The Home Buyer's Glossary of Terms

ABSTRACT

A written history of the title to a parcel of real estate as recorded in a Land Registry Office.

ACRE

A measure of land equalling 160 square rods, or 4,840 square yards, 43,560 square feet, or .4 hectares.

ADVERSE POSSESSION

When an individual, not the owner, takes actual possession of the property, hostile to, and without the consent of the owner.

AGENT

One who is authorized by a principal to represent him/her in business transactions with a third party, In the real estate profession it refers to a licensed brokerage.

AGREEMENT for SALE

An agreement for the purchase of real property wherein the purchase price is paid in installments and title is not conveyed to the purchaser until the purchase price is paid in full.

AGREEMENT OF PURCHASE AND SALE

A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions.

AGREEMENT TO LEASE

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

AMORTIZATION

Repayment of a mortgage in equal installments, usually monthly, of principal and interest, rather than interest-only payments.

APPRAISAL

A professional estimation of the value of the property.

APPRAISED VALUE

An estimate of the value of the property. Conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.

APPURTENANCE

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

ASSESSED VALUE

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

ASSESSOR

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

ASSUMABILITY

Allows the buyer to take over the seller's mortgage on the property.

ASSUMPTION OF MORTGAGE

A buyer's agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.

AUTHORITY

The legal power or right given by a principal and accepted by the agent to act on the principal's behalf in business transactions with a third party.

BALANCE DUE ON COMPLETION

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

BALLOON PAYMENT

A lump sum principal payment due at the end of some mortgages or other long-term loan.

BREACH OF CONTRACT

Failure to fulfill an obligation under a contract. Breach confers a right of action on the offended party.

BROKER

See Real Estate Broker.

BUILDING CODES

Regulations established by local governments providing for structural requirements for building.

BUILDING LINE

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

BUILDING PERMIT

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

BUNDLE OF RIGHTS

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

CAP

The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.

CAVEAT EMPTOR

"Let the buyer beware." The buyer must examine the goods or property he/she is buying and he/she, therefore, buys at his/her own risk.

CHARGE

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

CHATTEL

Personal property which is tangible and moveable.

CLOSED MORTGAGE

A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of the closed term.

CLOSING DATE

The date on which the sale of a property becomes final.

CLOUD ON TITLE

Any encumbrance or claim that affects title to real property.

COLLATERAL

Assets pledged as security on a loan. For example, real estate serves as collateral in a mortgage.

COMMISSION

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

COMMON LAW

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

COMPENSATION

Payment or reward for performance of service.

COMPOUND INTEREST

Interest on both the original principal and on interest accrued.

CONDITION PRECEDENT

A condition in a contract which calls for the happening of some event, or performance of some act, before the agreement can become binding on the parties.

CONDITION SUBSEQUENT

A condition referring to a future event upon the happening of which the contract becomes no longer binding on the parties.

CONDOMINIUM

A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (walls, floors, ceilings) serve as its boundaries.

CONDOMINIUM FEES

A common payment among owners which is allocated to pay expenses.

CONSIDERATION

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

CONTINGENCY

A condition that must be satisfied before a contract is binding. For instance, an agreement for purchase and sale may be contingent upon the buyer obtaining financing.

CONSTRUCTION LIEN

See Mechanics Lien

CONTRACT

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

CONVENTIONAL MORTGAGE

A first mortgage outside the conditions of the National Housing Act granted by an institutional lender such as a bank, mortgage, loan, or trust company wherein the amount of the loan does not exceed 75% of the approved lending value of the property.

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

COOPERATIVE

A form of multiple ownership in which a corporation or business trust entity holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.

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

A person to whom a debt is owed by another person termed the debtor.

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

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

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

Failure to fulfill an obligation.

The portion of the sown payment delivered to the vendor by the purchaser with a written offer as evidence of good faith. Also known as earnest money.

A legal identification of land or premises.

One who engages in the subdivision or improvement of land.

To repay a mortgage in full.

The estate (i.e. property) which derives benefit from an easement over a servient tenement, as in a Right-of-way.

The buyer's cash payment towards the property. The difference between the purchase price and the amount of the mortgage loan.

A two-family dwelling or house.

Residence.

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

The study of how persons and society choose resources which have alternative uses, to produce various commodities over time and distribute them for consumption now and in the future, among various people and groups in society.

The unauthorized extention of the boundaries of land.

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

Equity is the difference between the selling price and any charges against the property and appraised/market value.

The right of the mortgagor to reclaim clear title to the property upon full repayment of the debt.

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

An interest in land.

A bar to alleging or denying a fact because of one's own previous actions or words to the contrary.

Rules of behaviour made and accepted by business to provide fair and moral practice.

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

Authority delegated by the principal which clearly sets forth in exact, plain, direct and well-defined limits those acts and duties which the agent is empowered to perform on behalf of the principal, e.g. an exclusive listing.

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.

Chattels included in the sale.

An estate in which the owner has unrestricted power to dispose of the property as desired, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

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

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

The rough timber work of a house, including the flooring, roofing, partitioning, ceiling and beams.

A technical term used in deeds of conveyance to indicate a transfer of an interest or estate in land.

The party to whom an interest in real property is conveyed.

The party who conveys an interest in real property by deed.

The gross annual income required to cover payments associated with housing (mortgage principal and interest, taxes, secondary financing, heating, and 50% of condominium fees, if applicable). Expressed as a percentage.

A mortgage loan that exceeds the normal limit of a conventional first mortgage, in regard to the ratio of the loan amount to the property's lending value; the higher loan is made possible by a mortgage insurance plan.

Protection against failure of mechanical systems within the property. Usually includes plumbing, heating systems, and installed appliances.

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

A document or deed, usually in duplicate, expressing certain objects between the parties.

A person who is a minor, under the age of eighteen, and thus incapable of the independent judgment necessary to undertake a legal obligation.

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

A form of written legal document.

The percentage which is charged for the use of borrowed money.

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

Incapable of being recalled or revoked; unchangeable, unalterable.

An equal, undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest in the property.

The decision of the Court.

The person from whom another holds tenancy.

A fee paid to the municipal and /or provincial government for the transfer of property from seller to buyer.

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

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

Tenant under a lease.

The person who grants use of property under lease to a tenant.

Your debts, for example, a car loan.

An encumbrance or claim against real property that may be voluntary. For example, a homeowner agrees to pledge real estate as collateral for a home improvement being done by a contractor. A lien may also be involuntary. For example, a homeowner is delinquent in payment of a property tax bill. An involuntary lien is placed on the property by the relevant municipality.

A legal document giving notice that an action or proceeding is pending in the courts which affects the title to the designated property.

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

A title which a court of equity considers to be so free from defect that it will enforce its acceptance by a purchaser.

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

The end of the term, at which time you can pay off the mortgage or renew it.

A claim filed in the land registry office by an individual, or company, for labour or material, or both, supplied for the improvement of the property.

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

That area which includes not only the entire chief urban core of a city (the central city) but also the outlying suburbs which are appended thereto.

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

A person who is under the age of legal competence, which is eighteen years in Ontario.

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

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

The one who makes the mortgage; the borrower or debtor.

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

Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.

Pays off the mortgage if the borrower dies.

An arrangement among brokerages, usually real estate board members, whereby each brokerage presents its listings to the other members, who may negotiate the transaction.

Notice filed in court by mortgagor under foreclosure proceedings that he desires an opportunity to redeem.

The basic requisite of any contract is a proposal by one party, called the offeror, to another party, called the offeree, to accept the basic terms of the Agreement. If the offeree indicates assent to the proposal, there is an acceptance and the contract will bind both parties to its terms.

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

Allows partial or full payment of the principal at any time, without penalty.

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.

All property, except land and the improvements thereon.

A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.

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

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

Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a 'firm' offer when you find the right home.

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

Voluntary payments in addition to regular mortgage payments.

The employer of an agent or brokerage, who gives the agent the authority to do some act for him/her.

In mortgage law, this term refers to the debt itself, as distinguished from interest. This is the amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.

A potential buyer or customer.

A general release of all claims or rights to a parcel of land.

"Real Estate" includes real property, leasehold and business whether with or without premises, fixtures, stock-in-trade, goods or chattels in connection with the operation of the business as defined in the Real Estate and Business Brokers Act of Ontario.

A brokerage who represents a principal in a real estate trade. (See more formal definition in the Real Estate and Business Brokers Act.)

The combination of the tangible and intangible attributes of land and improvements. Value-wise, it is the sum of the value of the real estate, considered as land and structure and, for example, the tangible value arising by reason of a favourable lease.The real estate, plus the rights that go with it.

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

Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

Re-negotiation of a mortgage loan at the end of a term for a new term.

The compensation paid for the temporary use, and/or occupation of real estate.

See Zoning By-law.

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

The interest one has in a piece of property.

The distinguishing feature of joint tenancies which provides that, where land is held in undivided portions by co-owners, upon the death of any joint owner, his/her interest in the land will pass to the surviving co-owner, rather that to his/her estate.

The right to pass over another's land, more or less frequently, according to the nature of the easement.

The rights of the owners of lands on the banks of watercourses, to make advantageous use of the water on, under, or adjacent to his land, including the right to acquire accretions, wharf slips, and fish therefrom.

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

A licensee of a brokerage authorized to trade in Real Estate (as defined within the Real Estate and Business Brokers Act). Also can be referred to as a Sales Representative or an Associate Broker.

A term indicating that a conveyor has received adequate consideration as evidenced by his/her voluntary delivery. The word "sealed" adds more strength since under old conveyancing law an official seal was used as a substitute for consideration.

Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.

Land over which an easement exists in favour of the dominant tenement.

The distance from the curb or other established line within which no buildings may be erected.

A relatively thin and small unit of roofing, partially laid in overlapping layers as a roof covering or as cladding on the sides of buildings.

An assessment which is not customarily levied and which is made against only those specific parcels of property directly benefiting therefrom.

A remedy in a court of equity compelling a defendant to carry out the terms of an agreement or contract. It is available only where the remedy of damages can not afford adequate relief to the plaintiff.

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

A law established by an act of the legislature.

A law which provides that certain contracts must be in writing in order to be enforceable at law. It includes real estate contracts.

Any cement-like material used as an exterior covering for walls and the like, put on wet and drying hard and durable.

One of the series of wood structural members used as supporting elements in walls and partitions. (Plural: studs or studdings)

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

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

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

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

One who occupies land or tenement under a landlord.

A system of land holdings for a temporary time period.

In a mortgage "term" is the actual length of time for which the money is loaned and for which the interest rate is fixed.

A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date.

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

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

To convey from one person to another.

An account separate and apart from one's personal monies, as required by law in the case of a brokerage.

Estimated worth or price. The act of ascertaining how much specific real property is worth.

A mortgage with fixed payments, but fluctuating interest rates. The changing interest rate determines how much of the payment goes towards the principal.

A seller of real property.

When the seller provides some or all of the mortgage financing in order to sell their property

Of no legal effect. A nullity.

Where one party to a contract is entitled to rescind the contract at his option.

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