pad site

An individual freestanding site for a retail, often adjacent to a larger "shopping center."

par

The face value of a bond or security. (See security)

parcel

A piece of property under one ownership; a lot in a "subdivision."

parking

The amount shown is the monthly charge per car and is usually subject to change from time to time at the building owner's discretion. The ratio (i.e., 1:1,500) indicates that there is parking for one car per each 1,500 square feet of office space leased.

parol evidence rule

A rule of evidence providing that a written agreement is the final expression of the agreement of the parties, not to be modified by oral or written negotiations.

partial release clause

A mortgage provision under which the mortgagee agrees to release certain parcels from the lien of the blanket mortgage upon payment by the mortgagor of a certain sum of money. The clause is frequently found in tract development construction loans.

partial sales

The sale of an interest in real estate, which is less than the whole property. This may include, for example, a sale of easement rights, a parcel of land or retail pad, or a single building of a multi-building investment. [NCREIF]

partial zoning

Zoning that does not consider its effect on other areas. (See zoning)

participating mortgage note

A loan secured by real property, with a stated interest rate that also provides for the participation by the lender in annual net cash flow, gain on sale, or proceeds from refinancing the property.

participation financing

Where a lender becomes a partner in a development.

participation mortgage

A mortgage loan wherein the lender has a partial equity interest in the property or receives a portion of the income from the property.

partition

Co-tenants who wish to terminate their co-ownership may file an action in court to partition the property. Partition is a legal way to dissolve the relationship when the parties do not voluntarily agree to its termination. If the court determines that the land cannot be divided physically into separate parcels without destroying its value, the court will order the real estate sold. The proceeds of the sale will then be divided among the co-owners according to their fractional interests. (See co-ownership)

partnership

An association of two or more persons or entities for the purpose of carrying out an investment or business for profit and for sharing of both profits and losses. [Wurtzebach/Miles] Similar to equities, a partnership can be leveraged or unleveraged.

partnership

An association of two or more individuals who carry on a continuing business for profit as co-owners. Under the law a partnership is regarded as a group of individuals rather than as a single entity. (See general partnership, limited partnership, joint venture)

party wall

A wall that is located on or at a boundary line between two adjoining parcels of land and is used or is intended to be used by the owners of both properties.

party wall easement

A party wall can be an exterior wall of a building that straddles the boundary line between two lots, or it can be a commonly shared partition wall between two connected properties. Each lot owner owns the half of the wall on his or her lot, and each has an appurtenant easement in the other half of the wall. A written party wall agreement must be used to create the easement rights. Expenses to build and maintain the wall are usually shared. A party driveway shared by and partly on the land of adjoining owners must also be created by written agreement, specifying responsibility for expenses. (See easement, appurtenant easement)

pass-through

Payment on securities sold in the secondary markets that are sent directly to investors. (See secondary market)

pass-through security

A security issued by the Government National Mortgage Association (Ginnie Mae) to mortgage investors. Cash flows from the underlying block individual mortgage loans are "passed through" to the holders of the securities in pro rata share, including loan prepayments. With a mortgage-backed security, the timely payment of principal and interest is guaranteed by Ginnie Mae. In 1982, the Federal National Mortgage Association (Fannie Mae) instituted its own mortgage-backed securities program designed to attract billions of dollars into the conventional mortgage market from pension funds and other investors. (See FHA, Fannie Mae, Freddie Mac, Ginnie Mae, mortgage-backed securities, VA loan)

passive income

Income generated when a person is not active in a business or occupation. Examples of situations where passive income is generated include limited partnerships, or rental income remaining after allowable deductions. (See limited partnerships)

passive investor

1. One who invests money but does not manage the business or property.
2. See "passive income," "portfolio income." Example: Dooley has neither time nor skills to manage the property in which he wants to invest. He forms a "partnership" with a real estate syndicator who will devote time and expertise the manage the property for profit. Dooley contributes money but not effort, so he is a "passive investor."

passive losses

Losses left over when deductions for annual operating expenses, loan interest, and depreciation exceed annual rents. For tax purposes, passive losses can only be used to offset passive income. (See annual operating expenses, depreciation, passive income)

patent

The instrument that conveys real property from the state or federal government to an individual.

patent defect

A defect that is obvious from a reasonable inspection of a property.

pay interest rate

The return or yield rate used to determine current mortgage payments, typically lower than the stated rate and used when cash flow of the property is not sufficient to make payments at the Stated Rate.

payback period

The amount of time required for cumulative estimated future income from an investment to equal the amount initially invested. It is used to compare alternative investment opportunities. Example: Purchase of an apartment building requires an equity investment of $20,000. Annual cash flow is expected to be $2,000. The "payback period" for the investment is 10 years.

payee

The person to whom a debt instrument, such as a check or promissory note, is made payable; obligee; the "receiver." (See maker, receiver)

payment

A periodic installment that is made to service a debt. For an interest-only loan, the payment consists of interest; for a constant payment loan, the payment consists of interest and principal.

payment cap

The limit on the amount the monthly payment can be increased on an adjustable-rate mortgage when the interest rate is adjusted.

payoff statement

See reduction certificate.

payor

The debtor on a promissory note or the party who makes payment to another. (See obligor)

pension funds

Pension funds usually have large amounts of money available for investment. Because of the comparatively high yields and low risks offered by mortgages, pension funds have begun to participate actively in financing real estate projects. Most real estate activity for pension funds is handled through mortgage bankers and mortgage brokers. (See noninstitutional lenders)

per stirpes

A legal method of distributing an "estate" to include the descendants of a deceased legatee, whose share is apportioned among linear descendants. Example: A person dies "intestate." State Law requires a "per stirpes" distribution of assets. The "decedent" had 4 children. Three are surviving; the fourth child died as an adult and left 5 children. The estate is divided into 4 equal parts. Each surviving child of the decedent gets one fourth, and the 5 orphaned grandchildren, as a group, share the remaining one fourth.

percentage increase to rent

Changes in the base rent during the term of the lease, including fixed percentages, C.P.I. increases, or pre-set “bumps” in the rental rate at specified points in the lease term.

percentage lease (retail)

A lease whose rental is based on a percentage of the monthly or annual gross sales made on the premises. An underlying concept of the percentage lease is that both the landlord and the tenant should share in the location advantages of the leased premises. There are many types of percentage leases. Examples are: the straight percentage of gross income, without a minimum, (this is uncommon); the fixed minimum rent plus a percentage of the gross; and the fixed minimum rent plus a percentage of the gross, with a ceiling to the percentage rental.

percentage rent

Rent payable under a "percentage lease." Typically, the percentage applies to sales in excess of a pre-established base amount of the dollar sales volume.

percolation test

A test of the soil to determine if it will absorb and drain water adequately to use a septic system for sewage disposal.

periodic rate

The interest rate which is charged per compounding period (for example, per month or per day).

periodic tenancy

A tenancy which automatically renew itself on the last day of the term for a further term of the same duration until terminated by either party.

personal income

A person's gross income from wages, salaries, commissions, interest and profits from businesses or investments.

personal property

Things that are tangible and movable; property that is not classified as real property, such as chattels. Title to personal property is transferred by way of a bill of sale, as contrasted with a deed for real property.

physical deterioration

A reduction in a property's value resulting from a decline in physical condition; can be caused by action of the elements or by ordinary wear and tear.

piggyback loan

1. A combination of the "construction loan" with the permanent "loan commitment." Example: The permanent lender would issue a commitment at a 15% rate, effective upon completion of construction. As assurance that the loan will be borrowed even if rates are lower later, the commitment is "piggybacked" to the construction loan, and must be drawn down upon "retiring" the construction loan.
2. One mortgage held by more than one lender, with one lender holding the rights of the others in "subordination." Example: A loan is made for 90% of the home price; 80% of the price is supplied by a "savings and loan association," 10% by an individual, who then has a "piggyback loan." The piggyback agreement allows the S&L to have priority in "foreclosure."

PITI

Acronym for Principal, Interest, Taxes & Insurance.

plaintiff

A person who brings an action; the party who complains or sues in a personal action and is so named on the record.

planned unit development (PUD)

A relatively modern concept in housing designed to produce a high density of dwellings and maximum use of open spaces. This efficient use of land allows greater flexibility for residential land and development. It also usually results in lower-priced homes and minimum maintenance cost. Often, PUDs are specifically provided for in zoning ordinances or are listed as a conditional permitted use, sometimes called planned development housing.

plat map

A map of a town, section or subdivision indicating the location and boundaries of individual properties.

plot plan

A diagram showing the proposed or existing use of a specific "parcel" of land.

plottage

The increase in value or utility resulting from the consolidation (assemblage) of two or more adjacent lots into one larger lot.

PMI

Acronym for Private Mortgage Insurance. (See private mortgage insurance).

point of beginning (POB)

In a metes-and bounds legal description, the starting point of the survey, situated in one corner of the parcel; all metes-and-bounds descriptions must follow the boundaries of the parcel back to the point of beginning.

points

A percentage of the principal conventional loan amount. A lender often charges borrower "service-charge" points for making a loan. Points may cover expenses in origination the loan, to increase a lender's yield or to "buy down" the rate. In conventional financing, points may be paid by the buyer or seller.

police power

The inherent right of the state to regulate for the purpose of promoting health, safety, welfare, and morality. Police power gives the state the right to impose certain restraints on human conduct which are reasonably necessary in order to safeguard the public interest. This right is the basis of zoning, the official map, building codes, and subdivision regulations.

pooling agreement

An agreement between investors who have a direct ownership in real property to share revenues and expenses generated by individual rental units.

portfolio loan

A loan originated and maintained by the lender and not sold in the secondary mortgage market. (See secondary mortgage market)

possession date

Date on which the purchaser is entitled to take possession of the property.

power center

A center dominated by several large anchors, including discount department stores, off-price stores, warehouse clubs or "category killers," i.e. stores that offer tremendous selection in a particular merchandise category at low prices. The center typically consists of several freestanding (unconnected) anchors and only a minimum amount of small specialty tenants.

power of sale

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

power-of-attorney

A written instrument authorizing a person, the attorney-in-fact, to act as the agent on behalf of another to the extent indicated in the instrument. (See attorney-in-fact)

power-of-sale clause

A clause in a mortgage authorizing the holder of the mortgage to sell the property in the event of the borrower's default. The proceeds from the public sale are used to pay off the mortgage debt first, and any surplus is paid to the mortgagor. A power-of-sale clause is also found in trust deeds, giving the trustee authority to sell the trust property under certain circumstances.

pre-tax income

The amount earned from a business or investment before deducting income taxes. Example: "Pre-tax income" of $50,000 was earned from a "mini-warehouse" operation, according to its accountant. Income taxes of $15,000 reduced the "after-tax income" to $35,000.

preferential returns, participations, conversion rights

Additional rights and benefits given to a mortgage lender.

prelease

To obtain "lease" commitments in a building or complex prior to its being available for occupancy. Example: As a requirement for obtaining a "permanent mortgage," a developer must "prelease" 50% of the space in the office building.

preliminary notice

Notifies a customer that work to be completed is subject the lien rights of the contractor. Preliminary notice must be given prior to recording of a mechanic's lien, and should be filed by a contractor at least 20 days prior to the start of work. If notice is given later, liens will cover only the work starting 20 days prior to filing. (See mechanic's lien)

preliminary public report

Under the Subdivided Land Law the preliminary public report can be issue before the public report, and allows a sub divider to take reservations from buyers but not sell parcels. (See public report, Subdivided Land Law)

preliminary title report

A title report that is made before a title insurance policy is issued or when escrow is opened. A preliminary report or policy of title insurance reports only on those documents having an effect on the title and should not be relied on as being an abstract. An abstract of title, on the other hand, reflects all instruments affecting title from the time of the original grant and also includes a memorandum of each instrument, and makes no attempt to determine which of the documents currently affects record title. The "preliminary" is not a binder or commitment that the title company will thereafter insure the title to the property, although this commitment may be obtained at an added cost. (See abstract of title)

premises

Land and "tenements;" an "estate;" the subject matter of a conveyance. Example: In selling the property Carter "deeds" the "premises" to Dawson. Dawson later "leases" the "premises" to Enright.

premium

A fee paid to an insurance company.

premium (in excess of par)

A price paid for a security in excess of its face value. (See par)

prepaid items

On a closing statement, items that have been paid in advance by the seller, such as insurance premiums and some real estate taxes, for which he or she must be reimbursed by the buyer.

prepayment clause

A clause in a "mortgage" that gives a "mortgagor" (borrower) the privilege of paying the mortgage indebtedness before it becomes due. Sometimes there is a "penalty" for prepayment, with "waiver" of the interest that is not yet due. Example: The "prepayment clause" in the mortgage allows the unpaid "principal" to be "retired" by the owner, with a 1% penalty.

prepayment penalty

The amount set by the creditor as a penalty to the debtor for paying off the debt before it matures; an early-withdrawal charge. The prepayment penalty is charged by the lender to recoup a portion of interest that the lender had planned to earn when the loan was made. It covers the lender for initial costs to set up the loan, to service it and to carry it in the early years of high risk. This punitive device also may represent the loss of income to the lender for the time the mortgage is paid off and the funds remain uncommitted. The reason most lenders are willing to allow prepayment after five years without penalty is that much of the total note's interest has been paid in by that time.

prepayment privilege

The right of a borrower to "retire" a loan before "maturity." Example: A loan on "commercial property" is closed (no "prepayment privilege") for the first 5 years. Afterwards, it can be prepaid without "penalty."

prequalify

Determine the maximum loan amount a prospective buyer qualifies for prior to showing them properties. Failing to prequalify may result in wasted efforts showing the prospect properties they cannot afford to purchase. (See back-end qualification, front-end qualification)

prescription

Acquiring a right in property, usually in the form of an intangible property right such as an easement or right-of-way, by means of adverse use of property that is continuous and uninterrupted for the prescriptive period established by state statute. Use of land is adverse when it is made under a claim or right. Therefore, there is no adverse use if the owner has granted permission, if the user has paid for the use or if the user has admitted that the owner has a superior right in the property. Prescription is often used interchangeably with the term adverse possession, which more strictly refers to the acquiring of title to lands. As in adverse possession, the essential elements are that the prescriptive right be adverse, under claim of right, continuous and uninterrupted, open, notorious and exclusive, with the knowledge and acquiescence of the servient owner, and continuing for the full prescriptive period. By "continuous" is meant that the property is used on a regular basis.

present value

The current equivalent of a future dollar amount.

present value of annuity

The value now of a level stream of income to be received each period for a finite number of periods. See "ordinary annuity." Example: The "present value of an annuity" of $1.00 per year for 10 years, discounted at 12%, is $5.65.

present value of one

The value today of an amount to be received in the future, based on a "compound interest" rate. Example: At a 12% interest rate, the receipt of one dollar one year from now has a "present value" of $0.89286. One dollar to be received in 2 years has a "present value" of $0.79719.

present worth

The discounted present-day value of money to be collected in the future.

preventive maintenance

Includes regularly scheduled activities such as painting and seasonal servicing of appliances and systems. Preventive maintenance preserves the long-range value and physical integrity of the building. This is both the most critical and the most neglected maintenance responsibility. Failure to perform preventive maintenance invariably leads to greater expense in other areas of maintenance.

price fixing

The practice of conspiring to establish fixed fees or prices for services rendered or goods sold. In recent years, the setting of attorney fees by local bar associations and commission percentages and management fees by local realty associations has been successfully attacked as price fixing and thus a violation of the Sherman Antitrust Act.

price-level-adjusted mortgage

A loan whose payment is adjusted according to the rate of inflation. The payments are generally quite low, typically 3% to 5% annually of the debt. This type of mortgage is not commonly used in the U.S. Example: A "price-level-adjusted mortgage" is made for $100,000. Monthly payments in the first year are $400. After the first year, the principal balance is reduced to $98,000. The inflation rate for the year was 10%. The principal balance is adjusted to $107,800 and the payments for the second year are increased to $440 per month.

prima facie

At first sight; on the first appearance; on the face of it; so far as can be judged from the first disclosure; presumably; a fact presumed to be true unless disproved by some evidence to the contrary.

primary lease

A "lease" between the owner and a tenant who's "interest," all or in part, has been sublet.

primary lenders

Originators of real estate loans including commercial banks, savings and loan associations and mutual savings banks.

primary mortgage market

The mortgage market in which loans are originated and consisting of lenders such as commercial banks, savings and loan associations and mutual savings banks. (See secondary mortgage market)

primary personal residence

The dwelling in which a taxpayer lives and that they occupy most of the time.

prime rate

The minimum interest rate a commercial bank will charge to its largest clients. Prime rates are determined in part by the rate the bank pays for the money they lend to borrowers. Decisions of the Federal Reserve Bank (The Fed) to increase or decrease the supply of money can cause the prime rates banks charge to fluctuate. (See Federal Reserve System)

prime tenant

In a shopping center or office building, the tenant who occupies the most space. Prime tenants are considered credit-worthy and attract customers or traffic to the center. See also "anchor tenant." Example: Huntley is developing an office building with 40,000 square feet of leasable space. Of this, 20,000 square feet are "pre-leased" to a "prime tenant." The "credit rating" and prestige of the prime tenant allow Huntley to obtain "financing" and pre-lease the remaining space to other tenants.

principal

1. One of the main parties to a transaction. For example, the buyer and seller are principals in the purchase of real property.
2. In a fiduciary relationship, the person who hires a real estate broker to represent him or her in the sale of property. The phrase, "principals only," often found in real estate ads, is meant to exclude real estate agents from contacting the owners of the property. (See fiduciary)

principal meridian

The main imaginary line running north and south and crossing a base line at a definite point, used by surveyors for reference in location and describing land under the rectangular (government) survey system of legal description. (See base line, government survey system, legal description, meridian)

principal payments

The return of invested capital to the lender, as compared to interest payments, which represents a return on invested capital.

prior appropriation

A concept of water ownership in which the landowner's right to use available water is based on a government administered permit system.

priority

The order of position, time or place. The priority of liens is generally determined by the chronological order in which the lien documents are recorded; tax liens, however, have priority even over previously recorded liens. Thus the old adage "prior in time is prior in right."

private law

The law that deals with disputes between two or more individuals.

private mortgage insurance (PMI)

Insurance provided by private carrier that protects a lender against a loss in the event of a foreclosure and deficiency. A special form of insurance designed to permit lenders to increase their loan-to-market-value ratio, often up to 95 percent of the market value of the property. Many lenders are restricted to 80 percent loans by government regulations, special loss reserve requirements or internal management policies related to mortgage portfolio mix. A lender, however, may lend up to 95 percent of the property value if the excess of the loan amount over 80 percent of value is insured by a private mortgage guaranty insurer. (See deficiency, foreclosure)

private nuisance

A legal term for wrongfully allowing the escape of injurious things onto another person's land or the wrongful disturbance of an easement or other interest granted over land.

private offering

An investment or business offered for sale to a small group of investors, generally under exemptions to registration allowed by the "Securities and Exchange Commission" (U.S.) and state securities registration laws. Example: The "syndicator" prepared a "private offering" of the "equity" in the apartments. Up to 35 persons are allowed to participate in the purchase. If more persons are allowed, the "syndicator" must register a "public offering" with the state securities commissioner or the U.S. Securities and Exchange Commission (SEC).

privity of contract

The relationship between contracting parties (mortgagor-mortgagee or assignee-assignor).

pro rata

An equal amount, according to the fraction held by each. Example: "A" owns 40%, "B" owns 30%, "C" owns 20%, and "D" owns 10%. A $100 "pro rata" distribution is paid to the owners: "A" received $40, "B" received $30, "C" received $20, and "D" received $10.

pro-forma statement

From Latin "pro forma:" "according to form". Financial statements showing what is expected to occur. Example: The "broker" prepared a "pro-forma" statement for the prospective purchaser. It showed expected cash flows for the property.

probate

The formal judicial proceeding to prove or confirm the validity of a will, to collect the assets of the decedent's estate, to pay the debts and taxes and to determine the persons to whom the remainder of the estate is to pass. (See decedent, will)

procedural law

The part of law which sets out the methods of determining and enforcing rights as between parties.

procuring cause

That effort which brings about the desired results. Also called predominant efficient cause or the contributing cause.

production acres

The area of land that can be used in agriculture or timber operations to produce income, not including areas used for crop or machinery storage or other support areas.

profit and loss statement

A detailed statement of income and expenses of a business that reveals the operating position of the business over a period of time. Commonly referred to a P&L.

progress payments

In construction, loan payments issued to the builder as building is completed. See (progress) "draw." Example: For the $100,000 "construction loan," the "progress payments" were $20,000 upon buying the lot and a like amount upon pouring the foundation ($20,000), roofing ($20,000), wiring ($20,000), and completion of all work ($20,000).

progression

An appraisal principle that states that, between dissimilar properties, the value of the lesser-quality property is favorably affected by the presence of the better-quality property. (See appraisal)

projected/estimated operating expense increase

A “good faith” estimate by the owner as to current operating expenses increases over a base year, which are billed to the tenant as additional rent.

promissory note

An unconditional written promise of one person to pay a certain sum of money to another, or order, or bearer, at a future specified time. A broker who accepts a promissory note as a deposit from a prospective purchaser must generally disclose to the seller that the buyer's deposit is in the form of a promissory note.

property

1. The rights that one individual has in lands or goods to the exclusion of all others; rights gained from the ownership of wealth. See "real property," "personality," "possession," "title." Example: An individual may own "property with the associated rights to enjoyment, control over others' use of the property, and disposition, subject to government-imposed "restrictions." Groups of individuals may own "property," with ownership rights shared collectively. Governments may also own "property," held for public use.
2. Real estate. Example: The appraiser needed to inspect the "property" prior to establishing its value.

property brief

Produced by the listing agent, a property brief is simply a one-page flier about the property pointing out attractive features. It usually contains a drawing or photograph of the property. They are given to people the agent feels are especially interested in the property.

property line

The recorded "boundary" of a plot of land.

property management

That aspect of the real estate industry devoted to marketing, leasing, managing, and maintenance of the property of others. [Institute of Real Estate Management]

property manager

Someone who manages real estate for another person for compensation. Duties include collecting rents, maintaining the property and keeping up all accounting.

property reports

The mandatory federal and state documents compiled by sub dividers and developers to provide potential purchasers with facts about a property prior to their purchase.

property tax

A government "levy" based on the "market value" of privately owned property. Sometimes referred to as "ad valorem tax" or "real estate tax." Example: Homeville assesses a property tax at the rate of $0.50 per $100 of market value. Kilmer pays a tax of $500 on a property valued at $100,000.

proprietary lease

A lease given by the corporation that owns a cooperative apartment building to the shareholder for the shareholder's right as a tenant to an individual apartment.

prorate

To allocate between seller and buyer their proportionate share of an obligation paid or due; for example, to prorate real "property taxes" or insurance. Example: Property taxes were $730, assessed for the calendar year and paid by the seller on April 30. The property was sold on September 15. it is necessary to "prorate" property taxes so that the buyer and seller each pay a proportionate share for his or her ownership period. There are 107 days from September 15, to December 31. Therefore, the buyer must pay $214 at "closing," based on a daily rate of $2.

prorations

Expenses either prepaid or paid in arrears, that are divided or distributed between buyer and seller at the closing.

prospecting

Locating owners of properties who are interested in selling, or buyers who are interested in purchasing property. (See endless chain, farming, networking)

protected class

Any group of people designated as such by the Department of Housing and Urban Development (HUD) in consideration of federal and state civil rights legislation. Currently includes ethnic minorities, women, religious groups, the handicapped and others.

public report

A disclosure statement required by the Subdivided Land Law stating that a buyer is not obligated until he or she has read the report and signed a receipt. (See Subdivided Land Law)

puffing

Exaggerated or superlative comments or opinions not made as representations of fact and thus not grounds for misrepresentation, such as, "This property is a real good buy." One test used is whether a reasonable person would have relied on the statement. A statement such as, "The apartment has a fantastic view,‰Û is puffing because the prospective buyer can clearly assess the view for himself or herself, whereas a statement such as "The apartment has a fantastic view of the lake," when in fact all its windows face the street, would be misrepresentation. (See caveat emptor, misrepresentation)

pur autre vie

"For the life of another." A life estate pur autre vie is a life estate that is measured by the life of a person other than the grantee.

purchase-money mortgage

A mortgage given as part of the buyer's consideration for the purchase of real property, and delivered at the same time that the real property is transferred as a simultaneous part of the transaction. It is commonly a mortgage taken back by a seller from a purchaser in lieu of purchase money. A purchase-money mortgage is usually used to fill a gap between the buyer's down payment and a new first mortgage or mortgage assumed, as when the buyer pays 10 percent in cash, gets an 80 percent first mortgage from a bank, and then the seller takes back a purchase-money second mortgage for the remaining 10 percent.