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  Resources - Education - Glossary of Terms

Following is a list of words and terms that are commonly used throughout this website and in the field of property management. For your convenience and education, we have provided definitions for each of these words and terms.

You can navigate to a word quickly by using the drop-down menu:

                                

Agent: Someone authorized by another (principal) to act for or in place of the principal; one entrusted with another's business.

Amenity: A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction, although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views, etc. Man-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

Apartment: A room or a group of related rooms, among similar sets in one building, designed for use as a dwelling.

Articles of Incorporation: Document filed with the state which sets forth general information about a corporation. The filing of this document creates the corporation. Specific rules of the corporation are contained in the bylaws.

Assessment: Fee or dues payable by members of an association, usually monthly. Assessments are determined annually in advance by the board of directors as part of the budgeting process and usually used to cover expenses for improvements or maintenance.

Asset: Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Association: A non-profit corporation created for the purpose of managing a common interest development.

Balance Sheet: A financial statement that shows an individual or corporation's assets, liabilities, and net worth as of a specific date.

Bankrupt: A person, firm, or corporation that is financially unable to pay debts when due. The debtor seeks relief through a court proceeding to work out a payment schedule or erase debts. In some cases, the debtor must surrender control of all assets to a court-appointed trustee.

Bankruptcy: A proceeding in a federal court in which a debtor who is financially unable to pay debts when due seeks relief to work out a payment schedule or erase debts.

Board Meeting: Any congregation of a majority of the board members at the same time and place to hear, discuss or deliberate upon any item of business scheduled to be heard by the board.

Board of Directors: The governing body of a corporation such as an association. The board is elected by the members of the association who elect the officers. The directors and officers have a duty to comply and enforce the governing documents of the association and all applicable laws.

Bond: An interest-bearing certificate of debt with a maturity date. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Breach: A violation of terms of any legal obligation.

Budget: A detailed plan of income and expenses expected over a certain period of time. A budget can provide guidelines for managing future investments and expenses.

Building Code: Local regulations that specify minimum structural requirements for design of, construction of, and materials used in a building or structure. Building codes are based on safety and health standards.

Bylaws: The rules adopted for governing a corporation such as an association. The bylaws address such things as elections of both directors and officers, the holding of meetings, rights to notice and the powers of directors and officers.

CC&Rs (Covenants, Conditions and Restrictions) or Declaration: A recorded document that sets forth the restrictions on the use or enjoyment of any portion of the common interest development.

CD (Certificate of Deposit): A short- or medium-term, interest-bearing, FDIC-insured debt instrument offered by banks and savings and loans. CDs offer higher rates of return than most comparable investments, in exchange for tying up invested money for the duration of the certificate's maturity. Money removed before maturity is subject to a penalty. CDs are low risk, low return investments, and are also known as "time deposits", because the account holder has agreed to keep the money in the account for a specified amount of time, anywhere from three months to six years.

Capital: (1) Money used to create income, either as an investment in a business or an income property. (2) The money or property comprising the wealth owned or used by a person or business enterprise. (3) The accumulated wealth of a person or business. (4) The net worth of a business represented by the amount by which its assets exceed liabilities.

Capital Expenditure: The cost of an improvement made to extend the useful life of a property or to add to its value. The cost of repairing a property is not a capital expenditure. Capital expenditures are appreciated over their useful life; repairs are subtracted from income for the current year.

Capital Improvement: Any structure or component erected as a permanent improvement to real property that adds to its value and useful life.

Certificate Of Title: A statement provided by an abstract company, title company, or attorney stating who holds title to real estate based on the public record.

Closing: The conclusion or consummation of a transaction. In real estate, closing includes the delivery of a deed, the signing of notes and security instruments, and the disbursement of funds necessary to the sale or loan transaction. Also referred to as settlement.

Closing Costs: Various expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include items such as broker's commissions, discount points, origination fees, attorney's fees, taxes, title insurance premiums, escrow agent fees, and charges for obtaining appraisals, inspections, questionnaires, status letters and surveys.

Common Areas: Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD), condominium project or homeowners' association that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Common Area Assessments: Payments required of individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

Condemnation: (1) Declaration that a building is unfit for use or is dangerous and must be destroyed; (2) taking of private property for a public use (such as a park, street or school) through an exercise of the right of eminent domain.

Condominium: A real estate project in which each unit owner has title to a unit in a multi-unit building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas. Consists of an undivided interest in real property, which is the common area, coupled with a separate interest in space called a unit, the boundaries of which, are described in the condominium plan.

Condominium Conversion: Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership. 

Condominium Hotel (aka Condotel): A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.

Condominium Plan: A description of a condominium project indicating all dimensions in sufficient detail to identify the common areas and each separate interest. The condominium plan is a recorded document.

Contract: An oral or written agreement to do or not do something.

Cooperative (aka Co-op): A type of multiple ownership in which the residents of a multi-unit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Covenant: A promise in a mortgage or deed that requires or prevents certain uses of the property that, if violated, may result in loss or foreclosure of the property.

Debt: An amount owed to another.

Declarant: The person or persons who signed or established the CC&Rs. This is nearly always the builder.

Declaration or CC&Rs: (Covenants, Conditions and Restrictions) A recorded document that sets forth the restrictions on the use or enjoyment of any portion of the common interest development.

Deed: The legal document conveying title to a property.

Default: Failure to make loan payments on a timely basis or to comply with other requirements of a mortgage.

Delinquency: Failure to make mortgage payments when due.

Directors & Officers Liability Coverage: Insurance coverage that protects board members in lawsuits due to actions taken on behalf of the association. It also covers errors and omissions by board members.

Easement: A right of way given to persons other than the owner to access to or over a property.

Eminent Domain: The right of a government to take private property for public use upon payment of fair compensation to the owner. Eminent domain is the basis for condemnation proceedings.

Employee: A worker that performs services subject to the will and control of the employer, both as to what will be done and how it will be done. The employer establishes hours of work, may provide training and the worker may not assign anyone to do the required work.

Encroachment: An improvement that physically intrudes or trespasses on another's property.

Encumbrance: Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, deeds, or restrictions.

Estate: The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.

Ethics / Professionalism: The system of moral principles and rules that becomes the standards for professional conduct.

Eviction: A legal proceeding by a landlord to recover possession of real property from the tenant.

Fair Housing Act: The federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status, and national origin.

Fiduciary: The legal, moral and ethical obligations a person has to fulfill responsibilities to another. In an association, directors of the association have a fiduciary duty to act in the best interests of the association.

Foreclosure: The legal process by which a borrower's interest in mortgaged property is taken because of a default on the loan. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Forfeiture: The loss of money, property, rights, or privileges due to a breach of legal obligation.

Governing Documents: The CC&Rs, Bylaws, Rules and Regulations and Articles of Incorporation (or Articles of Association).

Homeowner Association: A nonprofit association that manages the common areas of a residential subdivision. 

House: A building in which people live; residence for human beings.

HUD (Housing and Urban Development): HUD's (US Department of Housing and Urban Development) mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination. To fulfill this mission, HUD will embrace high standards of ethics, management, and accountability and forge new partnerships--particularly with faith-based and community organizations--that leverage resources and improve HUD's ability to be effective on the community level.

Independent Contractor: A worker hired to do a specific job over which the employer has no right to control the manner in which the work is done. The worker is generally licensed and offers services to the public. Independent contractors establish their own hours and receive no training. Independent contractors are free to assign work to others, if they determine to do so.

Insurance: A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.

Investment Property: A property that is not occupied by the owner and is generally rented to a tenant to produce income.

Judgment: A decree by a court of law that one person, a debtor, is indebted to another, a creditor, in a specified amount. The court may place a lien against the debtor's real property as collateral for payment of the judgment to the creditor.

Judgment Lien: A lien on the property of a debtor resulting from a judgment. 

Late Charge: The penalty paid when a payment is made a stated number of days (usually 10-15) after the due date.

Lease: A written or oral contract between a landlord (the lessor) and a tenant (the lessee) that transfers the right to exclusive possession and the use of the landlord's real property to the lessee for a specified period of time and for a stated consideration (rent). By state law, leases for longer than a certain period of time (generally one year) must be in writing to be enforceable.

Lease Term: The term or duration of the lease that the landlord (lessor) and tenant (lessee) agree that tenant will occupy, or have possession of the real property.

Lessee: The tenant that has the possession of the real property for the lease term for a specified consideration (rent).

Lessor: The landlord that has given possession of their real property for the lease term for a specified consideration (rent).

Lien: A legal claim against a property that must be paid off when the property is sold. Is a recorded claim against a property, including Assessment Liens, Deeds of Trust and unpaid taxes.

Liquid Asset: A cash asset or an asset that is easily converted into cash.

Maintenance: The care or upkeep of a property or unit. This usually does not increase the value but keeps the property in good working order (i.e. grass cutting, minor plumbing repair, fixing leaking gutter, etc.).

Management Agreement: The contract between an association and property management company setting forth the rights and obligations of the parties. These agreements may be “full service” or “financial service” contracts.

Master Association: A homeowners' association in a large residential development that is made up of representatives from separate associations covering specific areas within the joint residential development. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the development.

Meeting of Board: Any congregation of a majority of the board members at the same time and place to hear, discuss or deliberate upon any item of business scheduled to be heard by the board.

Money Market Account: A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.

Money Market Fund: A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.

Mortgage: A legal document that pledges a property to the lender as security for payment of a debt.

Multi-Dwelling Units: Properties that provide separate housing units for more than one family, although they secure only a single mortgage. Typically a 2-4 unit property.

Non-Liquid Asset: An asset that cannot easily be converted into cash.

Notary: An official authorized by law to attest and certify certain documents by his or her hand and official seal.

Operating Rule: A regulation adopted by a board of directors that applies generally to the management and operation of the Association or the conduct of the business of the Association.

Personal Property: Any property that is not real property or is not permanently fixed to land or structure.

Planned Development: A common interest development other than a condominium or cooperative. The common area is often owned by the association, however, it may also be owned in common by the owners of the separate interests. The separate interest is a lot, parcel, area or space, not a unit.

Primary Residence: The place someone lives most of the time.

Proforma Budget: An annual budget for the association setting forth the estimated revenue and expenses along with a summary of the association’s reserves based upon the most recent reserve study.

Property: A piece of land or real estate, including any permanent fixtures attached to the land or real estate.

Property Management Agreement: The contract between an association and property management company setting forth the rights and obligations of the parties. These agreements may be “full service” or “financial service” contracts.

Property Manager: Someone who manages real estate for another person or corporation for compensation. Duties include collecting Association fees, maintaining the property via independent contractors, and providing the Board of Directors with appropriate accounting for Association.

Proxy: The power granted by one person to a representative to vote for the person. A proxy form is often completed by an owner who is unable to attend an Association meeting so that a quorum can be achieved at the meeting.

PUD (Planned Unit Development): A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners. It is a newer concept in housing designed to produce a high density of dwellings and maximum use of open spaces. The concept is an "overlay" zoning, which enables a developer to obtain a higher density (and sometimes a mixed use for commercial and industrial) than is permitted by the underlying zoning.

Real Estate Agent: A person who is normally licensed by the state and who, for a commission or a fee, assists in negotiating a real estate transaction.

Real Property: Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Rent: A fixed, periodic payment made by a tenant of a property to the owner for possession and use, usually by prior written agreement of the parties.

Repairs: Improvements made on properties that enhance the value or fix something outdated or broken.

Reserve Study: A written report which identifies all of the major components which the association is obligated to repair, replace, restore or maintain having a remaining useful life of more than two years and less than 30 years as of the date of the study. The report estimates the remaining useful life of each component and the amount of funds the association must set aside each month (Reserves) in order to have the cash available to make all necessary repairs and replacements.

Reserves: The funds set aside for repairs and replacements to be made by an association as determined by a reserve study.

Second Home: A property occupied part-time by a person in addition to his or her primary residence.

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.

Single Family Residence: A residential structure designed to include one dwelling.

Special Assessment: An assessment made usually for a special project or in response to a large unbudgeted expense.

Structural: Refers to the load-bearing components of a building as opposed to the screening or ornamental elements.

Subdivision: A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Survey: A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

Townhouse: Is not a legal form of ownership, but an architectural style. Townhouses may be condominiums or planned developments. Townhouses are multi-level homes, usually built in rows with individual garages. The homes are not stacked one on top of another so that no owner lives above or below another owner.

Title: A legal document evidencing a person's right to or ownership of a property.

Title Company: A company that specializes in examining and insuring titles to real estate.

Undivided Interest: Refers to the type of ownership interest that the owner of a separate interest has in the common area. In a condominium or planned development, this undivided interest consists of a tenancy in common which means that each owner having an undivided interest may use all or any portion of the common area, subject to any restrictions set forth in the Declaration or CC&Rs.

 

 

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