Here are a list of common Real Estate terms.



The surrender or release of a right, claim, or interest in real property.


Often and commonly referred to as free rent or early occupancy and may occur outside or in addition to the primary term of the lease.

Above building standard

Upgraded finishes and specialized designs necessary to accommodate a tenant's requirements.


Giving up or nullifying one's rights. In the uniform Landlord Tenant law, tenants may not be required to give up any of their rights in advance of signing the lease


The rate, expressed as a percentage, at which available space in the marketplace is leased during a predetermined period of time. Also referred to as "Market Absorption".

Absorption field

A part of a septic system, it is a system of narrow trenches through which the discharge from the septic tank infiltrates into the surrounding soil.

Absorption rate

When analyzing demand for office space, the total number of vacant square feet of office space in the market area divided by the square footage historically leased per year. For example, 750,000 square feet leased per year divided by 3 million square feet of available vacant office space in a city, the absorption rate is 4.

Abstract of title

A history of a title and the current status of a title based on a title examination.

Abstract or title search

The process of reviewing all publicly recorded transactions to determine whether any title defects exist that could interfere with a clear transfer of property ownership.


Parcels of land next to each other, which share a common border.

Accelerated cost recovery system

A tax calculation that provides greater depreciation in the early years of ownership.

Accelerated depreciation

A bookkeeping method that provides faster property depreciation in the early years of ownership.

Acceleration clause

A clause that provides the mortgagee (lender) the right to demand immediate repayment of the loan balance upon default of the mortgagor (borrower). "Acceleration" is also triggered by the due on sale clause (demands immediate repayment if the home is sold).


Voluntary expression by the person Receiving the offer to be bound by the exact terms of the offer; must be unequivocal and unconditional.


The right to go onto and leave a property.


Property owners' rights to all the land produces or all that is added to the land, either intentionally or by mistake.

Accessory apartment uses

Uses that are incidental or subordinate to the main use of the building, such as a laundromat.

Accord and satisfaction

A new agreement by contracting parties that is satisfied by full performance, thereby terminating the prior contract as well.


The gradual building up of land in a watercourse over time by deposits of silt, sand, and gravel.

Accrual rate

The periodic rate at which interest is charged or due on a mortgage. This may differ from the pay rate.

Accrued expenses

Expenses seller owes on the day of closing but for which the buyer will take responsibility (such as property taxes).

Accrued interest

Interest which is charged or due on a loan but has not yet been paid. Frequently the accrued interest is added to the principal balance and commonly must be paid before any principal reductions are allowed.


see Alternative Credit Enhancement Structure.


see American Council of Life Insurers.


A formal statement before an authorized official (e.g., notary public) by a person who executed a deed, contract, or other document, that it was (is) his free act.


The act of acquiring a property.

Acquisition cost

The basis used by the FHA to calculate the loan amount.


A land area containing 43,560 square feet.


For specific Performance - A court action to compel a defaulting principal to comply with the provisions of a contract.

Action to quiet title

A lawsuit to clear a title to real property.

Act of waste

A violation of the right of estovers.

Actual age

Chronological age.

Actual damages

In the event of a breach of contract, the award of money to compensate for the actual loss caused by the failure of the non breaching party. Unpaid rent or a bill for a hole in the wall could be considered actual damages. The Uniform Landlord Tenant Law generally requires that the landlord document actual damages when deducting from the security deposit.

Actual eviction

The removal of a tenant by the land lord because the tenant breached a condition of a lease or other rental contract.

Actual notice

The knowledge a person has of a fact.


see Americans with Disabilities Act, 1990.


An addition or change to an existing contract between two (2) or more parties.

Additional bonds test

A test or screening mechanism to assess the amount of new bonds that can be issued by a firm or entity. Since bonds are secured by assets or revenues of a corporate or governmental entity, the underwriters of the bond must insure that the bond issuer can meet the debt service requirements of any additional bonds. The test usually is based on the issuer meeting specific financial benchmarks, such as what portion of the issuer's revenues or cash flow can be devoted to paying interest.

Additional principal payment

Additional funds outside of the scheduled loan payment to reduce the principal balance and shorten the term of the loan.

Add-on factor

Often referred to as the Loss Factor or Rentable/Usable (R/U) Factor, it represents the tenant's pro-rata share of the Building Common Areas, such as lobbies, public corridors and restrooms. It is usually expressed as a percentage which can then be applied to the usable square footage to determine the rentable square footage upon which the tenant will pay rent.


Lying Near to but not necessarily in actual contact with.


Continuous, attaching, in actual contact with.

Adjoining lands

Lands sharing a common boundary line.

Adjustable rate mortgage (ARM)

A mortgage in which the interest rate changes according to changes in a predetermined index.

Adjusted basis

Value of property used to determine the amount of gain or loss realized by an owner upon sale of the property; equals acquisition cost plus capital improvements minus depreciation taken.

Adjusted sales price

The amount realized minus fix-up expenses.


Additions or subtractions of dollar amounts to equalize comparables to subject property in the sales comparison approach to estimating value.

Adjustment period

The amount of time between interest rate adjustments in an adjustable-rate mortgage.

Administration rate

The annual rate of the servicing fee and trustee fee, expressed as a percentage of the outstanding principal balance of each loan.

Administrative law judge (ALJ)

A judge who hears complaints and makes decisions regarding statutory violations of law.

Administrative discipline

A directive by the Department of State which may result in fines or the suspension or revocation of a license.

Administrative law

Laws which address administrative directives in the form of rules, regulations, and orders to carry out regulatory powers.


A male appointed by a court to administer the estate of a person who has died intestate.

Administrator's deed

One executed by an administrator to convey title to estate property.


A female appointed by a court to administer the estate of a person who has died intestate.

Ad valorem

Latin meaning "according to value"; real property is taxed on an ad valorem basis.


Payments made by the servicer on behalf of delinquent loans (special servicer) or performing loans (master servicer) so that payments on the certificates can be paid as scheduled. Advances can be required not only for principal and interest but also for property protection, taxes, insurance and foreclosure costs. The servicer has a proxy claim to subsequent collections and foreclosure proceeds as reimbursement for advances up to an amount that was stipulated as "recoverable." Servicers do not have to advance fees that are deemed "non-recoverable" by the trustee or an officer of the servicers; also see no recoverable advance. Servicers are usually paid prime plus one per cent for their advances.

Adverse possession

A method of acquiring title to real property by conforming to statutory requirement; a form of involuntary alienation of title.

Advertising purchased

space in a newspaper, magazine or other medium used to attract public attention to a commodity for sale or lease.

Affirmative action

A policy expressed in some form of legislative act with respect to the handling of certain public or private acts of conduct.

Affirmative easement

A legal requirement that a servant owner permit a right of use in the servant land by the dominant owner.


The fiduciary relationship between a principal and an agent.

Agency closing

When a lender uses a title company or other firm as an agent to complete a loan.

Agency disclosure

Most states require agents who act for both buyers or sellers to disclose who they are working for in the transaction.

Agency securities

Securities issued by government or quasi-government agencies such as the Fannie Mae (Federal National Mortgage Association), Freddie Mae (Federal Home Loan Mortgage Corporation), or Ginnie Mae (Government National Mortgage Association). Agency securities are not rated by rating agencies but nonetheless have an implied triple-A rating.


A person hired by another to act on his or her behalf.

Aggregation risk

The risk assumed while mortgages are being warehoused during the process of pooling them for ultimate securitization. The mortgage holder faces the risk that the value of the mortgages will decline before the securitization can be executed due to factors such as adverse interest rate movements or credit losses.


A contract requiring mutual assent between two or more parties.

Agreement of sale

A legal document the buyer and seller approve detailing the price & terms of the transaction.

Agricultural districts

Created and protected by New York statute, these areas are used for animal grazing and crop production.

Air conditioning

The units are either tenant controlled and or owner supplied. The tenant is usually responsible for having an annual maintenance contract. The constant use of the A/C unit will translate into a high electricity bill. There are cases where the A/C unit is shared between two or more offices. In this situation the tenant will be charged a per sq. ft. fee for the use of the A/C for ex/ $1.25 per sq. Ft. and the electricity will be submetered.

Air rights

Rights in the air space above the surface of land.

Alien age

The citizenship or immigration status of any person who is not a citizen or national of the United States.


Transfer of title to real property.

Alienation clause

A statement in a mortgage or deed of trust entitling the lender to declare the entire principal balance of the debt immediately due and payable if the borrower sells the property during the mortgage term. Also known as due-on-sale clause.

All-in cost

The term applied to the total costs of a securitization. Usually quoted in basis points to reflect what would have been added to the yield if the expenses had not been applied to the creation of a security.

Allocated loan amount

The portion of the principal amount of a blanket mortgage associated with each individual property. This term is applicable when several properties are financed under one blanket mortgage with each property allocated its share of the total mortgage balance.

Allocation of realized losses

A CMBS provision that defines how realized losses will be allocated to each class of certificate holders.

Allodia system

The type of land ownership existing in the United States whereby individuals may hold title to real property absolutely.

Allowance over building shell

Most often used in a yet-to-be constructed property, the tenant has a blank canvas upon which to customize the interior finishes to their specifications. This arrangement caps the landlord's expenditure at a fixed dollar amount over the negotiated price of the base building shell. This arrangement is most successful when both parties agree on a detailed definition of what construction is included and at what price.


Increased soil, gravel, or sand on a stream bank resulting from flow or current of the water.

Alternative mortgage

A home loan program that does not conform to standard fixed-rate mortgage terms.

American council of life insurers (ACLI)

A trade association for life insurance companies based in Washington, DC. They collect data from a number of participating life companies on commercial real estate portfolios, including data on mortgage delinquencies, and disseminate those data. The data on delinquencies represent approximately 85% of all mortgages held by life insurance companies.

Americans with disabilities act (ADA)

A law that requires that property that is open to the public include features that facilitate access to the building. The ADA is designed to eliminate discrimination against individuals with disabilities by providing equal access to jobs, public accommodations, government services, public transportation and telecommunications.


The process of paying the principal and interest on a loan through regularly scheduled payments.

Amortization schedule

Designation of periodic payments of principal and interest over a specific term to satisfy a mortgage loan.

Amortization tables

Mathematical tables used to calculate a borrower's monthly payment.

Amortization term

The length of time required to amortize the mortgage loan expressed as a number of months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.

Amortized mortgage

One in which uniform installment payments include payment of both principal and interest.


The amount of current or electricity flowing though a wire.

Anchor store

Major department store in a shopping center, such as a national chain store. Also called key tenant. These tenants are important as they are meant to draw in many customers who may also shop at the smaller stores.

Anchor tenant

The major or prime tenant in a shopping center, building, etc.


Addition of an area into a city.

Annual mortgagor statement

An annual statement to borrowers detailing the remaining principal balance and amounts paid for taxes and interest throughout the year.

Annual percentage rate (APR)

The actual cost of borrowing money, expressed in the form of an annual interest rate. It may be higher than the note rate because it represents full disclosure of the interest rate, loan origination fees, loan discount points, and other credit costs paid to the lender.


The payment of a fixed sum at regular intervals.


The principle that property value is based on expectations or hopes of the future benefits of ownership.

Antitrust laws

Laws designed to preserve free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Most violations of antitrust laws in the real estate business involve either price-fixing (brokers or managers agreeing to set fixed compensation rates) or allocation if customers or services (brokers or managers agreeing to limit their areas of trade or dealing to certain areas or properties).

Antitrust violations

Any business activity where there is a monopoly, a contract, a conspiracy, or a combination that negatively impacts an individual's or a company's ability to do business.

Apartment information vendor

A licensed individual who is paid to provide information concerning the location and availability of residential real property.

Apartment sharing agent

A licensed individual who is paid to arrange and coordinate meetings between current owners of real property who wish to share their housing with others.

"A" pieces

Security classes, or tranches, that are rated as investment grade, therefore appropriate for regulated institutional investors (i.e., triple-A, double-A, single-A, and triple-B). Also called senior pieces.

Application fee

An application fee is charged by some lenders and may include charges for items such as property appraisal and/or a credit report unless those fees are reported separately.


Division of property and school tax monies so that school districts, counties, towns and cities in the different municipalities all pay their fair share of the tax levy.


A professional opinion of the value of a property by a licensed real estate appraiser.

Appraisal by capitalization

Income approach to appraisal of income-producing real estate.

Appraisal fee

The fee that a professional real estate appraiser charges to appraise, or estimate the market value of, a property.

Appraisal process

An organized and systematic program for estimating real property value.

Appraisal reduction

Following certain events based on loan delinquency, an appraisal will be performed to determine if the property value justifies any further advances by the master servicer. If the value is reduced below the loan balance plus authorized advances, the master servicer will stop or reduce principal and interest payments on that loan to the Trustee. The Trustee will then reduce principal and interest payments to the certificate holders in order of their priority, beginning with the firstloss security.

Appraisal report

A written report on the value of a property based on recent sales of comparable property in the area.

Appraised value

A professional opinion of the current market value of a property.


An increase in the value of a home or other property.

Approaches to value

Methods of estimating real property value: sales comparison, income, and cost.

Approved assessing unit

A division of local government that has completed a property reevaluation and been certified by the New York State Office of Real Property Services.


All rights or privileges that result from ownership of a specific property and move with the title.

Appurtenant easement

A right of use in the adjoining land of another that moves with the title to the property benefiting from the easement.

APR (annual percentage rate)

A measure of interest that expresses the cost of a mortgage as a yearly rate on the loan balance. The APR assumes the loan is held for its full term. For adjustable-rate loans, the APR assumes the loan's index doesn't change from its initial value.


A form of resolving a dispute that includes two or more opposing parties and a neutral third party; the neutral third party makes a judgment after hearing both sides.

Area management broker (AMB)

A property manager who works directly for the Federal Housing Administration managing subsidized housing under a contract.

Area variance

Permission to use land in a manner not normally allowed by the dimensional or physical requirements of the zoning ordinance.


Argus is used for discounted cash flow valuation. It is a transaction based software that can be used to determine the buying or selling value of a property. Cash flow reports can summarize the investment value of a property. For lease analysis, individual tenant cash flow can be determined directly from rent roll; as well as net present value of lease proposals for a space. For a broker, Argus is the most popular software because it is transaction based.

ARM (adjustable rate mortgage)

A home loan with an interest rate that periodically adjusts to reflect changes in a specified financial index.

ARM index

A publicly published number used as the basis for adjusting the interest rates of adjustable rate loans (ARM).


Delinquency in meeting an obligation; or, paid at the end of a period (e.g., at the end of the month) for the previous period; payments in arrears include interest for using the money during the pre-vious period.

Article 6-E

A section of the New York State law addressing regulations for certified and licensed real estate appraisers.

Article 9-A

A section of the New York Real Property Law addressing the purchase or lease of vacant subdivided lands sold through an installment contract in or outside of New York.

Article 12-A

The section of the New York Real Property Law pertaining to real estate salespersons and brokers.

Article 78 proceeding

An appeal brought forth because of a ruling by a government agency.


A mineral fiber, classified as a carcinogen. Found in asbestos containing materials (ACMs), it is often found in older properties where it was used in insulation, shingles, siding, concrete, floor and ceiling tiles, plasters and more.

"As-Is" condition

The acceptance by the tenant of the existing condition of the premises at the time the lease is consummated. This would include any physical defects.

Asking rent

Rental rate offered by the landlord to a prospective tenant. The rent paid can be less than the asking rent after tenants negotiate for an actual rental rate and concessions.

Assessed value

The dollar amount of worth to which a local tax rate is applied to calculate the amount of real property tax.

Assessing units

Local counties, cities, towns, villages, school districts, and special districts that raise money through real property taxes.


A fee imposed on property, usually to pay for public improvements such as water, sewers, streets, improvement districts, etc.

Assessment roll

Yearly list that contains all real property in a jurisdiction, with information about each parcel including its assessed value and exempt status.


An official of local government who has the responsibility for establishing the value of property for tax purposes.

Asset management

The assembly, management and disposition of a portfolio of investment properties.


Items of value which include cash, real estate, securities, and investments.


One to whom contractual rights are transferred.


The transfer of rights to pay a debt from one party to another, with the original party remaining liable for the debt if the second party defaults.

Assignment of lease

Transfer by a lessee of the entire remaining term of a lease without any reversion of interest to the lessee.


A person who transfers rights and interests of a property.

Associate real estate broker

A licensed real estate broker woo wishes to work under the name and supervision of another licensed broker.

Assumable mortgage

A mortgage that can be transferred to another borrower. One that does not contain an alienation clause.

Assumption clause

A provision that allows a buyer to take responsibility for the mortgage from a seller.

Assumption fee

A fee the lender charges to process new records for a buyer who assumes an existing loan.


To turn over or transfer to another money or goods. To agree to recognize a new owner of a property and to pay him/her rent. In a lease, when the tenant agrees to attorn to the purchaser, the landlord is given the power to subordinate tenant's interest to any first mortgage or deed of trust lien subsequently placed upon the leased premises.


A person appointed to perform legal acts for another under a power of attorney.


A form of property sale in which people bid against one another.

Automatic stay

Bankruptcy court order that suspends certain actions of creditors against the debtor or the debtor's property.

Available funds

All funds available or collected from borrowers, including regular payments of principal and interest, prepayments or servicer advances.

Available funds cap

A limit on the amount of interest payable to certificate holders, to the extent of interest accrued on a group or pool of mortgage loans.


An economic characteristic of land denoting that land is a commodity with a fixed supply base.

Average life

The time until all scheduled principal payments and unscheduled principal payments (i.e., prepayments) are expected to have been made. The average life of a CMBS is typically compared to the comparable Treasury (often an interpolated Treasury) to determine the expected yield on the CMBS.


Sudden loss or gain of land as a result of water or shift in a bed of a river that has been used as a boundary.


"B" pieces

A term applied to the classes or tranches of CMBS rated double-B and lower. Also called "B.I.G.," or below-investment grade.

Back title letter

A letter that a title insurance company gives to an attorney who then examines the title for insurance purposes.

Back-end ratio

A calculation used by lenders to compare a borrower's total debt to their gross monthly income.

Balance sheet

A statement providing the assets, liabilities and net worth of an individual.

Balloon framing

Method of construction that uses a single system of wall studs that runs from the foundation through the first and second floors to the ceiling support.

Balloon loan

A mortgage loan where the monthly payments are not large enough to repay the loan by the end of the term resulting in a lump sum due on the final payment date.

Balloon mortgage

One in which the scheduled payment will not fully amortize the loan over the mortgage term; therefore, to satisfy the debt fully, it requires a final payment called a balloon payment, larger than the uniform payments.

Balloon payment

A large principal payment that typically becomes due at the conclusion of the loan term. Generally, it reflects a loan amortized over a longer period than that of the term of the loan itself (i.e. payments based on a 25 year amortization with the principal balance due at the end of 5 years). See "Bullet Loan".

Balloon risk

The risk that a borrower is unable to make a balloon or lump-sum payment at maturity. Also see Refinance Risk.

Bank insurance fund (BIF)

A fund administered by the FDIC which insures deposits of BIF member institutions, thereby protecting depositors from losses in the event of bank failure. The BIP is funded by premiums paid by member institutions, primarily commercial banks, and was established by FIRREA in 1989 along with the Savings Association Insurance Fund (SAIF). While the FDIC is not a government agency backed by the full faith and credit of the u.s. Treasury, depositors and financial markets treat the BIP as if it had an implicit guarantee.


The condition or state of a person (individual, partnership, corporation, etc.) who is unable to repay it's debts as they are, or become, due.


Proceedings under federal statures to relieve a debtor who is unable or unwilling to pay its debts. After addressing certain priorities and exemptions, the bankrupt's property and other assets are distributed by the court to creditors as full satisfaction for the debt. See also: "Chapter 11".

Bankruptcy remote entity (BRE)

A legal entity devised to hold identifiable assets (e.g., mortgages) and/or individual borrowers in such a way as to insulate them from the effects of bankruptcy in a larger pool of assets. For example, a developer might segregate selected mortgages in a BRE that are destined for a CMBS; if other of the developer's mortgages were to default, the cash flow from the segregated assets would then not be interrupted or seized by a bankruptcy court, hence assuring a continuous cash flow to bondholders of a CMBS. Also see Special Purpose Entity.

Bargain-and-sale deed

A form of deed with or without covenants of title.

Base loan amount

The loan amount upon which payments are based. If the borrower chooses to finance closing costs or other fees these costs will be added to the base loan amount and payments adjusted to reflect the larger loan balance.

Base rent

A set amount used as a minimum rent in a lease with provisions for increasing the rent over the term of the lease. See also "Escalation Clause", "Operating Expense Escalation" and "Percentage Lease".

Base year

Actual taxes and operating expenses for a specified base year, most often the year in which the lease commences. Once the base year expenses are known, the lease essentially becomes a dollar stop lease.


The value of property for income tax purposes; consists of original cost plus capital improvements less accrued depreciation.

Basis point

A basis point is one one-hundredth of one percentage point. For example, the difference between a home loan at 5.25 percent and one at 5.37 percent is 12 basis points.

Basis risk

The risk that the cash flow from the underlying mortgage loans does not mirror the required payouts to bondholders because the offered certificates are tied to different indices than are the mortgages (e.g., mortgages are at fixed rates but bonds are at floating rates). This raises the possibility of the certificates accruing interest at higher interest rates than the underlying mortgage loans. Also see Basis Risk Shortfall.

Basis risk shortfall

When the aggregate amount of interest on the certificates is greater than on the collateral, the difference is known as the basis risk shortfall. Also see Basis Risk.

Bearing walls

Walls that support the ceiling and/or roof.

Before-tax income

Total income before any taxes are deducted.


Any structure or a portion of a structure located underground or below the surface grade of the surrounding land.

Below investment grade

see "B" Pieces.


(a) Recipient of a gift of personal property by will; (b) Lender in a deed of trust.


A gift of personal property by will.


Business Improvement District. A Business Improvement District (BID) delivers supplemental services such as sanitation and maintenance, public safety and visitor services, marketing and promotional programs, capital improvements and beautification in a designated area. BIDs are funded by a special assessment paid by property owners within the district.


see Bank Insurance Fund.

Bilateral contract

An agreement based on mutual promises that provide the consideration.

Bill of sale

A legal document transferring ownership of personal property.


A report detailing the condition of a property's title. Usually issued by a title insurance company to provide guidelines for issuing a title insurance policy.


A preliminary agreement between buyer and seller.

Biweekly mortgage

A mortgage that requires payments every two weeks and helps repay the loan over a shorter term.

Blind ad

An ad for real property placed by a real estate broker that does not indicate that the advertiser is a broker.

Blanket mortgage

A single mortgage collateralized by more than one property with the same owner. Also see Cross-Collateralization and Cross-Default.


For profit, to induce or attempt to induce any person to sell or rent any dwelling by representations regarding the entry into the neighborhood of individuals of a particular race, color, religion, sex, or national origin.


A building plan that is a detailed architectural rendering of the structure.

Blue sky laws

Federal and state securities laws and regulations to protect investors from fraud.

Board of assessment review

An appointed body consisting of three to five members that hears and decides upon grievances from taxpayers.

Board of directors

Governing and decision-making board of a cooperative.

Bona fide

In good faith.

Bondable lease

A lease in which a credit tenant assumes nearly all of the obligations of ownership, therefore making the lease payments net of any offsets or deductions to the lessor or owner. With a credit tenant, the lease becomes an obligation of the corporation, thus offering greater assurance of payment.

Book value

The value of a property based on its cost plus any additions, minus depreciation. Also known as historic value.


Cash received in a tax-free exchange.

Bottom-up approach to investing

An investment strategy which begins by searching for outstanding performance among individual securities or tranches of securities before considering the impact of macro-level economic trends. This approach assumes that an investment in an individual CMBS will perform well, even if the industry does not perform well. Also see Top-Down Approach to Investing.

Breach of contract

Failure, without legal excuse, to perform any promise that forms the whole or part of a contract.

Break-even point

The point in which the owner's rental income matches expenses and debt.

Bridge loan

A short-term loan for borrowers who need more time to find permanent financing.


Anyone who acts as a go-between between a buyer and seller. For example, a real estate broker is licensed to handle property transactions and negotiate between a buyer and seller. A mortgage broker acts as a go-between with the lender and the borrower.


The act of bringing together two or more parties in exchange for a fee or commission. Common brokerage companies include real estate brokerage and mortgage brokers.

Broker's agent

One who is hired through a broker to work for that broker.


Abbreviation for British thermal unit. It stands for the amount of heat required to raise the tempera-ture of one pound of water by one degree Fahrenheit.


A grouping of loans by a single, shared attribute. For example, an issuer might speak of loans satisfying a term bucket (meaning that all the loans have the same or nearly the same average life).

Building classifications

Building classifications in most markets refer to Class "A", "B", "C" and sometimes "D" properties. While the rating assigned to a particular building is very subjective, Class "A" properties are typically newer buildings with superior construction and finish in excellent locations with easy access, attractive to credit tenants, and which offer a multitude of amenities such as on-site management or covered parking. These buildings, of course, command the highest rental rates in their sub-market. As the "Class" of the building decreases (i.e. Class "B", "C" or "D") one component or another such as age, location or construction of the building becomes less desirable. Note that a Class "A" building in one sub-market might rank lower if it were located in a distinctly different sub-market just a few miles away containing a higher end product.

Building code

The various laws set forth by the ruling municipality as to the end use of a certain piece of property and that dictate the criteria for design, materials and type of improvements allowed.

Building envelope

The materials of a building that enclose the interior.

Building or "core" factor

Represents the percentage of Net Rentable Square Feet devoted to the building's common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Loss Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage. See also "Rentable/Usable Ratio".

Building permit

Permission from the appropriate local government authority to construct or renovate any type of property.

Building specifications

Written narratives that explain the building plan.

Building standard

A list of construction materials and finishes that represent what the Tenant Improvement (Finish) Allowance/Work Letter is designed to cover while also serving to establish the landlord's minimum quality standards with respect to tenant finish improvements within the building. Examples of standard building items are: type and style of doors, lineal feet of partitions, quantity of lights, quality of floor covering, etc.

Building standard plus allowance

The landlord lists, in detail, the building standard materials and costs necessary to make the premises suitable for occupancy. A negotiated allowance is then provided for the tenant to customize or upgrade materials. See also "Workletter".


The space improvements put in place per the tenant's specifications. Takes into consideration the amount of Tenant Finish Allowance provided for in the lease agreement. See also "Tenant Improvement Allowance"


An approach taken to lease space by a property owner where a new building is designed and constructed per the tenant's specifications.

Bullet loan

Any short-term, generally five to seven years, financing option that requires a balloon payment at the end of the term and anticipates that the loan will be refinanced in order to meet the balloon payment obligation. Essentially, should the refinancing not be available, often due to the property not performing as anticipated, the borrower is "shot" and the property is subject to foreclosure. An example of this is when a developer borrows to cover the costs of construction and carry-costs for a new building with the expectation that it would be replaced by long-term (or "permanent") financing provided by an institutional investor once most of risk involved in construction and lease-up had been overcome resulting in an income-producing property.

Bullet mortgage

A mortgage that requires monthly payments of interest only until the final mortgage payment, or bullet payment, when full payment of principal is due.

Bundle of rights

The rights of an owner of a free hold estate to possession, enjoyment, control, and disposition of real property.

Buyer agent

A real estate agent who works in the best interests of a buyer.

Buyer brokerage

An agency relationship between a buyer and a broker.

Buy down mortgage

A home loan program where the lender receives a premium as an enticement to reduce the interest rate during the early years of the mortgage.

Buyer's remorse

An emotion felt by first-time homebuyers after signing a sales contract or closing the purchase of a house.


Call option

A loan clause allowing a lender to ask for repayment of the entire balance at any time.

Call protection

Protection against early prepayment of mortgages. If mortgages prepay early, then the bonds collateralized by those mortgages would be called or paid down, thereby affecting the total yield on the original bonds. Also see Prepayment Penalty.

Cancellation option

A lease clause granting the tenant the option to cancel at the end of a predetermined term.


A limit on the amount the interest rate or monthly payment can increase in an adjustable rate mortgage.

Capital expenses

This type of expense is most often defined by reference to generally accepted accounting principles (GAAP), but GAAP does not provide definitive guidance on all possible expenditures. Accountants will often disagree on whether or not to include certain items.


A method of determining value of real property by considering net operating income divided by a predetermined annual rate of return. See "Capitalization Rate".

Capitalization rate

The rate that is considered a reasonable return on investment (on the basis of both the investor's alternative investment possibilities and the risk of the investment). Used to determine and value real property through the capitalization process. Also called "free and clear return". See "Capitalization".

Capital loss

Occurs when an investment property or other type of investment is sold at a loss.

Capital markets

Markets in which capital funds, both debt and equity, are traded. Included are private placement sources of debt and equity as well as organized markets and exchanges. Also see Primary Market.

Cap rate

Another name for capitalization rate.

Capital reserve budget

Projected budget over the economic life of improvements on the property for repairs, decorating, remodeling, and capital improvements.

Caps (Interest rate caps)

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage which may change per year and/or the life of the loan.

Carryback financing

Financing in which a seller agrees to hold back a note for a set amount of the sales price.

Carrying charges

Costs incidental to property ownership, other than interest (i.e. taxes, insurance costs and maintenance expenses), that must be absorbed by the landlord during the initial lease-up of a building and thereafter during periods of vacancy.

Case law

Legal precedent derived through court decisions.

Cash flow

Cash flow is examined at the level of both the security and the individual property. At the security level, the certificate holders of CMBS receive all principal and interest cash flow from a pool of mortgages in a sequential, defined manner. Early prepayments or extended maturities change those cash flows and therefore can have a material effect on how and when some certificate holders receive their sequential payments, hence affect the total yield on the bonds. The cash flow on a CMBS is thus unlike that in the direct commercial mortgage market, wherein the cash flow contract is divided between receipt of principal payments and interest payments. In assembling the assets in a CMBS, the cash flow of an individual property is carefully scrutinized to calculate the ability of the property to generate sufficient revenue to service the debt that is in effect the collateral for the security.

Cash flow investment

Any investment of funds received under qualified mortgages for a temporary period before distribution to holders of an interest in the REMIC. Amounts invested typically are placed temporarily in passive assets, i.e., investments limited to producing passive income characterized as interest-payable at the next regularly scheduled payment date.

Cash flow note

An indebtedness which is repaid on a periodic basis directly by all or a portion of the cash flow derived by the collateralized real property and not specifically based on an interest rate.

Cash flow statement

A yearly financial report showing the bottom-line return after taxes.

Cash-out refinance

The refinancing of a mortgage in which the money received from the new loan is greater than the amount due on the old loan.

Cashier's check

A check the bank draws on itself rather than on a depositor's account.


A property damaged or destroyed by an unexpected or unusual event.


A warning or caution such as a disclosure that a property lies in an agricultural district that is attended to a contract of sale.

Caveat emptor

Latin meaning: let the buyer beware; this theory no longer applies to real estate transactions in New York.

Cease and desist list

A list of homeowners compiled by dos in a cease and desist zone who do not wish to be solicited by real estate agents.

Cease and desist zone

A designation given by dos to certain geographic areas that have been subject to intense and repeated solicitation by real estate agents. See cease and desist list.

Census tract

Small geographical areas established through cooperation between the local community and the bureau of census.


see Comprehensive Environmental Response, Compensation Liability Act, 1980.


An actual certificate that defines the beneficial ownership in a trust fund.

Certificate Holder

The owner of record that actually owns a certificate (security).

Certificate of deposit

Note containing an acknowledgment by a bank that a sum of money has been received; the bank must repay the money together with interest at an agreed-upon rate when the cd expires.

Certificate of deposit index (CODI)

An index based on interest rates of six-month CDs. Commonly used to determine interest rates for some adjustable rate mortgages.

Certificate of eligibility

A document issued by the Veterans Administration that verifies the eligibility of a veteran for a loan program.

Certificate of occupancy (CO)

A document stating that a home or other building has met all building codes and is suitable for habitation.

Certificate of reasonable value (CRV)

An appraisal issued by the Veterans Administration showing a property's current market value

Certificate of title opinion

A report, based on a title examination, setting forth the examiner's opinion of the quality of a title to real property.

Certificate of veteran status

The document given to veterans or reservists who have served 90 days of continuous active duty (including training time).

Cession deed

A deed used to relinquish real property to a municipality for a road or something of that nature.


In land measurement, a distance of 66 feet.

Chain of title

The official record that details the ownership history of a piece of property.


The principle stating that change is continually affecting land use and therefore altering value.

Chapter 7 bankruptcy

Liquidation form of bankruptcy in which the debtor's nonexempt property is sold for cash.

Chapter 11 bankruptcy

Reorganization form of bankruptcy that provides a method for reorganizing the debtor's financial affairs under the supervision of the bankruptcy court.

Chapter 13 bankruptcy

A consumer debt adjustment form of bankruptcy that permits the court to supervise the debtor's plans for the payment of unpaid debts by installments.


Personal property.


A type of draft and three-party negotiable instrument containing an order to pay.


Chemical insecticide and termiticide that was banned in the early 1980s.

Chlorofluorocarbons (cfcs)

Man-made chemical substances that were used in hundreds of applications, including refrigerators and air conditioners.

Chronological age

Actual age of an item.


The underwriter's way of designating potential purchasers and the amounts that they might purchase of a securities issue during the registration period, before actual selling is permitted. Registered representatives canvas prospective buyers and report any interest to the underwriters, who then "circle" the names on their list and the possible amounts of the purchases.

Circuit breaker

A device that trips or switches the electrical power off for a given circuit if the current increases beyond the capacity of the system.

Circulation factor

Interior space required for internal office circulation not accounted for in the Net Square Footage. Based upon our experience, we use a Circulation Factor of 1.35 x the Net Square Footage for office and fixed drywall areas and a Circulation Factor of 1.45 x the Net Square Footage for open area workstations. See also "Net Square Footage and "Usable Square Footage.

Civil action

A lawsuit between private parties.

Civil law

Laws which address the private rights of citizens to sue and seek remedies through the courts for a wrongful action against them.

Civil rights act of 1866

A Federal law that guarantees that citizens of all races have the same rights as white citizens to inherit, purchase, lease, sell, hold and convey real and personal property. Reaffirmed by the Jones v. Mayer decision in 1968.

Civil rights act of 1968

See fair housing act of 1988.

Classified ads

Inexpensive line ads, most widely used when advertising residential property.


Some office buildings include 5 days of office cleaning in the rent. If you need this service it can be added. There can be charges for the following:
• Trash removal
• Fuel Surcharge
• Guard or Extra Security
• Business Improvement Tax (BID)
• Landlords Improvements to the building

Clear-p facility

A building, most often a warehouse or parking garage, with vertical columns on the outside edges of the structure and a clear p between columns.

Clear title

A title to property that does not have liens, defects or other legal encumbrances.


The principal of the agent.

Closed-end mortgage

A mortgage bond issued with an indenture that prohibits repayment before maturity and the repledging of the same collateral without the permission of the bondholders. Also called a closed mortgage. It is distinguished from an open-end mortgage which is reduced by amortization and can be increased to its original amount and secured by the original mortgage.

Closed mortgage

One that imposes a prepayment penalty.


The final procedure in which loan and title documents are signed between the buyer and seller and their respective representation.

Closing costs

Expenses related to the sale of real estate including loan, title, and appraisal fees. These costs are above and beyond the price of the property and are paid at closing. Most closing costs are one-time expenses however a few are recurring.

Closing statement

A document which details the final financial details of a property sale between a buyer and seller and the costs paid by each party.

Closing techniques

The process by which the manager guides the prospect to accepting the space and signing the lease. The best leasing agents use a variety of techniques to "close" a prospect.

Cloud on title

A claim against a title to real property

Cluster development

A type of development that provides for planned unit developments (puds), which create a neighborhood of cluster housing and supporting business establishments.

Cluster zoning

A form of zoning providing for several different types of land use within a zoned area.


see Commercial Mortgage Backed Security.


Commercial Mortgage Securitization Association, a CMBS trade association.

Coastal zone management program

A program coordinated by DOS to preserve and protect New York's coastline.

Code of ethics and standards of practice

Guide-lines for conduct required by license laws and by the National Association of REALTORS®.


A supplement or appendix to a will either adding or changing a bequest.

COFI index (Cost of funds index)

This index reflects the weighted-average interest rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts, advances from the FHLB, and other sources of funds. The 11th District represents the savings institutions (savings & loan associations and savings banks) headquartered in Arizona, California and Nevada. The COFI index is a popular index used for determining interest rates on adjustable rate mortgages.

Coinsurance clause

A common provision in property insurance policies that limits the liability of the insurance company to that proportion of the loss that the amount of insurance bears to a percentage of the value of the property.


In a new issue underwriting, the lowest rate acceptable to a buyer of bonds or the lowest price acceptable to the issuer. Also refers to the index level at which a circuit breaker is triggered.


Property pledged as security for payment of a debt.

Collectible income

Gross income from a property minus vacancy and other types of rent loss. Also called gross adjusted income.

Collection account

An account established by the master servicer in the name of the trustee for the benefit of the certificate holders. Usually all payments and collections received on the mortgages and from advances made by the servicers are deposited into this account.

Color of title

A defective claim to a title.

Comfort letter

1. An independent auditor's letter, required in securities underwriting agreements, to assure that information in the registration statement and prospectus is correctly prepared and that no material changes have occurred since its preparation. It is sometimes called a cold comfort letter - cold because the accountants do not state positively that the information is correct, only that nothing has come to their attention to indicate that it is not correct.
2. Letter from one to another of the parties to a legal agreement stating that certain actions not clearly covered in the agreement will or will not be taken. Such declarations of intent usually deal with matters that are of importance only to the specific parties and do not concern other signers of the agreement.

Commercial law

Laws that are applicable to the rights and relations of persons engaged in commerce or trade carried on for profit.

Commercial mortgage

A mortgage usually made to a business that may include an assignment of leases, personal guarantees, and a substantial down payment.

Commercial mortgage backed security (CMBS)

Securities collateralized by a pool of mortgages on commercial real estate in which all principal and interest from the mortgages flow to certificate holders in a defined sequence or manner.

Commercial mortgage broker

A mortgage broker who specializes in commercial mortgage applications.

Commercial mortgage lender

A mortgage lender who specializes in the funding of commercial mortgage loans.

Commercial property

Income-producing properties; public accommodations.

Commercial zones

Areas that are zoned for structures that house retail stores, restaurants, hotels, and service businesses.


An agent's mixing money or property of others with the agent's personal or business funds or other property.


A fee paid for the performance of services, such as a broker's commission.

Commissioner's deed

A form of judicial deed executed by a commissioner.

Commitment fee

A fee charged by the lender to guarantee a specific set of loan terms to be honored at some future date.

Common area

There are two components of the term "common area". If referred to in association with the Rentable/Usable or Load Factor calculation, the common areas are those areas within a building that are available for common use by all tenants or groups of tenants and their invitees (i.e. lobbies, corridors, restrooms, etc.). On the other hand, the cost of maintaining parking facilities, malls, sidewalks, landscaped areas, public toilets, truck and service facilities, and the like are included in the term "common area" when calculating the tenant's pro-rata share of building operating expenses.

Common area maintenance (CAM)

This is the amount of Additional Rent charged to the tenant, in addition to the Base Rent, to maintain the common areas of the property shared by the tenants and from which all tenants benefit. Examples include: snow removal, outdoor lighting, parking lot sweeping, insurance, property taxes, etc. Most often, this does not include any capital improvements (see "Capital expenses") that are made to the property.

Common elements

Parts of a property that are necessary or convenient to the existence, maintenance and safety of a condominium or are normally in common use by all of the condominium residents. Each condominium owner has an undivided ownership interest in the common elements.

Common law

Law by judicial precedent or tradition as contrasted with a written statute.

Community-based planning

A form of land use control originating in the grassroots of a community.

Community center

A shopping center of about 100,000 to 250,000 square feet (20 to 70 retail spaces) providing convenience shopping to about 5,000 families within a 1.5-mile radius.

Community planning

A master plan for the orderly growth of a city or county to result in the greatest social and economic benefits to the people.

Community property

A form of co-ownership limited to husband and wife; does not exist in New York


Lease rates and terms of properties similar in size, construction quality, age, use, and typically located within the same sub-market and used as comparison properties to determine the fair market lease rate for another property with similar characteristics.

Comparative income and expense analysis

A financial study of the projected income from a property in as-is condition versus financial returns from that property if suggested capital improvements were implemented. Property managers use the analysis to demonstrate to owners the return on proposed capital expenditures.

Comparative market analysis

An analysis of the competition in the marketplace that a property will face upon sale attempts.

Compensatory damages

The amount of money actually lost, which will be awarded by a court in case of a breached contract.

Competent parties

Persons and organizations legally qualified to manage their own affairs, including entering into contracts.


The principle stating that when the net profit a property generates is excessive, very strong competition will result.

Competitive bids

Work estimates submitted to the property manager by service contractors, suppliers, Trades people or construction contractors.

Complete performance

Execution of a contract by virtue of all parties having fully performed all terms.

Completion bond

A guarantee by a developer that ensures a municipality that off-site improvements to a subdivision will be made upon completion of the total project; also known as a subdivision bond.

Compound interest

The interest paid on the principal balance of a mortgage plus accrued interest.

Comprehensive environmental response, Compensation liability act (CERCLA), 1980

Legislation that outlines environmental problems and potential legal liabilities attendant to environmental contamination, e.g., asbestos, RCB, radon, or leaking underground storage tanks (LUSTS). The act establishes potential lender liability for environmental clean-up on a mortgaged property. Also see Phase I.


A relief or reduction in total payments for a period of time, used as an incentive to attract or retain tenants in lease agreements. Concessions can include reduced or free rent for a portion of the lease period and/or above-market tenant improvement and work letters. The use of concessions in leasing is a response to current market conditions, but the existence of concessions in a building's leases makes it more difficult to calculate net cash flow and, therefore, debt service coverage ratios.

Concierge services

A trend in the property management field that provides personal, secretarial, catering or other services to the occupants of office or residential buildings.

Conciliation agreement

Successful result of mediation between the parties in a discrimination complaint.


The process of taking private property, without the consent of the owner, by a governmental agency for public use through the power of eminent domain. See also "Eminent domain".

Condemnation value

Market value of condemned property.


Any fact or event that, if it occurs or fails to occur, automatically creates or extinguishes a legal obligation.

Conditional commitment

A promise by a lender to make a loan if the borrower meets certain conditions.

Conditional sale

A contract for property sale stating that the title will remain invested in the seller until all the conditions of the contract have been fulfilled.

Conditions, covenants and restrictions declaration (CC&RS)

A set of private restrictions on the use of a specific parcel of real property; often used with a condominium development.


A form of property ownership in which each occupant of a multiunit building owns his or her dwelling unit separately and an undivided interest with other owners in the property's common elements (lobbies, hallways, etc.).

Condominium declaration

The document that, when recorded, creates a condominium; also called a master deed.


The financial intermediary that functions as a link, or conduit, between the lender(s) originating loans and the ultimate investor(s). The conduit makes loans or purchases loans from third party correspondents under standardized terms, underwriting and documents and then, when sufficient volume has been accumulated, pools the loans for sale to investors in the CMBS market. Also see Real Estate Mortgage Investment Conduit (REMIC).

Conforming loan

A home loan that meets qualifications to be purchased by Fannie Mae or Freddie Mac.


Homogeneous uses of land within a given area, which results in maximizing land value.

Consent decree

Called nolo contendere in criminal cases, it is a compromise in civil lawsuits where the accused party agrees to stop the alleged illegal activity without admitting guilt or wrongdoing.


Minor repair, renovation and restoration of residential buildings that have substantial economic use remaining. Also called blight prevention.


Anything of value, as recognized by law, offered as an inducement to contract.

Constant prepayment rate (CPR)

A percentage of the outstanding collateral principal that is expected to prepay in one year. A CPR represents an assumed constant rate of prepayment each month (expressed as an annual rate), rather than a variable rate of prepayment. Also see PSA Standard Prepayment Model.

Constitutional law

Laws which address the role of the Supreme Court and its authority as relates to the President, Congress and the states; also deals with the powers of Congress and the executive branch.

Construction documents

Drawings and specifications from an architect and/or engineer providing detailed requirements for the construction of a project.

Construction loan

A short term loan for construction secured by a mortgage. Lenders usually disburse funds from construction loans in draws according to completion of defined stages throughout the construction process.

Construction management

The actual construction process is overseen by a qualified construction manager who ensures that the various stages of the construction process are completed in a timely and seamless fashion, from getting the construction permit to completion of the construction to the final walk-through of the completed leased premises with the tenant.

Construction mortgage

A temporary mortgage used to borrow money to construct an improvement on land.

Construction-to-permanent loan

A construction loan that is converted to a longer term traditional mortgage after construction has been completed.

Constructive eviction

A situation in which a tenant must abandon the premises because of the landlord's negligence in providing essential services.

Constructive notice

One in which all affected parties are bound by the knowledge of a fact even though they actually have not been notified of such fact.

Consumer price index ("CPI")

Measures inflation in relation to the change in the price of a fixed market basket of goods and services purchased by a specified population during a "base" period of time. It is not a true "cost of living" factor and bears little direct relation to actual costs of building operation or the value of real estate. The CPI is commonly used to increase the base rental periodically as a means of protecting the landlord's rental stream against inflation or to provide a cushion for operating expense increases for a landlord unwilling to undertake the record keeping necessary for operating expense escalations.


A condition in a contract relieving a party of liability if a specified event occurs or fails to occur.

Contiguous space

(1) Multiple suites/spaces within the same building and on the same floor which can be combined and rented to a single tenant. (2) A block of space located on multiple adjoining floors in a building (i.e., a tenant leases floors 6 through 12 in a building).


An agreement between competent parties upon legal consideration to do, or abstain from doing, some legal act.

Contract buyer's policy

Title insurance that protects contract buyer against defects in contract seller's title.

Contract documents

The complete set of design plans and specifications for the construction of a building or of a building's interior improvements. Working Drawings specify for the contractor the precise manner in which a project is to be constructed. See also "Specifications" and "Working Drawings".


A phase of the business cycle characterized by decreasing production.

Contract for deed

A contract of sale and a financing instrument wherein the seller agrees to convey title when the buyer completes the purchase price installment payments; also called installment land contract and installment plan.

Contract rent

The amount of rent agreed to in a lease.

Contract services

Maintenance tasks performed by outside laborers on a regular basis for a specified fee.


The principle that for any given part of a property, its value is the result of the contribution that part makes to the total value by being present, or the amount that it subtracts from total value as a result of its absence.

Contributions tax

A tax imposed on a REMIC triggered by certain contributions of properties made to a REMIC after the day on which the REMIC issues all of its interests. Each pooling and servicing agreement will include provisions designed to prevent the acceptance of any contributions that would be subject to such a tax.

Controlling party

A party designated in a CMBS that has the right to approve and direct certain actions of the special servicer with respect to specially serviced loans.


A measurement of the rate of change of duration of a security. Convexity implies that prices rise at an increasing rate as yields fall, and prices decline at a decreasing rate as yields rise.

Corporate guaranty

A guaranty made by the issuer (issuer guaranty) or a third party to cover losses due to delinquencies and foreclosures up to the guaranteed amount. The rating of the guarantor is commonly required to be, at a minimum, equal to the highest rating of the securities. A form of credit enhancement.

Conventional life estate

One created by intentional act of the parties.

Conventional loan

A long term loan a lender makes for the purchase of a home.

Conventional mortgage loan

One in which the federal government does not insure or guarantee payment to the lender.


Change in a form of ownership, such as changing rental apartments to condominium ownership.

Convertible adjustable-rate mortgage

A mortgage which starts as an adjustable rate loan, but contains a provision that allows the borrower to convert the loan to a fixed-rate mortgage during a specified period of time.

Convertible mortgage

A provision in a mortgage that gives the lender the option of converting the outstanding balance into an agreed-upon percentage of ownership in the property.


To pass to another (as in title).


Most commonly refers to the transfer of title to property between parties by deed. The term may also include most of the instruments by which an interest in real estate is created, mortgaged or assigned.

Cooling-off period

A three-day right of rescission for certain loan transactions.

Cooperating broker or agent

One who participates in the sale of a property.


A residential multifamily building whose title is held by a trust or corporation that is owned by and operated for the benefit of persons living within the building, who are the beneficial owners of the trust or stockholders of the corporation, each possessing a proprietary lease that gives them the right to occupy a certain unit in the building.

Cooperative mortgage

Any loan related to a cooperative residential project.


Title to real property held by two or more persons at the same time; also called concurrent ownership.

Core factor

Represents the percentage of Net Rentable Square Feet devoted to the building's common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Loss Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage."


A form of organization existing as an entity.

Corporation franchise tax

A tax calculated on the net profit of the corporation. Corporation law Laws which address federal and state formation and operation of corporations.

Corrected mortgage loan

A mortgage loan that had previously incurred a default or related event; been transferred to the special servicer for handling, becoming a specially serviced mortgage loan; had cured the default by any of a number of avenues available to special servicer; finally becoming a corrected mortgage loan and being returned to the master servicer for routine administration. Also known as a Reperforming Loan.

Corrective maintenance

Actual repairs necessary to keep a property in good condition and operating smoothly.


A step in the appraisal process in which the appraiser weighs the appraisal approaches to reach a rational conclusion as to the value of the subject property; also known as reconciliation.

Corridor development

Growth of businesses or plants along major arteries connecting two large industrial or commercial centers some distance from each other.


A second party who also signs a promissory note and takes responsibility for the debt.


The total dollar expenditure for labor, materials, and other items related to construction.

Cost approach

An appraisal method whereby the cost of constructing a substitute structure is calculated, depreciation is deducted, and land value is added.

Cost of living lease

Is a lease where yearly increases are tied to the cost of living index.


A method of paying construction contractors in which the contractor furnishes a preliminary estimate for the proposed job and is paid the actual cost of the work plus a percentage for profit.

Cost recovery

A type of income tax deduction available for real estate and personal property that allows the total cost of the property that is depreciable to be deducted over a certain timeframe.


A new offer made by an offer or rejecting an offer.

Courier fee

Fee charged at closing to cover the delivery of documents between lenders, escrow companies, and other third parties during a real estate transaction.


A written agreement inserted into deeds or other legal instruments stipulating performance or non-performance of certain acts or, uses or non-use of a property and/or land.

Covenant against encumbrances

A promise in a deed that the title causes no encumbrances except those set forth in the deed.

Covenant for further assurances

A promise in a deed that the grantor will execute further assurances that may be reasonable or necessary to perfect the title in the grantee.

Covenant of quiet enjoyment

The old "quiet enjoyment" paragraph, now more commonly referred to as "Warranty of Possession", had nothing to do with noise in and around the leased premises. It provides a warranty by Landlord that it has the legal ability to convey the possession of the premises to Tenant; the Landlord does not warrant that he owns the land. This is the essence of the landlord's agreement and the tenant's obligation to pay rent. This means that if the landlord breaches this warranty, it constitutes an actual or constructive eviction.

Covenant of right to convey

A promise in a deed that the grantor has the legal capacity to convey the title.

Covenant of seisin

A promise in a deed assuring the grantee that the grantor has the title being conveyed.

Covenant of warranty

A promise in a deed that the grantor will guarantee and defend the title against lawful claimants.


see Constant prepayment rate.


In a closing statement, money to be received or credit given for money or an obligation given.

Credit enhancement

Provisions in addition to the mortgage collateral to support a desired credit rating on mortgage backed securities. Provisions made by issuers to compensate for default risk in CMBS include subordination, reserve accounts, cross-collateralization, cross-default provisions, and advance payment agreements.

Credit facility loan

A mortgage loan entered into for the purpose of providing the borrower flexibility with respect to adding, releasing or substituting collateral. These loans generally have lower L TV and higher DSCR requirements.

Credit history

A file detailing an individual's current and past debt payments and financial obligations.

Credit lease

A lease signed by a lessee with an investment grade credit rating, which presumably increases the assurance of timely rental payments for the duration of the lease.

Credit life insurance

Insurance that pays off a mortgage in the event of the borrower's death.


One to whom a debt is owed.

Credit rating

The degree of creditworthiness assigned to a person based on their credit history and financial status.

Credit report

A detailed account of an individual's credit, employment, and residence history. A lender uses this report to determine a loan applicant's creditworthiness. The three largest credit bureaus are Trans Union, Equifax and Experian.

Credit repository

Large companies that gather financial and credit information from various sources about individuals who have applied for credit.

Credit risk score

A credit risk score is a statistical summary of the information contained in a consumer's credit report. The most well known type of credit risk score is the Fair Isaac or FICO score. This score represents the answer from a mathematical formula that assigns numerical values to various pieces of information in a credit report.

Credit score

A credit score is a statistical summary of the information contained in a consumer's credit report. The most well known type of credit score is the Fair Isaac or FICO score. This score represents the answer from a mathematical formula that assigns numerical values to various pieces of information in a credit report.

Criminal law

Laws that declare what conduct is criminal and prescribes the punishment to be imposed for such conduct.


A provision in a mortgage or deed of trust by which the collateral for one mortgage also serves as collateral for other mortgagees). Thus, should the collateral on the one mortgage fall short in repayment of the debt, the collateral of the other mortgagees) could be claimed as well (but only in the event of such a shortfall). CMBS backed by cross-collateralized properties have reduced delinquency risk; cross-collateralization therefore adds value to the structure. A set of properties with the same owner might be both cross-defaulted and crosscollateralized. A form of credit enhancement.


A provision in a mortgage or deed of trust by which a breach of terms or default under the loan documents of one loan will automatically trigger a default under other mortgagees). A set of properties with the same owner might be both cross-defaulted and cross-collateralized. A form of credit enhancement.


is designed for property management for large companies. It is designed for the needs of commercial real estate developers owners and managers.

Cubic-foot method

A means of estimating reproduction or replacement cost using the volume of the structure.


A dead-end street with a circular turn Around at the dead end.

Cumulative discount rate

The interest rate used in finding present values that when applied to the rental rate takes into account all landlord lease concessions and then expressed as a percentage of base rent.

Cumulative zoning

A type of zoning permitting a higher-priority use even though it is different from the type of use designated for the area.

Curable depreciation

A condition of property that exists when correction is physically possible and the cost of correction is less than the value increase.

Curb appeal

The impression gained, good or poor, of a property when it is first seen, usually from the street while driving, hence "curb" appeal.


A delinquent mortgage is said to be cured when all missed payments have been made and loan payments are current. The label also applies to a property that suffered from some environmental problem or contamination that has been redressed.

Cut-off date

The date on which the portfolio securing the CMBS is firmly identified, and the numbers from that pool are used for the final calculations before issuing the securities.


A husband's interest in the real property of his wife.


The party whom the agent brings to the principal as sellers or buyers of the property.

Cyclical fluctuation

See business cycle.



The amount of financial loss incurred as a result of another's action.

Dark space

Vacated retail space for which the tenant is still paying rent despite having vacated the space. "Induced" smaller tenants might exercise their right to cancel leases when a major tenant "goes dark" or no longer occupies the space.


In a closing statement, an expense or money received against a credit.


Any amount one person owes to another.

Debt service

The scheduled payments due on a loan. Payments include principal, interest and other fees that are required by the loan agreement.

Debt service coverage ratio (DSCR)

A measure of a mortgaged property's ability to cover monthly debt service payments, defined as the ratio of net operating income or net operating cash flow to the debt service payments. A DSCR less than 1.0 means that there is insufficient cash flow by the property to cover debt payments.

Debt-to-income ratio

The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income.


A deceased person.


Master deed containing legal description of the condominium facility, a plat of the property, plans and specifications for the building and units, a description of the common areas, and the degree of ownership in the common areas available to each owner.

Declaration of restrictions

The instrument used to record restrictive covenants on the public record.

Declining balance depreciation

A method of computing accelerated depreciation that adjusts the straight-line depreciation rate according to a percentage factor.


A court order.


To appropriate private property to public ownership for a public use.


An appropriation of land or an easement therein by the owner to the public.

Dedication by deed

The deeding of a parcel of land to a municipality.

Deductible expenses

Costs of operating property held for use in business or as an investment. These expenses are subtracted from gross income to arrive at net income.


A legal instrument transferring title to real property from the seller to the buyer upon the sale of such property.

Deed in lieu of foreclosure

Conveyance of title to the mortgagee by a mortgagor in default to avoid a record of foreclosure; also called friendly foreclosure.

Deed of correction

A deed executed to correct an error in a prior deed; also called a deed of confirmation.

Deed of gift

A warranty or quitclaim deed conveying title as a gift to the grantee.

Deed of trust

An instrument used in many states in place of a mortgage by which real property is transferred to a trustee by the borrower (trustier), in favor of the lender (beneficiary), to secure repayment of a debt.

Deed restriction

Limitation on land use appearing in deeds.


The general failure to perform a legal or contractual duty or to discharge an obligation when due. Some specific examples are: 1) Failure to make a payment of rent when due. 2) The breach or failure to perform any of the terms of a lease agreement.


The act of making an investment whole. The supplementing of existing investment terms available (typically through a cash payment) to make the currently available market yield equivalent to that of a pre-existing investment that is being terminated. Most commonly used in bond finance. Synonymous with yield maintenance. A common prepayment option.

Defeasance clause

A statement in a mortgage or deed of trust giving the borrower the right to redeem the title and have the mortgage lien released at any time prior to default by paying the debt in full.


Subject to being defeated by the occurrence of a certain event.

Defensible fee

A title subject to being lost if certain conditions occur.


With regard to a property, any condition that would: have a material adverse effect on value; adversely impair the health or safety of the occupants; and/or if not repaired, removed, or replaced would significantly shorten or adversely affect the expected normal life of the premises.

Deferred interest

The amount by which the interest a borrower is required to pay on a mortgage loan is less than the amount of interest accrued on the outstanding principal balance. This amount is usually added to the outstanding principal balance of the mortgage loan.

Deferred maintenance

Physical depreciation or loss in value of a building resulting from postponed maintenance to the building.

Deferred maintenance account

A reserve account established by a borrower to cover repairs or future property maintenance costs. Also called a replacement reserve account.

Deficiency judgment

A court judgment obtained by a mortgagee for the amount of money a foreclosure sale proceeds were deficient in fully satisfying the mortgage debt.


Failure to make mortgage payments on time. Severe delinquency can lead to foreclosure.

Delinquent mortgage

A mortgage that involves a borrower who is behind on payments. If the borrower cannot bring the payments up to date within a specified number of days the lender may begin foreclosure proceedings.

Delivery date

The date on which the securities will be delivered to the purchasers, or to the Trustee if the Trustee is the custodian for the Depository Trust Company (DTC). The DTC handles the security certificates for purchasers by acting as custodian of the certificates and issuing a form showing the "book entry" for safekeeping to the certificate holder.

Delivery and acceptance

The transfer of a title by deed requires the grantor to deliver and the grantee to accept a given deed.

Demand notes

Notes or loans that are short-term and might include a provision that repayment can be "demanded," or the note called, at the discretion of the lender. Demand notes often require all cash flow, net of debt service, to be used to amortize a mortgage loan if the borrower fails to show progress towards refinancing (e.g., an appraisal, engineering report, or environmental study) or is unable to obtain a signed commitment or sales contract on the underlying property.

Demand notes (Fast pay)

If the balloon payment of a balloon mortgage is not met, the borrower is required to apply all excess cash flows generated by the property to pay down the remaining loan balance to accelerate amortization.


To convey an estate for years; synonymous with lease or let.

Demising walls

The partition wall that separates one tenant's space from another or from the building's common area such as a public corridor.


The study of the social and economical statistics of a community.


Number of persons or structures per acre.

Department of housing and urban development (HUD)

A federal agency involved with housing.

Department of veterans affairs (VA)

An independent agency of the federal government which guarantees long-term, low or no down payment mortgages to eligible veterans. Offers a 100% loan that guarantees repayment of the top portion of the loan to the lender in the event the borrower defaults.

Depreciated value

The original basis of a property less the amount of depreciation taken at any point in time.


Spreading out the cost of a capital asset over its estimated useful life or a decrease in the usefulness, and therefore value, of real property improvements or other assets caused by deterioration or obsolescence.


Funds provided by the buyer with an offer to purchase property. Also referred to as "earnest money".


The entity that accumulates the mortgages and transfers them to the Trust simultaneously with the issuance of the securities to the certificate holders. The depositor can be the seller of a portfolio of mortgages or an entity established just for the purpose of holding the mortgages until the pool accumulation is completed.

Derived investment value (DIV)

A valuation procedure created for the RTC to price existing commercial mortgages. DIV is based on expected cash flows and a discounted cash flow model to generate an estimate of the price to be paid by an investor for an existing mortgage. Typically used for R TC and bulk sales of non- or sub-performing loans. Expected cash flows can include foreclosure costs and proceeds.


The distribution of property to legally qualified heirs of one who has died intestate.

Description by monument

A legal description sometimes used when describing multiple-acre tracts of land and may refer to permanent objects such as a stone wall, large trees, or boulders.

Description by reference

A valid legal description that may be found on a deed which references a plat of subdivision or other legal document.


A system in which a single entity is responsible for both the design and construction. The term can apply to an entire facility or to individual components of the construction to be performed by a subcontractor; also referred to as "design/construct”.

Determination date

The date of the month (usually the 15th or the next business day) that is used as a cut-off date for calculation of the payments due on the securities.


A gift of real property by will.


The recipient of a gift of real property by will.

Direct cost

The cost of labor and materials.

Direct management costs

Expenses that can be attributed directly to the operation of a management firm or department.


Any physical or mental impairment that substantially limits one or more of an individual's major life activities, including caring for oneself, performing manual tasks, walking, seeing, hearing, speaking and working.


A statement to a potential buyer listing information relevant to a piece of property, such as the presence of radon or lead paint.

Disclosure and informed consent disclosure

Explanation by a real estate agent of his position in the agency relationship and the verbal and written consent of the relationship by the client or customer.

Disclosure of information

The prompt and total communication to the principal by the agent of any information that is material to the transaction for which the agency is created.

Disclosure regarding dual agency relationship form

Pursuant to Section 443 of the New York Real Property Law, this document must be presented by a licensee and signed by all parties at the first substantive meeting with prospective purchasers or sellers.

Disclosure statement-Regulation Z

An accounting of all financial aspects of a mortgage loan required of lenders to borrowers in residential mortgage loans by Regulation Z of the Federal Reserve Board.

Discount department store

A specialized type of shopping center or large single store with emphasis on lower prices as a merchandising technique. The "closed-door" discount house is open only to qualifying members; the "open" discount house is open to the general public.

Discount margin (DM)

The difference between the price of a security and the face amount of the security.

Discount points

Fees charged by a lender to provide a lower interest rate. One discount point equals one percent (1%) of the loan amount.

Discount rate

The rate applied to each year's cash flow from a property to determine the net present value (NPV) of a series of cash flows. Based on the periodic weighted average cost of capital or the required return for a real estate investment.

Discriminatory advertising

Any advertising that states or indicates a preference, limitation, or discrimination on the basis of race, color, religion, sex, national origin, disability, familial status, age, or marital status in offering housing or commercial property for sale or rent.


The loss of funds available to lending institutions for making mortgage loans, caused by depositors' withdrawal of funds for making investments that provide greater yields.

Display ads

Newspaper ads that cost more than classified ads offering graphics and more elaborate designs. Display ads may be quarter-page or more in size and are used to market all types of real estate.

Disposition fee

"Workout fees" paid to a special servicer for making a loan current or liquidating a problem loan or foreclosed property. Can also include late fees, modification fees and loan administration charges. These fees are negotiated with each CMBS.

Dispossess proceedings

A suit brought by a landlord to evict a tenant for defaulting in the terms of the lease. Also known as unlawful detainer actions or distraint proceedings.


The act of seizing (legally or illegally) personal property based on the right and interest which a landlord has in the property of a tenant in default.

Distribution box

A part of a septic system, distributes the flow from the septic tank evenly to the absorption field or seepage pits.

Distribution date

The date of the month (usually the 20th or the next business day) the payments on the securities will be paid to the certificate holders.

Distribution panel

The location of circuit breakers or fuses.


see Derived investment value.


see Discount Margin.

Document needs list

A list of documents required by a lender from a potential borrower submitting a loan application. Documents requested can range from paycheck stubs to bank statements.

Documentation preparation fee

A fee charged by lenders, brokers and/or settlement agents to prepare the necessary documents for closing.

Dollar stop

An agreed dollar amount of taxes and operating expense (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its prorated share of increases. May be applied to specific expenses (e.g., property taxes or insurance).

Dominant tenement

Land benefiting from an easement appurtenant.

Double-net lease

See NN lease.


A wife's interest in her husband's real property.

Down payment

The difference between the purchase price and the portion financed by a mortgage lender.


A three-party negotiable instrument containing an order to pay.


A payment made to contractors, subcontractors, home builders or suppliers from the proceeds of a construction loan.


A person ordered in a draft to make payment.


A person who signs a draft and is identified as the one ordering payment.


See Debt Service Coverage Ratio.

Dual agent

A broker/salesperson who attempts to represent both buyer and seller in the same transaction.

Due diligence

Legally, due diligence is a measure of prudence, activity or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances. The degree of prudence is not measured by any absolute standard but depends on the relative facts of the special case. Prevailing industry standards are used as the primary benchmark from which prudence is judged. In CMBS, due diligence is the foundation of the process because of the reliance securities investors must place on the specific expertise of the professionals involved in the transaction. It is physically and financially impossible for most CMBS investors to inspect properties or evaluate financial records, or to perform the many duties required to prepare, analyze, deliver and service commercial mortgages. Due diligence protects these investors from unethical improprieties and unprofessional practices. Due diligence is said to be the cornerstone of securities law. Also see Up-Front Due Diligence.

Due on sale clause

Standard language in a mortgage that states the loan must be repaid upon sale. See Alienation clause.

Due process

Mandate that anyone involved in a legal matter is entitled to a legal proceeding according to established rules and regulations.

Dun & Bradstreet

A credit-reporting agency that publishes credit ratings for many corporations and businesses.


Two-apartment building.


The inability of a party to exercise his free will because of fear of another party.


An indication of the percentage change in the price of a security relative to a change in interest rates. It provides a measure of the price volatility of the security; the greater the duration, the greater the price volatility relative to a change in interest rates. Positive duration means that the price of a security moves in the opposite direction of a change in interest rates; conversely, negative duration means that the price moves in the same direction as a change in interest rates. Duration is the weighted average term-to-maturity of the security's cash flows when the weights are the present values of each cash flow as a percentage of the present value of all cash flows of the security.

Duty of disclosure

A responsibility for revealing all information that affects the agency agreement.


This program is similar to Argus yet it has additional features. It is designed for long term portfolio analysis and valuation. For example, if I sell a building, how would it affect my portfolio? "DYNA is used for preparing operating projections for commercial office, retail, industrial, apartment, and hotel properties on a cash, tax, or book basis." DYNA's additional features are designed for the management, budgeting and forecasting aspects of the industry.


Earnest money

A deposit a buyer makes at the time of submitting an offer, to demonstrate the true intent to purchase; also called binder, good faith deposit, or escrow deposit.

Earn-out loans

A loan agreement which provides that the original principal balance may be resized by an additional advance as the operating performance of the property is able to service additional debt. Earn-out loans are made on properties of which performance is expected to improve in the near term due to such factors as renovations, retenanting or repositioning. Earn-out loans specifY certain resizing criteria such as minimum debt service coverage ratios (DSCRs) and, in some cases, minimum loan to value ratios (LTVs). Also see Reverse Earn-Out Loans.

Earthquake insurance

An insurance policy that provides coverage against damage to a home from an earthquake.


A right of use over the property of another created by grant, reservation, agreement, prescription or necessary implication. It is either for the benefit of adjoining land ("appurtenant"), such as the right to cross A to get to B., or for the benefit of a specific individual ("in gross"), such as a public utility easement.

Easement appurtenant

See appurtenant easement.

Easement by condemnation

Created by the exercise of the government's right of eminent domain.

Easement by grant

Created by the express written agreement of the landowners, usually in a deed.

Easement by implication

Arising by implication from the conduct of the parties.

Easement by necessity

Exists when a landowner has no access to roads and is landlocked.

Easement by prescription

Obtained by use of the land of another for the legally prescribed length of time.

Easement in gross

A right of use in the land of another without the requirement that the holder of the right own adjoining land.


The lowest part of the roof, which projects beyond the walls of the structure.

Economic depreciation

Physical deterioration of property caused by normal use, damage caused by natural and other hazards, and failure to maintain property adequately.

Economic feasibility

A building or project's feasibility in terms of costs and revenue, with excess revenue establishing the degree of viability.

Economic life

The period of time during which a property is financially beneficial to the owner.

Economic obsolescence

Loss in value caused by things such as changes in surrounding land use patterns and failure to adhere to the principle of highest and best use.

Economic oversupply

A market condition in which available rental space is priced beyond the financial capabilities of potential tenants.

Economic recovery tax act (ERTA), 1981

Tax reform which created tax incentives for construction of commercial real estate. The practical effect was to fuel excess building, particularly of multifamily properties, which were only economically viable in that tax-advantaged environment. Also see Tax Reform Act, 1986.

Economic rent

The market rental value of a property at a given point in time, even though the actual rent may be different.

Effective age

The age of a property based on remaining economic life.

Effective demand

A desire for property accompanied by financial ability to satisfy the desire by purchasing the property.

Effective gross income

Total potential income less deductions for vacancy and credit losses plus other Income.

Effective interest rate

Actual rate of interest being paid.

Effective rent

The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant, usually expressed as an average rate over the term of the lease.

Efficiency factor

Represents the percentage of Net Rentable Square Feet devoted to the building's common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Core Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage.


The right to leave a parcel of land entered (ingress) by law.


There are three ways you can be charged for the power that you use.
1. Direct: Direct charge from provider (ex. Con Edison)
2. Submetered: Landlord usually buys the power in bulk from the provider at a discount and puts a markup such as 15% on top before you are billed.
3. Rent Inclusion: In this instance you are charged a set rate per square foot. Usually $3.00 to $3.50 per sq. ft. if it is insufficient.

Electromagnetic field

Created when electricity flows through a wire.

Emergency tenant protection act

A law in effect in New York City and other municipalities that gives tenants, in most cases, entitlement to a one- or two year lease renewal.

Eminent domain

A power of the state, municipalities, and private persons or corporations authorized to exercise functions of public character to acquire private property for public use by condemnation, in return for just compensation. See also "Condemnation".


A worker whose work is directed and controlled by the person for whom he or she works. The employer controls when, where and how the work is done as well as defining the desired end result of the work. Usually the employer withholds taxes and pays a portion of the employee's contribution into the Social Security retirement fund.

Employee retirement income security act of 1974 (ERISA)

Legislation which stipulates the standards of risk that are appropriate and acceptable for private pension plan investments. A fiduciary of an employee benefit plan, i.e., a pension fund subject to ERISA, may invest in CMBS only if the certificates meet specified investment guidelines.


The individual or company who pays people to work for them. State laws determine the minimum number of persons hired, total amount of wages paid and working conditions that must exist to classify an employer.

Enabling acts

Laws passed by state legislatures authorizing cities and counties to regulate land use within their jurisdictions.


The intrusion of a structure which extends, without permission, over a property line, easement boundary or building setback line.


Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property)..

End loan

The conversion from a construction loan to permanent financing


Additional coverage on an insurance policy to include a specific risk.


A contract in which the parties may legally be required to perform.


The VA home loan benefit is called an entitlement and often referred to as eligibility.

Environmental assessments

An investigation of a property to determine if there are any environmental hazards or concerns that could affect the use of the property or impose future financial liability. Preliminary research should be done prior to purchase in order to protect the seller, buyer, lender and property managers.

Environmental impact statement

A requirement of the National Environmental Policy Act and the State Environmental Quality Review Act prior to initiating or changing a land use that may have an adverse effect on the environment.

Environmental protection agency (EPA)

A federal organization created by the National Environmental Policy Act. The EPA's purpose is to centralize government's environmental responsibilities.

Environment policy act

A federal law that requires filing an environmental impact statement with the EPA prior to changing or initiating a land use or development.

Environmental risk

Lender liability and/or risk of loss of collateral value due to the presence of hazardous materials, such as asbestos, RCB, radon, or leaking underground storage tanks (LUSTS) on a property. Properties in a CMBS are required to have at least a Phase I environmental clearance. Even when properties show no current environmental problems, however, rating agencies sometimes in effect "price in" the possibility that properties are at risk of not meeting future environmental standards. Also see Comprehensive Environmental Response, Compensation Liability Act (CERCLA); Phase I.


Environmental Protection Agency

Equal Credit Opportunity Act (ECOA)

Federal law that prohibits a lender or other creditor from refusing to grant credit based on the applicant's sex, marital status, race, religion, national origin or age.

Equal housing logo

A picture of a house containing an equal sign. This logo should be included in all display ads, brochures and other forms of advertising indicating to the public that the landlord/man-ager will not discriminate against individuals based on their race, color, religion, national origin, sex, familial status or handicap.


One of the main credit-reporting bureaus.

Equitable distribution

Theory which governs the division of marital property in New York.

Equitable title

An interest in real estate such that a court will take notice and protect the owner's rights.


The fair market value of an asset less any outstanding indebtedness or other encumbrances.

Equity Kicker

A loan or investment provision that allows the lender/investor to receive an equity-based return in addition to normal rates upon some event. Typically this involves a lender/investor receiving a disproportionate percentage share of the proceeds of refinancing or sale.

Equity of redemption

The borrower's right to redeem the title pledged or conveyed in a mortgage after default and prior to a foreclosure sale by paying the debt in full, accrued interest, and lender's costs.

Equity Yield Rate

See Cash-on-Cash Return.


See Employee Retirement Income Security Act of 1974.


The wearing away of land by water, wind, or other processes of nature.

Errors and omissions insurance

A policy that insures against mistakes made by a builder or architect.


See Economic Recovery Tax Act, 1981.

Escalation Clause

A clause in a lease which provides for the rent to be increased to reflect changes in expenses paid by the landlord such as real estate taxes, operating costs, etc. This may be accomplished by several means such as fixed periodic increases, increases tied to the Consumer Price Index or adjustments based on changes in expenses paid by the landlord in relation to a dollar stop or base year reference.


When landlords rent space they want to make sure that If costs go up they don't take a beating on increased expenses. So they devised a complicated formula tied in to the Consumer Price Index to raise your rent yearly based on things like inflation and average market based costs. This increase generally does not take effect until you have been a tenant for one year.
• Consumer Price Index (C. P. I.)
• Fixed Percentage: Some landlords will let you choose as an alternative to CPI - an all inclusive set rate that your rent will be increased every year over the base year - example : 2.5%, 3%, 3.5%, 4%, 5%

Escrow Account

A deposit jointly held by a borrower and a lender which provides reserved funds for key operating or capital expenses. Typical escrow accounts are held for real estate taxes, insurance, tenant improvement, leasing commissions, necessary structural repairs or environmental remediation, or reserves for replacement. Also called an Impound Account.


The power of government to take title to property left by a person who has died without leaving a valid will (intestate) or qualified heirs.

Escrow account

(a) An account maintained by a real estate broker in an insured bank for the deposit of other people's money; also called trust account;
(b) An account maintained by the borrower with the lender in certain mortgage loans to accumulate the funds to pay an annual insurance premium, a real property tax, or a homeowners' association assessment.

Escrow agent

A neutral third party who ensures that all conditions of a real estate transaction are met before any transfer of funds or property is recorded.

Escrow agreement

A written agreement made between the parties to a contract and an escrow agent. The escrow agreement sets forth the basic obligations of the parties, describes the monies (or other things of value) to be deposited in escrow, and instructs the escrow agent concerning the disposition of the monies deposited.

Escrow closing

Escrow closes when all conditions of a real estate transaction are met and the title of the property is transferred to the buyer.

Escrow company

A firm that acts as a neutral third party to ensure that all conditions established by the buyer, seller and lender in a real estate transaction are met.

Escrow Disbursements

The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance and other property expenses as they become due.

Escrow payment

Funds that a mortgage servicer withdraws from a borrower's escrow account to pay property taxes and insurance.


The total assets of a person, including real property, at the time of death

Estate at sufferance

Continuing to occupy property after lawful authorization has expired; a form of leasehold estate.

Estate at will

A leasehold estate that may be terminated at the desire of either party.

Estate for years

A leasehold estate that continues for a specified period of time. It is not ordinarily terminated by death of either party or by the sale of the property.

Estate from year-to-year

A leasehold estate that automatically renews itself for consecutive periods until terminated by notice by either party; also called estate from period-to-period or periodic tenancy.

Estate in fee

An estate in fee simple absolute.

Estate in real property

An interest sufficient to provide the right to use, possession, and control of land; establishes the degree and duration of ownership.

Estimated closing costs

An estimate of expenses related to the sale of real estate including title and appraisal fees.

Estimated hazard insurance

An estimate of hazard insurance, also known as homeowners insurance, to cover physical risks such as fire and wind damage.

Estimated property taxes

An estimate of property taxes payable on the property according to state and county tax rates. The amount due is based on the property's assessed value which is based on the most recent sale price plus any assessment updates.

Estoppel Certificate

A signed statement certifying that certain statements of fact are correct as of the date of the statement and can be relied upon by a third party, including a prospective lender or purchaser. In the context of a lease, a statement by a tenant identifying that the lease is in effect and certifying that no rent has been prepaid and that there are no known outstanding defaults by the landlord (except those specified).


The right of a life tenant or lessee to cut timber on the property for fuel or to use in making repairs.


A system or code of professional behavior.


A study of the usefulness or utility of a property without reference to the specific estimate of value.


A landlord's action that interferes with the tenant's use or possession of the property. Eviction may be actual or constructive.

Eviction notice

A landlord's legal notice to a tenant explaining the tenant's default under the terms of the lease and informing him or her of a pending eviction suit.

Examination of title

An inspection by a title company of public records and other documents to determine the chain of ownership of a property.

Excess Interest/Excess Spread

Interest received from repayments that is greater than the interest on the certificates. It is defined as the difference between the interest paid on the mortgage loans (net of servicing fees) and the interest accrued on the certificates.

Exclusive agency listing

A listing given to one broker only (exclusive), who is entitled to the commission if the broker or any agent of the listing broker effects a sale but imposes no commission obligation on the owner who sells the property to a person who was not interested in the property by efforts of the listing broker or an agent of the listing broker.

Exclusive right to rent

This contract is between an owner or lessor and a broker or agent in the rental of residential property.

Exclusive right to sell listing

A listing given to one broker only, who is entitled to the commission if anyone sells the property during the term of the listing contract.

Exclusive-use zoning

A type of zoning in which only the designated use may be made of property within the zoned district.

Executed contract

A contract in which all parties have fulfilled their promises.


Signing a contract or other legal document.

Execution of judgment

Judicial proceeding in which property of a debtor is seized (attached) and sold to satisfy a judgment lien.


A male appointed in a will to see that the terms of the will are carried out.

Executor contract

An agreement that has not been fully performed.


A female appointed in a will to see that the terms of the will are carried out.


Relieved of liability.

Exercise of option

Purchase of optioned property by the optional.


A phase of the business cycle characterized by increasing production.

Expansion option

A lease clause granting a tenant the option to lease additional adjacent space after a specified period of time.

Expense Ratio

The ratio between operating expenses and operating revenues.

Expense Stop

An agreed dollar amount of taxes and operating expense (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its prorated share of increases. May be applied to specific expenses (e.g., property taxes or insurance).


Experian is one of the main credit reporting bureaus.

Express agency

An agency relationship created by oral or written agreement between principal and agent.

Express contract

One created verbally or in writing by the parties.

Extended coverage

An insurance term referring to the extension of a standard fire insurance policy to cover damages resulting from wind, rain, and other perils.

Extensional Extension Option

A period of time given to a borrower to repay a mortgage loan through refinancing or sale of the property past the contractual termination of the mortgage or an automatic provision permitting extension of the original term of the mortgage. In order to prevent placing a property in foreclosure, thereby incurring additional costs, servicers may grant an extension to a borrower who has a balloon payment due.

Extension Advisor

A third party who has the right, or obligation, to approve loan extensions and modifications recommended by the master servicer or special servicer. Not all CMBS have third party extension advisors.

Extension Risk

Potential inability to refinance balloon mortgages in a timely manner, thereby requiring that the life of the security be extended beyond the expected life.


Face amount

Amount of insurance coverage shown on the declaration page.

Face Rental Rate

The "asking" rental rate published by the landlord.

Facility manager

Commercial property specialists who are responsible for managing a team of other specialists, for furnishing and maintaining leased space.

Fair Credit Reporting Act

Federal law designed to regulate procedures and prevent old or inaccurate information from staying in consumer credit files. This act provides individuals the right to inspect their own credit files, although the credit bureau may charge a fee.

Fair Housing Act of 1968

A federal prohibition on discrimination in the sale, rental, or financing of housing on the basis of race, color, religion, sex, or national origin.

Fair Housing Act of 1988

A federal prohibition on discrimination in sale, rental, financing, or appraisal of housing on the basis of race, color, religion, sex, national origin, handicap, or familial status.

Fair Housing Amendments Act of 1988

A law adding to the Fair Housing Act provisions to prevent discrimination based on mental or physical impairment or familial status.

Fair Market Value

The sale price at which a property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. Also known as FMV.

Familial status

A class of people protected by the Federal Fair Housing Act, which is defined as the presence of at least one individual in the family who is younger than 18 or the presence of a pregnant woman.


An individual, or two or more persons related by blood, marriage, or adoption, living together in one dwelling; or a group of up to three people who are not married, blood relatives, or adopted, living together as a single housekeeping unit; or one or more persons living together in a single housekeeping unit as distinguished from a hotel, club, and so on.

Fannie Mae, (Federal National Mortgage Association - FNMA)

A government sponsored enterprise (GSE) or a "corporate instrumentality" of the government. Fannie Mae is a quasi-private corporation, with stock that trades. It does not receive a government subsidy or appropriation and is taxed like any other corporation. Fannie Mae purchases and pools conventional mortgages, i.e., those not insured by the Federal Housing Administration (FHA), the Veteran's Administration (VA), or the Farmer's Home Administration (FmHA), but also buys mortgages from FHA, and then issues securities using the pool of mortgages as collateral. Fannie Mae was the first agency to pool mortgages backed by adjustable-rate mortgages and created the first pass-through collateralized by multifamily mortgages through a swap program. Holders of Fannie Mae certificates are guaranteed full and timely payment of principal and interest.

Farmer's Home Administration (FMHA)

A U.S. Department of Agriculture agency that provides credit to farmers and rural residents.


See Financial Accounting Standards Board.


In house construction, the area of material facing the outer edge of the soffit.


see Financial Asset Securitization Investment Trust.

Fast-track construction

A method under which construction of a building begins under a negotiated contract before all plans and specifications have become final. Construction proceeds as plans come off the drawing board.


see Federal Deposit Insurance Corp

Feasibility study

A report on the potential profitability of a proposed real estate project. It includes considerations such as land area, physical features of the land, requirements of the project, estimated cost and the comparison of the data with other similar projects.

Federal Deposit Insurance Corp. (FDIC)

The FDIC oversees the insurance fund for both commercial banks (the BIF) and saving institutions (the SAIF) and assures the viability and liquidity of retail financial institutions. The FDIC is also the principal regulator for some banks, while the Comptroller of the Currency is the regulator for other banks.

Federal Financial Institutions Examination Council (FFIEC)

An interagency body of regulatory agencies that establishes standards and reporting requirements to which depository institutions are subject. The FFIEC includes five regulatory agencies: the Comptroller of the Currency, the chairman of the FDIC, a member of the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, and the Chairman of the National Credit Union Administration.

Federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)

Defines minimal requirements governing the licensure and certification of appraisers and mandates and empowers individual states to license and certify appraisers.

Federal Home Loan Mortgage Corporation (FHLMC)

The Federal Home Loan Mortgage Corporation is commonly known as Freddie Mac. This corporation buys mortgages from lending institutions, pools them with other loans and sells shares to investors.

Federal Housing Administration (FHA)

This government agency provides low-rate mortgages to buyers who make a down payment as small as 3 percent.

Federal Insurance Contributions Act (FICA)

A federal regulation requiring employers to pay retirement fund taxes (social security) for employees.

Federal National Mortgage Association (FNMA) also know as "Fannie Mae"

A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA.

Federal Reserve System

The U.S. agency that regulates monetary policy and, thereby, the money supply and interest rates.

Federal Trade Commission

An administrative body that has the power to declare trade practices unfair, particularly with regard to antitrust legislation.

Federal Unemployment Tax Act (FUTA)

A regulation requiring employers to file federal unemployment tax returns for employees.

Fee simple absolute

An inheritable estate in land providing the greatest interest of any form of title.

Fee simple on condition

A defensible fee (title), recognizable by the words "but if."


Any serious crime above a misdemeanor which is generally punishable by imprisonment.


see Federal Financial Institutions Examination Council.


see Federal Housing Administration.

FHA loans

Mortgages that are insured by the Federal Housing Administration (FHA). The FHA operates loan plans for investors and purchasers of rural property, and provides low-rate mortgages to buyers who make a down payment as small as 3 percent.

FHA Mortgage Insurance

Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure the loan with the Federal Housing Administration (FHA). In addition to the one time fee, the FHA also requires an additional insurance fee of up to 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.


A person, such as an agent, placed in a position of trust in relation to the person for whose benefit the relationship is created; essentially the same as a trustee.

Fiduciary duties

The duties of an agent to the principal to maintain the greatest trust and confidence generally including care, obedience of lawful instructions, accountability, loyalty, and disclosure of material facts.

Filtering down

Properties in neighborhoods that were once middle income or upper income decline in value.

Financial Asset Securitization Investment Trust (FASIT)

A REMIC-like tax structure intended to permit the securitization of a wide variety of asset classes, including mortgages. This new vehicle expands and improves upon the existing REMIC rules. With respect to CMBS, it permits the replacement of pre-paid loans after initial sale of the security, permits the inclusion of hedging investments and permits the pooling of mixed asset types. The legislation was passed in 1996 as part of the "Small Business Job Protection Act of 1996" (HR 3448).

Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), 1989

Legislation which created the Resolution Trust Corporation (RTC) to restructure the losses experienced by failed financial institutions. Also created the Bank Insurance Fund (BIF) and Savings Association Insurance Fund (SAIF) under the administration of the FDIC. FIRREA required thrifts to meet risk-based capital requirements, in which "risk" was equated with credit risk. Title XI of FIRREA sets forth appraisal guidelines which are frequently followed in the appraisal of commercial real estate assets for CMBS.

Finance charge

An amount imposed on the borrower in a mortgage loan, consisting of origination fee, service charges, discount points, interest, credit report fees, and finders' fees.

Financial Accounting Standards Board (FASB)

An industry group that establishes the prevailing standards for the accounting treatment of assets and liabilities. F ASB decisions that seem arcane can have an important effect on investment behavior. For example, F ASB 144 stipulates the accounting treatment of impairment and the disposal of impaired assets such as repriced real estate. A ruling that requires writing-down assets to current fair market value and reporting the loss on income statements means that companies holding real estate cannot hide behind the book value of those assets. This ruling thus makes it more costly to hold real estate for banks and insurance companies.

Fire insurance policy

See homeowner's policy.

Firm commitment

A written promise made by a lender to loan money for the purchase of property.


see Financial Institutions Reform, Recovery and Enforcement Act.

First Generation Space

Generally refers to new space that is currently available for lease and has never before been occupied by a tenant. See also "Second Generation Space.

First Loss Piece

The lowest class or tranche of a CMBS which will absorb credit losses from a pool of mortgages first before any other classes are affected.

First Mortgage

The senior mortgage which, by reason of its position, has priority over all junior encumbrances. The holder of the first or senior mortgage has a priority right to payment in the event of default.

First Refusal Right or Right Of First Refusal (Purchase)

A lease clause giving a tenant the first opportunity to buy a property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept.

First Refusal Right or Right Of First Refusal (Adjacent Space)

A lease clause giving a tenant the first opportunity to lease additional space that might become available in a property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept. This right is often restricted to specific areas of the building such as adjacent suites or other suites on the same floor.

First substantive meeting

The first contact or meeting when some detail and information about the property is shared with parties who express some interest in the real estate transaction.

Five-year forecast

A long-term projection of estimated income and expense for a property based on predictable changes.

Fixed Costs

Costs, such as rent, which do not fluctuate in proportion to the level of sales or production.

Fixed expenses

Expenditures such as property taxes, license fees, and property insurance; subtracted from effective gross income to determine net operating income.

Fixed-fee bids

Also called flat fee bids, the contractor estimates his/her costs including profit and submits one fee to do the job. Most construction contracts are negotiated on this type of fee.

Fixed lease

One in which the rental amount remains the same for the entire lease term; also called flat, straight, or gross lease.

Fixed-rate mortgage

A home loan with an interest rate that will remain at a specific rate for the term of the loan.

Fixed time

The specific weeks in a year that an owner of a timeshare arrangement has access to accommodations.


Personal property that has become real property by having been permanently attached to real property.

Fix-up expenses

Costs incurred by the seller of a principal residence in preparing it for sale.


A metallic material that is used in certain areas of the roof and walls to prevent water from seeping into the structure.

Flat fee

A property management fee expressed as a dollar amount per year or per month.

Flat lease

One in which the rental amount does not change during the lease term.

Flea market

A large building or open area in which space is sold to individuals for the sale of merchandise, usually used or of a collectible nature.

Flexible payment mortgage

A loan that allows smaller mortgage payment in the first years of purchase and then increases the amount of payment later on.

Flex Space

A building providing its occupants the flexibility of utilizing the space. Usually provides a configuration allowing a flexible amount of office or showroom space in combination with manufacturing, laboratory, warehouse distribution, etc. Typically also provides the flexibility to relocate overhead doors. Generally constructed with little or no common areas, load-bearing floors, loading dock facilities and high ceilings.

Flitch beam

A double top plate used to tie the walls together and provide additional support for the ceiling and roof system.

Floating slab

A type of foundation constructed by pouring the footing first and then pouring the slab.

Flood certification

The process of determining whether a property is located within a known flood zone.

Flood insurance

Insurance coverage that is required in designated flood areas.

Floor Area Ratio (FAR)

The ratio of the gross square footage of a building to the land on which it is situated. Calculated by dividing the total square footage in the building by the square footage of land area.


The concrete base below the frost line that Supports the foundation of a structure.


The act of refraining from taking legal action for payment of a mortgage despite the fact that it is due.

Force majeure

A force that cannot be controlled by the parties to a contract and prevents said parties from complying with the provisions of the contract. This includes acts of God such as a flood or a hurricane or, acts of man such as a strike, fire or war.


The process by which a lender takes back title to a property on which the mortgagee has defaulted. A servicer may take over a property from a borrower on behalf of a lender. A property usually goes into the process of foreclosure if payments are more than 90 days past due.

Foreign trade zone (FTZ)

An area designated under federal law that permits manufacture, shipping or storage of goods duty-free.

Forfeiture clause

A statement in a contract for deed providing for giving up all payments by a buyer in default.


A colorless, organic chemical with a strong pronounced odor. One of the indoor air pollutants that contributes to sick building syndrome.

Formal will

A will, in writing, signed by the testator or testatrix in front of two witnesses.

For Sale By Owner (FSBO)

A selling method whereas the owner of the property acts as the selling agent and handles the sales process directly with the buyer or buyer's agent. This is most commonly done y owners in order to avoid having to pay a listing commission.

Foundation walls

Poured concrete, masonry block, or brick sides of a structure.


The wooden skeleton of the structure.

Framing members

Lumber with a nominal dimension of two inches thick used for constructing the wooden skeleton of the home.


An intentional false statement of a material fact.

Freddie Mac (Federal Home Loan Mortgage Corporation - FHLMC

A government sponsored enterprise (GSE) or a "corporate instrumentality" of the government. Freddie Mac is a quasi-private corporation, with stock held by Federal Home Loan Banks, under the regulatory control of the Department of Housing and Urban Development (HUD). Under the direction of the Federal Home Loan Bank Board (FHLB), Freddie Mac is charged to buy mortgages from S&Ls to enhance their role in and provide liquidity to the secondary market for single family mortgages (i.e., mortgages not backed by a government agency) and then issues securities using the pool of mortgages as collateral. It also issues participation certificates (PCs), most of which are backed by pools of conventional mortgages, but some pools are comprised of mortgages that are insured by the Federal Housing Administration (FHA) and/or guaranteed by the Veterans Administration (VA). Holders of Freddie Mac PCs are assured timely payment of interest and eventual payment of principal.

Freehold estate

A right of title to land.

Free market

An economic condition in which buyer and seller have ample time to negotiate a beneficial purchase and sale without undue pressure or urgency.


A quality of some asbestos that causes it to crumble, allowing toxic particles to escape into the air that may lodge in the lungs.

Friendly foreclosure

An absolute conveyance of title to the lender by the mortgagor in default to avoid a record of foreclosure; also called deed in lieu of foreclosure.

Frieze board

A decorative and functional board that prevents wind and moisture from penetrating the junction of the soffit and sheathing.

Front-end ratio

A lender calculation that compares a borrower's monthly housing expense (principal, interest, taxes, and insurance) to gross monthly income.

Front foot

A linear foot of property frontage on a street or highway.

Full covenant and warranty deed

A deed containing the strongest and broadest form of guarantee of title.

Full recourse

A loan on which an endorser or guarantor is liable in the event of default by the borrower.

Full Service Lease

see Gross Full Service Lease.

Full service rent

An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount. See also "Pass Throughs".

Fully amortized ARM

An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

Fully amortizing mortgage

One in which the scheduled uniform payments will payoff the loan completely over the mortgage term.

Functional obsolescence

Loss in value resulting from things such as faulty design, inadequacies, overadequacies, and out-of-date equipment.


A device that is part of a wiring system that will melt and open the circuit when overheating occurs, causing electrical power to stop.

Fusion Deal

The combination within one CMBS of conduits loans, small loans and large loans that previously would have been disaggregated into separate securities.

Future interest

The rights of an owner of an estate who will vest at some upcoming time.

Future proposed space

Space in a proposed commercial development which is not yet under construction or where no construction start date has been set. Future Proposed projects include all those projects waiting for a lead tenant, financing, zoning, approvals or any other event necessary to begin construction. Also may refer to the future phases of a multi-phase project not yet built.


Gain realized

The excess of the amount realized over the adjusted basis.

Gap financing

Usually a short-term loan to provide funds over and above an already existing loan until more permanent financing is in place. See also bridge loan.

General agent

One with full authority over property of the principal, such as a property manager.

General contractor

The prime contractor who contracts for the construction of an entire building or project, rather than just a portion of the work. The general contractor hires subcontractors, (e.g., plumbing, electrical, etc.), coordinates all work, and is responsible for payment to subcontractors.

General lien

One that attaches to all of the property of a person within the court's jurisdiction.

General obligations law

See statute of frauds.

General Partner

A member of a partnership who has authority to bind the partnership. A general partner also shares in the profits and losses of the partnership. See also "Limited Partnership".

General partnership

The partners are personally liable for partnership debts exceeding partnership assets.

General warranty deed

A deed denoting an unlimited guarantee of title.


Funds a buyer receives from a relative or other source. Mortgage lenders usually require a gift letter from the giver of this "gift money" stating that the money does not have to be repaid.


See gross income multiplier.

Ginnie Mae (Government National Mortgage Association - GNMA)

A government-related agency that is part of the Department of Housing and Urban Development (HUD) and uses the "full faith and credit" of the U.S. government in borrowing. GNMA guarantees securities collateralized by mortgages initially issued by approved lenders (thrifts, commercial banks, and mortgage banks) that pooled the mortgages, using the mortgages for collateral for the security. In so doing, GNMA supports the Federal Housing Administration (FHA) mortgage market as well as mortgages from the Veterans Administration (VA) and the Farmers Home Administration (FmHA). GNMA guarantees pass-throughs, but does not issue them, and will only guarantee a pool in which the underlying mortgages are insured or guaranteed by either the FHA, VA, or FmHA.


The main carrying beam of a house that ps the distance from one side of the foundation to the other.


See Gross Leasable Area.

Going-In Cap Rate

The capitalization rate applied to the first year's income. Also see capitalization rate and reversionary cap rate.

Good faith estimate

Lender's estimate of borrower's settlement costs, required by RESPA to be furnished to borrower at time of loan application.

Government Sponsored Enterprise (GSE)

One of several agencies formed to provide a secondary market for residential real estate loans, including Fannie Mae (Federal National Mortgage Association - FNMA); Freddie Mac (Federal Home Loan Mortgage Corporation - FHLMC); and Ginnie Mae (Government National Mortgage Association - GNMA).

Government National Mortgage Association (GNMA)

This government agency buys home loans from lenders, pools them with other loans and sells shares to investors. However, unlike Fannie Mae and Freddie Mac, Ginnie Mae only purchases loans backed by the federal government. (Commonly known as Ginnie Mae)


See Graduated Payment Mortgage.

Graduated Payment Mortgage (GPM)

An indebtedness whereby the individual payments on the loan are graduated based on a pre-defined schedule. This may include an interest rate or principal payments which change at fixed increments over the life of a loan.

Grace period

A specified amount of time in which a borrower may make a loan payment after its due date without penalty.

Graduated lease

One in which the rental changes from period to period over the lease term, increasing in stair-step fashion; used for new business tenants whose income increases over time.

Graduated Payment Mortgage

A mortgage that requires a borrower to make larger monthly payments over the term of the loan. Payments are lower for the first few years but gradually rise until year three or five, when payments become fixed.




One who receives title to real property by deed. One to whom a grant is made.

Granting clause

The statement in a deed containing words of conveyance.

Granting theory

A type of mortgage lending practice in which a disinterested third party holds legal title to a property in security for the loan through a deed of trust; not used in New York.


One who conveys title to real property by deed. The person making the grant.


A written complaint, filed by a property owner with the local board of assessment review, protesting the validity of an assessment.

Gross absorption

A measure of the total square feet leased over a specified period of time with no consideration given to space vacated in the same geographic area during the same time period. See also "Net Absorption".

Gross building area

The total floor area of the building measuring from the outer surface of exterior walls and windows and including all vertical penetrations (e.g. elevator shafts, etc.) and basement space.

Gross building area

The total floor area of the building measuring from the outer surface of exterior walls and windows and including all vertical penetrations (e.g. elevator shafts, etc.) and basement space.

Gross floor area

A method of measuring industrial space in which area is the total of all floor space within the exterior walls of the building, with no allowance made for structural projections and with a required minimum ceiling height of 7.5 feet.

Gross Full Service Lease

Lease structure under which the landlord pays all building expenses. Also called a full service lease or a gross rent lease.

Gross income

The total household income before taxes or expenses are subtracted.

Gross income multiplier (gim)

A factor used in calculating estimated value of income property.

Gross lease

A common residential lease under which the tenant pays a fixed rental and the landlord pays all operating expenses for the property.

Gross operating income

Gross scheduled rental income minus losses from vacancies and credit losses.

Gross rent multiplier (grm)

A method of estimating the value of income property.

Gross sales

The total sales made by a retail tenant at a leased premises. A proportion of gross sales is charged as rental consideration under a percentage lease.

Ground lease

A type of net lease. usually used with industrial real estate, under which the owner of a tract of land leases the property to a tenant who constructs his or her own building on the site. Also called a land lease.

Ground rent

Rent paid to the owner for use of land, normally on which to build a building. Generally, the arrangement is that of a long-term lease (e.g. 99 years) with the lesser retaining title to the land.

Ground water

Water obtained from underground.

Group boycott

A conspiracy wherein a person or group is persuaded or coerced into not doing business with another person or group.

Group home

A residential facility for five or more adults who have been institutionalized and then released.

Growing-equity mortgage

A fixed rate mortgage that increases payments over a specific period of time. The extra funds are applied to the principal.


see Government Sponsored Enterprise.


One who makes a guaranty. See also "Guaranty".


Agreement whereby the guarantor undertakes collaterally to assure satisfaction of the debt of another or perform the obligation of another if and when the debtor fails to do so. Differs from a surety agreement in that there is a separate and distinct contract rather than a joint undertaking with the principal. See also "Guarantor".


Habendum clause

The statement in a deed beginning with the words "to have and to hold" and describing the estate granted.


Suitable for the type of occupancy intended.


A casual expression for reducing the estimated income or cash flow expected to emerge from a property. For example, one might speak of a rating agency giving a "haircut" to a property or portfolio in lowering the expected cash flow on which the debt service coverage ratio is calculated.


A disability is a physical or mental impairment; an impairment that substantially limits one or more of an individual's major life activities. Persons who have AIDS are protected by the fair housing laws under this classification, as are those participating in addiction recovery programs, but current users 'of illegal drugs are not. For example, a landlord may lawfully discriminate against a cocaine user, but not against a member of Alcoholics Anonymous.

Hard cost

The cost of actually constructing the improvements (i.e. construction costs). See also "Soft Cost".


The physical parts of the computer that can be seen and touched, including the keyboard, printer and display screen or terminal.

Hazard communication standard plan

An OSHA mandated plan to be compiled by property managers detailing protective measures to be implemented when handling hazardous chemicals. See Occupational Safety and Health Administration (OSHA).

Hazard insurance

Hazard insurance provides coverage for damage from items as fire and wind. Mortgage lenders require coverage for at least the replacement value of the home. (Also known as homeowner's insurance or fire insurance)

Hazardous wastes

Waste that poses a threat to human health or the environment, including wastes that are ignitable, corrosive, toxic, explosive, violently reactive, or specifically named as hazardous.


Wooden reinforcements for the placement of doors and windows.


Owner supplies heat from October 15 through May 15th, usually at no charge, but there are still some old buildings that are heated by propane and there is a heating charge.


Persons legally eligible to receive property of a decedent.


A variety of dissimilar uses of property; no homogeneous.

Highest and best use

The use of land that will preserve its utility and yield a net income flow in the form of rent that, when capitalized at the proper rate of interest, represents the highest present value.

High Rise

In the Central Business District, this could mean a building higher than 25 stories above ground level but in suburban sub-markets, it generally refers to buildings higher than 7 or 8 stories.

Holder in due course

Holder of a negotiable instrument who takes an instrument for value, in good faith, and without notice that it is defective or over Due.

Holding period

The length of time a property is owned.

Holdover tenant

A tenant who remains in possession of property after a lease terminates.

Holographic will

One handwritten by the testator.

Home Buyer's Guide

A booklet explaining aspects of loan settlement required by RESPA.

Home equity line

An open ended line of credit based on a homeowner's accumulated equity.

Home equity loan

A loan that allows owners to borrow against the equity in their homes however unlike a home equity line this product provides a defined amount at closing without an option to redraw in the future.

Home inspection

An examination of a home's condition by a licensed inspector prior to purchase.

Home inspector

A licensed professional who evaluates the structural soundness and operating systems of a residence.

Home occupations

A small business or occupation that may be conducted only by the residents of the dwelling and must be incidental and secondary to the use of the dwelling.

Homeowner's insurance

Insurance that includes coverage for any damages that may affect the value of a house, in addition to personal liability and theft coverage.

Homeowners Association (HOA)

A group that governs a subdivision, condominium or planned community. The association collects monthly fees from all owners to pay for common area maintenance, handle legal and safety issues and enforce the covenants, conditions, and restrictions set by the developer.

Homeowners Association dues

Monthly payments due to a homeowners' association to be used for maintenance and communal expenses. Condominiums, townhouse complexes, and planned unit developments (PUDs) may require monthly homeowners' association dues.

Homeowner's policy

An insurance policy protecting against a variety of hazards.

Homeowner's warranty (HOW)

An insurance policy protecting against loss caused by structural and other defects in a dwelling.

Home price

The price agreed upon by a buyer and seller, usually based on an appraisal of the house's market value.


A parcel of land used by the owner as a primary residence.


Similar and compatible, as in land uses.

Hours of Building Operation

Note: Owners that supply A/C and Heat may shut these services off if it is not a 24/7 building. If you need to work on weekends be prepared for extra charges. Find out what they are, or find a building that is opened 24/7.

Housing expense ratio

The percentage of gross monthly income devoted to housing costs.


Abbreviation of (the U.S. Department of) Housing and Urban Development. HUD is a federal agency that oversees the Federal Housing Administration (FHA) and a variety of housing and community development programs.

HUD-1 Uniform Settlement Statement

A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing for the buyer and seller.

HUD Form No.1

A standard settlement form required by RESPA.

Hurdle Rate

A break-even debt service calculation that establishes the maximum interest rate a mortgaged property can handle at maturity if the property must be refinanced. It is calculated using current net operating income and an interest-only mortgage with a reasonably short maturity of less than five years. The hurdle rate is usually calculated to answer the question, Can all loans refinance at maturity if interest rates are at a "disaster level?" Also called break even debt service analysis.


Heating, ventilation, and air conditioning. The capacity of HV AC systems becomes an issue in office property because modem, competitive space requires significant HV AC capability to accommodate intense computer utilization.

Hydronic system

A process in a heating system in which liquids such as water are heated or cooled.


The accelerated pay down of a class in a CMBS or of an individual property loan achieved by allocating the scheduled principal and interest to that class.


To pledge property as security for the payment of a debt without giving up possession.



An investment that is not easily convertible to cash.

Illusory offer

One that does not obligate the offer.


Incapable of being moved, fixed in location; an important physical characteristic of land.

Implied agency

Agency that exists as a result of actions of the parties.

Implied contract

One created by deduction from the conduct of the parties rather than from the direct words of the parties; opposite of an express contract.

Implied warranty

One presumed by law to exist in a deed, though not expressly stated.


A portion of the monthly mortgage payment that is placed in an account and used to pay for hazard insurance, property taxes and private mortgage insurance( if applicable).

Impound Account

A deposit jointly held by a borrower and a lender which provides reserved funds for key operating or capital expenses. Typical escrow accounts are held for real estate taxes, insurance, tenant improvement, leasing commissions, necessary structural repairs or environmental remediation, or reserves for replacement. Also called an Escrow Account.

Improved land

Land on which structures or roads exist.


In the context of leasing, the term typically refers to the improvements made to or inside a building but may include any permanent structure or other development, such as a street, sidewalks, utilities, etc. These typically increase the value of a property, except in some cases of overimprovement. See also "Leasehold Improvements". See also "Leasehold Improvements" and "Tenant Improvements".

Incentive zoning

Offers incentives to developers and property owners to construct amenities that would provide certain types of uses and enjoyment for the residents of the municipality.

Income approach

The primary method for estimating the value of properties that produce rental income; also called appraisal by capitalization.

Income and expense report

A monthly financial report showing the income from the property, operating expenses and the amount remitted to the owner.

Income property

Describes a person who is not capable of managing his or her own affairs, under law.


Intangible things such as rights.

Increasing or diminishing returns

The cost of the improvement is compared to the increase in value to the property after the improvement is completed. Under diminishing returns, the increase in value is less than the cost of the improvement. Under increasing returns, the increase in value is more than the cost of the improvement.

Incubator space

A building located in an industrial park and divided into small units of varying sizes to accommodate young, growing companies that want to combine office and industrial space at one location.

Incurable depreciation

That which is not physically correctable or not economically practical to correct.


Reimbursement or compensation paid to someone for a loss already suffered.

Independent contractor

Workers who control when, where and how they perform their own jobs and who are responsible for paying their taxes and into the Social Security system.

Independent Director

A non-affiliated individual of the board of directors of a (borrowing) entity. The vote of the independent director is required for certain actions by the entity, e.g., declaration of bankruptcy, thus insulating the entity from deleterious control by affiliated principals. This is often a key component of special purpose entity (SPE) and bankruptcy remote structures.


A physical characteristic of land describing that land as a permanent commodity that cannot be destroyed.


Financial tables used by lenders to calculate interest rates on adjustable mortgages. Commonly used indexes are the Prime Rate, the LIBOR and Treasury bills.

Indexed Rate

The sum of the published index plus a margin. For example if the index were 5% and the margin 2.75%, the "fully indexed rate" would be 7.75%.

Index lease

A lease containing an escalation clause that is tied to an index.

Indirect costs

Development costs, other than material and labor costs which are directly related to the construction of improvements, including administrative and office expenses, commissions, architectural, engineering and financing costs.

Indirect management costs

Expenses in the budget of a real estate agency or parent company that are partially attributable to the operation of the management department.


The person who transfers or indorses a negotiable instrument to another.

Industrial park

A suburban industrial subdivision designed to offer comparatively small firms land in outlying areas with good accessibility to transportation; now often called a business park.

Industrial property

Property used for light or heavy manufacturing, research and development (R&D) or warehouse space. Also includes office/warehouse space and flex space.

Industrial zones

areas that are zoned for structures that are used for light or heavy manufacturing and warehouses.

Informed consent

Agreement by a buyer or seller to a type of agency relationship after considering the various alternatives.


The manmade physical features of an urban area, such as roads, highways, sewage and drainage systems and utility facilities necessary to support a concentration of population.


The right to enter a parcel of land; usually used as "ingress and egress" (both entering and leaving).

Initial interest rate

The original interest rate on an adjustable rate mortgage. This rate may be subject to various adjustment at points throughout the mortgage.

Initial rate cap

A specific limit defined by some adjustable rate loans (ARMs) for the maximum amount the interest rate may increase at the expiration of the initial interest rate.

Initial rate duration

Most adjustable rate loans (ARMs) offer an initial interest rate below the current market rate. This initial or "teaser" rate expires after a period called the initial rate duration, which may last months or years.

Inspection fee

The fee paid to a licensed property inspector in order to determine the present physical condition of the property.

Institutional Property

A property used by special institutions, such as a university, hospital, or a government agency. Institutional properties may be similar to other property types, but since they are designed for a specific purpose, they can be difficult to adapt for other uses.


A court instruction to discontinue a specified activity.

In ram legal proceeding

An action that is brought against the real property directly and not against an individual and his personal property.

Inspection report

A licensed property inspectors; written report of the property's condition.

Installment land contract

See contract for deed.

Installment sale

A transaction in which the seller receives the sale price over a specified period of time.

Institutional property

Office buildings owned and occupied by the same corporation.


A written legal document such as a contract, note, or mortgage.

Insurable interest

The degree of interest qualifying for insurance.

Insurance binder

A temporary insurance arrangement usually put in force until a permanent policy can be obtained

Insured conventional loan

One in which the loan payment is insured by private mortgage insurance to protect the lender.

Insured Mortgage

A mortgage that is insured (guaranteed) by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI).

Insured value

The cost of replacing a structure completely destroyed by an insured hazard.


(a) money paid for the use of money; (b) an ownership or right.

Interest accrual rate

The rate at which interest accrues on a mortgage.

Interest Only Strip (I/O)

When the interest rate on the underlying mortgages(s) exceeds the interest rate or coupon paid on the security backed by the mortgage(s), the excess interest is "stripped" and sold as a separate payment stream, an interest only (I/O) strip. The strip is usually described in the (notional) amount of the original security class( es) from which it was stripped and then sold for a small fraction of the price of the whole security or similarly rated class(es). I/Os can be very volatile securities. For example, if several loans prepay earlier than expected, then there may not be an interest stream from which to pay the interest on the strip, so the I/O could end up with a much shorter life than originally expected.

Interest paid over life of loan

The total amount paid to the lender for the use of money during the time the money is borrowed

Interest Paid vs. Interest Impacted

An important clause in the CMBS structure that determines how and when losses are allocated, e.g., are losses allocated before principal is paid or after principal is paid. This clause impacts the yield of the lowest class of certificate holders most profoundly.

Interest rate

The fee, expressed as a percentage, charged for a loan.

Interest rate buy-down plans

For buyers with limited cash reserves some sellers are willing to advance funds from the sale of the home to buy down the interest rate and reduce the buyer's monthly obligation.

Interest Rate Cap

Limits the interest rate or the interest rate adjustment to a specified maximum on either a periodic or lifetime basis. This protects the borrower from rising interest rates and is typically purchased by the borrower.

Interest Rate ceiling

The highest interest rate a lender can charge for an adjustable rate mortgage

Interest Rate Floor

For an adjustable-rate mortgage (ARM), the minimum possible interest rate, as specified in the mortgage note.

Interest only loan

The borrower pays only the interest that accrues on the loan balance each month. Because each payment goes toward interest, the outstanding balance of the loan does not decline with each payment.

Interest Shortfall

The aggregate amount of interest payments from borrowers that is less than the accrued interest on the certificates.

Interpolated Treasury

A "hypothetical" Treasury rate based on the relative rates of two other Treasuries. For example, if a 4-year CMBS tranche (or any other bond) is priced to yield a rate benchmarked to Treasuries, the price will be set at approximately the midpoint between the 3-year and 5-year Treasury rates since there is no 4-year Treasury.

Interim financing

Short-term financing used by sellers to bridge the gap between the sale of one house and the purchase of another (also known as bridge or swing loans). A construction loan is also a form of interim financing.

Interposal deed

Conveys real property from husband to wife or wife to husband.

Interstate land sales full disclosure act

A federal law regulating the sale across state lines of subdivided land under certain conditions.

Intervivos trust

A trust set up while the parties are living.


The condition of death without leaving a valid will.

Intestate succession

Distribution of property by descent as provided by statute.


Not legally enforceable.


The total amount of rentable square feet of existing and any forthcoming space (whether it be a tenant vacating space or new buildings coming on the market), in a given category, for example, all warehouse space in a specified submarket. Inventory refers to all space within a certain proscribed market without regard to its availability or condition, and categories can include all types of leased space such as office, flex, retail and warehouse space.


The outlay of money for income or profit.

Investment Grade

Investments that are rated triple-A, double-A, single-A and triple-B are investment grade, therefore appropriate for regulated institutional investors. Also see" A" pieces and Senior Pieces.

Investment property

Real estate that generates income, such as an apartment building or a rental home.

Investment syndicate

A joint venture, typically controlled by one or two persons, hoping for return to all investors.

Investment value

The highest price an investor would pay in light of how well he believes a given property would serve his financial goals.

Investor Reporting Package

The CMSA Investor Reporting Package is the established reporting standards for the CMB S industry. The IRP is a standardized set of bond, loan and property level information provided for all CMBS securitizations.

Involuntary alienation

Transfer of title to real property as a result of a lien foreclosure sale, adverse possession, filing a petition in bankruptcy, condemnation under power of eminent domain, or, upon the death of the titleholder, to the state if no heirs exist.

Involuntary lien

An act wherein a creditor places a claim on real and/or personal property of another to obtain payment of a debt.

Involuntary Payment

Prepayment on a mortgage loan due to a default.


That which cannot be changed or canceled.

Issuer Guarantee

see Corporate Guarantee.


Joint liability

The responsibility of two or more people to fulfill the terms of a home loan or other financial debt.

Joint tenancy

Ownership by two or more people that gives equal shares to a piece of property. Rights pass to the surviving owner or owners.

Joint venture

Participation by two or more parties in a single undertaking.


Wooden framing members used in the construction of floors and ceilings.


The final decision of a court resolving a dispute and determining the rights and obligations of the parties. Money judgments, when recorded, become a lien on real property of the defendant.

Judgment Lien

An encumbrance that arises by law when a judgment for the recovery of money attaches to the debtor's real estate. See also "Lien".

Judicial deed

One executed by an official with court authorization.

Judicial foreclosure

A court proceeding to require that property be sold to satisfy a mortgage lien.

Jumbo loan

Loans that exceed the conforming limits set annually by Fannie Mae & Freddie Mac.

Junior mortgage

A loan that is subordinate to the primary loan.


The extent of authority of a court.

Just Compensation

Compensation which is fair to both the owner and the public when property is taken for public use through condemnation (eminent domain). The theory is that in order to be "just", the property owner should be no richer or poorer than before the taking.


Key tenant

A major department store in a shopping center. Also called anchor store.


Payment by a broker of any part of a compensation to a real estate transaction to anyone who is not licensed or who is not exempt from the license law.


Labor-extensive industry

A business with a low concentration of employees per acre.

Labor-intensive industry

A business with a high concentration of employees per acre.

Labor-oriented industry

A business that tends to locate near a low-cost labor pool.


Loss of legal rights because of failure to assert them on a timely basis.


The surface of the earth, the area above and below the surface, and everything permanently attached thereto.

Land Contract

(Contract for deed) A contract of sale and a financing instrument wherein the seller agrees to convey title when the buyer completes the purchase price installment payments; also called installment land contract and installment plan.

Land-employment densities

In industrial properties, expressed as a ratio of the number of principal shift employees to total land area. Those which process raw materials often require fewer employees, while electronics firms and others utilizing highly skilled workers will have a higher ratio. This impacts on parking needs, for example.

Land grant

Conveyance of land as a gift for the benefit of the public.

Land lease

A type of lease that allows a lessee the right to use land for any purpose for a specified period of time.


Describes property with no access to a public road.

Landlord's lien

A type of lien that can be created by contract or by operation of law. Some examples are: (1) a contractual landlord's lien as might be found in a lease agreement; (2) a statutory landlord's lien; and (3) landlord's remedy of distress (or right of distraint), which in not truly a lien but has a similar effect. See also "Lien".

Landlord's lien or warrant

A warrant from a landlord to levy upon a tenant's personal property (e.g., furniture, etc.) and to sell this property at a public sale to compel payment of the rent or the observance of some other stipulation in the lease.

Land patent

Instrument conveying public land to an individual.

Land trust

Type of trust in which title to land is held by a trustee for the benefit of others.

Land use controls

Governmental restrictions on land use (e.g., zoning laws and building codes).

Late charge

A fee imposed by a lender when the borrower does not make a payment on time.

Late payment

A payment a lender receives after the due date has passed.


Life insurance company, often shortened to life company. "LC" is also a common shorthand for Letter of Credit.


A toxic metallic element found in some homes in paint, dust, and water.

Lead agency

The governmental agency that oversees the environment impact process and makes final decisions.

Lead Based Paint Hazard Reduction Act

The Federal Act that seeks to control exposure to lead-based paint hazards, specifically mentioning protecting children under the age of six. It requires that landlords of properties built before 1978 to make certain disclosures before entering into a lease.

Lead Manager

The investment bank charged with the principal responsibility for coordinating the issuance of a new security. This firm also typically has the largest role in the underwriting of the security, and their name appears in the most prominent position on the tombstone advertisement announcing the issuance of the security.


A written or oral contract between a landlord (lessor) and a tenant (lessee) that transfers the right to exclusive possession and use of the landlord's real property to the lessee for a specified period of time and for a stated consideration (rent). Most state laws require that leases more than a certain amount of time must be in writing to be enforceable.

Lease agreement

The formal legal document entered into between a Landlord and a Tenant to reflect the terms of the negotiations between them; that is, the lease terms have been negotiated and agreed upon, and the agreement has been reduced to writing. It constitutes the entire agreement between the parties and sets forth their basic legal rights.

Lease Assignment

An agreement between a commercial property owner and a lender that assigns lease payments directly to the lender. Otherwise, lease payments would go to the owner, who would then forward mortgage payments to the lender. In a CMBS, lease payments would go directly to the servicer under a lease assignment. A form of credit enhancement.

Lease assumption

A concession whereby a property owner agrees to take over the balance of payments on a prospective tenant's current lease if he or she rents space in the owner's property.

Lease commencement date

The date usually constitutes the commencement of the term of the Lease for all purposes, whether or not the tenant has actually taken possession so long as beneficial occupancy is possible. In reality, there could be other agreements, such as an Early Occupancy Agreement, which have an impact on this strict definition.

Leased fee

Lessor's interest in leased property.


The limited interest in a property held by a tenant; primarily the right to inhabit it for a specified period of time. At the end of the lease, the property reverts to the owner or landlord.

Leasehold estate

No freehold estate; of limited duration, providing the right of possession and control but not title.

Leasehold improvements

Improvements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvements to be made in the leased premises by Landlord. See also "Tenant Improvements".

Leasehold mortgage

One in which a leasehold (no freehold) estate is pledged to secure payment of the note.


The lease purchase contract sets the closing date and provides remedies to the seller if the buyer defaults. (a type of delayed closing)

Lease renewals

After the lease expires, signing a new lease with the existing tenant. Topics up for renegotiation may include a new rental rate, repairs or alterations, expansion or contraction of space.

Leasing agent

Salespeople who are skilled in communications and telephone techniques, on-site customer qualifying, merchandising themselves and their properties, and closing techniques.


A gift of personal property by will.

Legal blemish

Blemishes on a piece of property such as a zoning violation or fraudulent title claim.

Legal capacity

The ability to contract.

Legal Description

A geographical description identifying a parcel of land by government survey, metes and bounds, or lot numbers of a recorded plat including a description of any portion thereof that is subject to an easement or reservation.

Legal entity

A person or organization with legal capacity.

Legality of object

Legal purpose.

Legal owner

The term is in technical contrast to equitable owner. The legal owner has title to the property, although the title may actually carry no rights to the property other than as a lien. See also "Lien".


Recipient of the gift of personal property by will.


A bank, savings institution or mortgage company that offers home loans.


A tenant under a lease.


A landlord under a lease.

Letter of Credit (LOC or LC)

An obligation by a third party to cover losses due to delinquencies and foreclosure. The rating of the third party is commonly required to be, at a minimum, equal to the highest rating of the securities. A form of credit enhancement.

Letter Of Attornment

A letter from the grantor to a tenant, stating that a property has been sold, and directing rent to be paid to the grantee (buyer). See also "Attorn".

Letter Of Credit

A commitment by a bank or other person, made at the request of a customer, that the issuer will honor drafts or other demands for payment upon full compliance with the conditions specified in the letter of credit. Letters of credit are often used in place of cash deposited with the landlord in satisfying the security deposit provisions of a lease.

Letter Of Intent

A preliminary agreement stating the proposed terms for a final contract. They can be "binding" or "non-binding". This is the threshold issue in most litigation concerning letters of intent. The parties should always consult their respective legal counsel before signing any Letter of Intent.


The use of borrowed funds; the larger the percentage of borrowed money, the greater the leverage.


Imposition of a tax, executing a lien.


A borrower's debts and financial obligations.

Liability insurance

An insurance policy that protects owners against claims of negligence, personal injury or property damage.


Acronym for "London Interbank Offered Rate." An index used to determine interest rate changes for adjustable rate mortgages. Very popular index for interest only mortgage programs.


A personal privilege to do a particular act or series of acts on the land of another.


A claim or encumbrance against property used to secure a debt, charge or the performance of some act. Includes liens acquired by contract or by operation of law. Note that all liens are encumbrances but all encumbrances are not liens.


One whose property is subject to a lien.

Lien foreclosure sale

Selling property without consent of the owner who incurred the debt resulting in a lien, as ordered by a court or authorized by state law, and title conveyed to purchaser by judicial deed.


The one holding a lien against another.

Lien theory

A type of mortgage lending practice in which a mortgage loan constitutes a lien against the real property; the theory of mortgage lending in New York.

Lien waiver (waiver of liens)

A waiver of mechanic's lien rights, signed by a general contractor and his subcontractors, that is often required before the general contractor can receive a draw under the payment provisions of a construction contract. May also be required before the owner can receive a draw on a construction loan.

Life cap

Limits the amount a loan's interest rate can change during the mortgage term. For example, if the rate on an adjustable-rate mortgage begins at 4 percent and has a life cap of 6 percentage points, it can not go over 10 percent.

Life estate

A freehold estate created for the duration of the life or lives of certain named persons; a non-inheritable estate. Life estate in remainder a form of life estate in which certain persons, called remaindermen, are designated to receive the title upon termination of the life tenancy.

Life estate in reversion

A form of life estate that goes back to the creator of the estate in fee simple upon termination.

Life estate pur autre vie

An estate in which the duration is measured by the life of someone other than the life tenant. See also pur autre vie.

Life safety and security

A trend in property management that provides for the management of the total physical protection of tenants. A typical life safety and security program consists of prevention, detection, containment and counteraction.

Life safety control center

A security center found most often in large complexes, responsible for handling various emergencies impacting complex workers. See life safety and security.

Load factor

The ratio of rentable space to usable space on a multiple-tenancy floor of an office building.

Life tenant

One holding a life estate.

Lifetime payment cap

For an adjustable-rate mortgage (ARM), a limit on the amount payments can increase or decrease over the life of the mortgage.

Lifetime rate cap

A maximum interest rate or "ceiling" that may not be exceeded under any circumstances over the entire life of the loan.


see Low Income Housing Tax Credit.

Like-kind property

A term used in an exchange of property held for productive use in a trade or business or for investment. Unless cash is received, the tax consequences of the exchange are postponed pursuant to Section 1031 of the Internal Revenue Code.

Limited liability corporation (LLC)

Business arrangement formed by two or more persons who are not personally liable for the obligations of the llc; the llc is taxed as a partnership.

Limited liability partnership (LLP)

A business arrangement formed by professionals such as attorneys and accountants who are all limited partners and are not personally liable for the obligations of the partnership.

Limited partnership

A type of partnership, created under state law, comprised of one or more general partners who manage the business and who are personally liable for partnership debts, and one or more special or limited partners who contribute capital and share in profits but who take no part in running the business and incur no liability over and above the amount contributed. See also "General Partner".

Liquid assets

Cash and all other assets that can be converted to cash relatively quickly. Liquid assets can include money in savings and checking accounts, money-market accounts and most CD's.

Liquidated damages

Money to be paid and received as compensation for a breach of contract.


The sale of a defaulted mortgage loan or of the REO property that previously secured the loan.

Liquidation Fee

That portion of the special servicer's compensation that is payable when the special servicer obtains a full or discounted payoff on any specially serviced loan or obtains any liquidation proceeds on any specially serviced loan or REO property. The fee is calculated by applying the liquidation fee rate as stipulated in the pooling and servicing agreement with regard to the related payment or proceeds.


A measure of the ease and frequency with which assets, e.g., CMBS, are actively traded in the secondary market. Large-size CMBS issues with similarities in collateral and structure are often traded more readily in the secondary market, thus increasing the degree of liquidity of CMBS issues.

Lis pendens

Latin, meaning "a lawsuit pending." See notice of lis pendens

Listing agreement

An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation. See also "Exclusive Listing Agreement".

Listing contract

A contract whereby a property owner employs a real estate broker to market the property described in the contract.


A lawsuit.

Littoral rights

Rights belonging to owner of land that borders a lake, ocean, or sea.

Loan application

A document that details a borrower's income, debt and other obligations to determine credit worthiness. Also includes information on the subject property.

Loan application fee

A fee charged by lenders to cover expenses incidental to reviewing a loan application.

Loan commitment

A promise by a lender or other financial institution to make or insure a loan for a specified amount and on specific terms.

Loan officer

An official lending institution representative who is empowered to act on behalf of the lender within certain limits.

Loan origination fee

A fee charged by lenders to cover the direct costs of arranging the loan.

Loan term

The time set by a lender for a buyer to pay a mortgage. Most conforming loans have 30 or 15-year terms.

Loan-to-value ratio (LTV)

The ratio of the total loan amount to the value of the property. For lending purposes, the property value is equal to the purchase price or the appraised value, whichever is lower.


see Letter of Credit.

Local access network

A method of linking together personal computers within the same office to allow communication between the computers.

Location (situs)

An economic characteristic of land having the greatest effect on value in comparison to any other characteristic.


A lender's commitment to a borrower to guarantee (or "lock in") a specific interest rate for a limited amount of time.

Lock-Box Provision

A provision wherein the trustee is given control over the gross revenues of the underlying properties in a CMBS. Property owners only have a claim to cash flows net of expenses. Expenses include debt service, taxes, insurance and other operating expenses.

Lock-in period

A period of time during which the borrower is guaranteed an agreed-upon interest rate, even if market rates rise. The longer the period, the higher the cost (in points) to the borrower.


A low-rent, multistory building located in the central business district, originally used for a combination of manufacturing, office and storage space.

Long Term Lease

In most markets, this refers to a lease whose term is at least three years from initial signing until the date of expiration or renewal option.

London Interbank Offered Rate (LIBOR)

The short-term (I-year or less) rate at which banks will lend to each other in London. Commonly used as a benchmark for adjustable rate financing. LIBOR terms are usually for one, two, three or six months or one year.

Loss factor

The ratio of rentable space to usable space on a single-tenancy floor of an office building.

Loss Severity

Rate of loss on a liquidated mortgage. Defined as the ratio of (a) the outstanding principal on the mortgage loans minus the realized loss, divided by (b) the outstanding principal on the mortgage loans.

Loss to Lease

The difference between the market rental rate for a property and the rent being paid for a similar property. It is an indicator of changing market conditions. For example, if a property were leased for a one year term at $1,000 per month, and the current market rate were $1,100 per month on similar properties, the loss to lease would be $100 per month.


Generally, one of several contiguous parcels of land making up a fractional part or subdivision of a block, the boundaries of which are shown on recorded maps and "plats".

Lot and block

A type of legal description used in a deed in addition to a metes and bounds description.

Low-documentation loan

A home loan that requires only minimal verification of income and assets.

Low Income Housing Tax Credit (LIHTC)

A tax credit given to owners for the construction or rehabilitation of low income housing. To qualify for the credit, the property must have (a) at least 20% of the units occupied by individuals with incomes of 50% or less of the area median income, or (b) at least 40% of the units occupied by individuals with incomes of 60% or less ofthe area median income. Also called Section 42 properties after the section of the Internal Revenue Code which authorizes the credit.

Low Rise

A building with fewer than 4 stories above ground level.


Signifies locus signilli, a Latin term meaning "in place of the seal."

LTV (loan-to-value ratio)

The ratio of the total loan amount to the value of the property. For lending purposes, the property value is equal to the purchase price or the appraised value, whichever is lower.

Lump-Sum Contract

A type of construction contract requiring the general contractor to complete a building or project for a fixed cost normally established by competitive bidding. The contractor absorbs any loss or retains any profit.


Maintenance fee

The monthly assessment paid by homeowners' association members for the repair and maintenance of common areas.

Maintenance request

A request from the tenant for repairs. A key to tenant satisfaction, it should be in writing, and the tenant should be told when the repair will be made, or why it will not be.


One who creates or executes a promissory note and promises to pay the note when it becomes due.

Management agreement

A contract in which an owner employs a property manager.

Management contract

The contract between an income property owner (principal) and a management firm or individual property manager (agent) that outlines the scope of the manager's authority, owner's responsibilities, and compensation.

Management plan

The financial and operational strategy for the ongoing management of a property. It is based on market analyses, a property analysis and the owner's goals and consists of an operating budget, a five-year forecast and sometimes a comparative income and expense analysis.

Management pricing worksheet

A method of computing management fees by itemizing management activities, calculating the direct cost to the firm and adding a percentage for profit. This method is most appropriate when managing condominium communities.

Management proposal

A program for operating a property submitted to the owner by a property manager.


A percentage added to the index and fixed for the life of the loan. When the initial interest rate on an adjustable-rate loan has expired, the interest rate moves toward the sum of its index plus a margin.

Marital property

Property acquired during the marriage and distributed equitably, taking into account various factors.


Adjustments of estimated value or cash flows to reflect current market levels. In a falling or weak market this is likely to create a downward adjustment of current value based on lower expected future income streams if rental rates on existing leases are greater than rental rates being charged for new leases in the market (i.e., if there are several above-market leases in a building that are "burning off"). The opposite is true in a strong or rising market.

Mark-to-Market Regulations

In December, 1996 the IRS released final regulations relating to the requirement that a securities dealer mark-to-market those securities that are being held for sale to customers. This mark-to-market requirement applies to all securities owned by a dealer, except to the extent that the dealer has specifically identified a security as held for investment. The mark-to-market regulations provide that, for purposes of this requirement, a REMIC Residual Certificate is not treated as a security and thus generally may not be marked to market.

Marketable title

A title which is free from encumbrances and could be readily marketed (i.e., sold) to a reasonably intelligent purchaser who is well informed of the facts and willing to accept such title while exercising ordinary business prudence. See also "Encumbrance".

Market allocation agreement

An agreement between competitors dividing or assigning a certain area or territory for sales.

Market analyses

Regional and neighborhood studies of economic, demographic and other information made by the property manager to determine supply and demand, market trends and other factors important in leasing and operating a specific property.

Market-oriented industry

A business that tends to locate near industrial users and consumers of its products.

Market rent

The rental income that a property would command on the open market with a landlord and a tenant ready and willing to consummate a lease in the ordinary course of business; indicated by the rents that landlords were willing to accept and tenants were willing to pay in recent lease transactions for comparable space.

Market study

A forecast of future demand for a certain type of real estate project that includes an estimate of the square footage that can be absorbed and the rents that can be charged. Also called "Marketability Study".

Market value

The highest price a property would command in a competitive and open market under all conditions requisite to a fair sale with the buyer and seller each acting prudently and knowledgeably in the ordinary course of trade.

Master deed

The instrument that legally establishes a condominium; also called condominium declaration.

Master lease

A primary lease that controls subsequent leases and which may cover more property than subsequent leases. An Executive Suite operation is a good example in that a primary lease is signed with the landlord and then individual offices within the leased premises are leased to other individuals or companies.

Master Servicer

A firm engaged to service the mortgage loans collateralizing a CMBS on behalf and for the benefit of the certificate holders. Responsibilities vary according to the servicing agreement. Common responsibilities include the following: (a) collect mortgage payments and pass the funds to the trustee; (b) advance any late payments to the trustee; (c) provide mortgage performance reports to bond holders; and (d) pass all loans to the special servicer that are nonperforming or become REO.

Master Servicing Fee

The principal compensation paid to the master servicer for servicing activities. The fee is payable monthly on a loan-by-1oan basis from interest on the loans. The base fee is computed on the principal amount for the same period and accrued at the applicable fee rate for a specific deal. Additional compensation to the master servicer may include retainage of all assumption and modification fees, late payment charges and similar fees to the extent actually paid by mortgagors for loans which are not specially serviced mortgage loans.

Material fact

Important information that may affect a person's judgment.

Materialman's lien

See mechanic's lien.

Maximum percentage lease

A type of percentage lease that sets a ceiling on the amount of rent to be paid.

Mechanic's lien

A claim created by state statutes for the purpose of securing priority of payment of the price and value of work performed and materials furnished in constructing, repairing or improving a building or other structure, and which attaches to the land as well as to the buildings and improvements thereon.


The use of a neutral third party to discuss and attempt to resolve a dispute.

Meeting of the minds

A condition that must exist for creation of a contract.

Merchants' association

An organization of shopping center tenants intended to facilitate joint advertising, promotion and other activities beneficial to the center as a whole.

Merged credit report

A report that draws information from the three (3) main credit-reporting agencies including: Equifax, Experian and Trans Union.


The absorption of one thing into another.

Merger clause

Clause in a real estate contract in which the contract is fulfilled and the conveyed deed supersedes the contract.

Metes and bounds

The boundary lines of land, with their terminal points and angles, described by listing the compass directions and distances of the boundaries. Originally, metes referred to distance and bounds referred to direction.

Mezzanine Debt

Any debt which is paid after a first mortgage. Often refers to a short-term second or third mortgage which will be taken out (paid off or earned out) in the short term upon changes in property performance. The term "mezzanine" implies temporary indebtedness, but a long-term second mortgage is technically mezzanine debt.

Mezzanine Investor

A party who actively invests in mezzanine debt either by issuing such debt or pooling mezzanine security classes.

Mezzanine Pieces

Those security classes (or tranches) rated in the middle range ofa multi-class security, i.e., more secure than the first-loss tranche but less secure than senior class(es).


A building with between four and eight stories above ground level although in a Central Business District, this might extend to buildings up to twenty-five stories.


One-tenth of a cent.

Mineral rights

A landowner's ability to take minerals from the earth or to sell or lease this right to others.

Minimum-guaranteed percentage lease

A type of percentage lease that requires the tenant to pay either a fixed minimum rental or a percentage of gross sales, whichever is greater.


Small, secure storage units rented to individuals and small businesses.


A person who has not attained the statutory age of majority.


A lesser crime than a felony which may be punished by a fine and/or imprisonment.


(a) A false statement or omission of a material fact; (b) In real estate, making an intentionally false statement to induce someone to contract.


Space within a building or project providing for more than one use (i.e., a loft or apartment project with retail, an apartment building with office space, an office building with retail space).

Mixed-use development (MXD)

A development in the use of property combining retail, office-residential or industrial-office residential development.

Mobile home park

A popular, expanding form of residential living consisting of permanently or semi permanently situated manufactured homes. The ground only, the home, or both, may be rented from the owner.

Modeling/Cash Flow Modeling

When pools of loans are converted to securities, all payments, including balloon maturities, are chronologically collated into a cash flow pool and then sequentially allocated to the various classes of securities created with the issuance of CMBS. Despite elaborate computer programs designed to estimate expected cash flows based on multiple variables, rarely do all loans in a pool perform exactly as the primary loan documents prescribe. Investment bankers have invested a great deal of time and money to develop their cash flow modeling capability.


A change in the terms of a loan agreement.

Modified annual percentage rate (APR)

The modified APR is an index of loan cost based on the standard APR and adjusted for the time the borrower expects to hold the loan.

Monolithic slab

A type of foundation where the footing and slab are poured at the same time.

Monthly association dues

A payment due monthly to a homeowners' association for maintenance and communal expenses.


A type of property description mainly used by surveyors; the description is drawn from permanent objects such as a stone wall, large trees, or boulders.


A delay in allowing development of property within the municipality.


A written instrument creating an interest in real estate and that provides security for the performance of a duty or the payment of a debt. The borrower (i.e., mortgagor) retains possession and use of the property.

Mortgage acceleration clause

A clause that allows a mortgage lender to demand repayment of the entire loan balance in a lump sum under certain circumstances, such as when the home is sold, title is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Mortgage assumption

The transfer of mortgage obligations to purchaser of the mortgaged property.

Mortgage banker

A company that provides home loans using its own money. The loans are usually sold to investors such as insurance companies and Fannie Mae.

Mortgage broker

An individual that matches lenders with prospective borrowers who meet the criteria of lenders the broker is approved to deal with.

Mortgage broker business

A company that matches lenders with prospective borrowers who meet the criteria of lenders the broker is approved to deal with. The mortgage broker business does not keep or make the loan, but receives payment from the lender for services.

Mortgage insurance

Required by lenders on some loans to protect lenders from a possible default. Most conventional loans with down payments or home equity percentages that are less than 20 percent of the home value require private mortgage insurance (PMI).

Mortgage life insurance

Insurance that will pay off a mortgage if the borrower dies before the debt is retired.

Mortgage Interest deduction

The tax write-off that the Internal Revenue Service allows most owners to claim for annual interest payments made on real estate loans.


A bank or other financial institution that lends money to the borrower. The borrower is considered the mortgagor.

Mortgagee's title insurance policy

A policy that insures a mortgagee against defects in a title pledged by a mortgagor to secure payment of a mortgage loan.

Mortgage insurance premium (MIP)

A payment for insurance to protect the lender and/or insurer against loss if default occurs.

Mortgage principal

The amount of money (usually the loan amount) on which interest is either paid or received.

Mortgage satisfaction

Full payment of a mortgage loan.

Mortgage value

The value sufficient to secure payment of a mortgage loan.

Mortgaging clause

The statement in a mortgage or deed of trust that demonstrates the mortgagor's intent to mortgage the property to the mortgagee.


The borrower in a mortgage loan who executes and delivers a mortgage to the lender.

Multifamily Property

A building with five or more residential units or apartments. Multifamily properties are usually distinguished as high rise, low rise, or garden apartments. Multifamily properties are typically distinguished by quality as follows: (a) Class A: Properties are above average in terms of design, construction and finish; command the highest rental rates in the market; have a superior location in terms of desirability and/or accessibility; and generally are professionally managed by national or large regional management companies. (b) Class B: Properties frequently do not possess design and fmish reflective of current standards and preferences; illustrate adequate construction quality; command average rental rates in the market; are generally well-maintained; have unit sizes that are somewhat larger than current standards; and are managed by national or regional management companies. A majority of the apartments collateralizing CMBS are of "B" quality. (c) Class C: Properties provide functional housing; exhibit some level of deferred maintenance; command below-average rental rates; are usually located in less desirable areas; are occupied by tenants who provide a less stable income stream to property owners than Class A and B tenants; and are generally managed by smaller, local property management companies.

Multiple exchange

A transaction in which more than two like-kind properties are exchanged.

Multiple listing service (MLS)

An organized method of sharing or pooling listings by member brokers.

Mutual assent

The voluntary agreement of all parties to a contract as evidenced by an offer and acceptance.

Mutual mistake

An error of material fact by both parties.



see National Association of Insurance Commissioners.

Narrative appraisal report

A statement of an opinion of value containing the element of judgment as well as the data used in arriving at the value estimate.

National Association of Insurance Commissioners (NAIC)

Insurance companies are regulated by the states in which they are domiciled, and these regulators have an association that is headquartered in Kansas City. Although NAIC recommendations are not binding on members, they are generally followed and, as a result, NAIC rulings can be important to the CMBS market. For example, the NAIC determines the reserves that life companies are required to retain against either mortgages or bonds. There was recently a controversy over whether a CMBS collateralized by a single asset was really a mortgage (requiring higher reserve levels) or a bond (with lower capital reserve requirements).

National association of realtors (NAR)

The largest and most prominent trade organization of real estate licensees.

National electric code

National standard for electrical installation and service.

National Environmental Policy Act (NEPA)

A federal act passed in 1970 that requires the processing of environmental impact disclosures for major federal action affecting the environment.


The National Council of Real Estate Investment Fiduciaries (NCREIF) compile numerous indices on commercial real estate performance based on data provided principally by pension funds' equity real estate. Often used as a benchmark for real estate investment performance.

Negative amortization

Occurs when a borrower's monthly payment is too small to cover both the principal and interest of a loan, so the outstanding balance of the loan actually grows larger with each payment. Many adjustable rate mortgages are susceptible to this.

Negative covenant

See restrictive covenant.

Negative easement

A right in the land of another prohibiting the servient owner from doing something on the servient land because it will affect the dominant land.


Legal term describing failure to use the care that a reasonable person would use in like cir-cumstances.

Negotiated contract

An joint proposal of costs based on collaboration among the plumbing, electrical, hardware supplier and other trades people which often leads to a lower price than if the manager solicited bids individually from each contractor.

Negotiable instrument

An unconditional promise or order to pay a fixed amount with or without interest.

Neighborhood analysis

A part of formulating the management plan. an assessment of five factors in the neighborhood market area of the subject rental property: boundaries and land usage, transportation and utilities, economy, supply and demand, and neighborhood amenities and facilities.

Neighborhood center

A shopping center of about 30,000 to 100,000 square feet (15 to 20 retail spaces) on about 3 acres. Often anchored by a supermarket and small stores that serve about 1,000 families.

Net absorption

The square feet leased in a specific geographic area over a fixed period-of-time after deducting space vacated in the same area during the same period. See also "Gross Absorption".

Net cash flow

Income from an investment property after expenses such as principal, interest, taxes and insurance are subtracted.

Net Effective Rent

The actual revenue from rental payments after certain expenses are deducted. The gross rent less operating expenses, rental concessions, tenant improvements, et al. equals the net effective rent. Obviously, net effective rent can be negative, and often was at the trough of the commercial real estate market.

Net income

Gross income less operating expenses; also called net operating income.

Net lease

A common industrial lease form requiring the tenant to pay rent plus certain costs incurred in the operation of the property. Generally, straight net leases require the tenant to pay rent, utilities, real estate taxes and assessments. Net-net leases require the tenant to pay rent, utilities, real estate taxes, assessments and insurance premiums. Net-net or triple-net leases may require the tenant to pay all of the above expenses plus agreed-on items of maintenance and repair.

Net listing

A method that is illegal in New York of establishing the listing broker's commission as all money above a specified net amount to the seller.

Net-Net Lease, or Double-Net Lease

see NN Lease.

Net-Net-Net Lease, or Triple-Net Lease

see NNN Lease.

Net Operating Cash Flow (NOCF)

The revenues earned by a property's on-going operations less the expenses associated with such operations and the capital costs of tenant improvements, leasing commissions and capital replacements costs (or reserves). Briefly, NOCF is net operating income (NO!) less tenant improvements (Tl's), leasing commissions and capital repairs.

Net Operating Income (NOI)

Total income less operating expenses and adjustments but before mortgage payments, tenant improvements, replacement reserves and leasing commissions. NOI is commonly used as a basis for many financial calculations, e.g., debt service coverage ratios.

Net rentable area

The floor area of a building that remains after the square footage represented by vertical penetrations, such as elevator shafts, etc., has been deducted. Common areas and mechanical rooms are included and there are no deductions made for necessary columns and projections of the building. (This is by the Building Owner and Manager Association - BOMA, Standard).

Net square footage (S.F.)

The space required for a function or staff position. Also see "Circulation Factor and "Usable Square Footage".

Net worth

The worth of a person or company based on the difference between total assets and liabilities.

New York state energy code

Regulation that sets minimum requirements for the design of energy efficiencies for new buildings and renovations to existing buildings.

New York state human rights

Law created to eliminate and prevent discrimination in residential and commercial real estate as well as in employment, public accommodations, places of amusement, and educational institutions.

New York state office of parks, recreation, and historic preservation (OPRHP)

Oversees public recreational areas and administers federal and state preservation programs authorized by federal and state law.

New York state uniform fire prevention and building code

Provides minimum standards for the construction and renovation of all types of buildings in new York.

NN Lease

A lease that typically requires the tenant to pay for property taxes and insurance in addition to the rent. Also called a net-net lease or a double-net lease.

NNN Lease

A lease that typically requires the tenant to pay for property taxes, insurance and maintenance in addition to the rent. Also called a net-net-net lease or a triple-net lease.

No-cash-out refinance

When the amount of the new mortgage covers the remaining balance of the first loan plus closing costs and any liens, and yields no more than 1 percent of the new loan's principal in cash.

No-documentation loan

A loan application that does not require verification of income or assets and is generally based on a combination of strong credit with a large down payment.

Non-assumption clause

A loan provision that prohibits the transfer of a mortgage to another borrower without lender approval.

Non-compete clause

A clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and that no other tenant operating the same or similar type of business can occupy space in the building. This clause benefits service-oriented businesses desiring exclusive access to the building's population (i.e. travel agent, deli, etc.).

Noncompeting tenant restriction

A lease clause granting a retail tenant an exclusive right to operate without competition on the property.

Non-conforming loan

A non-conforming loan is any loan that doesn't meet the qualifications or is too large to be purchased by Fannie Mae or Freddie Mac.

Nonconforming use

Utilization of land that does not conform to the use permitted by a zoning ordinance for the area; may be lawful or unlawful.

Non-Consolidation Opinion

An attorney's statement which affirms that the assets of an entity would not be substantially consolidated with those of its affiliates by a bankruptcy court per Section 105 of the bankruptcy code. This is often a key component of special purpose entity (SPE) and/or bankruptcy remote structures.

Nonrecoverable Advance

No advance is required to be made by a master servicer, special servicer or trustee if, in their judgment, such advance would not be recoverable from related proceeds or another specifically identified source.

Nonfreehold estate

Leaseholds; estates with a length determined by agreement or statute; establishes possession of land as opposed to ownership in fee.


Classification of real property that is not for residential purposes and includes commercial, industrial, special franchise and utility property, and some vacant land.


A physical characteristic of land describing that land as a unique commodity.

Non-liquid asset

An asset such as a house that is not easily turned into cash.

Non-Performing Loan

A loan that is not paying principal and/or interest as stipulated. A non-performing loan might be making payments but at a rate less than the full principal and interest payments required in the mortgage note.

Non-recourse loan

A loan which bars a lender from seeking a deficiency judgment against a borrower in the event of default. The borrower is not personally liable if the value of the collateral for the loan falls below the amount required to repay the loan.

Nonrecourse note

A note in which the borrower has no personal liability for payment.

Nonrecurring closing costs

Fees that are only payable once such as appraisal, loan points, credit report, title insurance and home inspection.

Nonrecurring variable expense

A type of variable property expense (e.g., capital improvements) that occurs only once.

Nonsolicitation order

An order issued by the secretary of state prohibiting licensees from soliciting listings in certain areas of the state.

Normal wear and tear

The deterioration or loss in value caused by the tenant's normal and reasonable use. In many leases the tenant is not responsible for "normal wear and tear".

Notary public

A person authorized by a state to take oaths and acknowledgments.


A legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.

Note rate

The interest rate specified in a mortgage note.

Notice of Default (NOD)

To initiate foreclosure proceeding involving a public sale of the real property securing the deed of trust or a mortgage, the trustee under the deed of trust or mortgage lender records in the public records a Notice of Default and Election to Sell (NOD) the real property collateral. NOD also includes the right to be informed of a borrower's default on a major contract such as a ground lease.

Notice of lis pendens

A statement on the public record warning all persons that a title to real property is the subject of a lawsuit and any lien resulting from the suit will attach to the title held by a purchaser from the defendant.

Notional Amount

A stated dollar amount on which a calculation is based, such as the payment on an I/O strip.


Substitution of a new contract for a prior contract.

Null and void

Invalid; without legal force or effect.



One to whom an obligation is owed.


One who owes an obligation to another.


Loss in property value caused by economic or functional factors.


Physical possession of property.

Occupational Safety and Health Administration (OSHA)

A federal organization empowered to prescribe and legislate the use of potentially toxic chemicals and compounds, and other safety rules for the workplace.


A promise made to another conditional upon acceptance by a promise or act made in return.

Offer and acceptance

Necessary elements for the creation of a contract.


One to whom an offer is made.


One making an offer.

Office park

See business park.

Office Property

Property designed to be used principally as a place of business, ranging from major multitenant buildings to single tenant buildings built to a tenant's specific needs. Office properties include major multitenant-CBD, multitenant suburban, single tenant-built to suit, or a combination office/showroom.

Off-price center

A specialized type of shopping center recognized by the Urban Land Institute; a variation of the discount department store concept.


see Original Issue Discount.

One-year Adjustable Rate Mortgage

A mortgage whose interest rate changes yearly. The rate is usually based on movements of a published index plus a specified margin.

Onsite job program

Employment of tenants occupying low-cost residential buildings to perform maintenance work in these buildings.

Open-ended listing contract

One without a termination date.

Open-end mortgage

One that may be refinanced without rewriting the mortgage.

Open listing

A listing given to one or more brokers in which the broker procuring a sale is entitled to the commission but imposes no commission obligation on the owner in the event the owner sells the property to someone who was not interested in the property by one of the listing brokers.

Open mortgage

One that does not impose a prepayment penalty.

Open Prepayment

A provision which permits repayment of all or a portion of a loan during a specified period without fee or penalty.

Open space

An unimproved area of land or water, or containing only such improvements as are appropriate to the use and enjoyment of the open area, and dedicated for public or private use or enjoyment or for the use and enjoyment of owners and occupants of land adjoining or neighboring such open spaces.

Operating budget

A projection of income and expense for the operation of a property over a one-year period.

Operating costs

A calculation of yearly costs of operation based on operating expenses from comparable properties and the maintenance needs of the subject property and used in preparing an annual operating budget.

Operating cost escalation

Although there are many variations of escalation clauses, all are intended to adjust rents by reference to external standards such as published indexes, negotiated wage levels, or expenses related to the ownership and operation of buildings. During the past thirty years, Landlords have developed the custom of separating the base rent for the occupancy of the leased premises from escalation rent. This technique enables the landlord to better ensure that the "net" rent to be received under the lease will not be reduced by the normal costs of operating and maintaining the property. The landlord's definition of Operating Expenses is likely to be broad, covering most costs of operation of the building. Most landlords pass through proper and customary charges, but in the hands of an overly aggressive landlord, these clauses can operate to impose obligations which the tenant would not willingly or knowingly accept.

Operating expenses

The actual costs associated with operating a property including maintenance, repairs, management, utilities, taxes and insurance. A landlord's definition of operating expenses is likely to be quite broad, covering most aspects of operating the building.

Operating expense escalation

Although there are many variations of operating expense escalation clauses, all are intended to adjust rents by reference to external standards such as published indexes, negotiated wage levels, or expenses related to the ownership and operation of buildings.

Operating statement

A report of receipts and disbursements resulting in net income of rental property.

Operation of law

The manner in which rights and liabilities of parties may be changed by application of law without the act or cooperation of the parties.

Opinion of title

See certificate of title opinion.

Option Adjusted Spreads (OAS)

A representation of the incremental return (or risk premium) over comparable Treasuries (as a risk-free base) that incorporates interest rate volatility and possible variations in cash flow due to changes in rates. OAS does not, however, factor in credit quality. The technique was first applied to residential mortgage backed securities (MBS) to price the prepayment risk an investor assumes in residential MBS. In residential MBS, borrowers have a legal "option" to payoff their loans when interest rates decline, thereby creating reinvestment risk and possibly causing a reinvestment loss for the investor. This option is significantly reduced in CMBS, however, due to commonly used prepayment penalties.

Optional Termination

A legal provision in a CMBS that defines who can liquidate a CMBS prior to the last payment on the mortgages in the pool; the provision also addresses when and under what circumstances this can occur.

Optimum rents

The ideal rent for a specific type of unit in a defined market area that may need to be adjusted to reflect specific advantages and disadvantages of the subject property.


A situation in which a buyer puts down money for the right to purchase a piece of real estate within a set time period but does not have an obligation to buy.

Option Arm Loan

A home loan where the borrower has multiple payment options each month.


One who receives an option.


One who gives an option.

Option to purchase

A contract whereby a property owner (optionor) sells a right to purchase his or her property to a prospective buyer (optionee).

Option to renew

A lease provision giving the tenant the right to extend the lease for an additional period of time on specified terms.

Oral will

A will usually restricted to the granting of personal property because it conflicts with the statute of frauds, which states that the conveyance of real property must be in writing.


A law enacted by a local government.

Original Issue Discount (OID)

The sale of a bond below, or at a discount to, the par price. The increase in value of the bond as it approaches maturity is part of the total return calculation, but various investors are required to treat this part of their total return differently. The tax considerations of owning a CMBS REMIC are very complex, with at least part of the issue subject to OlD tax considerations, and a violation of the REMIC qualification for a CMBS can cause onerous tax penalties.

Original principal balance

The amount of principal owed on a loan before a borrower makes any payments.

Origination fee

A fee charged by most mortgage lenders to cover costs of arranging the loan.

Other Real Estate Owned (OREO)

A term used primarily by banks to identify real estate on the books that was taken back through foreclosure of a mortgage loan. The term "Other" REO is used by banks to distinguish foreclosed real estate from bank real estate owned, which is typically corporate real estate assets. Nonetheless, the industry commonly uses the term REO for foreclosed real estate. Also see Real Estate Owned (REO).

Outlots/out parcels

Land that is outside of the main area of development.


A percentage of gross sales over a certain amount paid to an owner in addition to a minimum base rent; often required in percentage leases.


The outstanding collateral principal of a security in excess of the outstanding certificate principal. A form of credit enhancement.


An improvement to land that results in the land not being able to obtain its highest and best use.

Owner financing

A transaction in which the seller of a property agrees to finance all or part of the purchase.


The right to use, control, possess, and dispose of property.

Ownership in severalty

Title to real property held in the name of one person only.

Owner's title insurance policy

A policy insuring an owner of real property against financial loss resulting from a title defect.


Package mortgage

One in which personal property as well as real property is pledged to secure payment of the note.

Package policy

Insurance coverage for property damage and liability loss all within one premium.


A specific portion of land such as a lot.

Parens patriae

The right of government to litigate and therefore protect in the name of the public good.

Parking ratio or index

The intent of this ratio is to provide a uniform method of expressing the amount of parking that is available at a given building. Dividing the total rentable square footage of a building by the building's total number of parking spaces provides the amount of rentable square feet per each individual parking space (expressed as 1/xxx or 1 per xxx). Dividing 1000 by the previous result provides the ratio of parking spaces available per each 1000 rentable square feet (expressed as x per 1000).

Parol evidence rule

A concept allowing that oral explanations can support the written words of a contract but cannot contradict them.

Partial eviction

A situation in which the landlord's negligence renders all or part of the premises unusable to the tenant for the purposes intended in the lease.

Partial Taking

The taking of part (a portion) of an owner's property under the laws of eminent domain.

Participation certificate

Proof of membership in a trust cooperative granted in a particular amount, usually with the right to occupy a unit in property owned by the trust.

Participation mortgage

(a) one in which two or more lenders share in making the loan; (b) one in which a lender shares in the profit produced by an income property pledged to secure the loan payment in addition to receiving interest and principal payments.


A legal proceeding dividing property of co-owners so each will hold title in severalty.


A form of business organization in which the business is owned by two or more persons, called partners.

Partnership law

Laws that address the form of business organization composed of two or more individuals.

Party wall

A common wall used by two adjoining structures.

Passive activity income

Any trade or business in which the taxpayer does not materially participate.

Pass throughs

Refers to the tenant's pro rata share of operating expenses (i.e. taxes, utilities, repairs) paid in addition to the base rent.

Pass-Through Securities

A security representing pooled debt obligations repackaged as shares that passes income from debtors through an intermediary to investors. The most common type of pass-through is a mortgage-backed certificate, many of which are government-guaranteed (e.g., by Ginnie Mae), in which homeowners' principal and interest payments pass from the originating bank or savings and loan through a government agency or investment bank to investors, net of service charges. Pass-throughs representing other types of assets, such as auto loans or student loans, are also widely marketed. Such securities can be structured as straight pass-through, partially modified pass-through or modified pass-through securities. (a) Straight pass-through: Pays principal and interest to the investor as and when received from the underlying mortgage loan pool. (b) Partially modified pass-through: Pays certain sums whether or not such sums have been paid by the pool's mortgagors. (c) Modified pass-through: Involves a guaranty of all scheduled principal and interest payments to investors whether or not such payments have been paid by the mortgagors.


A recipient of money.

Payment cap

If the interest rate on the loan changes and therefore the monthly payments increase, the lender allows a payment cap in which the monthly payment remains the same and the money for the higher interest rate is added to the principal.

Payment Change Date

The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the adjustment date.

Pay Rate

The periodic rate at which interest is paid on a mortgage. This may differ from the accrual rate.

Percentage Fee

A property management fee expressed as a percentage of the gross collectible income from a property.

Percentage lease

Refers to a provision of the lease calling for the landlord to be paid a percentage of the tenant's gross sales as a component of rent. There is usually a base rent amount to which "percentage" rent is then added. This type of clause is most often found in retail leases.


The movement of water through soil.

Percolation (perc) test

A test of soil to determine if it is sufficiently porous for installation of a septic tank.

Per-diem interest

Interest charged or accrued daily.

Performance bond

A surety bond posted by a contractor guaranteeing full performance of a contract with the proceeds to be used to complete the contract or compensate for the owner's loss in the event of nonperformance.

Periodic costs

A type of fixed property expense (e.g., property taxes) that occurs on a regular but infrequent basis.

Periodic lease

See periodic tenancy.

Periodic Payment Cap

A limit on the amount that payments can increase or decrease during any single adjustment period.

Periodic Rate Cap

A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Periodic tenancy

A lease that automatically renews for successive periods unless terminated by either party; also called an estate from year to year.

Per se illegal

Legal doctrine stating that an activity is specifically not allowable under the law.

Personal property

All property that is not land and is not permanently attached to land; everything that is movable; chattel.

Personal property law

Laws that relate to ownership of other than real property.

Per-unit-cost method

A method of computing management fees based on the management firm's capabilities and the direct cost of managing a specific number of units.

Phase I

An assessment and report prepared by a professional environmental consultant which reviews the property, both land and improvements, to ascertain the presence or potential presence of environmental hazards at the property such as underground water contamination, PCB's, abandoned disposal of paints and other chemicals, asbestos or a wide range of other potential environmental contaminants. This Phase I Environmental Site Assessment (ESA) provides a review and makes a recommendation as to whether further investigation is warranted (a Phase II Environmental Site Assessment). The latter report would confirm or disavow the presence of an environmental hazard and, should one be found, will recommend additional review and/or mitigation efforts that should be undertaken. Also see Comprehensive Environmental Response, Compensation Liability Act (CERCLA).

Physical deterioration

Loss in value caused by unrepaired damage or inadequate maintenance.


The slope of the roof.

PITI (principal, interest, taxes, and insurance)

A payment amount calculated by a mortgage lender to include the total payment of all principal, interest, taxes and insurance due monthly.

Planned Unit Development (PUD)

A planning concept in the development of property, principally employed in housing development to produce a high density of dwellings and maximum utilization of open spaces.


A program for the development of a city or county designed to provide for orderly growth.

Plat (plat map)

Map of a specific area, such as a subdivision, which shows the boundaries of individual parcels of land (e.g. lots) together with streets and easements, recorded on the public record in plat books.

Plat book

A record of subdivision maps generally filed with the county clerk.

Platform framing

The most common type of framing in residential construction in which the framing of the structure rests on a subfloor platform.


To provide property as security for payment of a debt or for performance of a promise.

Pledged Account Mortgage (PAM)

A type of mortgage that is tied to a pledged savings account and this fund (plus earned interest) is gradually used to reduce mortgage payments.


Combining two or more parcels of land into one tract that has more value than the total value of the individual parcels.


see Probable Maximum Loss.


Fees charged by a lender to provide a lower interest rate. One point equals one percent (1%) of the loan amount. Also referred to as a discount point.

Police power

The power of government to regulate the use of real property for the benefit of the public.

Polychlorinated biphenyls (PCBs)

A manmade, odorless, liquid organic compound and carcinogen appearing in groundwater and soil.

Population density

The number of people within a given land area.

Porters Wage

This increase is based upon the buildings workers collective bargaining contract negotiated every three years and leaves a little space for bargaining. Ex. Porters wage, Penny for penny porters wage, Penny for penny porters wage with fringes.

Positive misrepresentation

A person's actual statement that is false and known to be false.


When one either actively or constructively occupies a property; implies constructive notice that the possessor has certain legal rights.

Post-and-beam framing

A type of construction in which the framing members are much larger than ordinary studs and larger posts can be placed several feet apart instead of 16 or 24 inches on center.

Potential gross income

The amount of rental income that would be received if all units were rented 100 percent of the time and there were no credit losses.

Power of attorney

An instrument appointing an attorney-in-fact; creates a universal agency.

Power of sale

Clause inserted in a mortgage or deed of trust giving the mortgagee (or trustee) the right and power, on default in the payment of the debt secured, to advertise and sell the property at public auction.


A thorough assessment made by a lender of a potential borrower's ability to pay for a home and a confirmation of the amount to be borrowed. The completion of a loan application is necessary to close the loan.

Pre-approval letter

A letter from a lender that states the amount of money a potential buyer can obtain.

Precast concrete

Concrete components (i.e. walls) of a building which are fabricated at a plant site and then shipped to the site of construction.


Refers to space in a proposed building that has been leased before the start of construction or in advance of the issuance of a Certificate of Occupancy.

Preliminary Prospectus

A preliminary prospectus or private placement memorandum includes all (or nearly all) of the information that will be included in the final prospectus but is subject to amendment. It is identified by the red printing on the front cover, hence the colloquial name of "red herring" or, more briefly, "the red." Despite the name, there is no implication that the document is in any way diversionary (as the common use of the term "red herring" might suggest). It is a valuable marketing tool for securities transactions because it allows investors to make some preliminary assessment of the utility of the particular security for meeting their investment goals. Also see prospectus.

Prepaid expenses

Costs the seller pays in advance but were not fully used up (such as utility payments or property taxes due), shown as a credit to the seller and a debit to the buyer.

Prepaid fees

Funds collected by the lender from the borrower to pay certain recurring items in advance, including interest, property taxes, hazard insurance and, if applicable, private mortgage insurance (PMI).

Prepaid interest

Interest paid before it is due.

Prepaid items

Funds paid at closing to start an escrow account, as required in certain mortgage loans; also called prepaids.


A whole or partial prepayment by the borrower greater than and/or earlier than a scheduled payment on a mortgage loan. Estimating the probability or scale of prepayments in a pool of mortgages is one of the more problematic risks in assessing the ultimate yield on the security or any class in the security. Also see Involuntary Prepayment and Voluntary Prepayment.

Prepayment Interest Shortfall

The difference between the interest accrued on the corresponding certificates and the interest accrued from a prepayment. This commonly occurs when prepayments are made prior to the payment due date, and interest received from the prepayment is less than the interest on the certificates. To the extent that any such shortfall is allocated to a certain class of offered certificates, the yield on that class will be adversely affected.

Prepayment Premium or Prepayment Penalty

A stipulation in loan documents requiring a borrower to pay a penalty for any prepayments made on a mortgage loan. Some prepayment premiums are structured as yield to maintenance. Other prepayment premiums are set at a fixed rate, which often decreases in steps as the loan matures. For example, a mortgage loan might have a prepayment premium of 5% for the first seven years, which decreases at a rate of I % per year over the next five years (4% in year eight, 3% in year nine, etc.), so that after year twelve there is no prepayment premium.

Prepayment penalty clause

A financial charge imposed on a borrower for paying a mortgage prior to expiration of the full mortgage term.

Prepayment Risk

The risk that a borrower will repay the remaining principal or an amount other than the scheduled payment on a mortgage prior to maturity, thus shortening the life of the loan. In order to reduce prepayment risk, commercial mortgages commonly have lockout periods, prepayment premiums and/or yield maintenance.


A lender's preliminary assessment of a buyer's ability to pay for a home and an estimate of how much the buyer may borrow.


A method of acquiring an easement by continuous and uninterrupted use without permission.

Prescriptive easement

One obtained by prescription.

Press release

A news release written by the manager or professional advertising agency highlighting specific features of the rental property sent to local papers or real estate trade journals. A press release can lend more credibility than paid advertising and provide valuable, inexpensive advertising.

Preventive maintenance

A program of regularly scheduled maintenance activities and routine inspections of the interior and exterior of the buildings, equipment and grounds. Its objective is to preserve the physical integrity of the property, eliminate corrective maintenance costs and ensure uninterrupted service to the tenants.


The amount a purchaser agrees to pay and a seller agrees to accept under the circumstances sur-rounding a transaction.


A violation of antitrust laws whereby brokers or managers conspire to fix (set) rental or compensation rates.

Prima facie case

A suit that is sufficiently strong that it can be defeated only by contrary evidence.

Primary financing

The loan with the highest priority.

Primary Market

Loans directly from lenders to borrowers. When such loans are sold by the initial lender to another investor, they constitute the secondary market.

Primary mortgage market

The activity of lenders' making mortgage loans to individual borrowers.

Prime contractor

A construction supervisor who contracts with the property manager to oversee a job and then sublets the work to various skilled tradespeople.

Prime rate

The interest rate a lender charges to the most creditworthy customers.

Prime space

This typically refers to first generation (new) space that is currently available for lease and which has never before been occupied by a tenant.

Prime tenant

The major tenant in a building or, the major or anchor tenant in a shopping center serving to attract other, smaller tenants into adjacent space because of the customer traffic generated.


(a) in the law of agency, one who appoints an agent to represent her; (b) amount of money on which interest is paid or received.

Principal paid over life of loan

The sum of scheduled principal payments calculated by the lender to equal the face amount of the loan.

Principle of conformity

The idea that a house will more likely appreciate in value if its size, age, condition and style are similar to other houses in the neighborhood.

Priority liens

Special liens that receive preferential treatment (such as mechanic's liens).

Priority of Distributions

The CMBS provision that defines how, when and to whom the available funds will be distributed.

Private industry councils (PICs)

Using federal funds, groups operate employment and educational programs to train the workforce to meet employment needs.

Private Label Securities

Securities backed by mortgages that are issued by the private sector, including conduits, banks, thrifts and other financial institutions. These securities are also known as non-agency securities and are not backed by agencies such as Fannie Mae, Freddie Mac, or Ginnie Mae.

Private land use control

Regulations for land use by individuals or nongovernment organizations in the form of deed restrictions and restrictive covenants.

Private mortgage insurance (PMI)

A form of insurance required by a lender when the borrower's down payment or home equity percentage is less than 20 percent of the home value.

Private Placement

The sale of securities or bonds to institutional investors who meet specific criteria of net worth and/or income and who are deemed to be sophisticated investors, e.g., insurance companies. Private placement securities are generally exempt from registration requirements of the Securities Act of 1933. Investors are permitted to scrutinize the financial data of private placements that would not otherwise be publicly released due to confidentiality restrictions. As a result, private placements are particularly suitable for the lower-rated tranches of CMBS because investors have access to more information on which to base a decision. Also see SEC Rule 144A.

Private placement exemption

Allows issuers of securities to raise capital from an unlimited number of accredited investors without having to register with the securities exchange commission.

Private property

That which is not owned by government.

Privity of contract

An agreement that exists only between lessor and lessee for the right to demand and receive the specific benefit.

Probable Maximum Loss (PML)

An analysis generated by a computer model which determines the economic severity of earthquake risk for a property by defining the damage ratio due to the worst possible earthquake scenario. Generally, properties with PML's over a certain threshold (perhaps 20%) are require to carry additional insurance coverage. PML levels are typically required in earthquake-prone areas.


The judicial determination of a will's validity.

Procedural law

Laws that address the rules as to how a lawsuit proceeds through the court system and also deals with the functions of administrative agencies.

Processing fee

A fee charged by some lenders for gathering information necessary to process the loan.

Procuring cause

The basis for a direct action that results in successfully completing an objective. Profit the right to participate in profits of another's land.

Profit and loss statement

An annual financial report of a property's actual net profit before taxes.

Proforma schedule

An operating statement adjusted to reflect a potential change in income and expenses based upon the investor's knowledge of the real estate market.

Promissory note

A written promise to pay a debt as set forth in the writing.


To put in effect by public announcement.

Property analysis

A study made to familiarize a property manager with the nature and condition of a building, its position relative to comparable properties and its estimated income and operating expenses.

Property condition disclosure form (PCD)

A comprehensive checklist pertaining to the condition of the property, including its structure and any environmental hazards in and around the property.

Property description

An accurate legal description of land.

Property management

A branch of the real estate profession that seeks to preserve or increase the value of an investment property while generating income for its owners.

Property management report

A periodic financial report prepared for the owner by a property manager.

Property manager

One who manages properties for an owner as the owner's agent.

Property report

Disclosure required under interstate land sales disclosure act.

Property tax

Tax paid on privately owned property. Property taxes are usually paid semiannually, or monthly if the lender requires. The amount is based on local tax rates and assessed property value.

Proprietary lease

The right of a member of a cooperative to occupy a unit in the building subject to certain conditions.

Protected classes

Any group of people that can be identified by a characteristic designated as such by the U.S. Department of Housing and Urban Development (HUD) in consideration of federal and state civil rights legislation. States may add groups for protection, but may not delete any group designated by the federal laws.

Pro rata

Proportionately; according to measure, interest, or liability. In the case of a tenant, the proportionate share of expenses for the maintainenance and operation of the property. See also "Common Area" and "Operating Expenses".


Division of certain settlement costs between buyer and seller.


The document filed with the Securities and Exchange Commission (SEC) that stipulates all the material information about a security. The final prospectus is commonly called "the black" to differentiate it from the preliminary prospectus which had been distinguished by red lettering on the cover to avoid confusion between the preliminary and final prospectus. In the case of a CMBS, the prospectus lists various details, including (but not limited to) the properties collateralizing the security, the terms and conditions of payment to security holders, the payment sequence among classes, the contingency plan in the event that mortgages are not paid as expected, and the treatment of defaults and prepayments. ALL relevant information about a security MUST be spelled out in the prospectus. Also see red herring.

PSA Standard Prepayment Model

A standard prepayment model for residential MBS developed in the 1980's by the Public Securities Association (PSA) and various Wall Street firms. The PSA changed its name to the Bond Market Association in 1997. The PSA model specifies a standard prepayment percentage (in terms of an annual percentage) each month from origination through the thirtieth month. Thereafter, the prepayment rate remains constant. The base is at 100% PSA. Here the annual prepayment rate is 0.2% constant prepayment rate (CPR) the first month, 0.4% CPR the second month, increasing each month by 0.2% CPR until the thirtieth month at 6% CPR (30 X 0.2%). Thereafter the prepayment rate is held constant at 6% CPR. To determine the prepayment rate for any PSA scenario, multiply the corresponding CPR at 100% PSA by the given PSA rate, e.g., for 200% PSA at the fourth month, 4 X 0.2% CPR X 200% = 1.6% CPR. Also see constant prepayment rate (CPR).

Public grant

A grant of a power, license, or real property from the state or government to a private individual.


Editorial space in a newspaper, magazine or other medium that is not paid for but serves to attract public attention to an individual. firm or commodity.

Public land use control

Regulation of land use by government organizations in the form of zoning laws, building codes, subdivision ordinances, and environmental protection laws.

Public liability insurance

A type of insurance that covers the risks an owner assumes when the public enters the premises.

Public open space

Land that is not intensely developed for residential, commercial, industrial, or institutional use.

Public property

That which is owned by government.

Public record

Constructive notice, for all to see, of real property conveyances and other matters.

Punch list

An itemized list, typically prepared by the architect or construction manager, documenting incomplete or unsatisfactory items after the contractor has notified the owner that the tenant space is substantially complete.

Punitive damages

In the event of fraud, damages awarded to one party to punish the other party for his/her dishonest conduct to deter others from committing the same offense.

Pur autre vie

Translated, means for the life of another; a life estate measured by the life of someone other than the life tenant.

Purchase-money mortgage (PMM)

A mortgage obtained by a borrower as partial payment for a property.


Qualified fee simple

A defensible fee (title), recognizable by words "as long as."

Qualified Institutional Buyer (QIB)

A QIB is defined within the meaning of Rule 144A under the Securities Act. A QIB must have a minimum net worth and/or income and be knowledgeable of the risks of the investment. Most CMBS can only be sold to QIBs.

Qualified Mortgage

A mortgage that can appropriately be included in a CMBS. Includes any obligation (including any participation or certificate of beneficial ownership interest) which is principally secured by an interest in real property and which is either (a) transferred to the REMIC on the startup day, or (b) purchased by the REMIC within the three-month period beginning as of the startup day, pursuant to a fixed price contract in effect on the startup day. Additional obligations qualifying as secured by real property for the purposes of being termed a qualified mortgage include (a) obligations secured by stock held by tenants/stockholders in a cooperative housing corporation; (b) debt securities backed by mortgages on timeshare ownership interests in a condominium development; and (c) REMIC regular interests (not residual interests) transferred to the REMIC on the startup day in exchange for any interest in the REMIC.

Qualifying process

Determining the prospect's spatial needs, urgency to move, motives, and financial ability in order to determine if the manager has a space appropriate for the prospect.

Qualifying ratio

A ratio calculated by a lender to determine how much a potential buyer can borrow.

Qualified Reserve Asset

An intangible asset held for investment as part of a "qualified reserve fund," which is defined as any reasonably required reserve to provide for full payment of expenses of the REMIC or amounts due on regular interests in the event of defaults on qualified mortgages or lower than expected returns on cash flow investments. The creditworthiness of the qualified mortgages and the extent and nature of any guarantee are factors to be considered in determining the reasonableness of the amount of reserve. The reserve must be reduced in a timely manner as payments on the qualified mortgages are received.

Quantity survey

A method for estimating replacement or reproduction cost.

Quasi judicial

Rulings that are subject to review and change in the state and federal courts.

Quiet enjoyment

Use or possession of property that is undisturbed by an enforceable claim of superior title.

Quiet title action

A lawsuit to remove a cloud on a title.


A deed to relinquish or release a claim to real property.

Quitclaim deed

A deed operating as a release that is intended to pass any title, interest, or claim that the grantor may have in the property, but not containing any warranty or professing that such title is valid.



Distance from the center of a circle to the perimeter; part of a metes and bounds description.


A naturally occurring, odorless, colorless, radioactive gas that is a known carcinogen which has been found in every state and territory. Buildings with levels over the EPA action level of 4 should be mitigated.


A wooden framing member used in the roof of a structure.

Rate cap

The maximum interest rate allowed on the monthly payment of an adjustable rate mortgage during an adjustment period.

Rate lock

A lender's commitment to a borrower to guarantee (or "lock in") a specific interest rate for a limited amount of time.

Rate-improvement mortgage

A loan with a clause that entitles a borrower to a one-time interest rate cut without going through refinancing.

Rate of return

Percentage of net income produced by a property or other investment.

Rate Step-Ups

A pre-agreed upon increase in mortgage rates. Rate step-ups might be contractual and expected at intervals or be triggered by certain events, e.g., if the borrower (particularly with a balloon mortgage) fails to show progress towards refinancing (such as an appraisal, engineering report, or environmental study) or is unable to obtain a signed commitment or sales contract on the underlying property.


After-the-fact acceptance of an agency agreement.


To reaffirm a previous action.

Rating Agency

The agency that examines the securities and their underlying collateral and rates the securities based on its benchmarks. Ratings range from triple-A, the highest rating, to triple-C, the lowest rating possible. They are a major influence on CMBS structure and pricing. The four rating agencies of CMBS are Dominion Bond Rating Service, FitchRatings, Moody's Investor Service and Standard & Poor's.

Raw land

Unimproved land that remains in its natural state.

Raw space

Unimproved shell space in a building.


see Risk Based Capital.

Ready, willing, and able

Describes a buyer who is ready to buy, willing to buy, and financially able to pay the asking price.

Real estate

Land and everything permanently attached to land.

Real estate broker

A person or an organization who negotiates real estate sales, exchanges, or rentals for others for compensation.

Real estate cycle

A sequence of strengths and weaknesses that occurs in the real estate segment of the general business economy; phases of the cycle are influenced by, but are not identical to, those of the business cycle.

Real Estate Investment Trust (REIT)

A legislated tax election option which allows a corporation or partnership specially formed to invest in real estate (e.g., by acquiring or providing financing for real estate properties) and/or securities backed by real estate. REITs are required to pass through 90% of taxable income to their investors but are not taxed at the corporate level. The major types ofREITs are equity, mortgage, and hybrid; equity REITs are the most common.

Real Estate Mortgage Investment Conduit (REMIC)

Legislated financial vehicle which allows for the issuance of multi-class securities with no adverse tax consequences. A REMIC is a pass-through entity that can hold loans secured by real property without the regulatory, accounting and economic obstacles inherent in other forms of mortgage-backed securities. A REMIC is a bankruptcy-remote legal entity which distributes the cash flow to bondholders of various classes (or tranches) of securities without being taxed at the entity level. REMICs have facilitated the sale of interests in mortgage loans in the secondary market. Embedded in the Tax Reform Act, 1986.

Real estate market

A local activity in which real property is sold, exchanged, leased, and rented at prices set by competing forces.

REO (Real Estate Owned)

Real estate that has come to be owned by a lender, including real estate taken to satisfy a debt. Includes real estate acquired by lenders through foreclosure or, in settlement of some other obligation.

Real estate salesperson

A person performing any of the acts included in the definition of real estate broker but while associated with and supervised by a broker.

Real Estate Settlement Procedures Act (RESPA)

A federal law regulating activities of lending institutions in making mortgage loans for housing.

Real Estate Taxes

The landlords want to make sure that if his real estate taxes go up- that you pay your proportionate share of the increase. This is based on the percentage of the building that you occupy. This usually does not take effect until after you have been in the space for one year.

Reality of consent

Mutual agreement between the parties to a contract; meeting of the minds; to exist and be free of duress, fraud, undue influence, and misrepresentation.

Realized gain>

Actual profit resulting from a sale.

Realized Loss

The amount unrecovered from the sale of a foreclosed mortgage loan or REO property. It is equal to the amount of (a) the outstanding principal balance of the loan, (b) plus all unpaid scheduled interest, (c) plus all fees applied to the sale of the property, (d) minus the amount received from liquidation.

Real property

Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing and heating fixtures, or other items which would be personal property if not attached.

Real property law

Laws that address the acquisition, transfer, and possession of an interest in real estate and the rights attached to it.


A registered trademark of the National Association of REALTORS; its use is limited to Members only.


Land and everything permanently attached to land.


(1) When the IRS recovers the tax benefit of a deduction or a credit previously taken by a taxpayer, which is often a factor in foreclosure since there is a forgiveness of debt. (2) As used in leases, a clause giving the lessor a percentage of profits above a fixed amount of rent; or in a percentage lease, a clause granting the landlord a right to terminate the lease if the tenant fails to realize minimum sales.

Recapture clause

A provision in a percentage lease that grants the landlord the right to terminate the lease at the end of a certain period if gross sales have not reached the level anticipated during negotiations.

Recapture provision

A clause within an assignment and subletting lease clause giving the landlord the right to recover any space that the tenant is unable to occupy or sublease.


The peak of the business cycle; the point at which supply equals and begins to surpass demand.


Mutual agreement by certain states to extend licensing privileges to each other.

Recognized gain

The amount of profit that is taxable.


(a) The process of checking accounting of settlement statement; (b) The adjustment process in appraising, whereby comparables are adjusted to the subject property.


Written registration of an owner's title in public records to protect against subsequent claimants.


Registering a document on the public record.

Recording fee

A fee charged by real estate agents for conveying the sale of a piece of property into the public record.


The right of a lender, in the event of a default by the borrower, to recover against the personal assets of a party who is secondarily liable for the debt (e.g. endorser or guarantor).

Recreational Property

A property designed for a recreational specialized use.Includes sports arenas, country clubs and marinas.

Rectangular survey system

A type of land description utilizing townships and sections.

Recurring variable expense

A type of variable property expense (e.g., redecorating costs) that occurs repeatedly on an irregular basis.


See equity of redemption.

Red Herring, or "Red"

A preliminary prospectus or private placement memorandum that is subject to amendment. It is identified by the red printing on the front cover, hence the name, and there is no implication that the document is in any way diversionary (as the common use of the term "red herring" might suggest). It is a valuable marketing tool for securities transactions. Also see prospectus.


The refusal of lending institutions to make loans for the purchase, construction, or repair of a dwelling because the area in which the dwelling is located is populated by minorities.


The owner's right to regain possession of real property.

Referee's deed

A type of judicial deed allowing conveyance of real property through a court-appointed individual.

Referral fee

A percentage of a broker's commission paid to another broker for sending a buyer or seller to him or her.

Refinance Risk

The risk that borrowers are unable to refinance mortgages at maturity, thereby extending the life of a security collateralized by those mortgages. Also see Balloon Risk.


Obtaining a new mortgage loan to pay and replace an existing mortgage.

Regional center

A large shopping center containing from 70 to 225 stores and more than 400,000 square feet of leasable area housing up to six major department stores and numerous satellite stores and supported by 50,000 to 150,000 families.

Regional market analysis

Used when drafting the management plan, a report detailing demographic and economic information on the regional or metropolitan area in which the subject property is located and used to interpret economic trends.

Registration statement

A filing statement required by the Securities Exchange Commission containing pertinent information about the securities offering.

Regular Interests, or Regular Certificates

A REMIC may be comprised of only two forms of interest or certificates: regular and residual interests. The terms and maturities of regular interests, the primary form of interest in a REMIC, must be fixed on the startup day and must state a specific amount to which the holder is ultimately unconditionally entitled. Generally, regular interests must provide for interest payments or other similar amounts at or before maturity at a fixed rate.

Regularly recurring cost

A type of fixed property expense (e.g., cleaning costs) that occurs consistently each month.

Regulation Z

A federal code issued under the Truth in Lending Act that requires a borrower be advised in writing of all costs associated with the credit portion of a financial transaction.

Regulatory taking

Under its power of eminent domain, government may take and develop land for public use.


An extensive renovation of a building or project which is intended to cure obsolescence of such building or project.

Rehabilitation mortgage

A mortgage that provides for the costs of repairing and improving a resale home or building.


see Real Estate Investment Trust.


To refuse to accept an offer.

Release clause

A provision in a mortgage to release certain properties from the mortgage lien when the principal is reduced by a specified amount.

Release Provision

1) A provision to release certain collateral under a mortgage for a pre-agreed upon amount. 2) If a borrower prepays the loan associated with one property in a pool of mortgages that are cross-collateralized and cross-defaulted (a "crossed" pool), the borrower must additionally prepay a portion of all other loans in the pool. This provides protection against a borrower "cherry picking" properties out of a crossed pool.

Remainder interest

A future interest in a life estate.


One having a future interest in a life estate.

Remaining balance

The amount of unpaid principal on a home loan.

Remaining term

The original loan term minus the number of payments made.


see Real Estate Mortgage Investment Conduit.


To release or give up.

Remittance Report

A report sent to each certificate holder on each distribution date by the servicer which provides detailed information about the current distribution; copies of the remittance reports are also sent to the underwriter and trustee. There are no fixed standards for the information to be included in remittance reports and, in fact, there is a wide variety of formats - some have a minimal amount of typewritten information while others are computer generated and supply more detail.

Renewal Option

A clause giving a tenant the right to extend the term of a lease, usually for a stated period of time and at a rent amount as provided for in the option language.


Compensation or fee paid, usually periodically (i.e. monthly rent payments, for the occupancy and use of any rental property, land, buildings, equipment, etc.)

Rent Step-Up

A lease agreement in which the rent increases at given intervals for a fixed amount of time or for the life of the lease.

Rentable space

According to BOMA, the floor area of an office building minus allowances for stairs, elevator shafts, duct work and other areas not available to the tenant.

Rentable square footage

Rentable Square Footage equals the Usable Square Footage plus the tenant's pro rata share of the Building Common Areas, such as lobbies, public corridors and restrooms. The pro-rata share, often referred to as the Rentable/Usable (R/U) Factor, will typically fall in a range of 1.10 to 1.16, depending on the particular building. Typically, a full floor occupancy will have an R/U Factor of 1.10 while a partial floor occupancy will have an R/U Factor of 1.12 to 1.16 times the Usable Area.

Rentable/usable ratio

That number obtained when the Total Rentable Area in a building is divided by the Usable Area in the building. The inverse of this ratio describes the proportion of space that an occupant can expect to actually utilize/physically occupy.

Rental center

A special leasing area located in a real estate development. It includes a display area, furnished models and a closing area.

Rental concession

Concessions a landlord may offer a tenant in order to secure their tenancy. While rental abatement is one form of a concession, there are many others such as: increased tenant improvement allowance, signage, lower than market rental rates and moving allowances are only a few of the many. See also "Abatement".

Rental history

A record of the prospect's previous rental patterns that can influence the manager's decision to rent or not rent. Considerations include frequent moves, expensive modifications, and future expansion requirements.

Rent commencement date

The date on which a tenant begins paying rent. The dynamics of a marketplace will dictate whether this date coincides with the lease commencement date or if it commences months later (i.e., in a weak market, the tenant may be granted several months free rent). It will never begin before the lease commencement date.

Rent factor

A multiplier used to establish the rental rate for industrial properties, based on the rate of return the owner desires on the investment.

Rent roll

The number of rental units currently occupied in a building multiplied by the rental amount per unit.

Rent-up period

That period of time, following construction of a new building, when tenants are actively being sought and the project is approaching its stabilized occupancy.


see Real Estate Owned.

Replacement cost

The amount of money required to replace a structure with another structure of comparable utility.

Replacement cost insurance

The type of insurance that guarantees that partial damage to old, depreciated property will be fully replaced by new construction.

Reperforming Loan

see Corrected Mortgage Loan.

Replacement reserve

A fund to replace assets when they wear out.


Regaining possession of property as a result of a breach of contract by another.

Representation Agreement

An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation. See also "Exclusive Listing Agreement".

Reproduction cost

The amount of money required to build an exact duplicate of a structure.

Reps and Warranties

The representations (or "reps") and warranties made by a mortgage lender about the quality of the loans. Many reps and warranties survive the securitization process, i.e., are still enforceable once the mortgage has been included in a security.

Request for proposal ("RFP")

The formalized Request for Proposal represents a compilation of the many considerations that a tenant might have and should be customized to reflect their specific needs. Just as the building's standard form lease document represents the landlord's "wish list", the RFP serves in that same capacity for the tenant.


The cancellation of a contract by law or consent from the parties involved.

Reserve funds

An expense category in the operating budget, monies are set aside for replacement expenditures not covered by insurance, such as roof or furnace repairs.

Resident manager

A manager who resides at the managed property who coordinates and executes maintenance operations for the building, and in some cases, interfaces regularly with tenants.

Residential property

The type of property where people live. It includes privately owned dwellings as well as government and institutional ownership, and provides the greatest demand for professional property management.


Refers to any cash flow remaining after the liquidation (full pay-off) of all classes of securities in a CMBS. Multiple-asset, multiple-class CMBS frequently have a residual.

Residual income

Income allocated to the land under the principle of highest and best use.

Residual Interests, or Residual Certificates

Every REMIC must have one and only one class of residual interests, although there may be multiple owners of residual interests. All distributions of residual interests must be prorated; however, a residual interest does not have to entitle the holder to any fixed or minimum distributions in order to qualify as such. Residual interests may accrue income or cash flow in several ways, including the following: (a) the rate(s) differential(s) between the underlying mortgages and the REMIC regular interests; (b) income or cash flow resulting from over-collateralization; (c) buy-down reserves, sinking funds or prepaid insurance; and (d) income from qualified reserve funds or cash flow investments in excess of what is required to service regular interests. Also see regular interests.

Resolution Trust Corporation (RTC)

Created by the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), 1989. An agency designed to assume the assets of failed financial institutions, principally savings and loan institutions (S&Ls or thrifts) and dispose of those assets. The RTC can be credited with profoundly expanding the CMBS market by assuming a large volume of these securities, often with substantial credit enhancement to make them palatable to investors. The RTC charter expired in 1995, and all remaining assets and duties were transferred to the FDIC.

Resource-oriented industry

A business that locates near suppliers or raw materials necessary for its operations.

Restrictive clause

A clause in a deed or lease that limits the way that the real estate ownership or possession may be used.

Restrictive covenant

Restriction placed on a private owner's use of land by a nongovernmental entity or individual.

Retail Property

Property types range from super-regional shopping centers with a gross leasable area greater than one million sq. ft. to small stores with single tenants. Also see Shopping Center.


Under the Uniform Landlord Tenant Law, landlords are not permitted to get even with a tenant who files a complaint with a government agency. Prohibited examples include singling out the tenant for a rental increase, unnecessary and frequent property inspections, removing a parking space.


An energy-saving program that calls for replacing or upgrading heating and air conditioning equipment, often at great expense.

Reverse annuity mortgage

A mortgage used by older people in which the lender makes payments to the borrower for a contracted period of time; upon the death of the homeowner or sale of the property, the money is paid back.

Reverse Earn-Out Loans

A mortgage loan that, like an earn-out loan, is made on a property or properties that do not yet possess stabilized cash flows. Unlike an eamout loan, a reverse earn-out is sized at origination on the basis of specific criteria (generally DSCR) not yet achieved, or achieved but not yet shown to be consistent. If specified criteria (generally a DSCR of 1.2x-l.4x) are not met by a specified date, the loan is resized down. The difference between the outstanding balance of the loan and the resized balance must be paid down by the borrower from other sources, which may not result in a further encumbrance of the property, or with an outside preferred equity investment. Also see Earn-Out Loan.

Reverse mortgage

A special type of loan available to equity-rich, older home owners. Repayment is not necessary until the borrower sells the property. Many downsides exist to these loans.


Return of title to the holder of a future interest, such as the grantor in a life estate not in remainder.

Reversionary Cap Rate

The capitalization rate applied to the expected ultimate sale price/value of a building after a several year holding period. Typically about 50 basis points higher than a going-in cap rate.

Reversion/Reversionary Value

Reversion is the ultimate or theoretical sale of a building after a several year holding period. The reversionary value is thus the expected value of the building at that time.

Reversionary interest

A provision stating the owner's interest: that possession of property will go back to owner at end of lease.


The lowest point, or nadir, of the business cycle; the point at which demand equals and begins to surpass supply.


Withdrawal of an offer.


Addendum to cover supplemental issues of an agreement.

Right of assignment

Allows lender to sell mortgage at any time and obtain money invested rather than wait for completion of loan term.

Right of first refusal

A statement in a lease or condominium articles of association that provides for a lessee or an association to have the first opportunity to purchase the property before it is offered to anyone else.

Right of inheritance

The right for property to descend to the heirs of the owner as set out by will or by intestate succession.

Right of redemption

Real property owners are given the opportunity to satisfy liens against their property prior to foreclosure proceedings.

Right of Substitution

The ability to replace collateral, parties or other components in a contractual obligation. For example, a mortgage may allow the release of certain property from the collateral as long as other acceptable collateral replaces it.

Right of survivorship

The right of an owner to receive the title to a co-owner's share upon death of the co-owner, as in the case of joint tenancy or tenancy by the entirety.


An easement allowing someone to use the land of another.

Right to Cure

In the event that a contractual obligation between two parties (e.g., a ground lease) is breached or defaulted, the right to cure permits a specified and interested third party (e.g., a lender) to assume the responsibilities of one of the parties (e.g., the borrower) to perform under the agreement (e.g., pay rent) on behalf of the defaulting party to preserve their interests (e.g., their lien position). Also see Cured.

Right to rescission

A provision in the federal Truth in Lending Act that allows borrowers to cancel certain kinds of loans within three (3) days of signing.

Riparian rights

The rights of an owner of property adjoining a watercourse such as a river, including access to, and use of, the water.

Risk Based Capital (RBC)

The amount of capital (or net worth) an investor must identify and allocate to absorb a potential loss on an investment or investment class. This requirement was established by institutional regulatory bodies in the last few years because of losses at various types of financial institutions. The amount of risk based capital that is required varies among asset classes depending on perceived risk (e.g., is different for mortgages or rated bonds) and is typically expressed as a percent of the amount at risk.

Risk factor

The potential for loss.

Risk management

That portion of property management that deals with minimizing or allocating risk of damage, such as utilizing insurance policies to transfer the risk of loss to a third party.

Routine maintenance

Regular upkeep aimed at finding structural and mechanical problems before major repairs are necessary.


see Resolution Trust Corporation.

Rule 144A

see SEC Rule 144A.

Rule of reason

Legal doctrine that means if an activity is reasonable, then it is allowable under law.


Rights moving from grantor to grantee along with a title.



see Savings Association Insurance Fund.


An arrangement by which the owner occupant of a property agrees to sell all or part of the property to an investor and then lease it back and continue to occupy space as a tenant. Although the lease technically follows the sale, both will have been agreed to as part of the same transaction.

Sales comparison approach

The primary approach in estimating the value of vacant land and single-family, owner-occupied dwellings.

Sales contract

A contract signed by the buyer and seller detailing the terms of a property sale.

Satisfaction of mortgage

Legal instrument signifying a mortgage has been paid in full.

Savings Association Insurance Fund (SAIF)

A fund administered by the FDIC which insures deposits of SAIF member institutions, primarily thrifts or savings and loan associations (S&Ls), funded by premiums paid by member institutions. Established by FIRREA in 1989 along with the Bank Insurance Fund (BIF).


(a) an economic characteristic of real property; (b) in appraisal, supply of property in relation to effective demand.

Seasonal variations

Changes in the economy that recur at least once a year.


The length of time since origination of a mortgage loan. The longer a loan has been outstanding and performing to its terms, the better "seasoned" it is. The presumption is that more seasoned loans have a lower probability of default. A loan that has been outstanding for perhaps three years but shows a poor pay history (e.g., several late pays, particularly beyond 30 days), is not considered seasoned because of its performance.


see Securities and Exchange Commission.

Secondary mortgage market

The market in which lenders sell mortgages.

Second generation or secondary space

Refers to previously occupied space that becomes available for lease, either directly from the landlord or as sublease space. See also "First Generation Space.

Secondary Market

The trading of securities that had been previously issued. Also see primary market.

Second mortgage

A mortgage on property that ranks below a first mortgage in priority. Properties may have two, three, or more mortgages, deeds of trust, or land contracts as liens at the same time. Legal sequence priority, indicated by the date of recording, determines the designation first, second, third, etc.

Secondary Mortgage Market Enhancement Act (SMMEA), 1984

Originally passed to assist the residential mortgage market in accessing the capital market by eliminating legal restrictions that impeded certain investor groups from participating in residential MBS. At this time, if a security is rated double-A or better from at least one national rating agency, and if it is backed by a first-lien mortgage on residential property (including multifamily and congregate care), then the security is said to be "SMMEA eligible," and hence a permitted investment for S&Ls, federally-chartered banks, and state regulated financial institutions (life companies and state-chartered banks). Lobbying is underway to modify investment guidelines so that qualified investors are permitted wider access to the CMBS market as well as residential MBS.

SEC Rule 144A

The sale of bonds not registered with the Securities and Exchange Commission (SEC) is restricted to the conditions set forth by this rule of the SEC originally contained in the Securities Act of 1934. Unregistered certificates can only be sold to "qualified investors," principally institutional investors, who can demonstrate that they meet certain standards of net worth and/or income and are therefore deemed to be sophisticated investors. The rule under which some securities are privately placed. Also see Private Placements.

Section 8

A federal subsidized housing program administered by HUD whereby a tenant pays up to thirty percent of his or her adjusted monthly income and HUD pays the difference between that figure and market rent. Income requirements vary regionally, and owners are not required to participate.

Secured creditor

One who has filed a financing statement or who possesses a written security agreement as security for extending credit to a debtor.


In the CMBS market, securities are the generic term applied to Certificates of Ownership of the funds or assets of a trust fund. These undivided interests are issued by the trustee in amounts of $100,000 until less than $100,000 remains, then in amounts of $1 ,000. The certificates are usually issued in lettered classes starting with Class A, the highest-rated class. Each class is risk-rated by one or more of the major rating agencies. If the higher risk first-loss class is included in the security and sold rather than being held by the seller, the class is rated as "NR" (not rated). The "not rated" risk-rating is used for securities not qualifying for the minimum risk rate.

Securities act of 1933

Regulates securities offered by individuals, general or limited partnerships, and unincorporated associations, or individuals.

Securities exchange commission

Federal agency that requires the registration of securities offered to the public.


A term used to describe the process of raising funds through the sale of securities. It usually creates a new financial instrument representing an undivided interest in a segregated pool of assets such as commercial mortgages. The ownership of the assets is usually transferred to a legal trust or special purpose, bankruptcy remote corporation to protect the interests of the security holders.

Security deposit

A payment by a tenant, held by the landlord during the lease term and kept (wholly or partially) on default or destruction of the premises by the tenant. Individual states set forth rules for holding, retaining or returning security deposits.

Seepage pit

A covered pit through which the discharge from the septic tank infiltrates into the surrounding soil.

Seisen (seizen)

Possession of real property under claim of freehold estate. This term originally referred to the completion of feudal investiture by which a tenant was admitted into the feud and performed the rights of homage and fealty. Presently it has come to mean possession under a legal right (usually a fee interest). As the old doctrine of corporeal investiture is no longer in force, the delivery of a deed gives seisin in law.

Self-Amortizing Loans

Loans for which the full amount of the principal will be completely paid off at the loan's termination pursuant to the loan's payment schedule.

Seller agent

A listing agent, subagent, or broker agent who works in the best interests of the seller.

Seller carry-back

An agreement where the seller provides financing for a home purchase.

Seller financing

The seller allows the borrower to use a portion of the equity in the property to finance the purchase.

Senior Pieces

Security classes, or tranches, that are rated as investment grade, therefore appropriate for regulated institutional investors (i.e., triple-A, double-A, single-A, and triple-B).

Senior/Subordinate Structure

A common structure used in CMBS involving a prioritization of cash flows. For example, in a simple two class senior/subordinate structure (also known as an AIB structure), (a) Class A will receive all cash flow up to the required scheduled interest and principal payment; (b) The subordinate class, Class B, provides credit enhancement to Class A, and (c) Class B will absorb 100% of losses experienced on the collateral until cumulative losses exceed Class B's amount; thereafter Class A will absorb all losses. Also known as a sequential pay structure.

Sequential Pay Structure

see Senior/Subordinate Structure.

Sensitivity analysis

A study of how a change in one factor can affect the income to the property.

Septic system

A household wastewater treatment system consisting of a house sewer, septic tank, distribution box, and absorption field or seepage pit.

Service drop

Aboveground electrical cables, that come from the nearest pole connecting to the service entrance conductors of a structure.

Service lateral

Underground electrical wiring connecting to a structure.


Institution acting for the benefit of the certificate-holders in the administration of mortgage loans in a CMBS. Functions include reporting to the trustee, collecting payments from borrowers, advancing funds for delinquent loans, negotiating workouts or restructures (as permitted by the pooling and servicing agreement) and taking defaulted properties through the foreclosure process. Also see Master Servicer and Special Servicer.

Servicing Advances

Generally defined as customary, reasonable and necessary out-of-pocket costs and expenses incurred by the master servicer or special servicer in connection with the servicing of a mortgage loan after an event of default, delinquency or other unanticipated event or in connection with the administration of an REO property. These advances are paid by the master servicer or sometimes the special servicer and are generally reimbursable from future payments and other collections. In all cases, the required servicing advances are detailed in the pooling and servicing agreement.

Servicing Transfer Event

An event that triggers the transfer of the management of a mortgage loan from the master servicer to the special servicer. A servicing transfer event occurs when a borrower has defaulted or, in the reasonable judgment of the master servicer, is likely to default and be unable to cure within a reasonable time. In this event, the master servicer can transfer the day-to-day handling of the account to the special servicer until such time as the special servicer determines that the default has been cured and that the loan is now a corrected mortgage loan.

Servient tenement

Land encumbered by an easement.


The distance from a curb, property line or other reference point, within which building is prohibited.

Setback Ordinance

Setback requirements are normally provided for by ordinances or building codes. Provisions of a zoning ordinance regulate the distance from the lot line to the point where improvements may be constructed.

Settlement or closing fees

Fees paid to the escrow agent (often a title insurance company) for carrying out the written instructions of the agreement between buyer and seller and/or borrower and lender.

Settlement statement

A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing for the buyer and seller.


Ownership by only one person.

Shadow Anchor Retail

A major retail tenant which provides significant drawing power to a retail center but which itself may not be part of the particular shopping center or the specific collateral. For example, imagine a shopping center for which a WalMart serves as anchor for a shopping center consisting of several in-line stores. If that WalMart is not owned by the shopping center, the store nonetheless serves as a shadow anchor to the other property and in-line stores.

Shared appreciation mortgage

(a) A mortgage that allows the lender to benefit from the appreciation of property value in exchange for a lower rate of interest to the borrower. (b) A loan that allows a lender or other party to share in the borrower's profits when the home is sold.

Shared-equity transaction

A transaction in which two buyers purchase a property, one as a resident co-owner and the other as an investor co-owner.

Shared tenant services

When permitted by local utilities, building management can provide telephone and data transmission services to two or more unrelated tenants.


A material such as plywood or sheetrock that covers the framing members of a structure; also a type of insulation material.

Shell space

Setback requirements are normally provided for by ordinances or building codes. Provisions of a zoning ordinance regulate the distance from the lot line to the point where improvements may be constructed.

Shell Rent

A portion of rental rates that is intended to amortize the costs of extraordinary tenant improvements.

Show list

A short list of up to three available apartments ready for inspection at any given time. As one is rented, another is made ready and added to the list for showing and renting. Analysis of the show list can serve as a control guide for the marketing program.

Sick building syndrome

A physical condition caused by substances within a building that causes symptoms that disappear when the occupant leaves the building.

Sill plate

The first wooden member of a structure used as the nailing surface for the floor system.

Single agent

An agent who works only for the buyer or the seller.

Site analysis

The study of a specific parcel of land which takes into account the surrounding area and is meant to determine its suitability for a specific use or purpose.

Site development

The installation of all necessary improvements, (i.e. installment of utilities, grading, etc.), made to a site before a building or project can be constructed upon such site.

Site plan

A detailed plan which depicts the location of improvements on a parcel of land which also contains all the information required by the zoning ordinance.


Location of land.


The exposed wearing surface laid over the structural support beams of a building to form the floor(s) of the building or laid slab-on-grade in the case of a non-structural, ground level concrete slab.

Slab-on-grade construction

A type of concrete flooring that is part of the foundation and is poured an a prepared and graded surface.

Slum clearance

The razing of substandard and unsalvageable residential buildings for redevelopment.


see Secondary Mortgage Market Enhancement Act, 1984.


see Standard Prepayment Assumption.


Special Purpose Corporation. see Special Purpose Entity.


see Special Purpose Entity.

Special Purpose Entity (SPE)

A bankruptcy-remote entity established by the borrower(s) at the loan level and the issuer at the securities level whose sole asset is the property or properties being financed. The SPC protects the lender and, ultimately, the certificate holders of a security, from having the underlying property involved in bankruptcy proceedings against the borrower on the property; in the event of a bankruptcy or insolvency of the borrower or issuer, an automatic stay would apply and delay payments to investors. Rating agencies generally request counsel to provide "true sale" opinions on the sale from the transferor to the issuer and "non-consolidation opinions" confirming that the entity is indeed bankruptcy remote. Also called a special purpose corporation (SPC) or special purpose vehicle (SPV).


Special Purpose Vehicle. see Special Purpose Entity.

Special Servicer

Some transactions have a separate special servicer, in addition to the master servicer, who is responsible for managing loans that go into default and conducting the "work-out" or foreclosure process, e.g., liquidating of loans and advancing the proceeds to the trustee. There are various types of special servicers: (a) Those that retain first-loss pieces; (b) Those that invest in B-pieces in return for special servicing rights; and (c) Those that are appointed solely because of their specialized asset-management expertise.

Special Servicing Fee

That portion of the special servicer's compensation that accrues with respect to each specially serviced mortgage loan and each mortgage loan that has become REO. The fee is calculated on a loan-by-Ioan basis per the applicable pooling and servicing agreement.

Spread Accounts

A reserve account funded on an on-going basis by collateral interest in excess of bond interest that is not directed to any particular class. This account absorbs mortgage losses up to a stated cap, providing additional credit support for the security, hence is a form of credit enhancement.

Standard Prepayment Assumption (SPA)

Prepayment rates on loans are commonly measured relative to a prepayment standard or model, such as the Standard Prepayment Assumption prepayment model or the Constant Prepayment Rate (CPR) prepayment model. SPA represents an assumed variable rate of prepayments each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of loans. Different prepayment assumptions than this baseline are often expressed as percentages of SPA. CPR, in contrast, represents an assumed constant rate of prepayments each month (expressed as an annual percentage) relative to the then outstanding principal balance of a pool of loans for the life of such loans.


A wood, vinyl, or aluminum material placed under the roof extension of a structure.

Soft cost

That portion of an equity investment other than the actual cost of the improvements themselves (i.e. architectural and engineering fees, commissions, etc.) and which may be tax-deductible in the first year. See also "Hard Cost".


Programmed instructions used to run the computer, including user programs saved on disks and tapes.

Sole plate

A horizontal base plate that serves as the foundation for the wall system.

Sole proprietorship

A business owned by one individual.

Space plan

A graphic representation of a tenant's space requirements, showing wall and door locations, room sizes, and sometimes includes furniture layouts. A preliminary space plan will be prepared for a prospective tenant at any number of different properties and this serves as a "test-fit" to help the tenant determine which property will best meet its requirements. When the tenant has selected a building of choice, a final space plan is prepared which speaks to all of the landlord and tenant objectives and then approved by both parties. It must be sufficiently detailed to allow an accurate estimate of the construction costs. This final space plan will often become an exhibit to any lease negotiated between the parties.

Special agent

Agent with limited authority to act on behalf of the principal, such as in the situation created by a listing.

Special assessment

A levy by a local government against real property for part of the cost of making an improvement to the property, such as street paving, installing water lines, or putting in sidewalks.

Special-purpose property

Hotels, resorts, nursing homes, theaters, schools, places of worship and other businesses or organizations whose specialized needs dictate the design and operation of the building.

Special purpose real estate

The result of combining both the land and its improvements for a singular highest and best use.

Special-use permit

A permit for a use that is not allowed in the zone without the approval of the planning board or other legislative body.

Special warranty deed

A deed containing a limited warranty of title.

Specific cycle

A wavelike movement, similar to the business cycle, that occurs in certain sectors of the general economy.

Specific lien

One that attaches to one particular property only.

Specific performance

A court instruction requiring a defaulting party to a contract to buy and sell real property to perform his obligations specifically under the contract.

Speculative space

Any tenant space that has not been leased before the start of construction on a new building. See also "First Generation Space".


An individual or entity who develops an offering plan for a cooperative or condominium.

Spot zoning

In New York, illegal rezoning of a certain property in a zoned area to permit a different type of use than that which is authorized. It is for the benefit of an individual and against the best interests of the health, safety, and welfare of the community.

Square-foot method

A technique used to estimate the total cost of construction, in which the total number of square feet to be constructed is multiplied by a cost-per-square-foot figure to derive total cost.

Stabilized budget

A forecast of income and expense as may be reasonably projected over several years; prepared by a property manager.

Standard fire insurance

A basic form of insurance protecting a property against direct loss or damage.

Standby Fee

That portion of the special servicer's compensation which accrues with each mortgage loan, including specially serviced mortgage loans and those which have been converted to REO. This fee accrues at the standby fee rate, is calculated in the same manner as the master servicer's fee and is payable by the master servicer from its master servicing fee.

Startup Day

The first day on which interests in the REMIC are issued.

State environmental quality review act (seqra)

A New York law requiring preparation of an environmental impact statement on any project that requires government approval and may have a significant effect on the environment.

State of New York mortgage association (sonyma)

An agency that raises money from the sale of New York tax-free bonds and uses these funds for mortgage loans.

Statute of frauds

That part of state law that requires certain instruments, such as deeds, real estate contracts, and certain leases, to be in writing to be legally enforceable.

Statute of Limitations

State laws establishing the time period within which certain lawsuits may be brought.

Statutory foreclosure

A foreclosure proceeding that allows a statutory time period after a foreclosure sale during which the borrower may still redeem the title.

Statutory law

A body of law which addresses everyday behavior.

Steep slope

Land with a slope that ranges from 30 percent to 45 percent or more.


The directing of members of protected classes to buildings or neighborhoods that are already occupied primarily by members of those same classes and away from buildings and neighborhoods occupied primarily by members of other classes in order to avoid altering the racial/ethnic make-up of these areas.

Step-rate mortgage

A loan that allows a gradual increase in the interest rate during the first few years of the loan.

Step-up clause

A lease clause providing for rental rate increases of a definite amount at specific times over the term of the lease.

Step-up lease (graded lease)

A lease specifying set increases in rent at set intervals during the term of the lease.

Straight lease (flat lease)

A lease specifying the same, a fixed amount, of rent that is to be paid periodically during the entire term of the lease. This is typically paid out in monthly installments.

Straight-line depreciation

A method of computing depreciation that assumes that the wearing-out process proceeds at a stable rate over the useful life of a building.

Straight percentage lease

A type of percentage lease that bases rental rate solely on gross sales.

Straight-term mortgage

A loan in which the borrower pays interest only for a specified term and, at the end of the term, is required to pay the principal.

Stress Test

A series of tests performed by the rating agency which project the performance of the mortgage pool under varying scenarios or stress-related assumptions. The rating agency determines the likelihood of timely repayment using historical loan experience for the collateral type and its own statistical database concerning probability of default and severity of loss. The stress tests to which the pooled loans are submitted include analysis of the mortgage documents, real property collateral, tax structure, geographical distribution, loan servicing and administration issues. For example, a stress test might assess the impact of a change in interest rates on debt-service coverage ratios (DSCRs).

Strip centers

Also known as convenience centers, shopping centers located on the edge of urban areas or in the suburbs, consisting of about 10,000 to 30,000 square feet, four to ten retail spaces. They usually include parking spaces in front of the shops, and are often owner-managed.

Stripped Interest Certificates

Classes of securities that are entitled to distributions of interest with nominal or no distributions of principal.

Stripped Principal Certificates

Classes of securities that are entitled to distributions of principal with nominal or no distributions of interest.

Structural density

The ratio of the total ground floor area of a building to the total land area of the site on which it is built.


Refers to the tax and legal structure of a CMBS, such as pass-through structure, a bond structure, a collateralized mortgage obligation (CMO), or a real estate mortgage investment conduit (REMIC). The structure can determine the tax benefits or penalties, and the rights of the CMBS holders and the issuer in the event of a failure or default within the terms of the security. Most CMBS are senior/subordinated, multiple class pass-throughs classified as REMICs.


The process of experimenting with various combinations of mortgages and security classes to achieve the highest price for a CMBS based on capital market factors prevailing at that time.


Wooden framing members used for forming the wall skeleton of a structure.


A person appointed by an agent with the permission of the principal to assist in performing some or all of the tasks of the agency.

Subchapter S corporation

Corporate formation whereby corporate income and expenses flow through to shareholders as if a partnership.


A contractor working under and being paid by the general contractor. Often a specialist in nature, such as an electrical contractor, cement contractor, etc.


One who formats land into lots for building purposes in accordance with state and local requirements.


A tract of land divided into lots or plots and eventually used for building purposes.

Subdivision plat

A detailed drawing which depicts the manner in which a parcel of land has been divided into two or more lots. It contains engineering considerations and other information required by the local authority.

Subdivision regulation (ordinance)

Public control of the development of residential subdivisions.


The transfer of only part of a lease term with reversion to the lessee; a lesser lease estate.


Partial transfer of a tenant's right in a rental property to a third party.


Lower in priority.

Subordinate Ground Lease

An agreement to occupy and use a parcel of land in which the rights attributable to such an agreement are junior, or secondary, to another indebtedness or obligation.

Subordinate lease

A lease that can be canceled by a lender if the borrower defaults on a mortgage loan.

Subordinate Lien

A collateralized indebtedness in which the rights attributable to such indebtedness are junior, or subordinate, to another indebtedness or obligation, i.e., a second mortgage.


Structuring a security into classes, in which the risk of credit loss is disproportionately distributed. It is commonly recognized as a senior/subordinate structure. A form of credit enhancement.

Sub-Performing Loan

A loan that is making payments, perhaps even the full principal and interest payments required in the mortgage note, but with a debt coverage ratio that would be unacceptable if underwritten at this time. Many investors also classifY a loan as sub-performing even if monthly payments are current if the loan-to-value ratio (L TV) or other primary value indicator suggests that the loan is unlikely to be able to pay off in full at maturity.

Subordinate loan

A second or third mortgage.

Subordinate mortgage

A junior mortgage that is lower in priority to another mortgage.

Subordination agreement

As used in a lease, the tenant generally accepts the leased premises subject to any recorded mortgage or deed of trust lien and all existing recorded restrictions, and the landlord is often given the power to subordinate the tenant's interest to any first mortgage or deed of trust lien subsequently placed upon the leased premises.

Subrogation of rights

The substitution of the title insurance company in the place of the insured for filing a legal action.

Subsequent rate adjustments

The interest rate for adjustable rate loans (ARMs) adjusts at regular intervals. This adjustment period could in some cases differ from the initial interest rate duration period.

Subsequent rate cap

A specific limit defined by most adjustable rate loans (ARMs) for the maximum amount the interest rate may increase at each regularly scheduled interest rate adjustment date. This limit may differ from the initial rate cap.


A servicer who contracts with master servicers and special servicers to perform some of the real estate services required under pooling and servicing agreements, such as property inspections, foreclosure services or individual loan administration. The master or special servicer is legally responsible for the activities of the sub-servicers. Sub-servicers are more likely to be engaged for specialized property types or if there is a small number of loans, a subset of the total portfolio, in a given area.

Subsidized housing

Residential developments for low-income families that are insured or (indirectly) financed in part by a government agency.


The principle providing that the highest value of a property has a tendency to be established by the cost of purchasing or constructing another property of equal utility and desirability provided that the substitution can be made without unusual delay. also see Right of Substitution

Subsurface rights

Rights to the area below the earth's surface.


Many reps and warranties which are made by the lender survive the securitization process, i.e., are still enforceable once the mortgage has been included in a security.

Superfund Amendments and Reauthorization Act of 1986 (SARA)

The umbrella title given to various amendments to CERCLA. Amendments limit pesticide liability and provide for government reclamation of contaminated property.

Super jumbo mortgage

A mortgage that is over $650,000 or $1,000,000, depending on the lender.

Super regional shopping centers

Largest type of shopping center, housing as much as 1.5 million square feet of shops and appurtenant areas.

Supply and demand

(a) The principle that follows the interrelationship of the supply of and the demand for real estate, recognizing that real property is subject to the influences of the marketplace just as any other commodity. (b) The principle stating that the greater the supply of any commodity in comparison to demand, the lower the value; conversely, the smaller the supply and the greater the demand, the higher the value.


One who at the request of another, and for the purpose of securing to him a benefit, voluntarily binds himself to be obligated for the debt or obligation of another. Although the term includes guarantor and the terms are commonly, though mistakenly, used interchangeably, surety differs from guarantor in a variety of respects.

Surface rights

A right or easement granted with mineral rights, enabling the possessor of the mineral rights to drill or mine through the surface.


The process by which a parcel of land is measured and its boundaries and contents ascertained.


The right of the surviving co-owner to receive the title automatically of a deceased co-owner immediately without probate.

Sweat equity

The non-cash value added to a piece of property by the owner, such as do-it-yourself home improvements.

Swing loan

A type of interim loan wherein a borrower uses the equity that he has in one property to obtain the money necessary to buy another property.



A procedure used to preserve the adverse possession claim where the possession of the property is taken over from one person to another, sometimes through inheritance.

Take-out loan

Permanent financing arranged to replace a short-term construction loan.


A common synonym for condemnation or any actual or material interference with private property rights but it is not essential that there be physical seizure or appropriation.

Taking title subject to a mortgage

Accepting a title pledged to secure a mortgage and with no personal liability for payment of the note.

Taxable status date

In New York, as of March I in towns, and January I in villages, real property is assessed with respect to its condition. The date may differ in other municipalities.


One of the powers of government to tax, among other things, real property.

Tax base

The assessed valuation of all the real property that lies within the jurisdiction of a taxing authority, which is then multiplied by the tax rate or mill levy to determine the amount of tax due.

Tax basis

This consists of the price paid for the property, plus expenses incurred in acquiring the property (other than those incurred in arranging financing) plus the cost of any capital improvements. See basis.

Tax certiorari proceeding

A judicial review in state supreme court of a decision of the local assessment board of review.

Tax credit

An amount of money that may be deducted from a tax bill to arrive at the net amount of tax due.

Tax-deductible expense

An amount of money that may be deducted from gross income in arriving at net taxable income before depreciation, if any.

Tax deed

A deed conveying title to real property to a new owner that a municipality obtained as a result of the original owner's failure to pay real estate taxes.

Tax depreciation

A provision of tax law permitting a property to take an ordinary business deduction for the amount of annual depreciation.

Tax exemption

Program that allows taxpayers relief from paying certain school or property taxes in whole or in part.

Tax-free exchange

Trading of like-kind properties held as an investment or for use in business.

Tax incentives

Inducements by states and cities to encourage companies that are a source of employment, income and tax revenues to locate in their areas.

Tax levy

The amount that a municipality must raise by taxing real property to meet budgetary requirements.

Tax lien

A statutory lien, existing in favor of the state or municipality, for nonpayment of property taxes which attaches only to the property upon which the taxes are unpaid.

Tax participation clause

A lease provision requiring the tenant to pay a pro-rata share of any increase in real estate taxes or assessments in addition to the basic rental.

Tax rate

The amount of dollars needed by the municipality to meet budgetary requirements divided by the taxable assessed and nonexempt value of all the real property within that jurisdiction.

Tax Reform Act (TRA) 1986

Reversed many of the tax reforms of 1981. Properties that were profitable in the tax environment of 1981-1986 were not economically viable after the TRA. Many markets had become oversupplied due to tax advantaged construction of properties which the underlying economic and demographic demand could not support. As a result, TRA triggered a sharp drop in new construction, particularly of apartments. Also see Economic Recovery Tax Act, 1981.

Tax roll

A list or record containing the descriptions of all land parcels located within the county, the names of the owners or those receiving the tax bill, assessed values and tax amounts.

Tax service fee

A fee collected to set up third-party monitoring of the borrower's property tax payments. This is done to ensure that the payments are made on time and to prevent tax liens from occurring to the detriment of the lender.

Tax shelter

A method of tax avoidance such as protecting income from taxation by allowable depreciation.

Teaser rate

A low, short-term interest rate offered on a mortgage to entice the borrower.

Technical oversupply

A market condition in which available rental space exceeds tenant demand.

Tenancy at sufferance

A rental situation in which a tenant who originally obtained possession of the premises legally continues to occupy the property after the expiration of the leasehold interest and without the consent of the owner.

Tenancy at will

An estate that gives the tenant the right of possession for an indefinite period until the estate is terminated by either party or the death of either party.

Tenancy by the entirety

Ownership by a husband and wife in which they together hold title to the whole property with right of survivorship.

Tenancy in common

A form of ownership in which two or more owners hold an undivided (though not necessarily equal) interest in the property, with no right of survivorship.

Tenancy for years

See estate for years.

Tenant (Lessee)

One who rents real estate from another and holds an estate by virtue of a lease.

Tenant alteration costs

Construction, remodeling and alteration expenses for work needed to make the premises usable by the tenant. These costs may be assumed by the tenant or the owner or both and are a major point of negotiation.

Tenant at will

One who holds possession of premises by permission of the owner or landlord, the characteristics of which are an uncertain duration (i.e. without a fixed term) and the right of either party to terminate on proper notice.

Tenant Improvements (TI)

The expense to physically improve the property or space, such as new improvements or remodeling. Often, tenants are provided with a market rate TI allowance (expressed in dollars per square foot) that the owner will contribute toward improvements; amounts above the TI allowance might be paid for by the tenant. In a soft real estate market, more generous TI allowances might be necessary to attract tenants, thus adding greater uncertainty to the expected cash flow from a building.

Tenant improvements

Improvements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvements to be made in the leased premises by the landlord. See also "Leasehold Improvements", "Workletter".

Tenant Improvement ("TI") Allowance or Work Letter

Defines the fixed amount of money contributed by the landlord toward tenant improvements. The tenant pays any of the costs that exceed this amount. Also commonly referred to as "Tenant Finish Allowance.


see Tenant Improvements.

Tenant mix

The combination of retail tenants occupying a shopping center; must be considered carefully to achieve maximum profit for each merchant and the center as a whole.

Tenant relocator

A person who arranges, for a fee, the relocation of commercial or residential tenants from buildings that are to be demolished, rehabilitated, or remodeled.

Tenant union

A local organization of residential tenants working for their common interests and rights.

Tenant wardens

Employees of tenant companies who are schooled in emergency procedures by the building staff to direct their fellow employees during routine drills and actual emergencies.


Right of ownership of real estate held by a person.

Term mortgage

One that requires the mortgagor to pay interest only during the mortgage term, with the principal due at the end of the term.

Testamentary trust

A trust set up within a person's will and effective upon the death of the person who created the trust.


To have died leaving a valid will.


A male who has died and left a valid will.


A female who has died and left a valid will.


Volunteers from state or private agencies who enforce fair housing by claiming to be home seekers, thereby finding out if brokers deal fairly with all clients or customers.

Third Party Pool Insurance

Protects investors from any losses on the mortgage loans. The bond insurer, paid an annual fee by the issuer, will absorb the losses. The CMBS is usually never rated higher than the credit rating of the third-party issuer. A form of credit enhancement.

Tie-in arrangement

Agreement between a party selling a product or service with a purchaser that as a condition of the sale, the purchaser will buy another product from the seller or the purchaser will not buy a product or use a service of another.

"Time is of the essence"

Means that performance by one party within the period specified in the contract is essential to require performance by the other party.


Ownership that involves the acquisition of a specific period of time or percentage of interest in a vacation home or resort.

Time-share condominium

Ownership in vacation area residential property for an assigned period, usually two weeks. Also called interval ownership.

Time value of money

The determination of which particular investment would bring the greatest return on dollars invested for a given period of time.


The legal document conferring ownership of a piece of real estate.

Title closing

The consummation of a real estate contract; a meeting in which the buyer, seller, and closing agent meet to execute documents and disburse funds.

Title company

A firm that ensures that the property title is clear and provides title insurance.

Title Exam

An examination of the public record to determine that the seller is the legal owner and there are no encumbrances (such as claims or liens) affecting the property.

Title insurance

A policy issued by a title company after searching the title and which insures against loss resulting from defects of title to a specifically described parcel of real property, or from the enforcement of liens existing against it at the time the title policy is issued.

Title insurance binder

A title insurance company's written commitment to insure title to the property subject to the conditions and exclusions shown on the binder.

Title risk

Possible impediments to the transfer of a title from one owner to another.

Title search

The process of reviewing all recorded transactions in the public record to determine whether any title defects exist that could interfere with the clear transfer of ownership of the property.

Title theory

A disinterested third party holds legal title to a property in security for the loan through a deed of trust; not used in New York.

Title transfer tax

A tax imposed on the conveyance of title to real property by deed.


The physical features and contours of land.

Torrens system

A system of title recordation.


Wrongful act that is committed either intentionally or unintentionally.

Total expense ratio

The percentage of monthly debt obligations relative to gross monthly income.

Total inventory

The total amount of square footage of a type of property (i.e. office, industrial, retail, etc.) within a geographical area, whether vacant or occupied. This normally includes owner-occupied space.

Total lender fees

Fees required by the lender to obtain the loan, apart from other fees associated with transferring a property between buyer and seller.

Total loan amount

The base loan amount plus any financed closing costs.

Total monthly housing costs

The sum of principal, interest, property taxes and, if applicable, private mortgage insurance (PMI) and either hazard insurance or homeowners' association dues.

Total of all payments

The total cost of the loan including repayment of the principal amount and the sum of monthly interest payments.


An attached home that is not a condominium.

Top-Down Approach to Investing

An investment strategy in which an investor first looks at large-scale trends in the general economy, then selects those industries and companies that are likely to benefit from those trends. For example, an investor who thinks that the general economic environment is favorable for real estate might further examine which specific real estate financial vehicles are most appropriate, then review and assess specific transactions that meet investor requirements. Also see Bottom-Up Approach to Investing.


see Tax Reform Act, 1986.


An online computer system being developed by HUD to help administer subsidized housing.


An area of land.

Trade fixtures

Personal property that is attached to a structure (i.e. the walls of the leased premises) that are used in the business. Since this property is part of the business and not deemed to be part of the real estate, it is typically removable upon lease termination.

Trade name

A sole proprietorship that does business under an assumed name.

Trading down

Buying a home that is less expensive than the one's current house.

Trading up

Buying a home that is more expensive than one's current house.


A term applied to describe the discretely-rated classes of CMBS securities, e.g., the triple-A tranche. Each class or tranche is typically paid a coupon stipulated at the time of issue and principal based on a predetermined payment sequence. Typically, lower-rated tranches have higher coupons and longer lives, since they receive interest payments (the coupon) but no principal payments until the higher-rated tranches have been retired or paid off.


The ability to transfer property ownership from seller to buyer.

Transfer of development rights

A developer can buy the development rights to another property, such as a historic property, that cannot use them.

Trans Union Corporation

One of the major credit reporting bureaus.

Transfer tax

An assessment by state or local authorities at the time a piece of property changes hands.

Treasury Index

An index used to determine interest rate changes for adjustable rate mortgages.


Unlawful entry on the land of another.

Triple-Net Lease

see NNN Lease.

Triple net (NNN) rent

A lease in which the tenant pays, in addition to rent, certain costs associated with a leased property, which may include property taxes, insurance premiums, repairs, utilities, and maintenances. There are also "Net Leases" and "NN" (double net) leases, depending upon the degree to which the tenant is responsible for operating costs. See also "Gross Lease".


A three-unit apartment building.


A legal relationship under which title to property is transferred to a person known as trustee.

Trust cooperative

A cooperative in which legal ownership of a building is held by a trust company.


One who holds title to property for the benefit of another called a beneficiary. The trustee for a CMBS holds the mortgage collateral documents, issues the certificates of beneficial ownership (the securities), passes all funds from the master servicer to the bondholders, and distributes statements on distributions and the status of the collateral. Acts as a supervisor to the master servicer and special servicer. Ensures that the servicers act in accordance with the pooling and servicing agreement. If there is a violation of the agreement, the trustee has the right to assume the authority of or appoint a new servicer. The trustee represents the trust that holds the legal title to the collateral for the benefit of all class holders of the security. Trustees must carry out their duties according to the indentures established within the trust indenture. Some trustees actually collect the proceeds from the master servicer and distribute them to the security holders while other trustees subcontract the distribution to "paying agents." Such a subcontract does not release the trustee from the legal obligation to protect the interests of the security holders. There are also bankruptcy trustees and trustee for deed of trust.


One who conveys title to a trustee.

Trusts and wills

Laws which address the succession to the ownership of an estate by inheritance or any act of law.

Truth-in-Lending Simplification and Reform Act (TILSRA)

See Regulation Z.

Turn key project

The construction of a project in which a third party, usually a developer or general contractor, is responsible for the total completion of a building (including construction and interior design) or, the construction of tenant improvements to the customized requirements and specifications of a future owner or tenant.

Two-step mortgage

An adjustable mortgage with two interest rates: one for the first five or seven years of the loan, and the other for the remainder of the loan term.


Up-Front Due Diligence

The due diligence completed on individual loans and properties that are expected to be packaged for securitization.

U.S. Department of Housing and Urban Development

Also known as HUD. This federal agency oversees the Federal Housing Administration and a variety of housing and community development programs.

Under Construction

When construction has started but the Certificate of Occupancy has not yet been issued.

Under Contract

A property for which the seller has accepted the buyer's offer to purchase is referred to as being "under contract". Generally, the prospective buyer is given a certain period of time in which to perform its due diligence and finalize financing arrangements. During the period of time the property is under contract, the seller is precluded from entertaining offers from other buyers.

Underground storage tanks (USTs)

One or more combination of tanks, including the piping, used to contain an accumulation of regulated substances, and which is 10 percent or more underground. If a tenant's tanks leak petroleum products or hazardous or toxic materials, the landlord may be all or in part responsible for the cleanup.

Underwriters' knot

A code-approved knot tied at the end of an electrical cord to prevent the wires from being pulled away from their connection to electrical terminals.


Use of land that is not its highest and best use and therefore does not generate the maximum income.


The act of reviewing loan documentation and evaluating a borrower's ability and willingness to repay the loan and sufficiency of the collateral value of the property.

Underwriting fee

A fee charged by mortgage lenders to verify information on the loan application and make a final decision about whether or not to approve the loan.

Undisclosed principal

A principal whose identity may not be disclosed by an agent.

Undivided interest

Ownership of fractional parts not physically divided.

Undue influence

Any improper or wrongful influence by one party over another whereby the will of a person is overpowered so that he or she is induced to act or prevented from acting according to free will.


Describes title to property that is free of liens and any other encumbrances. Free and clear. See also "Encumbrances.

Unenforceable contract

One that appears to meet the requirements for validity but would not be enforceable in court.

Uniform Commercial Code (UCC)

A standardized and comprehensive set of commercial laws regulating security interests in personal property.

Uniform Irrevocable Consent and Designation Form

A document that allows a summons to be served upon out-of-state residents in New York.

Uniform Residential Landlord and Tenant Act

A model law drafted in 1972 by the National Conference of Commissioners on Uniform State Laws. It serves as a model statute for standardization and regulation of the residential landlord-tenant relationship.

Unilateral contract

An agreement in which there is a promise in return for a specific action, which together supply the consideration.

Unimproved Land

Most commonly refers to land without improvements or buildings but can also mean land in its natural state. See also, "Raw Land"


Conventional loan. One in which the loan payment is not insured to protect the lender.

Unintentional misrepresentation

An innocent false statement of a material fact.

Unities of title

Time, title, interest, and possession.

Unit-in-place method

Technique used in appraising real estate under the cost approach, in which the cost of replacement or reproduction is grouped by stages of construction.

Universal agent

Agent who has complete authority over any activity of principal; for example, power of attorney.

Unrecorded deed

A deed that transfers ownership from one party to another without being officially recorded.

Unsecured creditor

One who has not filed a financing statement or who does not possess a written security agreement as security for extending credit to a debtor.

Urban renewal

Renovation, rehabilitation and redevelopment of substandard urban residential properties.

Urea formaldehyde foam insulation (UFFI)

A type of foam containing formaldehyde, a gaseous compound that can cause illness, which was widely used for home insulating.

Usable space

Floor area of an office building that can be used for tenant office space.

Usable Square Footage

Usable Square Footage is the area contained within the demising walls of the tenant space. Total Usable Square Footage equals the Net Square Footage x the Circulation Factor. Also see: Circulation Factor and Net Square Footage.

Useful life

The period of time that a property is expected to be economically useful.

Use variance

Permission to use the land for a purpose that under the current zoning restrictions is prohibited.


Charging a rate of interest higher than the rate allowed by law. (25-26%)


Capable of serving a useful purpose.


VA (Veterans Administration)

The Veterans Administration assists veterans with purchasing a home without a down payment.

Vacancy Factor

The amount of gross revenue that pro forma income statements anticipate will be lost because of vacancies, often expressed as a percentage of the total rentable square footage available in a building or project.

Vacancy rate

A projected rate of the percentage of rental units that will be vacant in a given year.

Vacant land

Unimproved land, which could include land brought back to its natural state or land that does not possess improvements necessary to serve some kind of purpose.

Vacant Space

Refers to existing tenant space currently being marketed for lease. This excludes space available for sublease.

VA-guaranteed loan

A mortgage loan in which the loan payment is guaranteed to the lender by the Department of Veteran Affairs.

Valid contract

An agreement that is legally binding and enforceable.

VA loan

A loan through the Veterans Administration program, which allows most veterans to purchase a house without a down payment.

Valuable consideration

Anything of value agreed upon by parties to a contract.


Establishes an opinion of value utilizing an objective approach based on facts related to the property, such as age, square footage, location, and cost to replace. (Appraisal - CMA )


Unless otherwise specified, the value of a mortgaged property is its fair market value determined in an appraisal obtained by the originator when the loan is first made. There are, however, other concepts of "value," including derived investment value (DIV) and investment value.

Value in exchange

The amount of money a property may command for its exchange; market value.

Value in use

The present worth of the future benefits of ownership; a subjective value that is not market value.

Variable costs ratio

A method of expressing variable costs for a property as a percentage of total rental income: Variable costs ratio = actual annual variable costs / (gross collectible income x 100%)

Variable expense

An expense item in a property's operating budget that increases or decreases with the occupancy level of the building.

Variable rate mortgage (VRM)

A mortgage with an interest rate that changes with fluctuations in such indexes as the prime rate, libor rate, or treasury bill.

Variable scale percentage lease

A type of percentage lease in which the percentage rental rate increases or decreases according to the volume of business done by the tenant.


Refers to permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship. Included would be such things as the particular physical surroundings, shape or topographical condition of the property and when compliance would result in a practical difficulty and would deprive the owner of the reasonable use of the property.





Vendor's affidavit

Document signed under oath by the vendor stating that the vendor has not encumbered title to real estate without full disclosure to vendee.

Verification of deposit (VOD)

As part of the loan process a lender may ask a borrower's bank to sign a statement verifying the borrower's account balances and history.

Verification of employment (VOE)

As part of the loan process a lender may ask the borrower's employer for confirmation of the borrower's position and salary.

Vesting options

Choices buyers have in how to acquire property.

Vicarious liability

A person is responsible for the actions of another.

Voidable contract

An agreement that may be voided by the parties without legal consequences.

Void contract

An agreement that has no legal force or effect.


The electrical pressure that pushes through the wires.

Volume buying

See bulk purchasing.

Voluntary alienation

The transfer of title freely by the owner.

Voluntary lien

A type of lien in which an individual consents to placing a security against himself or his property.

Voluntary Prepayment

Prepayments made by the borrower to reduce or payoff the outstanding principal. Most occurrences are due to borrower refinancing at lower interest rates.


Warehouse fee

A closing cost fee representing the lender's cost of holding a borrower's loan temporarily before it is sold on the secondary mortgage market.

Warranty of Possession

This is the old "quiet enjoyment" paragraph, which of course had nothing to do with noise in and around the leased premises. It provides a warranty by Landlord that it has the legal ability to convey the possession of the premises to Tenant; the Landlord does not warrant that he owns the land. This is the essence of the landlord's agreement and the tenant's obligation to pay rent. This means that if the landlord breaches this warranty, it constitutes an actual or constructive eviction.


A measurement of amperage calculated for different electrical usage; also calculated in kilowatts.

Weighted Average Rental Rates

The mean proportion or medial sum made out of the unequal rental rates in two or more buildings within a market area.


Federal- and state-protected transition areas between uplands and aquatic habitats that provide flood and storm water control, surface and ground-water protection, erosion control, and pollution treatment.

Words of conveyance

Wording in a deed demonstrating the definite intention to convey a specific title to real property to a named grantee.

Worker's compensation insurance

Laws that require an employer to obtain insurance coverage to protect his or her employees who are injured in the course of their employment.

Work order bids

Work estimates filed according to the property involved providing important comparison data when considering future projects.

Working Drawings

The set of plans for a building or project that comprise the contract documents that indicate the precise manner in which a project is to be built. This set of plans includes a set of specifications for the building or project.


A list of the building standard items that the landlord will contribute as part of the tenant improvements. Examples of the building standard items typically identified include: style and type of doors, lineal feet of partitions, type and quantity of lights, quality of floor coverings, number of telephone and electrical outlets, etc. The Workletter often carries a dollar value but is contrasted with a fixed dollar tenant improvement allowance that can be used at the tenant's discretion. See also Leasehold Improvements and "Tenant Improvements.

Wraparound mortgage

A loan given to a buyer for the remaining balance on a seller's first mortgage and an additional amount requested by the seller. Payments on both amounts are made to the lender who holds the wraparound loan.

Writ of attachment

Court order preventing any transfer of attached property during litigation.


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The return on an investment.

Yield Maintenance

A prepayment premium that allows investors to attain the same yield as if the borrower had made all scheduled mortgage payments until maturity. Yield maintenance premiums are designed to make investors indifferent to prepayments and to make refinancing unattractive and uneconomical to borrowers. Also see Defeasance.

Yield Spread

The difference in yield between a security and a benchmark, typically U.S. Treasuries of the same maturity.

Yield to Average Life

Calculation used in lieu of yield to maturity or yield to call, predicated on the expected term of the bond class rather than its final maturity.

Yield to Maturity

Calculation of the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date. It takes into account purchase price, redemption value, time to maturity, coupon yield and the time between interest payments.



The division of a city or town into zones and the application of regulations having to do with the structural, architectural design and intended use of buildings within such designated zone (i.e. a tenant needing manufacturing space would look for a building located within an area zoned for manufacturing).

Zoning board of appeals

A local appointed board that has the power to review administrative rulings made by the planning board or other legislative body.

Zoning map

A map that divides the community into various designated districts.

Zoning ordinance

A statement setting forth the type of use permitted under each zoning classification and specific requirements for compliance.