Glossary

 

GLOSSARY OF REAL PROPERTY TERMS

 

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Abstract of title: A recitation of the cardinal aspects of instruments affecting title to a parcel of land including conveyances, interests, liens, and encumbrances.

Abstracter: Person or company engaged in making abstracts.

Abstracting: Process of making and compiling an abstract.

Acre-foot (AF): The volume of water required to cover one acre to a depth of one foot (equal to 325,851 gallons).

Active Storage:The water volume in a reservoir stored for irrigation, water supply, power generation, flood control, or other purposes but does not include flood surcharge.  Active storage is the total reservoir capacity in acre-feet, less the inactive and dead storage.

Adjudication: A process generally delineated along watershed or basin lines that examines the validity of all water rights and claims, and certifies valid claims in a state court. Process: When an adjudication of a particular source is commenced, IDWR is required to notify the water users of the commencement of the adjudication, and notify the water users that they are required to file notices of claims for their water rights with IDWR. IDWR then investigates the notices of claims and prepares a report that is filed with the court. Claimants of water rights are notified of the filing of the report, and objections to the report may be filed with the court by anyone who disagrees with the findings in the report. If no objection is filed to a water right described in the report, then the court decrees the water right as described in the report. If an objection is filed to a water right described in the report, then the court determines the water right after a hearing and decrees the water right.

Adjudicated water right: A water right for which the defining parameters required by law have been determined and decreed by a court of law.

Add-on factor: The ratio of rentable to usable square feet;  also known as the “load factor” and the “rentable-to-useable ratio.”

Additional rent: Commonly required for commercial space and may include taxes, insurance, cost of maintenance or repair, and other charges. Types of additional rent are net, triple net, or semi-gross, depending on what additional charges the tenant is required to pay (see terms below)

Adverse Possession: The unauthorized occupation of land belonging to another, by a person who does not have the consent of the owner. Said occupier is said to hold possession adverse to the rights and interests of the owner. In most states, by operation of law, title to land is vested in such occupier after a fixed number of years of peaceful occupancy.

Aeration: A process by which water becomes charged with air directly from the atmosphere.  Dissolved gases, such as oxygen, are then available for reactions in water.

Airspace rights: The right to use all or a portion of the airspace above all real property. Air space is the space that extends upward from the surface of land into the navigable airspace.

All-inclusive rate: When referring to title insurance, the rate that includes at least some of the cost of researching the title or the cost of conducting the closing.

Allocation: The process of legally encumbering specific amounts of the water resource for application to specific beneficial uses.

Alluvial Plain: A plain resulting from the depositing of alluvium by water.  In the southwestern United States most alluvial plains are formed by streams having a considerable grade, and hence are generally referred to as alluvial slopes.

Alluvium: Soil material, such as sand, silt, or clay that has been deposited by natural processes in river channels, floodplains, and fans at the foot of mountain slopes.

Alteration: A term usually used in reference to Idaho Code Title 42, Chapter 38, the Stream Protection Act.  An alteration is any human-directed activity that obstructs, diminishes, destroys, alters, modifies, relocates, or changes the natural existing shape of the stream channel within or below the mean high water mark.  It includes removal of material from the stream channel and emplacement of material or structures in or across the stream channel where the material or structure has the potential to affect flow in the channel as determined by the director of the Idaho Department of Water Resources.  Generally, any activity using mechanized equipment that moves or overturns gravel or earth in a stream.

Amendment: A change in point of diversion, place of use, period of use, nature of use or other substantial change in the method of diversion or use of a permitted water right.(See IDAPA 37.03.02.)

American Land Title Association (ALTA): The national trade association for the title insurance industry; ALTA is made up of title firms that conduct closings and issue title insurance.   Amortization: The paying off of an existing debt, usually a mortgage, by regular partial payments. The yearly interest percentage of a loan as expressed by the actual rate of interest paid.

Annual debt service: The total annual amount of principal and interest required to satisfy the obligations of a loan contract.

Annual Sustained Yield: A term typically used in forestry meaning that the yield harvested in a given year is equivalent to the replacement during that same time period.

Annular Space: The space between two concentric cylindrical objects, one of which surrounds the other, such as the space between the walls of a drilled hole (well bore) and a casing or between a temporary surface casing and a permanent casing.

Applicability clause provision: Provides that all terms of the original lease apply to a renewal of the lease.

Appraisal: An estimate of value of property from analysis of facts about the property; an opinion of value.

Appropriate or appropriation: To obtain the right to divert and use the public waters of the State of Idaho.

Appropriation Doctrine: The system of water law adopted by most Western States. The basic principles of the appropriation doctrine are: 1) that a private right to use water can be acquired only by diverting the water and applying it to a beneficial use; 2) the first in time of beneficial use is the first in right and the right is maintained only by use.

Arbitration provision: A form of dispute resolution performed outside the courts; dispute is heard and decided by an impartial decision-maker whom the parties agreed can issue a binding decision.

Aquicide: Relatively impermeable stratum that does not transmit water fast enough to supply a well or spring.

Aquifer: Any body of porous saturated material, such as rock, sand, gravel, etc., capable of transmitting ground water and yielding economically significant quantities of water to wells and springs.

Aquitard: An underground, saturated zone of low permeable rock, sand, or gravel that separates aquifer zones and will not provide significant quantities of water to a well or spring.

Arbitration provision: A provision sometimes included when parties believe arbitration will require less time and expense to resolve issues that otherwise would be litigated.

Area-Wide Optimization Program (AWOP): An effort to improve performance of facilities that treat surface water to provide drinking water by optimizing technologies already in place. AWOP emphasizes particle removal and disinfection.

Artesian well: An artesian well is a well that penetrates a confined aquifer. The water level in these wells rises above the upper surface of the aquifer due to the pressure in the confined aquifer.  If the water pressure is great enough, the well will overflow.

Assignment and sublease: A lease provision allowing a tenant the flexibility to assign or sublease the rented space. The difference between an assignment and sublease is that the assignment conveys all of the rights, duties, and obligations of the original lease, and a sublease conveys an interest that is less than the total interest.

Assignment of contract: When one party (the “assignor”) assigns his or her rights under a contract to a third party (the “assignee”).

Attainable Use: A beneficial use that, with improvement, a water body could support in the future.

Attorney’s opinion: An attorney’s written statement setting forth what he or she believes to be the legal condition of a parcel’s title.

Authority clause: Statement from both parties that each has the authority to execute the lease for the organizations they represent. It bars the party from later claiming the person that signed the lease had no authority to bind the organization to the terms of the lease.

Average annual effective rent: The tenant’s total effective rent divided by the lease term.

 

Base rate: A quoted dollar amount representing the rent in dollars per square foot per year.

Base rent: The minimum rent due to the landlord commonly charged on a square foot per year basis divided into monthly payments; quoted contract amount of periodic rent. The annual rate is the amount upon which rent increases are calculated.

Basic rate: With title insurance, the rate charged to a consumer who does not qualify for a reduced rate.

Basis of Claim: The method used to establish a water rights claim. Examples include prior decree, posted notice, beneficial use (historical) method, license, and permit.

Beneficiary: In a deed of trust, the beneficiary is the party lending the money and being protected with the security interest.

Bill of Sale: An instrument for conveying title to personal property, absolutely or by way of security.

Beneficial Use: The uses of water that are deemed by law to provide legitimate bases for a water right. The state may assign or designate beneficial uses for particular Idaho water bodies to support. The Idaho legislature designates uses for water bodies. Pursuant to Rules of the Department of Environmental Quality (DEQ), IDAPA 58.01.02.003(8), “Water Quality Standards and Wastewater Treatment Requirements,” a beneficial use includes any of the various uses which may be made of the water of Idaho, including, but not limited to, domestic water supplies, industrial water supplies, agricultural water supplies, navigation, recreation in and on the water, wildlife habitat, and aesthetics.

Beneficial Use Reconnaissance Program (BURP): A program for conducting systematic biological and physical habitat surveys of water bodies in Idaho. BURP protocols address lakes, reservoirs, and small (wadeable) streams and rivers.

Board: Idaho Water Resources Board (IWRB).

Board’s Water Supply Bank: The water exchange market operated directly by the Board to facilitate marketing of water rights.(See IDAPA 37.02.03.)

Bonneville Power Administration (BPA): A federal agency under the U.S. Department of Energy that serves the Pacific Northwest by operating an extensive electricity transmission system and marketing wholesale electrical power at cost from federal dams, one non-federal nuclear plant, and other non-federal hydroelectric and wind energy generation facilities. See www.bpa.gov

Breach of contract: Failure of a party to a contract to perform a duty under the contract without sufficient legal excuse.

Broker: One who acts as an agent for another in negotiating sales or purchases in return for a fee or commission.

Brokerage: A fee or commission paid to a broker.

Building permits: A license granted by a government agency (especially a municipality) for the construction of a new building or the substantial alteration of an existing structure.

Bureau of Land Management (BLM): An agency within the U.S. Department of the Interior that administers 261 million surface acres of America’s public lands, which are located primarily in 12 western states.

 

Capital expense: Expense made that provides a long-term or permanent benefit, such a large machinery or roofing.

Capitalization rate: Commonly referred to Cap Rate, the percentage relating market value of an income-producing property to its future income, calculated as net operating income divided by purchase price.

Captions provision: Provides that the section titles of a lease shall not be used to interpret or give meaning to an agreement. The captions merely help the parties locate terms within the lease.

Casualty provision: Details the responsibilities and rights of the parties to a contract in the event the leased premises is damaged or destroyed.

Certificate of title: In areas where attorneys examine abstracts or chains of title, an attorney’s written opinion that title is vested as stated in the abstract.

Certified Water Right Examiner: An employee of the Department, or a representative of the permit holder who is a professional engineer or professional geologist, qualified and registered in the State of Idaho who has the knowledge and experience necessary to satisfactorily complete water right field examinations as determined by the Director, and who has been appointed by the IWDR Director as a certified water right examiner. A certified water right examiner is commonly termed a field examiner, water right examiner, or examiner.(See IDAPA 37.03.02.)

Chain of title: The ownership history of a parcel from its first owner to the present one.

Claim: A right to assert, or the assertion of, a demand for payment of money due; or the surrender or delivery of possession of property or the recognition or some right. A demand for something as one’s rightful due.

Clean Water Act (CWA): The Federal Water Pollution Control Act, as last reauthorized by the Water Quality Act of 1987. It establishes a process for states to use to develop information on, and control the quality of, the nation’s water resources.

Closing (also known as settlement): The process of completing a real estate transaction during which deeds, mortgages, leases, and other required instruments are signed and/or delivered; where an accounting between the parties is made, money is disbursed, papers are recorded; and any and all other details of completing the transaction occur, such as payment of outstanding liens and transfer of hazard insurance policies.

Closed Conduit Flowmeters: Devices that measure water flow through closed conduits or pipes. Standard types used in Idaho include: 1) differential head, 2) force velocity, 3) ultrasonic, 4) vortex, and 5) electro-magnetic.

Closing statement: A summation, in the form of a balance sheet, made at a closing, showing the amounts of debits and credits to each party to a real estate transaction is entitled.

Cloud on title: An irregularity in the public documents record that might represent a claim or encumbrance which, if valid, would adversely affect or impair title.

Commercial Business: Non-manufacturing business, such as retail and distribution.

Commercial property: Real estate used for business activities such as office buildings, shopping centers, hotels, etc.

Commercial water use: Water used for motels, hotels, restaurants, office buildings, other commercial facilities, and institutions. The water may be obtained from a public supply or may be self supplied.

Common area: For lease purposes, refers to the areas of a building (and its physical site) that are available for the non-exclusive use of all its tenants, such as lobbies, corridors, and parking lots.

Common area maintenance: Charges paid by the tenant for the upkeep of areas designated for use and benefit of all tenants, common in shopping centers.

Conditions: Provisions in deeds and other real estate instruments which makes contingent a particular right upon occurrence of a future event.

Conjunctive Administration: When two or more water sources are to be administered as a single water system, diversion pursuant to a junior rights from one water source shall be regulated as provided by these rules to provide water to senior rights from the other water source.

Consent of landlord: Provides that the landlord must consent to a reasonable request by a tenant. If the landlord withholds consent unreasonably, tenant may seek an injunction but not damages.

Conservation restrictions: A covenant binding a parcel of land in ways that preserve a native plant or animal, a natural or physical feature of the land, or some aspect of the land that has historic, cultural, or scientific significance. The easement is a recorded, perpetual, individually tailored agreement creating a nonpossessory interest in real property, the interest being held by a government entity or by a qualified nonprofit.

Contract: Same as “agreement,” but usually more formal.

Contract of sale: Memorializes the parties’ understanding of their agreement and provides a due diligence period during which the buyer shall confirm his or her perceptions about a property. At a minimum, a contract describes the property, names of buyer and seller, purchase price, manner of payment, and time and place of closing.

Corporate ownership: Distinct legal entity separate from its shareholders with a perpetual life; can hold property in its name; provides its shareholders with limited liability (i.e., limited to their investment in the corporation), so long as the shareholders do not commingle corporate and personal funds and continue to treat the corporation as a distinct legal entity. Primary downside is double taxation meaning that corporate income is taxed at the corporate level and at the individual shareholder level.

Covenant: A formal agreement or contract between two parties where one gives the other certain promises and assurances, such as covenants of warranty in a warranty deed.

Covenants, conditions, and restrictions (CCRs): Written documents describing the limits and requirements for the use of real property in subdivisions imposed by original developers and enforced by homeowners’ associations. Legally they are called equitable servitudes, because each parcel agrees to serve the others by obeying the limits and requirements for use, and equitable, because they are to be enforced fairly and equally against every homeowner.

Crop subsidies: Payments by federal government to producers of agricultural products for the purpose of stabilizing food prices, ensuring plentiful food production, guaranteeing farmers’ basic incomes, and generally strengthening the agricultural segment of the national economy.
Deed: A written instrument by which real property is conveyed from a grantor owner to a grantee purchaser or donee, and which includes a Notary Public seal statement confirming the identity of the signing grantor, so that the instrument can be filed in the public record.

Cumulative effects:The combined environmental or social impacts that accrue over time and space from a series of similar or related individual actions, contaminants, or projects. Although each action may seem to have a negligible impact, the combined effects can be severe.

 

Decree: A Written decision by a court of law. Water right disputes are sometimes taken to court for resolution – the resultant description of the water rights in question are known as “decreed” water rights.

Deed book: A book among the public records in which deeds are recorded.

Deed restrictions: Deed restrictions are terms of a private agreement, contained in the language of the deed, that restrict the use of real property.

Deed of trust: Written instrument creating a lien on real property; means by which title to real property is held as security for the repayment of a debt. In the case of a mortgage, buyer borrows money from a lender (beneficiary). Loan is documented with a promissory note and secured by a mortgage or other security interest from a grantor (the trustor). In states that recognize deeds of trust, title to the property is conveyed to a third party (the trustee), who holds the property for the benefit of the lender. The trust document states that if the obligation is satisfied, the property will be reconveyed to the borrower. If the borrower defaults, the trustee must sell the property and use the proceeds to pay the lender.

Default: Failure to perform an essential obligation of the lease, or a violation of a restrictive covenant, upon which either the tenant or landlord can terminate the agreement.

Defect: An imperfection or deficiency; A defective title is one that is irregular and faulty.

Delegation: The act of entrusting another with authority or empowering another to act as an agent or representative. (Black’s Law Dictionary 519 10th ed. 2014).

Delivery Call: A request from the holder of a water right for administration of water rights under the prior appropriation doctrine. Usually, a demand made by the holder of a senior-priority surface or ground water right against the holder of a junior-priority ground water right in an area having a common ground water supply.

Director: The Director of the Idaho Department of Water Resources (IDWR) or the director’s duly authorized designee.

Discount effective rent: Refers to cash flows over the term of the lease discounted to the present value.

Division of Environmental Quality (DEQ): An agency of the State of Idaho created by the Idaho Environmental Protection and Health Act to ensure clean air, water,and land in the state and protect Idaho citizens from the adverse health impacts of pollution.

Domestic Water Use: The use of water as described in Idaho Code 42-111. Domestic use can be for a home, livestock, and for any other purposes in connection with a home, including irrigation of up to one-half acre of land. Total use cannot exceed 13,000 gallons per day.

Drilling Permit: A drilling permit must be obtained from the Department of Water Resources before the construction, modification, or abandonment of any well greater than 18 feet in depth. The drilling permit authorized the construction or modification of a well, but does not authorize water diversion, use, or injection.

Dual based claims In some cases, the federal government has claimed one right under two theories: a state law basis and a federal law basis. Both theories will be reported on one form for that single water right. In most cases, the priority dates are different and will be listed separately. The federal law basis is separately indicated in a box.

Due diligence: Due diligence is the work performed by a buyer to understand all aspects of a real estate investment before committing to a buy decision, including a physical inspection, review of public record documents including mortgages, leases, third-party obligations, other encumbrances, and title conditions affecting the property.

Due diligence period: Time period after the execution of a purchase agreement during which buyer has the opportunity to examine the physical property and any written records in order to decide whether to purchase the property according to the terms of the purchase agreement.

 

Earnest Money: Down payment or a small part of the purchase price made by a purchaser as evidence of good faith.

Easement:A right to cross over; an interest in land owned by a person who does not hold fee simple title. The land benefiting from an easement is called the dominant estate; the land burdened by an easement is called the servient estate (Black’s Law Dictionary 622 10th ed. 2014).

Efficiency percentage: The ratio of usable area to rentable area on a property.

Egress: The right to a path or right-of-way allowing a person to leave from his own real estate.

Ejectment: (1) Eviction or dispossession; (2) A law suit to regain possession of real estate held by another.

Eminent domain: The right of a government to take privately owned property for public purposes under condemnation proceedings upon payment of its reasonable value.

Encroachment: Usually an improvement to real property that stretches over onto the land of another, such as a building or an overhanging tree, but in a more general sense it is an infringement of another’s right.

Encroachments and restrictions provisions: States the party responsible for handling a dispute concerning the property’s title, restrictions on the property, or encroachments.

Encumbrance: A claim, right, or lien, usually financial, upon the title to real estate held by the non-owner, usually securing a debt such as a lien or mortgage; any property right that is not an ownership interest.

Endorsement: Addition to or modification of a title insurance policy which expands or changes coverage of the policy, fulfilling specific requirements of the insured.

Endangered species: According to the Endangered Species Act of 1973 Sec. 3.(6), any species in danger of extinction throughout all or a significant portion of its range, other than a species of the Class Insecta determined by the Secretary to constitute a pest whose protection under the provisions of this Act would present an overwhelming and overriding risk to man.

Entire agreement clause: Provides that the written lease and its exhibits and riders alone are the full agreement of the parties. This bars a party from later arguing that a separate document or oral agreement not included in the lease was part of the agreement.

Entry by landlord: Allows the landlord to enter the premises after providing reasonable notice to the tenant.

Environmental inspection: Inspection of water sources, any building(s), and surrounding land for hazardous substances like asbestos, noxious or deadly chemicals, in order to conform to local law, rules, and regulations as well as federal and state laws requiring the owner to clean up the property regardless of how long that owner has owned the property, and regardless of whether the contamination occurred during the term of that owner’s ownership.

Equity lease: Type of joint venture arrangement in which an owner enters into a contract with a user who agrees to occupy a space and pay rent as a tenant while, at the same time, receiving a share of the ownership benefits such as periodic cash flow, interest and cost recovery deductions, and perhaps a share of the sales proceeds.

Escrow: Technically this term strictly refers to a deed delivered to a third person to be held by him until the fulfillment or performance of some act or condition by the grantee. In title industry parlance it means the depositing with an impartial third party called the escrow agent (usually the title company) of anything pertaining to a real estate transaction including money and documents of all kinds which are to be disbursed and delivered to the rightful parties by the escrow agent when all conditions of the transaction have been met.

Estate: (1) A sizable piece of rural land usually with a large house and other pretentious improvements; (2) The whole of one’s possessions, especially all of the property, assets, debts, and liabilities left by a deceased or bankrupt person; (3) The nature and extent of an owner’s rights in real estate.

Estoppel certificate: Report about the status of a lease provided to a lender stating that the lease is in good standing, the rents have been paid, and there is no default.

Estoppel letter: States the outstanding principal balance and interest accrued on the mortgage, the maturity date and interest rate on the loan, the date the next payment is due, and whether the mortgage is currently in default. Delivery of an estoppel letter bars a party from later claiming that the facts were different than as stated in the estoppel letter.

Examination: In title industry terms, to peruse and study the instruments in a chain of title and to determine their effect and condition in order to reach a conclusion as to the status of the title.

Examiner: In the title industry, the title examiner; One who examines and determines the condition and status of real estate titles.

Exceptions documents: Documents affecting a given parcel of real property that have been filed for public record at the Recorder’s Office (sometimes called the Auditor’s Office) of the county in which the property is located. Because they are a part of the public record affecting a given parcel, these documents are typically shown as exceptions to title insurance coverage in Schedule B-II of a standard title insurance policy, which means title insurance will not cover claims related to these documents. Examples of exceptions documents can include recorded easements, restrictive covenants, shared well agreements, and records of survey.

Exclusions to title insurance: Specific risks to title or use of real property that are entirely outside of the “Covered Risks” of a standard title insurance policy. Because they are outside of the “Covered Risks,” exclusions cannot be brought within the scope of title insurance coverage, even with the purchase of extended coverage.

Expense stop: Maximum amount to which a landlord will pay certain operating expenses. Amounts above the “stop” are the tenant’s responsibility.

 

Federal Energy Regulatory Commission (FERC): Established in 1977 with the primary responsibility of ensuring the nations consumers adequate energy supplies at just and reasonable rates and providing regulatory incentives for increased productivity, efficiency, and competition.

Fee simple: the highest degree of ownership which a person can have in real estate. An interest in real estate which gives the owner unqualified ownership and full power of disposition.

Financing: Occurs when a buyer gets monies from a seller or third party to purchase a property that is paid back over a specified period of time.

First mortgage: A mortgage having priority as a lien over any other mortgage or lien on the same property.

Fixed expenses: Costs that do not change with a building’s occupancy rate including property taxes, insurance, and some forms of building maintenance.

Fixed lease: Lease where the lessee pays a fixed rent for the duration of the lease.

Flipping: Purchase of a residential property with the intent to sell quickly at a higher price, warranted because labor or capital was invested to increase the market value of the property.

Flood zones (floodplain): Land subject to floodwaters because of its topography and proximity to a river or arroyo; especially land adjacent to a river that, when inundated,exceeds the channel’s capacity.

For Sale By Owner (FSBO): A real estate transaction where the seller of the property is selling without retaining a real estate broker.

Foreclosure: A legal proceeding for the collection of real estate mortgages and other types of liens on real estate, which results in cutting off the right to redeem the mortgaged property and usually involves a judicial sale of the property to pay the mortgage debt.

 

General partnership: Defined by the Uniform Partnership Act (UPA) as “an association of two or more persons to carry on as co-owners a business for profit.” A formal partnership agreement serves as evidence of a partnership’s existence, but the sharing of profits and losses, the joint ownership of capital and assets, and joint control and management of the business serves as evidence as well. Tax advantage to the use of a partnership to own real property is that taxable income and loss can be passed through to the partners without the double taxation of corporations.

General warranty: A warranty provision in a deed or mortgage or other real estate instrument containing all of the common law items of warranty. Also known as a full warranty.

Geothermal Resources Act: Idaho statute defining any ground water having a bottom-hole temperature of greater than 100 degrees Celsius as a “geothermal resource.” Geothermal resources are put into a classification separate from water resources or mineral resources, and permits separate from those resources must be obtained for their extraction and use.

Governing law clause: Provides which state’s law will govern a lease. Property laws are state-specific. The landlord, tenant, and property may all be based from in different states, so disputes may arise as to which state’s laws apply to a given dispute. Such disputes can be prevented with a governing law clause.

Good faith estimate: Estimate of closing costs the lender is required (under the federal real estate settlement procedures act) to give to the buyer within at least three days of applying for a mortgage loan. This is the lender’s estimate – it must be completely accurate regarding the lender’s own charges and is supposed to be reasonably close to the charges third-party providers such as title insurers/agents, attorneys, surveyors, etc., may change. You should check with those third-party providers, however, regarding how much they will charge if you have any questions or concerns prior to settlement.

Grantor: In a deed of trust, the borrower who gives the security interest. The grantor in a deed of trust is also known as a trustor.

Grazing permit: Grazing permits authorize grazing on public lands and specifies the terms and conditions under which permittees may make use of the land during the term of the permit.

Gross area: The entire floor area of a building or the total interior square footage of a floor.

Gross leasable area: The total floor area designed for tenant occupancy and exclusive use, including basements, mezzanines, and upper floors; the area on which a tenant pays rent; the area that produces income.

Gross lease: Tenant pays rent and landlord pays all operating expenses including  taxes, utilities, insurance, and repairs and maintenance from the rent.

Gross rent multiplier: Method investors use to determine market value; calculates the market value of a property by multiplying gross rents by a given factor.

Ground lease: Land improved by tenant while landlord collects a fixed rent; landlord does not pay for the improvements.

 

Hazard insurance: Real estate insurance protection against fire, some natural causes, vandalism, and other conditions specific to the policy. May add extended coverage for personal property.

Heir: A person who inherits or is entitled to real estate by provision of law or a will.

Holder of a water right: The legal or beneficial owner or user pursuant to lease or contract of a right to divert or to protect in place surface or ground water of the state fora beneficial use or purpose.

Hydropower Project: Any development which uses a flow of water as a source of electrical or mechanical power,or which regulates the flow of water for the purpose of generating electrical or mechanical power. A hydropower project development includes all powerhouses, dams, water conduits,transmission lines, water impediments,roads, and other appurtenant works and structures.

 

Idaho Department of Fish and Game (IDFG): A State agency run by a commission that is responsible for establishing regulations and other needed controls on fishing, hunting, trapping and management of wildlife in line with the state’s wildlife policy.

Idaho Department of Lands (IDL): Responsible for protection of the beds and banks of navigable streams and lakes. Lead agency in administer in the state’s surface, dredge, and placer mining laws.

Idaho Department of Parks and Recreation (IDPR): Participates in water quality policy by recommending appropriation of in-stream flows for recreational and aesthetic protection and commenting on proposals affecting the quality of Idaho’s water recreational facilities. IDPR also administers the land and water conservation fund that acquires recreational lands.

Idaho Water Resource Board (IWRB): Duties and authorities include comprehensive basin planning, protected rivers designations, minimum stream flow program, water project financing, water supply banks and water rentals.

Improved land: Land that has been developed with the addition of roads, utilities, or buildings.

Index lease: Lease where the rental amount adjusts proportionately to changes in a price index, usually the consumer price index.

Industrial property: Commercial property used for the purpose of production, manufacturing, or distribution.

Industrial water use: Water used for industrial purposes such as fabrication, processing, washing, and cooling, and includes such industries as steel, chemical and allied products, paper and allied products,mining, and petroleum refining. The water may be obtained from a public supply or maybe self supplied.

Ingress: Right or permission to enter; also the means or place of entry such as a right of way across adjoining land.

Installment sale agreement: Sale of property where seller receives at least one payment after the tax year in which the sale occurs. Seller is taxed based on the profit received in a particular tax year.

Insurance provision: Cites insurance required for a particular transaction, including amount and type. A party may be listed on the certificate of insurance, but not named in the policy itself. A certificate of insurance does not convey rights to the certificate holder. Thus, the actual insurance policy should always be reviewed to make sure it includes all parties meant to be insured.

Intestate: The state of dying without a legal will.

Invalidity provision: Allows the rest of the agreement to survive if part is found to be illegal; also, it may include terms that invalidate the entire lease if certain essential terms are found illegal.

 

Joint tenants: Two or more persons who hold title to real estate jointly with equal rights to share in its enjoyment during their respective lives with the provision that, upon the death of a joint tenant, his share in the property passes to the surviving tenants, and so on, until the full title is vested in the last survivor. A joint tenant can not legally sell or encumber his interest without the consent or joinder of all of the other joint tenants.

Joint venture: Limited business relationship between individuals or entities, usually treated as a partnership for tax purposes and subject to the partnership law of the state under whose laws it was formed. Unlike partnerships, joint ventures are usually limited to a single transaction and are for a limited duration. The joint venture allows the participants to maintain their separate identities as individuals or business entities while still getting the benefit of working together on a single enterprise. This occurs without risk to any participant that the activities of one of the joint venturers could result in liability to an uninvolved venturer, which makes it a better choice for a risk-averse investor.

Judgment: A court’s final determination of the rights and obligations of the parties in a case.

Junior priority rights: A water right priority date later in time than the priority date of other water rights being considered.

 

Land lease: Landowner is landlord and investor/developer is tenant for a fixed term (usually more than 50 years). Tenant constructs improvements subject to loss of property rights when the term expires.

Land sale-leaseback: Leasing and financing strategy where a property owner sells land to an investor, then leases it back using a ground lease. This strategy frees capital that otherwise would be frozen.

Landlord: The lessor or owner of the leased property.

Landlord has right to perform tenant’s obligations: The provision in a lease allowing the landlord to perform the tenant’s obligations, giving the landlord the ability to protect his interest when the tenant fails to perform his duty to do so. The landlord may then seek contribution from the tenant later after the problem has been solved.

Landlord tenant relationship provision: The definition of landlord tenant relationship is a provision that avoids the assumption that the two parties have entered into a partnership; this provision is essential when the landlord receives additional rent in the form of a percentage of sales.

Landlord-paid tenant improvements: The total outlay of necessary tenant improvements paid by the landlord netted against any contribution made by the tenant.

Lease: Contract that creates the relationship of landlord and tenant. It is a contractually binding agreement that grants a right to exclusive possession or use of property, usually in return for a periodic payment called rent.

Lease buyout: Process by which a landlord, tenant, or third party pays to extinguish the tenant’s remaining lease obligation and rights under his existing lease agreement.

Leased fee interest: Value to the owner of the rental payments plus the value of the property at the end of the lease term (reversionary interest).

Leased premises: Generally a written agreement signed by the parties, describing the area so it can be identified by both parties. If not the entire building or property contained in the legal description, an exhibit with a floorplan or site plan should be included to show exactly what part of the building or property is being leased, and what parts the tenant will have access to.

Leasehold estate: An interest in real property, the tenant gives rent innexchange for the right to occupy and use the property for the duration of the lease.

Leasehold financing: A method for the owner of a leasehold interest in real estate (i.e., subject to ground lease or other lease) to get monies out of a property or gain funding to improve the real estate.

Leasehold interest: The value to the tenant of the lease and is usually determined by calculating the present value of the difference between market rent and contract rent.

Leasing: Gaining the physical and economic use of a property for a specified period without committing to an ownership interest.

Leasing broker: Finds tenants for real property; usually paid a commission by the landlord based on a percentage of rent paid during the lease term.

Legal description of the property: Written description of the location and boundaries of the property. The description should include whatever right, title, and interests are being conveyed along with title to the property.

Lessee: The person renting or leasing the property; also known as tenant.

Lessor: The person who rents or leases a property to another; also known as landlord.

Letter of intent: Represents a preliminary understanding between the potential parties to a contract enables the parties to memorialize their understanding of the key points of a deal without the necessity of covering every point. The critical aspect of a letter of intent is that it is subject to the parties entering into a formal contract.

Lien: The liability of real estate as security for payment of a debt; such liability may be create by contract, such as a mortgage, or by operation of law, like a mechanics lien.

Limitations on lawsuits: Limits the time period during which a lawsuit may be brought under the lease. This is essentially a statute of limitations by private contract.

Limited liability company: Non-corporate entity that combines the advantages of a limited partnership and a corporation without the corresponding disadvantages. An LLC is a group of individuals with interests in property that provides each individual owner with limited liability and the ability to participate in the management of their commonly owned property. It places no restrictions on management, operation or finances, and avoids the double taxation of corporations.

Limited partnership: Association of two or more persons formed under the laws of any state, and having one or more general partners and one or more limited partners. A limited partner has no management authority and is not responsible for the debts of the partnership.

Lis pendens: Pending lawsuit; a lis pendens notice is legal notice to the world that a lawsuit is pending.

Loan policy A policy of title insurance issued by the mortgage lender insuring against the loss by defects in, liens agains, or unmarketability of title.

Load factor: Ratio of rentable area to useable area. The load factor is a gauge by which a user can evaluate different sites with comparable rents. It is also known as the add-on factor and the rentable-to-usable ratio.

Loan default: Occurs when a debt service payment is not made on time, or when the mortgagor or its tenants do not perform their obligations as described in the mortgage.

 

Marketable title: Title that a court of equity considers to be free of material defects and liens such that it forces the title’s acceptance by questioning purchaser; also known as a merchantable title.

Market value: Average between the highest price that a willing buyer would pay, and the lowest price a willing seller would accept.

McCarran Amendment: Waves the sovereign and immunity of the United States so as to allow state courts and agencies to adjudicate Federal water rights in proceedings that qualify as general stream adjudications. The waiver of immunity from suit has been interpreted by the courts to include claims against the United States as trustee of reserved water rights of Indian tribes and individual Indian allottees.

Mechanic’s lien: Lien on real estate, created by operation of law, which secures the payment of debts due to persons who perform labor or services or furnish materials incident to the construction of buildings and improvements on the real estate.

Merger clause, also known as entire agreement clause): Merges all of the negotiations leading up to the agreement into the final agreement and provides that the written agreement is the full agreement of the parties.

Metes and bounds: A method of describing land in which boundaries are defined by courses, directions, distances, and monuments.

Mineral easement: An easement that permits entrance to a property for the purpose of removing minerals.

Mineral rights: The right to search for, develop, and remove minerals from land or to receive a royalty based on the production of minerals.

Mortgage: Written instrument creating a lien on real property, or by which title to the real property is held as security for the repayment of a debt. The owner (the mortgagor) borrows money from a lender (the mortgagee), and the loan is documented with a promissory note and secured by a mortgage or other security interest. If the borrower does not repay the obligation, the lender can get title to the real property or sell the property at auction and reimburse itself for the loan proceeds, interest, and expenses.

Mortgage banker: Bank employee professional who seeks clients with pending real estate transactions and are in need of financing. Mortgage bankers review a property and the proposed deal to advise on the terms of financing the property owner will likely qualify for.

Mortgage broker: Independent professional who seeks financing for a real estate transaction from seeks the best price and terms in a competitive market from a network of lenders.

Municipal water use: Water for residential, commercial, or industrial use: for irrigation of parks and open spaces: or for related purposes.

 

Net lease, also known as triple net lease): A commercial lease where the landlord is responsible for debt service only and the tenant pays all operating expenses like taxes, water, sewer, insurance, repairs and maintenance, and the landlord’s operational expenses including CPA and attorney’s fees. Rent is lower with a net lease but the landlord risks nothing while the tenant is responsible for all expenses, including extraordinary expenses.

No-merger provision: Prevents the lease from collapsing if one entity acquires both the landlord’s and the tenant’s companies.

No negative inference against the drafter clause: Provides that the drafter will not lose an argument about the meaning of the contract simply because he was the drafter of the agreement. This provision puts the parties on equal footing if the contract must be interpreted by a court.

No other waivers or modifications provision: Provides that if a landlord waives or excuses the tenant from performing an obligation once, the landlord does not waive the obligation in the future. This provision allows the landlord to allow the tenant to cure a default, without waiving the landlord’s right to enforce the lease in the future.

Not fully supporting: Not in compliance with water quality standards or not within the range of biological reference conditions for a beneficial uses determined through the Water Body Assessment Guidance.

Notice provision: Instructions for how each party must give and receive notice. This assures that notice will not be intentionally sent in a manner that will be overlooked, and bars a party from later arguing that they did not receive notice.

 

Operating expenses: Cash outlays necessary to operate and maintain a property. Examples include; taxes, property insurance, property management and maintenance expenses, utilities, and legal or accounting expenses. Operating expenses do not include capital expenditures, debt payments, or cost recovery.

Operating expense stop: Negotiable amount at which the owner’s contribution to operating expenses stops.

Operation of properties prior to closing: Provision governing the seller’s operation of the properties before closing; commitment to not take any action that will adversely affect the property, tenants, or mortgagee of the property.

Opinion, also known as a title opinion:The conclusion and judgement of a skilled person as to the status of a title, based upon a title examination.

Option agreement: Agreement whereby a buyer gets the right, but not the obligation, to buy a piece of property. An option allows the buyer a period of time during which he controls, but does not own and has no obligation or liability for, the property to determine whether he will actually purchase the property.

Overage rent: Additional rent (over a base amount) that is paid by tenant to owner on tenant’s sales over a specified dollar amount; frequently found in retail leases. Also known as percentage rent.

Owner’s policy: Policy of title insurance usually insuring an owner of real estate against loss occasioned by defects in, liens against, or unmarketability of, the owner’s title.

Ownership of leased premises: Statement that tenant has no interest in the property other than the right to possession, and that no ownership right has been conveyed. This protects a landlord who is also the owner if the tenant later argues that he holds an ownership interest in the property.

 

Parol evidence clause: Statement that the executed contract supersedes all prior agreements and understandings between the parties; the contract itself should be the final source of all information regarding the terms of the transaction and the parties should not be able to use other documents, correspondence, or notes of discussions to interpret the terms of the contract.

Percentage lease: Lease in which the rent amount is based on a percentage of gross sales made by the tenant.

Percentage rent: Additional rent (over a base amount) that is paid by tenants to owners on the tenant’s sales over a specified dollar amount, frequently found in retail leases. Also known as overage rent.

Permit or Water Right Permit: The water right document issued by the Director authorizing the construction of diversion facilities and commencement of use of unappropriated public water of the state.

Personal property: Property that is movable, in contrast to land and buildings. A contract for real property should describe the furniture, fixtures, and items of personal property included in the sale. Although fixtures are typically included with the sale of the real property to which they are affixed, other items of personal property may not be included. By expressly stating the items included in the contract, the chance of an important piece of property being included for sale is eliminated. In the case of large commercial properties, the personal property can range from tractors and snow removal equipment to stoves, refrigerators, and dishwashers in apartments.

Plat: Map or plan of delineated or partitioned ground; especially a map describing a piece of land and its features, such as boundaries, lots, roads, and easements.

Power of attorney: Legal instrument authorizing one to act as another’s agent or attorney.

Preliminary title report: A report prepared prior to issuing a policy of title insurance that shows the ownership of a specific parcel of land, together with the liens and encumbrances on the parcel that will not be covered under a title insurance policy.

Premium: (1) the amount payable for an insurance policy; (2) a sum of money or bonus paid in addition to the regular price.

Probate: Legal procedure where the validity and probity of a document, such as a will, is proven.

Promissory note: A mortgage or deed of trust loan is evidenced by a promissory note from the borrower to the lender. The promissory note contains a promise to repay the loan and specifies the maker (borrower), the payee (lender), and the payment terms, including the interest rate, maturity date, and the fact (if applicable) that the loan is repayable on demand. It also references that the promissory note is secured by the mortgage or deed of trust and describes the conditions that constitute a default.

Public record: Documents located in a recorder’s office, usually at the County level, of recorded instruments of public interest, including indexes pertaining to them.

Purchase money mortgages: Mortgage that secures the unpaid portion of the purchase price of a property owed by buyer to seller; seller acts as lender. Also known as purchase money financing.

Purchase price: Price paid for a parcel depends on many factors including the aggregate purchase price, mortgages being assumed, the amount of the deposit or earnest money, whether the deposit is held in escrow and, if so, the name of the escrow agent; any purchase money financing provided by seller; the amount of financing on the property to which the buyer is taking title; and the portion of the purchase price due at the closing. If the purchase price is not a specific amount but is based on a formula that depends on other factors, the formula and the variable must be specified to avoid any confusion. Likewise, the contract should specify if the purchase price is subject to adjustment.

Purpose of use: As to claims for small domestic and/or stock water uses: Domestic right means a right to the use of water for homes, organization camps, public campgrounds, livestock, and for any other purpose in connection with these uses, including irrigation of up to one-half acre of land. Stock water right means a right to the use of water solely for livestock or wildlife. Period of use means the period of time during the year when you can use the water for your right.

 

Quiet title suit: Lawsuit brought by an owner of real estate for the purpose of cancelling, wiping out, and putting a quietus upon supposedly immaterial, inconsequential, and unenforceable claims and interests which cloud his title.

Quit claim deed : a deed which does not imply that the grantor holds title, but which surrenders and gives to the grantee any possible interest or rights which the grantor may have in the property.

 

Real estate broker: Finds third party to buy, sell, lease, exchange, or lend against a piece of real property; may manage real estate agents.

Realtor: Copyrighted trade name that can be legally used only by persons belonging to the National Association of Realtors.

Reciprocal easement and operating agreement: Agreement where participants jointly develop a property, share the cost of operation, and limit each other in their use of the property.

Record of Survey: Map drafted by a licensed surveyor, giving an opinion of the boundaries or features of real property. In most states, surveys must be recorded if a boundary monument is set by the surveyor.

Record title: Aspects of a title appearing in the public records, as distinguished from unrecorded title aspects and interests.

Right of way: (1) the right to pass over property owned by another, usually based upon an easement. (2) a path or thoroughfare over which passage is made. (3) a strip of land over which facilities such as highways, railroads, or power lines are built.

Rent: Periodic payments made for the right to use and possess property owned by another.

Rent concession: A period of free or discounted rent given to tenant by lessor.

Rent escalators: Items specified in a lease such as base rent, operating expenses, and taxes that may increase by predetermined amounts at stated intervals or by a constant annual percentage.

Rentable-to-usable ratio: Rentable area divided by the useable area. Also known as the add-on factor or load factor.

Repair and maintenance provision: This provision differs depending on the type of lease: gross, net, or semi-gross. Gross. Landlord is responsible for repairs and maintenance. Net or Semi-Gross: There is a split between tenant and landlord regarding who is responsible for repairs and maintenance.

Requirement of law: Landlord is responsible to ensure the building is in compliance with the requirements of the law, even with a net or semi-gross lease. Altering the premises to comply with local, state, and federal laws is different than the repair and maintenance requirement for which a tenant is responsible under a net lease: the former is a modification because of a legal duty while the latter is to keep the premises functional.

Right of first refusal: Property owner agrees that, when he decides to sell, the holder of the right of first refusal must have the first opportunity to accept or reject the seller’s offer.

Right of way: 1) The right to pass over property owned by another, usually based on an easement; 2) A path or thoroughfare over which passage is made; 3) A strip of land over which facilities such as highways, railroads, or power lines are built.

Riparian rights: Rights of a person regarding the banks, bed, shallows, shore, and water of a stream or body of water upon which his or her land borders.

Risk rate: With title insurance, a rate that does not include the cost of researching the title or the cost of conducting the close.

Rolling option: A type of option where the optionee has the ability to extend the option by making additional option payments that may or may not be applied against the purchase price if the option is turned into an agreement of sale.

 

Sale-leaseback: A leasing and financing strategy in which a property owner sells its property to an investor, and then leases it back. This strategy frees capital that otherwise would be frozen in equity.

Sandwich lease: Lease where the original tenant (lessee) sublets all or part of the leasehold interest to another tenant (subtenant), while still retaining a leasehold interest in the property. It is known as a sandwich lease due to the sandwiching of the original lessee between the lessor and the subtenant. Also known as a sublease.

Search: In title industry terms, a careful exploration and perusal of the public records in an effort to find all recorded instruments relating to a particular chain of title.

Second mortgage: Mortgage ranking in priority immediately below a first mortgage.

Secured property: Lenders use this term as a shorthand method of describing “property subject to a security interest, ” i.e., collateral. Factually, it is the lender who is secured, and the property itself is the security. The collateral real or personal property acting as security for a lender’s loan can be sold if the debtor does not otherwise pay the loan pursuant to the terms of the promissory note.

Security deposits: Deposit of money made by the tenant to the landlord to be used if the tenant causes damage to the leased property or otherwise violates the lease.

Security interest:Property interest created by agreement or by operation of law to secure performance of an obligation, especially repayment of a debt.

Semi-gross lease: Tenant pays the base rent and the tenant and landlord share responsibility for operating expenses.

Septic permits: A permit issued by a municipality for the installation, repair, or replacement of any portion of a septic system (septic tank, drainfield and related components).

Short-form lease provision: A shortened version of the lease to be created that will be recorded in the jurisdiction’s property recorders to provide notice of the lease. The lease should be recorded if the tenant is planning on financing his interest in the lease. Recording a short form lease will also give the tenant priority over future creditors that may claim an interest in the property.

Simultaneous issue rate: when referring to title insurance, the simultaneous issue rate is the reduced rate for a loan policy or owner’s policy of title insurance issued on the same property or loan at the same time as another policy. The term usually refers to a loan policy issued at the same time as an owner’s policy when a property is purchased.

Special exceptions to title insurance: Exceptions to title insurance that vary on a parcel-by-parcel basis. Special exceptions include documents affecting a given parcel that have been filed for record at the County Recorder’s office (e.g., easements, restrictive covenants, shared well agreements) and also include property taxes due or to become due. Special exceptions cannot be brought within the scope of title insurance coverage.

Special warranty deed: a deed which warrants the title only with respect to acts of the seller and the interests of anyone claiming by, through, or under him.

insurance contract: A generic, nonbinding form of an insurance contract intended to show what the final contract will generally look like without information specific to the insured party (e.g., special exceptions or endorsements).

Standard exceptions to title insurance: Exceptions to title insurance that typically apply to all parcels within a given region; sometimes called the “regional exceptions.” Standard exceptions can usually be removed through the purchase of extended coverage and/or riders to the title insurance policy.

Step-up lease: The rental amount paid by the lessee increases by a preset rate or set dollar amount at predetermined intervals. A step-up lease is a means for the lessor to hedge against inflation and future maintenance or operational expenses.

Sublease: Original tenant (lessee) sublets all or part of the leasehold interest to another tenant (known as a subtenant), while still retaining a leasehold interest in the property. Also known as a “sandwich lease” due to the sandwiching of the original lessee between the lessor and the subtenant.

Subdivision: an area of land laid out and divided into lots, blocks, and building sites, and in which public facilities are laid out, such as streets, alleys, parks, and easements for public utilities.

Successors-and-assigns provision: Binds the landlord or the tenant to the lease in the event there is a successor to the other party. The terms between the successor and the remaining party are the same rights, obligations, and duties as between the original parties.

Survey: (1) Determine the location, boundaries, area, or the elevations of land and structures upon the earth’s surface by means of courses in relation to the north star, and the measuring of angles and distances by using the techniques of geometry and trigonometry; (2) Map or plat drawn by a surveyor which represents the property surveyed and shows the results of a survey.

   

Tax-deferred exchange: Under section 1031 of the federal tax code, investors may defer capital-gains taxes on a qualifying exchange of “like-kind” properties exchanged for business or investment purposes. Normally, when investors sell real property they pay tax on their gain at the time of the sale. But Section 1031 lets investors defer that tax if they re-invest the gain into a “like-kind” property. The IRS defines “like-kind” property as property of the same nature, character, or class. Most real property is considered “like-kind” to other real estate.

Tax lien: A lien on property, and all rights to property, imposed by the federal government for unpaid federal taxes.

Tenancy in common: Ownership of real estate by more than one person, where each owner has a certain percentage interest in the property without the existence of an ownership entity (i.e., corporation, partnership, LLC, etc.). Each tenant in common has an undivided interest in the entire property. This means a “partition” suit is required if the owners cannot agree among themselves on how to operate or manage the property.

Tenancy by entireties: an estate or interest in real estate predicated upon the legal fiction that a husband and wife are one person. A conveyance or devise to them (unless contrary intent is expressed) vests title in them as one person. Upon the death of either husband or wife, full title passes to the survivor.

Tenant, also known as lessee): (1) Usually one who holds possession of real estate under a lease; (2) In a broader sense, one who holds or possesses lands and tenements by any kind of title.

Tenant improvements: Enhancements made to the leased premises prior to or during a tenant’s occupancy, which may be paid for by the landlord, the tenant, or both.

Tenants in common: two or more persons in whom title to a single piece of real estate is vested in such a manner that they have a common or equal right to possession and enjoyment of the property, but each holds a separate individual interest or estate in the property. Each owner may sell or encumber his respective interest or dispose of it by will, and if he dies without leaving a will, his heirs inherit his undivided interest.

Tenant-paid tenant improvements: The total cost (outlay) of necessary tenant improvements paid by the tenant offset against any allowance provided by the landlord.

Term of the lease: The strict meaning of “term” refers to the time period during which a tenant enjoys lawful possession and the right to exclude others, including the landlord, subject to law.

Third party: Term usually applied to persons who are not principal parties to a contract or other instrument, but who have some right, interest or duty which such contract or instrument affects. For example, where a sale contract between buyer and seller of real estate provides that the money and documents involved in the transaction will be deposited with a title company pending the closing of the deal, the title company becomes a third party to the transaction.

Timber easement: An easement that permits the holder to cut and remove timber from another’s property. Also known as timber rights.

Timber tax exemption: An agricultural or timber exemption is a certificate that is required when you claim a sales tax exemption on the purchase of items directly used to produce agricultural and timber products being raised or harvested for sale. These exemptions are assessed by the County Assessors office.

Timber Rights: The right to all or a part of the standing timber on real property.

Title: (1) A combination of all the elements that constitute the highest legal right to own, possess, use, control, enjoy, and dispose of real estate or an inheritable right or interest therein. (2) The rights of ownership recognized and protected by the law.

Title covenants: Covenants ordinarily inserted in conveyances and in transfers of title to real estate for the purpose of giving protection to the purchaser against possible insufficiency of the title received.

Title defect: (1) Any possible or patent claim or right outstanding in a chain of title which is adverse to the claim of ownership. (2) Any material irregularity in the execution or effect of an instrument in the chain of title.

Title insurance: Indemnity against loss resulting from defects in or liens upon a title.

Title plant: (1) In many areas, synonymous with an abstract plant; (2) A geographically filed assemblage of title information that expedites title examinations, such as copies of previous attorneys’ opinions, abstracts, tax searches, and copies of the public records.

Title report, also known as a preliminary title report): Insurance against certain risks of a real estate transfer is underwritten based on a title report citing pertinent publicly recorded documents relating to the parcel.

Title search: Search and perusal of the public records for recorded instruments which affect the title to a particular piece of land (see also abstract and examination).

Title searcher: One who searches titles.

Total effective rate: The rate per square foot paid by the tenant over the entire period analyzed.

Total effective rent: The total dollar amount (cash flow) that the tenant actually will pay out over the entire period analyzed.

Triple net lease: A commercial lease where the landlord is not responsible for anything besides their own financing charges and the tenant has to pay the taxes, insurance, and other costs of owning and maintaining the property. Rent is typically lower because the landlord is not taking on any risk that could interrupt the flow of rent. Also known as a net lease.

Trustee: In a deed of trust, the trustee is the party who holds the instrument and protects the interest of the beneficiary.

Trustor, also known as grantor): In a deed of trust, the trustor is the borrower who gives the security interest.

 

Underwriter: An insurance company that issues insurance an policy; a professional employed by an insurance company who reviews the applications and relevant documents to rate an insurance policy.

Unimproved land: Land that has not been developed by the addition of utilities, landscaping, roads, or buildings.

Use provisions: Local zoning laws that govern how the tenant uses the property. Unless a lease includes restrictions, a tenant is allowed to use the premises for any lawful purpose. The tenant is not precluded from using the property for any use if the lease mentions a specific use without restricting or prohibiting other uses. The buyer should ascertain whether the intended use violates the building’s certificate of occupancy, easements, title restrictions, and the rights of other tenants in the building.

Usable area: Rentable area less certain common areas that are shared by all tenants of the office building such as corridors, storage, facilities, and bathrooms. It is computed by multiplying the rental area times the building efficiency percentage.

Utilities: Statement of which party is responsible for payment of utilities; in a triple net lease, tenant is typically responsible for utilities; in a gross lease, the landlord is typically responsible; in a semi-gross lease, the utilities provisions should specify who is responsible for which utilities.

Vacancy rate: Percentage of the total supply of units or space of a specific commercial type that is vacant and available for occupancy at a particular point in time within a given market.

Variable Expense: Expense that is related to changes in output, as opposed to being fixed and unrelated to output.  Sewer is a variable expense; garbage is a fixed expense.

   

Waiver: Voluntary and intentional relinquishment of a known right, claim, or privilege.

Waiver of trial by jury provision: Where allowed by law, bars a tenant from seeking a jury trial to resolves disputes.

Warranty deed:Deed containing one or more title covenants.

Wetlands: In order to be considered a wetland, the land must have one or more of the following three attributes: (1) at least periodically, the land supports predominantly hydrophytes (wetland plants); (2) the substrate is predominantly undrained hydric soil; and (3) the substrate is non-soil and is saturated with water or covered by shallow water at some time during the growing season.

Work letter: A work letter obligates the landlord to prepare the premises for the tenant’s occupancy. The buyer should review the work letter to know whether the landlord’s obligations have been satisfied.

 

Zoning: The legislative division of a region, esp. a municipality, into separate districts with different regulations within the districts for land use, building size, and other circumstances of the parcel that could potentially affect the general welfare.

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