Canadian Real Estate Terms

ECONOMIC LIFE - The period over which improvements to real estate contribute to the value of the property.

ECONOMICS - The study of how individuals and society allocate scarce resources in satisfying their wants and needs, including production, distribution, and consumption of goods and services to meet the needs of various economic units.

EFFECTIVE AGE - The estimated age in years as indicated by the condition and utility of a structure based on the age of structures of equivalent utility, condition, and remaining life expectancy, as distinct from chronological age.

EFFECTIVE DATE - The day or date upon which something occurs or ceases to occur.

EFFECTIVE RATE OF INTEREST - The true rate of interest charged on a mortgage loan.

ELECTRICAL SERVICE SIZE - The size of the electrical service (amps) provided from the primary line to the building. (e.g., 6OA, 100A, 200A)

ELEVATION - The exterior of a structure usually viewed from the front or otherwise identified: e.g., side elevation, rear elevation.

EMINENT DOMAIN - The right of a government or municipal quasi-public body to acquire private property for public use.

EQUALIZATION (TAXATION) - The raising or lowering of assessed values for tax purposes in a particular county or taxation district to make them equal to assessments in other counties or districts.

EQUITY - The difference between the value for which you could sell your property and what is owed against it. There is an important distinction from "down payment" to a lender.
For example, if a buyer purchases a home without a down payment, he/ she can have "equity" if the value of the property quickly goes up.

EQUITY CAPITALIZATION RATE - Expresses the relationship between cash flow and the equity invested in a property, usually obtained from comparable properties.

EQUITY OF REDEMPTION - The right of the mortgagor to reclaim clear title to the property upon full repayment of the debt. It is a right granted to mortgagors but is extinguishable upon foreclosure.

ESCALATION CLAUSE - A clause in a contract providing for increases or decreases in rent payments in accordance with fluctuations of certain direct costs or expenses of the landlord.

ESCHEAT - The reversion of property to the state or some agency of the state in the event the owner thereof dies leaving no will and having no legally qualified heir to whom the property may pass by lawful descent.

ESCROW - A written agreement between two or more parties providing that certain instruments of property be placed with a third party to be delivered to a designated person upon the fulfillment or performance of some act or condition.

ESTATE - An interest in land or more specifically the degree, quantity, nature, and extent of interest that a person has in real property.

ESTOPPEL CERTIFICATE - The Estoppel Certificate provides a reasonably complete report on the financial health of the condominium corporation but it is by no means exhaustive. This certificate may go under a variety of names: In Ontario it is called the Status certificate. Each Province or State may differ slightly.

EVICTION - The forced removal, by legal means, of a tenant from the leased premises.

EVICTION NOTICE - A written notice to a tenant to vacate the leased premises within a specified time for infractions of the lease or other specified causes.

EXCLUSIVE AGENT - An agent with the exclusive rights to sell, lease or exchange the property owned by another for a fixed period.

Exclusive Listing - Gives one broker the authority to offer the property for sale (lease, exchange, etc.) during a specified time period.

EXECUTOR / EXECUTRIX - A person appointed by testator to carry out the provision of the testator's will.

EXPANSION JOINT - An opening designed for expansion that is located between independent segments within a structure.

EXPENSE RATIO - The fraction of gross income consumed by expenses.

EXPRESS AUTHORITY - A precise instruction, either in writing or orally, in which an authority is granted.

EXPROPRIATIONS - Taking of private property by the state for public use, with fair compensation to the owner, through the exercise of the right of eminent domain.

Fraudulent Misrepresentation - Made with the knowledge of its falsity or with reckless disregard for its truth on the part of the person making it; the purpose must have been to induce the other party to enter a contract; it must have been acted upon to the other party's prejudice.

Negligent Misrepresentation - if there is a special relationship between the parties and a misrepresentation is made negligently, then the person who is mislead will have an action for damages.

FEE SIMPLE - The highest estate or absolute right in real property.

FIDUCIARY RELATIONSHIP - A person to who power or property is entrusted for the benefit of another.

FIDUCIARY RESPONSIBILITIES - An agent owes to his/her principal various fiduciary duties such as competence, obedience, good faith, and full disclosure, and full accounting.

FINANCIAL INSTITUTIONS: Banks, credit unions, insurance or trust companies.

FIRST MORTGAGE - A mortgage registered before all others on title. Gives the lender a primary lien/charge against your house and property that has precedence over all other mortgages. Priority is determined by the date and time registered, so a first mortgage was literally and legally registered "first". A new first mortgage can therefore only be registered as a "first" mortgage upon the discharge of an existing one if the holder of a second mortgage "postpones" (i.e., "puts back in time") to a time immediately following the registration of the new first mortgage.

Five-Percent Down Program This allows buyers to obtain up to 95% financing on properties up to a certain value. The loan must be insured against default by Genworth Mortgage Insurance Corporation or CMHC (Canada Mortgage and Housing Corporation). This maximum home value will vary according to location (local Realtors should know the applicable limit) and eligibility can vary with personal circumstances.

FULL ACCOUNTING - The requirement for full and complete accounting, such as details of all funds held in trust, and all monies handled on behalf of the principal.

FINDER'S FEES (MORTGAGE) - Often referenced as a mortgage referral fee, is paid to persons such as real estate brokers or mortgage brokers for successfully referring customers to lending institutions.

FIT UP - Sometimes referenced as fitting up or build-outs, it is the construction necessary within the enclosing walls to divide and improve the tenant's space into a functional layout.

FIXED ASSETS - Frequently referenced as capital assets, add value to a business and are used in the operation of the enterprise, and are being held by the company for the intention of resale in the marketplace.

FIXED EXPENSES - Charges that do not vary with occupancy, and have to paid whether the property is occupied or vacant.

FIXTURES - An item that is attached to the real property or building to become part of it.

FLASHING - Sheet metal or other material used in roof and wall construction to shed water.

FLAT PAYMENT - A payment structure in which the borrower is not required to repay any of the principal until the maturity date.

FLOOD PLAIN - The area, usually low lands, adjoining a watercourse that has been, or may be covered by floodwater.

FOOTING - The widen section, usually concrete, at the base or bottom of a foundation wall, pier or column.

FORECLOSURE - Remedial court action taken by a mortgagee, when default occurs on a mortgage, to cause forfeiture of the equity of redemption of the mortgagor, and also subsequent encumbrancers' equity of redemption.

FRAMING - The rough timberwork of a house, including the flooring, roofing, partitioning, ceiling and beams.

FRI (FELLOW OF THE REAL ESTATE INSTITUTE) - Designation to licensed individuals who have completed the Real Estate Institute of Canada (REIC) education program.

FRI (A) (FELLOW OF THE REAL ESTATE INSTITUTE APPRAISAL SPECIALIST) - Members who specialize in residential appraisals.

FRI (E) (FELLOW OF THE REAL ESTATE INSTITUTE EXECUTIVE) - Designation for unlicensed management professionals, who are not involved in residential or commercial sales.

FUNCTIONAL OBSOLESCENCE - Impairment of functional capacity or efficiency. Reflects the loss in value brought about by such factors as overcapacity, inadequacy, and changes in technology that affect the property item itself or its relation with other items comprising a larger property.

GABLE - An inverted 'V' or triangular shaped portion of a wall, extending down to the roof line, above the first floor level and may or may not contain a window or a decorative structure.

GARNISHMENT - A proceeding whereby property, money, or credits of a debtor; in the possession of another (the garnishee), are applied to the payments of debts by means of process against the debtor and the garnishee.

GENERAL CONTRACTOR - Normally selected through bidding procedures, is responsible for completion of the project in a skillful manner that is acceptable to both architect and owner.

Good Faith & Full Disclosure - Honesty of intention, abstention from taking advantage of another and freedom from knowledge of circumstances that ought to cause a reasonable person to investigate.

GOODWILL - The expectation of continued business activity arising from the reputation of a business, and can be a salable asset of a corporation and as such can be included in the balance sheet.

GRADUATED LEASE - A lease that provides for specific increases or decreases in rent at definite times based on specified conditions during the term of the lease.

GRADUATED PAYMENT - A blended payment plan with regular increases of individual payments to a predetermined level.

GRANDFATHER CLAUSE - A colloquial expression pertaining to a rule or regulation placed in force, but exempts various persons or situations owing to pre-existing conditions.

GRANT - A legal term used in deeds of conveyance to indicate a transfer of an interest or estate in real property by the Grantor to the Grantee.

GRANTEE/GRANTOR - The grantee is the party to whom an interest in real property is conveyed. The grantor conveys an interest in real property.

GROSS DEBT SERVICE RATIO (GDS RATIO) - Refers to the relationship between a borrower's income and the sum of principal, interest, and property tax payment during the year.

GROUND FAULT CIRCUIT INTERRUPTER - A ground fault specifically designed to shut the power off to a circuit when as little as .005 amps are leaking.

GUARANTOR - Person providing a separate personal covenant over and above a named party in a contract regarding some obligation(s): e.g., mortgage, personal loan or lease.

HOLDING OVER - The act of a tenant retaining possession of the premises longer than the term expressed in the lease; often referenced as over-holding.

HOLDOVER CLAUSE - A clause in a listing agreement that protects a real estate brokerage for a specific period of time of time after the listing agreement expires. It requires the payment of a commission fee when a buyer makes a private offer to purchase, after having been introduced to the property during the time the property was listed with the brokers.

HOME INSPECTION - The process by which a qualified person examines and evaluates various components of a residential building including but not limited to structural aspects, components, exterior coverings, roofing system, plumbing, electrical, heating, central air conditioning, insulation, ventilation, and interior structure. It is designed to provide a client with a thorough understanding of the condition of a property as of the date of inspection.

HOUSING ABSORPTIONS - Refers to the rate for newly completed units sold or rented.

HOUSING STARTS - The number applied to quantity of units, where construction has advanced to a stage where full (100%) footings are in place. In the case of multiple unit structures, the definition of a start applies to the entire structure.

HVAC - An acronym used primarily in commercial and industrial leasing/sales to indicate the Heating, Ventilating and Air-Conditioning facilities within a particular building/structure.

IMPLIED - Created by the conduct or words of other parties, and not arising from explicit agreements.

IMPOSSIBILITY OF PERFORMANCE - A contract may be discharged because of the impossibility of performance, or frustration due to supervening and unanticipated circumstances.

INCOME APPROACH - A procedure in appraisal analysis that converts anticipated benefits (dollar income) to be delivered from the ownership of property into a value estimate.

INCOME SOURCE VERIFICATION - Lenders will vary in terms of the type of proof required to support an application for mortgage financing. The most complete form is an Income Verification Form completed by the applicant's employer, which provides information concerning both the reliability and durability of the applicant's income stream.

INCURABLE DEPRECIATION - A loss in value resulting from physical deterioration or functional obsolescence that either cannot be corrected, or can only be corrected at a cost greater than their contribution to the value of the property.

INDEMNIFY - To secure against hurt, loss or danger; to make compensation for incurred hurt, loss or damage.

INDENTURE - A deed or agreement setting out specific objects and executed by the parties.

INDEPENDENT CONTRACTOR - Generally an individual who works according to his/her own methods and judgment.

INDUCEMENTS - The act of persuading or in some way influencing the actions and/or attitudes of others.

INFILL HOUSING - Any project that create new housing within an existing established neighbourhood.

INHERITANCE - Land passes to heirs after the death of the owner.

INSTRUMENT - A form of written legal document.

INTENSIFICATION - Regarding urban planning, involves the expanded use of buildings and serviced land to provide additional housing stock and more effectively use of existing municipal services as opposed to the creation of new housing stock through subdivision developments, and has various dimensions which includes the increased use of existing housing stock through the creation of accessory apartments.

INTEREST ADJUSTMENT DATE - The date in a blended payment plan, prior to commencement of the mortgage term, to which accrued interest computed on the various advances is calculated.

INTERIOR PARTITIONS - All types of interior non-load-bearing partitions that enclose or subdivide space and may be of steel, wood, glass, masonry, or combinations of these materials and can be either movable or non-movable, prefabricated, or built on the job.

INTESTATE - A person who dies without a will, or leaves one defective in form, in which case his/her estate descends by operation of law to the heirs or next of kin.

IRREVOCABLE - Incapable of being recalled or revoked; unchangeable, unalterable.

JOINT TENANCY - Ownership of land by two or more persons whereby, on the death of one, the surviving tenants take the whole interest in the property.

JOINT VENTURE - A real estate project undertaken by a group of investors in which the parties share in the project including any profits or losses.

JUDGMENT - The decision of the court and is most commonly found as a lien registered against land and is more fully described as a charge, or lien, upon the lands of a debtor.

JUDICIAL SALE - Is one type of remedy available to a mortgagee when the mortgage is in default. The mortgagee looks to the court to sell the property with the proceedings being applied against the mortgage debt.

JURISDICTION - Refers to the authority to act and the defined limitations of that authority.

LANDSCAPING - The planting of shrubs, grass and trees, including alterations to the contours of the property to improve the overall aesthetic appeal of the site.

LATENT DEFECT - A physical deficiency or construction defect not readily ascertainable from a reasonable inspection of the property, such as a defective septic tank or underground sewage system, or improper plumbing or electrical lines.

LAWFUL OBJECT - Being within the bounds of the law, in regards to a real estate transaction, it is the transferal of ownership of the seller's property to a purchaser.

LEACHING BED - One component of a disposal system normally built using two or more rows of buried distribution pipe.

LEASE - A contract between the landlord (lessor) and tenant (lessee) for the occupation or use of the landlord's property by the tenant, for a specified time and for a specified consideration (rent).

LEASE BUYOUT - A cash payment or other settlement made by the tenant to the landlord to terminate a lease.

LETTER OF INTENT - A general understanding of the parties that may ultimately lead to a detailed agreement setting out various provisions, covenants, terms and other matters between those parties.

LETTER OF OPINION - A brief, unsubstantiated statement of an appraiser's opinion of value or value range.

LEVERAGE - The use of borrowed funds to make investment(s) in real property in the hope of realizing a profit in addition to monies necessary to pay for the borrowed funds.

LEVY - To impose or assess a tax on a person or property.

LICENSE - Permission given by an authority to engage in an action for a particular purpose.

LICENSE LAW - A general reference in real estate to the regulatory controls imposed on real estate practitioners by a governing body.

LIEN - A right of encumbrance affecting any property, and can be either in the form of an agreement between two parties, namely, the party owing the money (lienor) and the party to whom those funds are due (lienee).

LIFE ESTATE - An interest in property that continues for the life of an individual and terminates in favour of others in the event of his/her death.

LIMITED LIABILITY - Responsibility for the debts of a business in relation to the amount of investment one makes within that enterprise.

LIMITED PARTNER - A participant in a limited partnership whose liability is confined to his/her investment and who does not have a voice in the management of the partnership.

LIMITED PARTNERSHIP - An investment arrangement that limits the partner's liability to the amount invested and also limits the profit he/she can make.

LINE OF CREDIT - A line of credit is a highly flexible form of interim financing that is based on the past performance and strength of personal or corporate covenants.

LINTEL - A horizontal structural member (beam) that supports the load over an opening, such as a door or window.

LISTING AGREEMENT - A written agreement under which the owner appoints a real estate broker for a designated period of time to sell, lease or exchange the property based on the owner's stated terms, and under which the owner agrees to pay the broker a commission.

LOAN RATIO - The ratio of the principal amount of the loan to the lending value of the property.

LOT GRADING - The general topography of the lot.

MARKET POSITION - The concept of positioning based on the premise that market niches exist.

MARKET RENT - The rental income that a property would most probably command on the open market, as indicated by current rentals being paid for comparable space as of the effective date of the rental appraisal.

MARKET VALUE - The highest price in terms of money, which the property will bring to a willing seller if exposed for sale on the open market; allowing a reasonable time to find a willing purchaser, buying with the knowledge of all the uses to which it is adapted and for which it can be legally used, and neither party acting under necessity, compulsion or peculiar and special circumstances.

MARKETABLE TITLE - A title that a court of equity considers to be so free from defect that it will legally force its acceptance by a purchaser.

MASTER/SERVANT - A master directly controls and supervises the work of the servant, who is bound to comply with all of the master's reasonable orders. The master is responsible to third parties for the servant's actions in the performance of that work. Although this relationship may have originated with the ancient doctrines of servitude, the concept persists today in relationships involving most employees in the typical business situation. It is also true of the registered real estate salesperson employed by a broker.

MATRIMONIAL HOME - Any property in which a person has an interest, and that is or was at the date of separation occupied by the person and the spouse as their family residence.

MATURITY DATE - The final day in the term of an agreement, most frequently used in real estate with respect to mortgages.

MECHANIC'S LIEN - A claim against a property which is filed by a person or corporation in the land registry office for labour, services or materials supplied.

MENTAL INCOMPETENCE - In terms to parties to a contract, any person declared to be mentally incompetent is incapable of contracting.

METES AND BOUNDS - A system of written land description whereby all boundary lines are set forth by use of terminal points and angles; metes referring to a limit or limiting mark (i.e., distance) and bounds referring to boundary lines (i.e., directions)

MINIMUM LOT SIZE / AREA - Normally set out in square feet/meters or acres/hectares upon which a building may be built in compliance with local zoning bylaws.

MISTAKE - In legal terms, applying to real estate contracts has a narrow meaning. Not every mistake or simple error affects a contract and is considered a legal mistake of fact. The law does not simply declare a contract void simply because one or other of the parties make a mistake. Only certain types of mistakes give rise to a remedy. Obviously, the determination of a mistake and its impact on a contract is a legal issue.

MIXED USE PROJECT - A planned development that provides at least two types of uses (e.g., retail/office, office/residential, etc.) within a single project.

MORE OR LESS - Term often found in a property, intended to cover slight, unimportant or insubstantial inaccuracies of which both parties are willing to assume the risk.

MORTGAGE - A conveyance of property to a creditor (mortgagee) as security for payment of a debt, with a right of redemption upon payment of the debt.

MORTGAGE RENEWAL - An agreement whereby the lender may agree to extend the loan, but possibly on revised terms, concerning such items as principal repayments and interest rate.

MLS® Listing - A signed multiple listing form contains an authority from the seller permitting the broker to employ the services of cooperating brokers who are members of the real estate board or association. The responsibility regarding promotion, negotiations, and payment of commission to cooperating brokers is that of the listing agent.

MULTIPLE LISTING SERVICE ®(MLS®) - The trademarks known as MLS, Multiple Listing Service and the MLS design marks are Certification Marks registered and owned by The Canadian Real Estate Association (CREA). These marks are protected throughout Canada for the exclusive use of members of CREA in connection with services defined as listing to effect the purchase and sale of real estate. The Certification Marks may only be used in association with listing services performed as part of a plural system arrangement and are performed by members in good standing of The Canadian Real Estate Association.

MUTUAL AGREEMENT - This is one of the essential elements of a contract. It is created by an offer, the acceptance of the offer and communication of the acceptance back to the offeror. It is the basis for a meeting of the minds between the contracting parties.

NATIVE LANDS - Those reserved lands held by the Crown for the use and benefit of native people.

NET (SINGLE-NET) LEASE - An agreement in which the tenant pays the rent and certain expenses connected with the leased premises.

NET-NET LEASE - An agreement in which the tenant pays all maintenance and operating expenses, plus property taxes.

NET-NET-NET (TRIPLE NET) LEASE - An agreement in which the tenant pays maintenance and operating expenses, property taxes, and insurance.

NET OPERATING INCOME - Annual net income remaining after deducting all fixed and operating expenses, but prior to deducting financial charges such as expenses for debt service, and income taxes.

NON-CONFORMING USE - Use of land prohibited by the terms of he current approved zoning by-law.

NORMAL WEAR AND TEAR - This refers to the physical deterioration that occurs while using the property without negligence .

NOTARY PUBLIC - An officer appointed by the Province with authority to take the acknowledgment of persons executing documents and to witness the signature(s) and affix a notarial seal.

NOTICE - Information about or warning of something. Notice may be by personal observation or by written or oral message from another person.

NOTICE OF POWER OF SALE - A notice delivered to the mortgagor (and spouse) and subsequent encumbrancers in accordance with the Mortgages Act (or the mortgage document), stating that a Power of Sale action is being commenced.

NOTICE TO VACATE - A legal notice requiring tenants to remove their possessions from the premises within a stated period or upon a specified date, and to deliver vacant possession of the premises to the owner, agent, or designated successor.

NUISANCE - In real estate activity, a nuisance normally refers to an act that affects the enjoyment and/or use of a person's property.

NULL AND VOID - Having no legal force or effect. This term is commonly found in an Agreement of Purchase and Sale that involves a condition and related waiver.

OCCUPANCY PERMIT - A permit issued by a municipality allowing the premises to be occupied for the uses intended.

OFFER TO LEASE - When accepted, an agreement between interested parties to enter into a lease that sets forth the basic lease terms.

OPEN HOUSE - The practice of licensed salespersons and brokers demonstrating listed property by inviting the public to inspect the property within selected hours on a specific day (or days).

OPEN LISTING - A listing given to any number of brokers without liability to compensate any, except the one who first acquires a buyer ready, willing and able to meet the terms of the listing, or secures the acceptance by the seller of a satisfactory offer.

OPEN MORTGAGE - Mortgage containing some form of prepayment privilege for the partial or total reduction of principal with or without penalty.

OPTION TO BUY /PURCHASE - A right given by the owner of property to another (for valuable consideration) to buy certain property within a limited time at an agreed price.

OVER-IMPROVEMENTS - The placement of improvements on a property that are excessive and consequently inconsistent with the overall size, quality, or appearance of other improvements within the general vicinity.