Glossary of Apartment and Rental-Property Terms


- A-

Abandonment: A relinquishment or surrender of property or rights. Abandonment of leased premises refers to the relinquishing of the premises by the tenant before the le expires, without consent of the owner.

Abatement: In real estate, a reduction of rent, interest, or an amount due; also, any reduction of amount or intensity.

Abstract of title: A summary of all the deeds, wills, and legal proceedings that show the nature of a person’s right to a given estate, together with the mortgages, judgments, etc., that constitute liens or encumbrances on it.

Accounts payable: Monies due others for services rendered or for goods ordered and received.

Accounts receivable: Monies due for services rendered or goods ordered and delivered.

ACCREDITED MANAGEMENT ORGANIZATION (AMO): An accreditation conferred by the Institute of Real Estate Management of the NATIONAL ASSOCIATION OF REALTORS to real estate management firms that are under the direction of a CER TIFIED PROPERTY MANAGER and comply with stipulated requirements as to ac counting procedures, performance, and protection of funds entrusted to them.

ACCREDITED RESIDENTIAL MANAGER (ARM): A professional service award conferred upon individuals by the Institute of Real Estate Management of the NATIONAL ASSOCIATION OF REALTORS. Individuals who achieve the ARM recognition meet IREM’s standards of experience, ethics, and education. (See also CERTIFIED PROPERTY MANAGER.)

Accrual accounting: The method of accounting that involves entering amounts of income when money is earned and amounts of expense when bills are incurred (even though the cash may not be received or paid). (See also cash accounting.)

Actual authority: The authority expressly or implicitly conferred by a principal on an agent to act on his or her behalf.

Ad valorem tax: A tax levied according to the value of the object taxed: a tax in proportion to the value. Most often refers to tax levied by municipalities and counties against real property and personal property.

Adjustment: In insurance, the settlement of the amount to be received by the Insured.

Agency management: Management of property owned by another by an agency authorized to do so.

Agent: A person authorized to transact some business or perform some act for another (the principal) within the limits of the authority bestowed by the latter.

Aggregate rent: The total or gross rent amount for the lease term.

Amortized mortgage: A mortgage loan in which the principal as well as the interest is payable in monthly or periodic installments during the term of the loan.

Ancillary income: A common term used to describe additional, unscheduled income such as laundry room receipts and commissions; also called sundry income.

Annual mortgage constant rate: A rate equal to the percentage derived by dividing the annual payment of principal and interest on a loan by the amount of the loan; used with level payment loans.

Annual statement: In real estate, a fully detailed and annotated statement of all income and expense items involving cash and covering a twelve-consecutive-month period of operation of an individual property (including the disposition and application of net funds for the period concerned and accumulated funds from prior periods). Variations in form and content are effected to conform with owner directives.

Arbitration: The submitting of a matter in dispute to the judgment of one, two, or more disinterested persons called arbitrators, whose decision, called an award, is binding on the parties.

Assessed value: The value placed on land and buildings by a government unit (assessor) for use in levying annual real estate taxes.

Assessment: The imposition of a tax, charge, or levy, usually according to established rates. (See also special assessment.)

Assignee: One to whom some right or interest is given, either for the individual’s own enjoyment, or in trust; the person receiving an assignment.

Assignment: The transfer in writing of an interest in a bond, mortgage, lease, or other instrument.

Assignor: One giving some right of interest; the person making the assignment.

Authority: Power or right conferred on a person, usually by another to act on his or her behalf, so that the person authorized may perform the authorized activity without incurring liability. (See also agent.)

- B -

Balloon payment: The final payment of a mortgage loan that is considerably larger than the required periodic payments; this results from the fact that the loan was not fully amortized.

Beneficiary: A person designated to receive funds or other property under a trust, insurance policy, mortgage loan, etc.

Best use: In real estate, economically the most productive use in terms of net income or net return over a foreseeable period of time without prejudice to the total capital investment or fair market value of a property; also called highest and best use.

Betterment: Improvements upon real property other than mere repairs.

Blanket mortgage: A mortgage covering several pieces of property.

Blanket policy: An insurance policy covering all of a specified quantity or class of property, or a variety of risks, or both.

British thermal unit (Btu): The energy needed to raise the temperature of one pound of water by one degree Fahrenheit.

- C -

Cannibalization: To strip equipment or housing units of parts for use in other equipment or units to help keep the latter in service.

Capital Improvement: A structural addition or betterment to real property other than a repair or replacement; also, the use of capital for a betterment that did not exist before.

Capitalization: The process employed in estimating the value of a property by the use of a proper investment rate of return and the annual net operating income expected to be produced by the property, the formula being expressed:

Net Operating Income / Rate = Value :

Cash accounting: The method of accounting that recognizes income and expenses when money is received or paid. (See also accrual accounting.)

Cash flow: The amount of cash available after all payments have been made for operating expenses and mortgage principal and interest.

Cash-on-cash return: The annual cash flow divided by the original cash equity investment.

Certified copy: A document signed and certified as true by the official in whose custody the original is held.

CERTIFIED PROPERTY MANAGER (CPM): A professional designation conferred upon individuals by the Institute of Real Estate Management of the NATIONAL ASSO CIATION OF REALTORSX, For over fifty years IREM has awarded the CPM designation to those property managers who meet high standards of experience, ethics, and education. (See also ACCREDITED RESIDENTIAL MANAGER.)

Chart of accounts: An arbitrary classification or arrangement of account items according to grade or class.

Collateral: Security given as a pledge for the fulfillment of an obligation. Collateral materials As applied to advertising and promotion, includes printing and devices such as brochures, leaflets, floor plans, posters, photographs, lapel pins, book matches, etc.

Commingle: To mix or combine; combining the money of more than one person or entity into a common fund.

Comparison grid: A method of price analysis in which the features of a subject property are compared to similar features in three or more comparable properties in the same market. The price (Or rent) for each comparable property helps to determine an appropriate price (Or rent) for the subject. This method involves assigning values for different attributes such as square footage, amenities, patios, parking, floor and window treatments, appliances, location, and view; the process should take market trends into consideration and is obviously subjective. Each comparable property is compared to the subject, feature by feature. When the feature being examined is superior in the comparable property, the comparable price should be reduced by the amount that particular feature is worth in the marketplace. When the feature being examined is superior in the subject property, the comparable price should be appropriately increased. Pricing of the subject property is deter mined by tallying the adjustments to the price of each comparable and then either averaging the adjusted prices or using the final price of the comparable that has had the fewest adjustments—because this comparable is most like the subject property.

Compound Interest: Interest upon interest; when the simple interest on a sum of money is added to the principal as it becomes due, then bears interest itself, becoming sort of a secondary principal. Simple interest is paid on the principal only.

Condemnation: The taking of private property for public use; also the official act to terminate the use of real property for nonconformance with governmental regulations or because of hazards to public health and safety.

Condemnation: clause A provision in a lease stating the agreed rights, privileges, and limitations of the owner and tenant, respectively, in the event of the taking of the subject property for public use.

Condominium: Outright ownership of an individual unit within a multiple-unit structure along with prorated shared ownership of the common areas of the structure.

Consideration: Something that suffices to make an agreement legally binding; something given in exchange for a promise.

Constant: See annual mortgage constant rate.

Constructive eviction: Inability of a tenant to obtain or maintain possession by reason of a condition of the property making occupancy hazardous or unfit for its intended use.

Construction loan: A short-term loan made to finance the cost of new construction or rehabilitation, as distinguished from permanent financing on a completed building. Money is normally sent to the builder as costs are incurred during construction.

Constructive notice: Notice given to the world by recorded documents. All per sons are charged with knowledge of such documents and their contents whether or not they have actually examined them. Possession of property is also considered notice that the person in possession has an interest in the property.

Consumer Price Index (CPI): A ratio of the cost of consumer goods at the present time in relation to a base period, said to be 100. This index is published monthly by the United States Department of Labor, Bureau of Labor Statistics.

Contingent liability: A liability that can fall to one as an implied participant or contributor; conditional liability.

Conventional mortgage: A mortgage loan not insured or guaranteed by govern mental agencies (FHA or VA).

Conveyance: The instrument or document by which a transfer is made or title passed from one person to another.

Cooperative: Ownership of a share or shares of stock in a corporation that holds the title to a multiple-unit residential structure; shareholders do not own their units outright but have the right to occupy them.

Corporation: A legal entity that is chartered by a state and treated by courts as an artificial person or body of persons separate and distinct from the persons who own it.

Cost approach: The process of estimating the value of a property by adding to the estimated land value the appraiser’s estimate of the replacement cost of the building less depreciation.

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

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Death clause: A special clause in a lease that provides for termination of the lease before its expiration date in the event of the tenant’s death.

Deed of trust: A written document by which title to land is conveyed as security for the repayment of a loan.

Deed restrictions: Clauses in a deed limiting the future uses of the property. Deed restrictions may limit the density of buildings, dictate the types of structures that can be erected, or prevent buildings from being used for specific purposes (or at all). Deed restrictions may impose numerous limitations and conditions.

Default: The nonperformance of a duty, whether arising under a contract, or otherwise; failure to meet an obligation when due.

Defect of title: A claim, restricted use provision, or other imperfection that adversely affects the customary use and marketability of a property.

Deferred maintenance: Ordinary maintenance of a building that, because it has not been effected, noticeably affects the use, occupancy, welfare, and value of the property.

Deficiency judgment: A personal judgment levied against the mortgagor when the foreclosure sale does not produce sufficient funds to pay the mortgage debt in full.

Delinquency: An overdue debt, as rent not paid on the due date.

Demised premises: Property conveyed by a lease.

Density: The number of dwelling units constructed per acre.

Department of Housing and Urban Development (HUD): A federal department created in 1968 to supervise the Federal Housing Authority (FHA) and a number of other agencies that administer various housing programs.

Depreciation: Loss of value due to all causes, usually considered to include: (1) physical deterioration (ordinary wear and tear), (2) functional depreciation (see obsolescence), and (3) economic obsolescence; also, the tax deduction that allows for exhaustion of property.

Direct-reduction loan: Loan in which payments are equal in amounts, with a portion applied first to the current interest, and the remainder to the reduction of the principal; also called level-payment or self-amortizing loan.

Disability clause: A special lease covenant that provides for the alteration of the lease terms or the termination of the lease before expiration, in the event that the tenant is physically disabled and unable to continue his or her use of the leased premises; most often included in leases of residential property.

Discount rate: Any rate used to translate a future dollar amount into an equivalent present value. Also, the interest rate the Federal Reserve Bank charges banks.

Down payment: An agreed initial increment payment to secure the delivery of property or goods upon payment of the total agreed price in accordance with a specific agreement.

Duly authorized: Properly authorized to act for another in accordance with legal requirements and in conformance with a written series of conditions and covenants (e.g., power of attorney).

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Easement: A right or interest in land owned by another that entitles the holder (or occupant) of that land to some use, privilege, or benefit out of or over it.

Economic life: The number of years during which a building will continue to produce an acceptable yield.

Economic obsolescence: Impairment of desirability or useful life, or loss in the use and value, of property arising from economic forces outside of the building or property, such as changes in optimum land use, legislative enactments that restrict or impair property rights, and changes in supply-demand relationships. (See also obsolescence.)

Economic turnover: A type of turnover that involves either tenants moving from a rented apartment to a Purchased single-family home, townhouse, or condominium; or tenants moving to another part of the country. (See also lateral turnover and turnover.)

Economic vacancy: The number of units in a building or a development that are not producing income. This includes vacancies, models, offices, delinquencies, staff apartments, cannibalized units, and units being used for storage; usually expressed as a percentage of the total number of units. (See also physical vacancy.)

Efficiency apartment: A small, bedroomless apartment usually with less than a standard-size kitchen. (See also studio apartment.)

Efficiency factor: The percentage of gross building area that is actually rentable. Rentable Area / Gross Building Area = Efficiency Factor

Elevation: A drawing or design representing a vertical side or portion of a building; a place above the level of the surrounding ground.

Eminent domain: The right of a government or municipal quasi-public body to acquire private property for public use through a court action called condemnation in which the court determines that the use is a public use and determines the price or compensation to be paid to the owner.

Empty-nesters: Persons whose children have left home permanently.

Encroachment: A building or some portion of it, or a wall or fence that illegally extends beyond the owner’s land onto another’s land or a street or alley.

Encumbrance: Any lien, such as a mortgage, tax lien, or judgment lien; also, an easement, a restriction on the use of a land, or an outstanding dower right which may diminish the value of the property.

Endorse: To approve or guarantee payment; to alter a document by adding a covenant.

Environmental Protection Agency (EPA): The agency of the United States government established in 1970 to enforce laws that preserve and protect the environment.

Equalization: The raising or lowering of assessed values for tax purposes in a particular county or taxing district to make them equal to assessments in other counties or districts.

Equity: The interest or value that an owner has in real estate over and above the mortgage against it.

Errors and omissions Insurance: A form of liability insurance. In the case of the property manager, errors and omissions insurance protects against liabilities resulting from honest mistakes and oversights (but provides no protection in cases of gross negligence).

Escalator clause: A clause in a contract, lease, or mortgage providing for in creases in wages, rent, or interest based on fluctuations in certain economic indexes, costs, or taxes.

Eviction: A legal process to reclaim real estate from a tenant or person holding a mortgage who has not performed under the agreed-upon terms.

Exclusive agent: An agent with exclusive rights for a fixed period of time to sell or lease property owned by another.

Exculpate: To free from blame. Hold harmless clauses are exculpatory.

Execution: The signing and delivery of an instrument; also, a legal order directing an official to enforce a judgment against the property of a debtor.

Experience exchange:: A compilation of operating data on comparable proper ties generated through annual surveys of property managers. An example is Income/Expense Analysis. Conventional Apartments published every year by IREM.

Extended coverage (EC): An endorsement to a standard form of fire insurance policy adding to the insurance coverage against financial loss from certain other specified hazards.

- F -

Fair Credit Reporting Act: Enacted in 1971, this federal law gives people the right to see and correct their credit records at credit reporting bureaus.

Fair Debt Collection Practices Act: As originally passed in 1978, this federal law created a series of guidelines for debt collectors to follow and was designed to prevent collection agencies from harassing debtors. In 1986, the law was expanded to include any organization that collects consumer debt (including property managers). The law is governed and regulated by the Federal Trade Commission (FTC).

Fair housing laws: Any law that prohibits discrimination grounded on race, religion, national origin, family status, etc. against people seeking housing. There are federal, state, and local fair housing laws, all of which must be adhered to.

Fair Labor Standards Act: Enacted in 1938, this federal law establishes minimum wages per hour and maximum hours of work. It also provides that employees who work in excess of forty hours per week are to be paid one and one-half times their regular hourly wage. This is frequently referred to as Wage and Hour Law.

Fair market value: The price paid, or one that might be anticipated as necessarily payable, by a willing and informed buyer to a willing and informed seller, neither of whom is under any compulsion to act, and if the object sold has been reasonably exposed to the market.

Feasibility study: A study to discover the practicality, possibility, and reasonableness of a proposed undertaking.

Fee simple: The largest possible estate or rights of ownership of real property continuing without time limitation. Sometimes called fee or fee simple absolute.

Federal Housing Administration (FHA) An agency—part of the United States Department of Housing and Urban Development—that administers a variety of housing loan programs.

Fidelity bond A casualty insurance guaranteeing one individual against financial loss that might result from dishonest acts of another specific individual.

Fiduciary One charged with a relationship of trust and confidence, as between a principal and agent, trustee and beneficiary, or attorney and client.

Financial analysis Projection of income and expense, financing considerations, tax implementations, and value charged; used in a management survey.

Financing The availability, amount, and terms under which money may be borrowed to assist in the purchase of real property and using the property itself as the security for such borrowing.

Fire and extended coverage insurance (Fire and EC) Insurance for property that covers not only loss by fire hut also windstorm, hail, explosion, riot, civil commotion, aircraft, vehicles, and smoke.

Fire insurance Insurance on property against all direct loss or damage by fire. First mortgage A mortgage that has priority as a lien over all other mortgages.

Fixed assets Properties, goods, or other things of value that cannot be readily sold or otherwise converted on short notice at their true and fair value. Things possessed mainly of value in their use as is, and of little value if removed, such as trade fixtures and machinery.

Fixture An article of personal property attached permanently to a building or to land so that it becomes part of the real estate.

Float In banking, the time that lapses after a deposit or withdrawal is made and before the transaction is credited or deducted.

Foreclosure A court action initiated by the mortgagee, or a lienor, for the purpose of having the court order the debtor’s real estate sold to pay the mortgage or other lien (e.g., mechanic’s lien or judgment).

Fraud Intentional deception to cause a person to give up property or a lawful right.

Functional obsolescence Defects in a building or structure that detract from its value or marketability.

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General partnership The business activity of two or more persons who agree to pool capital, talents, and other assets according to some agreed-to formula, and similarly to divide profits and losses, and to commit the partnership to certain obligations. General partners assume unlimited liability.

Graduated rent Rent that has two or more levels in the same lease term.

Gross building area Area equal to length times width of the building(s) times the number of living floors, expressed in square feet.

Gross income The total monthly or annual revenue from all sources, such as rents and other receipts, before any deductions, allowances, or charges.

Gross National Product (GNP) The total value of a nation’s annual output of goods and services.

Gross possible Income The total monthly or annual possible income before uncollected income is deducted.

Gross receipts The total cash income from all sources during a specific period of time such as monthly or annually.

Gross rent multiplier A figure that, when used as a multiplier of the gross in come of a property, produces an estimated value of that property.

- H -

Half-bath A term used in real estate to describe a bathroom with a basin and water closet but no bathing facilities such as a tub or shower.

Head rent Rent charged to a person or persons occupying the same premises independently of each other.

Hold harmless A declaration that one is not liable for things beyond his or her control.

Holdover tenancy A tenancy whereby the tenant retains possession of leased premises after his or her lease has expired, and the landlord, by continuing to accept rent from the tenant, thereby agrees to the tenant’s continued occupancy as defined by state law.

- I -

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

Independent contractor A person who contracts to do a piece of work for an other by using his or her own methods and without being under the control of the other person regarding how the work should be done. Unlike an employee, an in dependent contractor pays for all expenses, income and social security taxes, and receives no employee benefits.

In-house management Management originating from within an organization or company (i.e., by the staff or the corporation owning the property rather than by someone brought in from outside).

Institute of Real Estate Management (IREM) A professional association of men and women, affiliated with the NATIONAL ASSOCIATION OF REALTORS who meet established standards of experience, education, and ethics with the objective of continually improving their respective managerial skills by mutual education and exchange of ideas and experiences.

Insurable value A term commonly used to describe the actual cash value (ACV) of a property; the cost to replace the building or structure, less certain depreciation factors.

Insurance An agreement to assume a foreseeable financial loss in the event of fire, casualty, liability, or property damage in consideration of a premium payment by the one insured (the insured) to the one insuring (the insurer, carrier, insurance company, etc.).

Interest A share in the ownership of property; a payment for the use of money borrowed.

- J -

Joint tenants Two or more owners of a parcel of land who have been specifically named in one conveyance as joint tenants. Upon the death of a joint tenant, his or her interest passes to the surviving joint tenant or tenants by the right of survivorship, which is the important element of joint tenancy.

Joint venture An association of persons or other entities to carry Out a single business enterprise for profit, for which purpose they combine their property, money, and skills.

Judgment clause A provision in notes, leases, and contracts by which the debtor, tenant, and others authorize any attorney to go into court and confess a judgment against them for a default in payment; sometimes called a cognovit. The use of this clause is prohibited in many jurisdictions.

Jurisdiction The district over which the power of the court extends.

- L -

Landlord-tenant law Laws enacted by various jurisdictions that regulate the relationship between landlord and tenant.

Latent defects Physical deficiencies or construction defects not readily detected from a reasonable inspection of the property, such as a defective septic tank, under ground sewage system, improper plumbing, or electrical wiring; also called hidden defects.

Lateral turnover A type of turnover that occurs when tenants move from one rented apartment to a similar rented apartment in the same general market. (See also economic turnover and turnover.)

Lease A contract, written or oral, for the possession of a landowner’s land or property for a stipulated period of time in consideration of the payment of rent or other income by the tenant. Leases for more than one year generally must be in writing to be enforceable; may be called an occupancy agreement.

Lease conditions The provisions or covenants setting forth the agreed privileges, obligations, and restrictions under which a lease is made; also called lease terms.

Lease extension agreement A covenant or other written and executed instrument extending or agreeing to extend the lease term beyond the expiration date as provided in the body of the original lease.

Legal description The description used to identify the property in such legal instruments as deeds or mortgages.

Lender’s loss payable An endorsement to a policy of hazard insurance providing that any compensation for losses sustained shall be made to the order of a lender to whom the property has been pledged as security for a loan.

Lessee The tenant in a lease.

Lessor The landlord in a lease.

Let To lease; to grant the use of a thing for compensation. Level-payment loan See direct-reduction loan.

License Official authorization to engage in a business, profession, or other activity with or for the public or affecting the public interest; freedom to act or ex press oneself; also, the revocable permission for a temporary use—a personal right that cannot be sold.

Lien The legal right of a creditor to have his or her debt paid Out of the property of the debtor.

Limited partnership A partnership arrangement that limits certain of the partners’ liability to the amount they have invested and limits the profit they can make. Limited partnerships are managed and operated by one or more general partners whose liability is not limited. The limited partners are not permitted to have a voice in the management.

Limited power of attorney A legal authorization to act on behalf of another for a specified purpose.

Loan commitment An agreement to lend an amount of money, usually under stated terms and conditions.

Loan cost The cost in money for securing a loan, as in loan fees, legal charges, title or abstract costs, recording charges or notary fees; the total charges for effecting a loan, customarily paid by the borrower.

Loan payment The payment of an installment on the principal balance plus accrued interest on the entire unpaid balance that accrued since the immediately pre ceding interest payment.

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Majority The age set by state law at which individuals have the legal right to man age their own affairs and are responsible for their own actions. The age of majority varies from state to state. (See also minor.)

Management agreement A contract or letter of understanding between the owner(s) of a property and the designated managing agent, describing the duties and establishing powers, responsibilities, rights, and obligations of the parties thereto.

Management company A real estate organization that specializes in the professional management of real properties for others.

Management fee The monetary consideration paid monthly or otherwise for the performance of management duties.

Managing agent An agent duly appointed to direct and control all matters pertaining to a property that is owned or controlled by another.

Market analysis A determination of the characteristics, purchasing power, and habits of the population segment expected to be tenants of a property, used in a management survey.

Market value The highest price that a buyer—ready, willing, and able, but not compelled to buy—would pay, and the lowest a seller—ready, willing, and able, but not compelled to sell—would accept.

Mechanic’s lien A lien created by statute that exists in favor of contractors, laborers, or material suppliers who have performed work or furnished materials in the erection or repair of a building.

Minor One who has not reached the age set by state law to be legally recognized as an adult; therefore, one not legally responsible for contracting debts or signing contracts. (See also majority)

Month-to-month tenancy An agreement to rent or lease for consecutive and continuing monthly periods until terminated by proper prior notice by either the landlord or the tenant. Notice of termination must precede the commencement date of the final month of occupancy. The time period of prior notice is usually established by state law.

Mortgage A conditional transfer or pledge of real property as security for the payment of a debt; also, the document used to create a mortgage loan.

Mortgagee The lender in a mortgage loan transaction.

Mortgagor The borrower, the owner of the real estate who conveys his or her property as security for the loan.

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NATIONAL ASSOCIATION OF RFALTORS The national nonprofit corporation whose membership is principally composed of individual real estate agents who are members in subscribing local real estate boards throughout the United States and its possessions and dedicated to the highest principles and performance by real estate licensee members.

Net cost Cost after all incidental charges are added and all allowable credits are deducted.

Net operating income (NOI) Total collections less operating expenses.

Net prior to debt service (NPDS) The cash available from collected rental in come after all operating expenses have been deducted and before capital expenses and debt service have been deducted; the net operating income.

Notary public An officer licensed by the state to certify documents to make them authentic and to take affidavits.

Notice to vacate A legal notice requiring a tenant to remove himself or herself and all removable possessions from the premises within a stated period of time or upon a specified day and date, and to deliver the premises to the owner or agent or to a designated successor.

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Obsolescence Lessening of value due to being out-of-date (obsolete) as a result of changes in design and use; also, an element of depreciation. (See also economic obsolescence and functional obsolescence.)

Occupancy agreement A lease agreement that spells Out the conditions of occupancy of a property for a specified length of time for a specified amount of rent.

Occupational Safety and Health Act of 1970 (OSHA) A law requiring employers to comply with job safety and health standards issued by the U.S. Department of Labor.

Off-site management Management of a property by persons not residing or keeping office hours at the subject property.

Option The right to purchase or lease something at a future date for a specified price and terms; the right may or may not be exercised at the option holder’s (optionee’s) discretion. Options may be received or purchased.

Owner, landlord, and tenant liability (OLT) Insurance protecting claims against a property owner, a landlord, or a tenant arising from personal injury to a person or persons in or about a subject property and including the improvements on the land and any other contiguous areas for which the insured is legally responsible, such as sidewalks.

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Parking ratio The number of parking spaces provided for each dwelling unit constructed.

Peaceful enjoyment The use of real property without illegal or unreasonable interference or annoyance within the control of the party granting the use.

Personal property Movable property belonging to an individual, family, etc., that is not permanently affixed to real property, such as clothing, furniture, furnishings, and appliances.

Physical vacancy The number of vacant units in a building or development that are available for rent, usually expressed as a percentage of the total number of units. (See also economic vacancy.)

Planned unit development (PU.D) A group of buildings, sometimes with varying uses (e.g. apartment, offices, shops, schools), that are completely planned be fore groundbreaking. Generally, they are large in scale and built in several phases over a number of years.

Plumbing chase A duct space or enclosure inside partition walls to house plumbing lines and vent stacks.

Points In real estate lending, fees charged by the lender to increase the overall yield to that lender: A point is 1 percent of the loan principal; also called discount points.

Power of attorney A written instrument authorizing another to act in one’s be half as his or her agent or attorney.

Prepayment penalty An extra stipulated charge for paying off all or part of a loan on real property in advance; a cash penalty for paying off a mortgage loan be fore its date of maturity.

Present value The worth of money to be received in the future discounted by a given discount rate—the value determined is the value of the money today.

Prime rate The lowest interest rate currently being charged to the most financially responsible persons or with the security of highly rated and easily converted securities on loans repayable on demand by the lender.

Principal (1) A sum of money lent or employed as a fund or investment—as distinguished from its income or profits; (2) the original amount, or remaining balance of a loan; or (3) a party to a transaction—as distinguished from an agent.

Property analysis A study conducted by a property manager referring to items such as deferred maintenance, functional and economic obsolescence, land location and zoning, exterior construction and condition, plant and equipment, unit mix, facilities, and expected income and expenses.

Property damage insurance Insurance against liability for damage to property of others that may result from occurrences in or about a specified property and for which the insured is legally liable.

Property manager The chief operating officer or administrator of a particular property or group of properties.

Public area A space in a property for general public use and not restricted for use by any lease or other agreements, as a lobby, corridor, or court.

Pullman kitchen A small non-walk-in kitchen, often in a closet-sized space, with appliances and equipment that are smaller than standard.

- R -

Real estate Land; a portion of the earth’s surface extending downward to the center of the earth and upward into space including all things permanently attached to the land by nature or by mankind; also, freehold estates in land.

Real estate broker Any person, partnership, association, or corporation who for a compensation or valuable consideration sells or offers for sale, buys or offers to buy, or negotiates the purchase, sale, or exchange of real estate, or who leases or offers to rent any real estate or the improvements on it for others. Such a broker may have to have a state license.

Real estate investment trust (REIT) An entity that sells shares to investors and uses the funds to invest in real estate. Real estate investment trusts must meet certain requirements such as a minimum number of investors and widely dispersed ownership. No corporate taxes need to be paid as long as a series of complex Internal Revenue Service qualifications are met.

REALTOR A registered trademark reserved for the sole use of active members of local boards of REALTORS affiliated with the NATIONAL ASSOCIATION OF REALTORS.

Recapitulation statement An annual balanced cash statement customarily pre pared by real estate managers showing all receipts, disbursements, and reserves accumulated for an established twelve-month period; also called “recap” statement.

Recurring expenses Operating expenses that recur monthly or periodically, such as those for utilities, supplies, salaries, scavenger services, insurance, and taxes.

Redemption period A period established by state laws during which the property owner has the right to redeem his or her real estate from a foreclosure or a tax sale by paying the sale price, interest, and costs. (Many states do not have mortgage redemption laws.)

Regional analysis A detailed study of a region, usually surrounding and including one or more neighboring cities, to determine the force of various factors affecting the economic welfare of a section of the region, such as population growth and movement, employment, industrial and business activity, transportation facilities, tax structures, topography, improvements, and trends.

Re-lease or re-let To rent again. Usually involving a cancellation of the previous lease.

Rent ledger Record of rent received, date, period covered, and other related information.

Rent loss The deficiency increment resulting from vacancies, bad debts, etc., between total projected rental income (for a given period) and the actual rents collected or collectible.

Rent roll A list of each rental unit described by size and type. This also includes the following information if the unit is being rented: amount of monthly rent, ten ant name, and lease expiration date; also called rent schedule. The rent roll— unlike the rent ledger—does not include the status of rent payment.

Rentable area The combined rentable area of all dwelling units in a project. The rentable area of a unit is calculated by multiplying length times width of the apartment, with no discounts for interior partitions, plumbing chases, and other small niches. Balconies, patios, and unheated porches are not included in these measurements. Sometimes called net rentable area.

Replacement cost The estimated cost to replace or restore a building to its exact pre-existing condition and appearance.

Rescind Invalidate, annul, cancel, repeal, etc.

Resident manager An employee residing in a building for the purpose of over seeing and administering the day-to-day building affairs in accordance with directions from the manager or owner; also called on-site manager, site manager, and residential manager.

Right of re-entry The act of resuming possession of lands, or tenements, in pursuance of a right reserved by the owner on parting with the possession. Leases usually contain a clause providing that the owner may terminate the lease and re-enter for nonpayment of rent or breach of any of the covenants by the tenant.

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Second mortgage A mortgage loan secured by real estate that has previously been made security for a prior mortgage loan; also called a junior mortgage or junior lien.

Security deposit A preset amount of money advanced by the tenant and held by an owner or manager for a specified period to cover damages and to ensure the faithful performance of the lease terms by the tenant.

Site plan A plan, prepared to scale, showing locations of buildings, roadways, parking areas, and other improvements.

Special assessment A charge against real estate made by a unit of government to cover the proportionate cost of an improvement such as a street or sewer.

Square-foot cost The cost per square foot of area to build, buy, rent, etc.

Studio apartment Commonly used term to describe an efficiency or bedroom- less apartment. In certain areas, the term refers to a small apartment with two levels.

Subdivision A tract of land divided by the owner into blocks, building lots, and streets by a recorded subdivision plat; compliance with local regulations is required.

Subletting The leasing of premises by a tenant to a third party for part of the tenant’s remaining term.

Subordination clause A lease covenant in which the tenant agrees to take any action required to subordinate his or her claims against the property to the rights of the lender under a first mortgage or deed of trust, so long as it does not affect his or her right to possession.

Subrogation The substitution of one creditor for another. The substituted per son succeeds to the legal rights and claims of the original claimant. Subrogation is used by insurers to acquire from the insured party rights to sue to recover any claims they have paid.

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Tenant One who pays rent to occupy or gain possession of real estate. The estate or interest held is called a tenancy.

Tenant Improvements Additions or alterations to a leased premises for the use of the tenant, at the cost and expense of the tenant and becoming a part of the realty unless otherwise agreed to in writing.

Tenant organization A group of tenants formed to use their collective powers against an owner to achieve certain goals such as improved conditions, expanded facilities, and lower rent.

Tenant profile A study and listing of the similar and dissimilar characteristics of the present tenants in a property.

Tenant selectivity An established set of standards used in the selection of ten ants for a particular property.

Title The evidence of right that a person has to the ownership and possession of land.

Title insurance A policy insuring an owner or mortgagee against the loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects, and matters that are specifically excluded by the policy.

Townhouse A one-, two-, or three-story dwelling with a separate outside entry way sharing common or partitioning walls with other similar dwellings.

Turnover The number of units vacated during a specific period of time, usually one year. Most turnover rates are expressed as the ratio between the number of new tenants and the total number of units in a property. (See also economic turn over and lateral turnover.)

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Umbrella liability insurance Extra liability coverage that exceeds the limits of one’s basic liability policy.

Unit mix A number or percentage total of each unit size or type contained in a particular property.

Unit size A listing of the number of bedrooms and baths an apartment contains.

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Vacancy An area in a building that is unoccupied and available for rent.

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Wage and Hour Law See Fair Labor Standards Act.

Walk-up An apartment building of two or more floors in which the only access to the upper floors is by means of stairways.

Work order A written form, letter, or other instrument for authorizing work to be performed. A means for controlling and recording work ordered.

Workers’ compensation Liability insurance obtained by an employer that will cover compensation and benefits awarded to an employee for a sickness or injury that occurred as a result of or in the course of employment.

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Yield The total economic return to an investor.

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Zoning ordinance Exercise of power by a municipality in regulating and con trolling the character and use of property.

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