls of the tenant space. Total Usable Square Footage equals the Net Square Footage x the Circulation Factor. Also see: Circulation Factor and Net Square Footage.
The period of time that a property is expected to be economically useful.
Permission to use the land for a purpose that under the current zoning restrictions is prohibited.
Charging a rate of interest higher than the rate allowed by law. (25-26%)
Capable of serving a useful purpose.
VA (Veterans Administration)
The Veterans Administration assists veterans with purchasing a home without a down payment.
The amount of gross revenue that pro forma income statements anticipate will be lost because of vacancies, often expressed as a percentage of the total rentable square footage available in a building or project.
A projected rate of the percentage of rental units that will be vacant in a given year.
Unimproved land, which could include land brought back to its natural state or land that does not possess improvements necessary to serve some kind of purpose.
Refers to existing tenant space currently being marketed for lease. This excludes space available for sublease.
A mortgage loan in which the loan payment is guaranteed to the lender by the Department of Veteran Affairs.
An agreement that is legally binding and enforceable.
A loan through the Veterans Administration program, which allows most veterans to purchase a house without a down payment.
Anything of value agreed upon by parties to a contract.
Establishes an opinion of value utilizing an objective approach based on facts related to the property, such as age, square footage, location, and cost to replace. (Appraisal - CMA )
Unless otherwise specified, the value of a mortgaged property is its fair market value determined in an appraisal obtained by the originator when the loan is first made. There are, however, other concepts of "value," including derived investment value (DIV) and investment value.
Value in exchange
The amount of money a property may command for its exchange; market value.
Value in use
The present worth of the future benefits of ownership; a subjective value that is not market value.
Variable costs ratio
A method of expressing variable costs for a property as a percentage of total rental income:
Variable costs ratio = actual annual variable costs / (gross collectible income x 100%)
An expense item in a property's operating budget that increases or decreases with the occupancy level of the building.
Variable rate mortgage (VRM)
A mortgage with an interest rate that changes with fluctuations in such indexes as the prime rate, libor rate, or treasury bill.
Variable scale percentage lease
A type of percentage lease in which the percentage rental rate increases or decreases according to the volume of business done by the tenant.
Refers to permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship. Included would be such things as the particular physical surroundings, shape or topographical condition of the property and when compliance would result in a practical difficulty and would deprive the owner of the reasonable use of the property.
Document signed under oath by the vendor stating that the vendor has not encumbered title to real estate without full disclosure to vendee.
Verification of deposit (VOD)
As part of the loan process a lender may ask a borrower's bank to sign a statement verifying the borrower's account balances and history.
Verification of employment (VOE)
As part of the loan process a lender may ask the borrower's employer for confirmation of the borrower's position and salary.
Choices buyers have in how to acquire property.
A person is responsible for the actions of another.
An agreement that may be voided by the parties without legal consequences.
An agreement that has no legal force or effect.
The electrical pressure that pushes through the wires.
See bulk purchasing.
The transfer of title freely by the owner.
A type of lien in which an individual consents to placing a security against himself or his property.
Prepayments made by the borrower to reduce or payoff the outstanding principal. Most occurrences are due to borrower refinancing at lower interest rates.
A closing cost fee representing the lender's cost of holding a borrower's loan temporarily before it is sold on the secondary mortgage market.
Warranty of Possession
This is the old "quiet enjoyment" paragraph, which of course had nothing to do with noise in and around the leased premises. It provides a warranty by Landlord that it has the legal ability to convey the possession of the premises to Tenant; the Landlord does not warrant that he owns the land. This is the essence of the landlord’s agreement and the tenant’s obligation to pay rent. This means that if the landlord breaches this warranty, it constitutes an actual or constructive eviction.
Water & Sprinkler
This is usually a set monthly charge depending on the size of the space you are taking and can run $20.00 to $100.00 per month for each.
A measurement of amperage calculated for different electrical usage; also calculated in kilowatts.
Weighted Average Rental Rates
The mean proportion or medial sum made out of the unequal rental rates in two or more buildings within a market area.
Federal- and state-protected transition areas between uplands and aquatic habitats that provide flood and storm water control, surface and ground-water protection, erosion control, and pollution treatment.
Words of conveyance
Wording in a deed demonstrating the definite intention to convey a specific title to real property to a named grantee.
Worker's compensation insurance
Laws that require an employer to obtain insurance coverage to protect his or her employees who are injured in the course of their employment.
Work order bids
Work estimates filed according to the property involved providing important comparison data when considering future projects.
The set of plans for a building or project that comprise the contract documents that indicate the precise manner in which a project is to be built. This set of plans includes a set of specifications for the building or project.
A list of the building standard items that the landlord will contribute as part of the tenant improvements. Examples of the building standard items typically identified include: style and type of doors, lineal feet of partitions, type and quantity of lights, quality of floor coverings, number of telephone and electrical outlets, etc. The Workletter often carries a dollar value but is contrasted with a fixed dollar tenant improvement allowance that can be used at the tenant’s discretion. See also Leasehold Improvements and "Tenant Improvements.
A loan given to a buyer for the remaining balance on a seller's first mortgage and an additional amount requested by the seller. Payments on both amounts are made to the lender who holds the wraparound loan.
Writ of attachment
Court order preventing any transfer of attached property during litigation.
The return on an investment.
A prepayment premium that allows investors to attain the same yield as if the borrower had made all scheduled mortgage payments until maturity. Yield maintenance premiums are designed to make investors indifferent to prepayments and to make refinancing unattractive and uneconomical to borrowers. Also see Defeasance.
The difference in yield between a security and a benchmark, typically
U.S. Treasuries of the same maturity.
Yield to Average Life
Calculation used in lieu of yield to maturity or yield to call, predicated on the expected term of the bond class rather than its final maturity.
Yield to Maturity
Calculation of the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date. It takes into account purchase price, redemption value, time to maturity, coupon yield and the time between interest payments.
The division of a city or town into zones and the application of regulations having to do with the structural, architectural design and intended use of buildings within such designated zone (i.e. a tenant needing manufacturing space would look for a building located within an area zoned for manufacturing).
Zoning board of appeals
A local appointed board that has the power to review administrative rulings made by the planning board or other legislative body.
A map that divides the community into various designated districts.
A statement setting forth the type of use permitted under each zoning classification and specific requirements for compliance.