Moving on with the A-Z series, here are a few words you’d like to add to your real estate vocabulary:
I
Implied Contract
Legally enforceable agreement that arises from the conduct, assumed intentions, some relationship among the immediate parties.or due to the application of the legal principle of equity.
Incubation Period
The time frame during which the incubation space service is availed/set up is offered.
Incubation Space
A fully fitted out interim space offered by the lessor/developer to the lessee iterant for a short duration of three to 12 months till a permanent space/building is ready and operational. Sometimes available in Science Parks or Business Parks to assist or encourage R&D start-ups or to nurture small businesses.
Incumbrance (Encumbrance) Claim or lien or interest in a
property that complicates the title process, interfering with its use or transfer. Restrictive covenants.
Indemnity Agreement
1) An agreement by the maker to repay the beneficiary of the document up to the stated limit for any loss due to a named unforeseen event.
2) A provision in a lease that requires a tenant to pay (indemnify) a landlord for damages.
Independent Appraisal Value
Estimates provided by a person who has no participation in ownership of the property in question.
Independent Contractor
One who is hired to do a particular job and is subject to the direction of the person in charge. Independent contractors pay for their own expenses and taxes and are not viewed as employees with benefits.
Independent Expert
Someone with relevant specialist knowledge who is appointed to resolve a difference between parties, e.g. a rent review or the interpretation of a clause in a lease. They use their own specialised knowledge in addition to any evidence presented to them. Their decision is final and binding on the parties unless their contract of appointment provides otherwise.
Index Lease
A rental contract in which the tenant’s rental is tied to a change in a price index.
Indexing
To alter mortgage term, payment or rates according to inflation and or a suitable mortgage rate index.
Inflation
Increasing price levels. A decrease in the purchasing power of money.
Ingress and Egress
Access from a land parcel to a public road or other means of exit. Right to enter and exit through land owned by another.
Inheritance Tax
State tax based on the value of a property and other assets received through inheritance.
Initial Return
In an investment analysis the initial net income at the date of purchase expressed as a percentage of the purchase price.
Initial Term
Described in the agreement as the initial period for which the demised premise has been taken up on lease. Usually for a period of three years or 36 months.
Initial Yield
The percentage return on price or value derived from the current net passing income. This is the ratio between the initial income and price or capital value, expressed as a percentage. No allowance is made for any future rental growth.
Institutional Lenders
A financial institution or mortgage lender that invests its own funds as well as real estate funds in mortgages on behalf of their depositors
Institutional Property
Property such as schools, colleges, hospitals, universities, etc., fall under this category.
Interest-Free Security Deposit
A security deposit kept with the landlord by the tenant on which no interest can be claimed by the tenant from the landlord.
Interest-Only Mortgage
A mortgage under which the principal amount borrowed is repaid in one payment while interest payments are made periodically.
Interest-Rate Cap
An instrument that protects the holder from rise in variable (usually) short-term interest rates. The counter-party makes a payment to the holder when an underlying interest rate (the “index” or”reference” interest rate) exceeds a specified strike rate.
Interim Financing
Financing, used for a short term, to bridge the gap between the
purchase and the sale, is also called abridge loan!’ Construction loans are interim financing.
Internal Rate of Return (IRR) (Money Weighted Rate of Return)
It is a method to calculate the annual yield of a financial
instrument.The rate of interest (expressed as a percentage) at which all future cash flows (positive and negative) must be discounted in order that the net present value of those cash flows should be equal to zero.lt is something called the discounted cash flow rate of return.
Intrinsic Value
The value of the commoditylasset itself, rather than any special features that make its market value different.
Investment Property
Real estate, such as rental properties, which generate income.
Investment Yield
The annual percentage return which is considered to be appropriate for a specific valuation or an investment, being expressed as the ratio of annual net income (actual or estimated) to the capital value.
J
Joint Agent
Two or more agents jointly instructed by a principal to act on his behalf. In the case of estate agents this is normally on the basis that if any one of the agents effects the sale, letting or other disposition of the property, being the subject of the principal’s instructions, the other joint agent(s) will share the
remuneration in agreed proportions.
Joint Sole Agent
One of two or more agents jointly instructed as the only agents entitled to represent the principal. It is customary for the joint agents to share any commission earned on an agreed basis, irrespective of which agent effects the sale or letting.
Joint Frequency
Equal ownership, by two or more people. each of whom has an undivided interest, with the right of survivorship.
Joint Tenants
Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon the death of a joint tenant the decedent’s
interest passes to the surviving joint tenant or tenants by the right of survivorship.
Joint Venture
A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking wherein all parties agree to share in the profits and losses of the enterprise.
Judicial Sale
The sale of a property made under the order of the court through a representative appointed by the court and not the owner.
K
Kiosk
A small structure with one or more sides open, used as a newsstand, refreshment stand, booth, etc., to display or sell products.
L
Land Grant
A gift of government land to an individual or corporation for the most part in the best interest and benefit of the general public.
Land Reclamation
Creation of habitable land by filling up low-lying lands, wetlands, lakes or portions of the seashore.
Land Records
The records maintained under the provisions of or for the purpose of maintaining relevant land revenue code and includes copies of maps and plans or a final town planning scheme, improvement scheme or a scheme of consolidation of holdings that has come into force in any area under any law in force.
Land Registration
Registration of the ownership and other rights over land and constructional improvements thereon.
Landlocked Parcel
A plot of land entirely surrounded by other privately owned lands.
Landlord’s Improvements
Any work of a capital nature i.e.,other than maintenance or repair, undertaken by the landlord, or by the tenant at the landlord’s expense, which increases the value of the landlords interest in a property.
Landscape
The setting of the land surrounding a building or
structure. Nowadays, this is often done artificially to increase the value of the property.
Landscape Architect
A person who plans and designs the decoration of the land surrounding a building that usually involves features like water bodies, pavements, gardens, etc.
Land-Use Planning Certificate
Document stating zoning and land planning parameters.
Land-Use Right Certificate
Document stating right to possess a specific plot of land for a stated period of time.
Leasable Area
Area by which rental is based on; usually equivalent to grass area. See also ‘Gross Leasable Area’.
Lease
A contract by which an owner of a property (known as lessor) gives the right of possession and use to another person (lessee), for a
specified term and against a specified consideration.
Lease Agreement
An agreement recording a lease between a lessor and a lessee.Lease With Option to Purchase A lease agreement which gives the lessee the option of purchasing the property within or on or after a specified date. The price and conditions under which such purchase will take place are usually mentioned in the agreement.
Leaseback
An arrangement where a property is sold by a seller to a buyer and then leased to the former.
Chronologically, the lease rakes effect only after the sale, but they are considered part of the same transaction.
Leasehold
A property that is held under a lease.The title of the property remains with the owner who receives a lease rent which may be paid monthly, quarterly, annually or in lump sum for the entire period of the lease.The property reverts back to the owner after the period of the lease.
Leasehold Improvements
Additions, alterations and improvements made to a leasehold property by the lessee.
Leasehold Value
Total value of a leasehold right.
Leave & License
An agreement recording a license between a licensor and licensee. The term of the license should not exceed 60 months.This kind of agreement is specific to
Mumbai (Bombay) where corporates would enter into a Leave & License Agreement instead of a Lease Agreement to save on the Stamp Duty and registration charges. A Leave & License agreement is usually for a period of 36 months and differs from a lease as there is no transfer on interest, although the licensee acquires a right to occupy the premises.
Lender
An individual or corporate body which loans money that has to be repaid.
Lessee
The person or corporate body that takes a property on lease.
Lessee Improvements
To enhance the deemed premises for the tenant’s business operations, the tenant is entitled to carry out interior works with prior intimation to the landlord
and subject to necessary approvals from the local authorities.
Lessee’s Indemnification
The lessee will indemnify the lessorilandlord against any loss or damage which the lessor/landlord may sustain by reason of claims brought against the lessor alleging bodily harm, injury and death to any person or damage to property which has been mutually discussed, described and agreed in the agreement.
Lessor
The person or corporate body that leases out a property.
Lessor’s Indemnification
The lessor/landlord will indemnify the lessee against all and any loss or damage which the lessee may sustain by reason of claims brought against the lessee alleging bodily harm, injury and death to any person or damage to property that has been mutually discussed, described and agreed in the
agreement.
Letter of Comfort
A letter issued to a lending institution by a parent company acknowledging the approval of a subsidiary company’s attempt for financing. In property terms, in particular, such a letter may be written by a bank or other financial institution on behalf of a prospective developer, purchaser or lessee.The purpose is to give confidence to the recipient that the other party will have the resources to complete the contract or in other respects may be relied upon to act in
accordance with what is promised. Specific terminology used in the letter determines whether such assurance constitutes a binding contract or only a moral obligation on the part of the issuer.
Letter of Intent (L01)
A letter written by a party or joint venturer expressing an intention to proceed with the transaction in the future. A letter of intent is not usually legally binding.
Line of Credit
A sum of money that is sanctioned by a bank or a lending institution for use by a borrower. Any
amount up to the value of the sanctioned amount is then
available on call for a given period of time.
Liquidated Damages
A pre-determined amount that has to be paid by a party who breaches a contractThe amount, or a method to arrive at a figure, is mentioned in the contract Such
amount has to be a close approximation of the losses incurred.
Liquidation
The sale of all financial assets to settle debts or claims following the closure of a business.
Loading
Area over and beyond the net usable area i.e., the pro rata share of common area in the building expressed as a percentage.
Lock In Period
A period mentioned in an agreement during which neither party can terminate the agreement.
Long Term Capital Gain
Profit on the sale of an asset that has been held for a given period of time (usually more than one year; the period varies from country to country). Such profits are usually taxed at a rate -lower than the highest rate of income tax.
Long Term Financing
An agreement for the advance of money for a long period of time. The legal definition of “long-term” varies from country to country.
Long Term Lease
A lease agreement that is valid for a long period of time.The legal
definition of “long-term” varies from country to country.
Loss of Access
The taking away of the right to enter or exit a property.
M
Maintenance Charge
A charge billed to an end user for installation, addition, or removal of equipment, services, repairs, or
management services.
Make-Good
The act of returning a vacated facility back to its original state prior to the ft-out Management Agreement A contract between the
developer/ owners of a hotel asset and a Management Company to operate a hotel.
Management Company I Operator
Those companies that own different brands and will take on the management of a hotel once the developer has developed it as per specifications.
Market Capitalisation
Number of shares issued by a listed entity multiplied by the unit price on the stock exchange.
Marketable Title
Title that can be marketed or sold readily. Any court can enforce this title.
Master Lease
A controlling lease in an apartment or office building that controls subleases.
Master Plan
Document that describes, in narrative and with maps,an overall development concept including both present property uses as well as future land development plans. The plan may be prepared by a local government to guide private and public development or by a developer on a specific project.
Maturity
The due date when a mortgage or a loan must be paid.
MBO
Acronym for a Multi-Brand Outlet (retail industry usage)
Mezzanine Floor
Balcony or low ceiling overhang just above the main floor and below the next storey.
Mezzanine Loan
A mezzanine loan is a relatively large, unsecured loan and normally not backed by a pledging of assets. The loan can carry a detachable warrant (the right to purchase a certain number of shares or stock or bonds at a given price for a period of time) or a similar mechanism to allow the lender to share in the future success of the business. Mezzanine loans are dependent on cash flow for repayment
Mineral Rights
Ownership rights to the minerals or other precious and natural
resources, in one’s property. The privilege of gaining income from the sale of oil, gas and other
valuable resources found on land.
Minimum Lot
The smallest lot area required or allowed for building under themunicipal zoning code.
Minimum Rent
A rent below which a variable rent will not fall, e.g.:
1) A stated rent payable for the whole or part of the duration of a lease containing a formula for a
possibly higher rent on review.
2) A dead rent under a mining lease.
3) A base rent under a turnover lease.
Misrepresentation An untrue statement
Misrepresentation is a form of fraud that could lead to cancellation of a contract and could lead to liabilities such as criminal and/or civil proceedings against the party who made such misrepresentations.
Mixed Use Development
Project which incorporates two or more property uses e.g. an office building with a retail offering.
Mom and Pop Store
Small or micro retail units that are family-owned and family-operated; often situated in neighbourhood locations.
Month to MonthTenancy
A tenancy when rent is being paid monthly and where the lease can be renewed for each succeeding month or terminated at the option of either party with sufficient
notice.
Mortgage Banker
An entity whose principal business is the originating, financing, closing, selling and servicing of loans,
secured by real property for institutional lenders on a
contractual basis.
Mortgage Bonds
Bonds collaterlised by real estate. Two kinds of mortgage bonds are senior mortgages (having a first claim on assets and earnings) and junior mortgages (having a
subordinate lien). A mortgage bond may have a closed-end provision that prevents the firm from issuing additional bonds of the same priority against the same property or may be an open-end mortgage that allows the issuance of additional bonds having equal status with the original issue.
Mortgagee
Financial institution that lends money to a borrower, taking a lien on that particular property as security.
Mortgagee in Possession
The position a lender takes in repossessing a property where the borrower is in default of its loan obligations.
Mortgagor
Person or entity that borrows money to purchase a property, granting a mortgage on the property to the lender as security for the loan.
Motel
Originally a building on or near a major highway, providing food and accommodation to travellers with common parking for their vehicles. Now most motels offer most of the features of hotels, such as restaurants, recreation, etc.
Multi-Family Dwelling
Residential property containing individual units for several
households within the same structure. A building to house several families.
Multiple Agency
The appointment of two or more agents to dispose of the same
property independently of one another on the basis that only the successful agent is entitled to a commission.
Multiple Listing
Arrangement where the real estate listings of many local agents are provided so that the property receives the greatest market exposure.
N
Negative Amortisation
A loan repayment schedule in which the outstanding principal balances of the loan increases, rather than amortising, because the scheduled monthly payments do not cover the full amount required to amortise the loan.The unpaid interest is added to the outstanding principal, to be repaid later.
Negative Cash Flow
A situation where income is less than expenses.
Negotiable Instrument
A promise to pay money,transferable from one person to another. A bill of exchange,cheque, promissory note or other written contract for payment that may serve as a substitute for money. It is simple in form and easy to transfer.
Negotiation
The deliberation which takes place between two or more parties
prior to an agreement.That which transpires in the negotiation makes no part of the agreement, unless introduced into it
Net Absorption
Change in occupied real estate stock between two points in time.
Net Effective Rate
The rent after allowing rent-free periods, rebates, incentives or concessions, if any.
Net Floor Area
Refers to the net useable floor area in a building. E.g. the net floor area of an office floor is the gross floor area less areas occupied by columns, walls, common passageways, lift lobbies and toilets.
Net Internal Area (NIA)
The usable space within a building measured to the internal finish of structural, external or party walls, but excluding toilets, lift and plant rooms, stairs and lift-wells,common entrance halls, lobbies and corridors, internal structural walls and car-parking areas. (Also known as “effective floor area”)
Net Present Value (NPV) Method
A method used in discounted cash flow analysis to find the sum of money representing the difference between the present value of all inflows and all outflows of cash
associated with the project by discounting each at a target yield.
Net Rent
The stated rental on a net floor area basis, exclusive of outgoings.
Net Rentable Area
The actual area for which rent can be charged.
Non-Performing Loan
A bank loan where the borrower has both ceased to make full
interest payments, such that the lender has stopped earning
interest and one where the borrower is likely to default on the principal.
Nonrecourse Loan
A type of loan where the lender may take the property pledged as collateral to satisfy a debt but has no ability to take the other assets of the borrower.
Notice to Quit
A certain and reasonable notice required by law, custom, special agreement or statute, served to the tenant to vacate rented
property.
Notation
Substitution of another borrower in place of the original borrower or lessee, releasing the latter from all obligations.This is done with the consent of the lender or
landlord.
Also refer to A-Z of Real Estate Part I
A-Z of Real Estate Part II
A-Z of Real Estate Part III
A-Z of Real Estate Part IV
A-Z of Real Estate Part V
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