take-out financing

Long-term permanent financing. In the usual large construction project, the developer obtains two types of financing. The first is the interim loan, a short-term loan to cover construction costs. Before lending any money, however, the interim lender normally requires a commitment by a permanent lender to agree to "take out" the interim lender in which the lender pays off the construction loan and leaves the developer with a permanent long-term loan when the building has been completed.

taking

The concept of taking comes from the Takings clause of the fifth amendment of the United States Constitution. The clause reads; "nor shall private property be taken for public use, without just compensation." This means that when land is taken for public use through the government's power of eminent domain or condemnation, the owner must be compensated. (See eminent domain)

tandem plan

A mortgage subsidy program offered from time to time by the United States Congress. The Government National Mortgage Association (GNMA) purchases certain mortgages at below market interest rates, granting borrowers low-interest loans. GMNA sells the loans on the secondary market at a discount, the discount being the amount of the subsidy. These programs are offered "in tandem" with local mortgage lenders. (See GNMA, secondary mortgage market)

tax and insurance escrow

An account required by a mortgage lender to fund annual property tax assessments and hazard insurance premiums for the mortgaged property. Funded through monthly contributions by the mortgagor. See "PITI." Example: When the mortgage loan was originated, a "tax and insurance escrow" was set up by the lender to pay tax and insurance expenses. The borrower's monthly mortgage payment was increased by an amount necessary to accumulate a balance in the account sufficient to cover these expenses.

tax base

The collective value of property, income or other taxable activity or assets subject to a tax. Tax revenues are computed as the tax base times the tax rate. For property taxation, the tax base is the total assessed value of all taxable property less exemptions. Example: American Widgetworks plans to build a new plant in Centerville. The plant will add $15 million to the property "tax base" of the city.

tax bill

A property owner's tax bill is computed by applying the tax rate to the assessed valuation of the property.

tax credit

An amount by which tax owed is reduced directly.

tax deed

An instrument, similar to a certificate of sale, given to a purchaser at a tax sale. (See certificate of sale)

tax deferred exchange (1031 exchange)

Under Section 1031 of the Internal Revenue Code, some or all of the realized gain from the exchange of property may not need to be immediately recognized for tax purposes. Both properties in an exchange must be held for productive use in trade or business or for investment, and must be of a like-kind. (See like-kind, realized capital gain)

tax foreclosure

The process of enforcing a lien against property for nonpayment of delinquent property taxes. Taxing authorities hold a superior lien against all taxable property to enforce the payment of their taxes. See "foreclosure." Example: The owner of the old apartment house had failed to pay property taxes on the building for the past 2 years. The county was forced to pursue a "tax foreclosure" against the property and have it sold at auction.

tax levy

The amount to be raised from the general real estate tax is then imposed on property owners through a tax levy. A tax levy is the formal action taken to impose the tax, usually a vote of the taxing district's governing body.

tax lien

A charge against property, created by operation of law. Tax liens and assessments take priority over all other liens. (See assessments, lien)

tax rate

The tax rate for each taxing body is computed separately. To arrive at a tax rate, the total monies needed for the coming fiscal year are divided by the total assessments of all real estate located within the taxing body's jurisdiction.

Tax Reform Act of 1986 (TRA 86)

Sweeping revisions to the income tax laws, enacted by the United State Congress in 1986, that lowered tax rates and eliminated many tax shelters.

tax relief

Action taken by a property owner to seek reductions in property assessment and hence realty and business taxes as a result of the decline in a property's market value, age or redundancy of design.

Tax Relief Act of 1997 (TRA 97)

Enacted by the United State Congress and effective May 7, 1997, TRA '97 provides for broader exemption from capital gains taxes on the profits on the sale of a personal residence. Replaces the old provision for a "one-time" exemption of $125,000 for sellers over age 55.

tax roll

The list of all properties subject to a tax in a county or other property taxing jurisdiction. It identifies all properties and indicates their assessed values. Example: A "tax roll" was prepared by the county tax assessor's office, showing $100 million worth of assessed value in the jurisdiction. The county commissioners needed to collect $1 million of taxes to run the government this year, so they applied a 10 mill tax rate to the tax roll.

tax sale

A court-ordered sale of real property to raise money to cover delinquent taxes.

tax shelter

A phrase often used to describe some of the tax advantages of real estate or other investments, such as noncash deductions for cost recovery (depreciation), interest, taxes and postponement or even elimination of certain taxes. The tax shelter not only may offset the investor's tax liability relevant to the real estate investment but also may reduce the investor's other ordinary income, which reduces overall tax liability.

tax-free gifts

Gifts that are free from federal gift taxes.

taxable income (loss)

Income (loss) reported for tax purposes. It is not to be confused with net income (loss). Net income (loss) is arrived at by the deduction of depreciation expense, whereas taxable income (loss) is calculated after the deduction of capital cost allowance.

taxable value

Actual value as determined by the Assessor. This value, in thousands of dollars, when multiplied by the Tax Rate equals the amount of real property taxes payable.

taxation

1. The process by which a government or municipal quasi-public body raises monies to fund its operation.
2. The impact an investment has on the investor's liability for the payment of federal, state, and local taxes.

tenancy

The right of possession of real property. May refer to ownership or occupancy. (See tenancy in common, joint tenancy)

tenancy agreement

Contract between the landlord and the tenant, pertaining to the letting of premises.

tenancy at sufferance

A tenancy (or estate) in which a person wrongfully holds or occupies a property after the expiration of a lease without the consent of the landlord. No notice of termination is required for the landlord to evict the tenant.

tenancy at will

A tenancy (or estate) in which a person holds or occupies real estate with the permission of the owner, for a term of unspecified or uncertain duration i.e., there is no fixed term to the tenancy.

tenancy by the entirety

Some states allow husbands and wives to use a special form of co-ownership called tenancy by the entirety. In this form of ownership, each spouse has an equal, undivided interest in the property. (The term entirety refers to the fact that the owners are considered one indivisible unit because early common law viewed a married couple as one legal person).

tenancy for life

Same as "life estate."

tenancy for years

A tenancy for a definite period of time. The tenant must vacate the property at the end of the lease unless an extension or new lease has been agreed upon.

tenancy from year to year

Same as "leasehold."

tenancy in common

An ownership of "realty" by 2 or more persons, each of whom has an "undivided interest," without the right of "survivorship." Upon the death of one of the owners, the ownership share of the decedent is inherited by the party or parties designated in the decedents "will." Compare with "partition." See "syndication." Example: A syndicate is formed using a "tenancy in common." Under this arrangement, all of the investors have to sign the deed for the entire property to be conveyed. Each tenant may convey his or her share independently.

tenancy in severalty

Ownership of a property by one person, rather than held jointly with others. Also called sole tenancy.

tenant

In general, one who exclusively holds or possesses property, such as a life tenant or a tenant for years; commonly used to refer to a lessee under a lease. A tenant's occupancy, although exclusive, is always subordinate to the rights of the owner. Tenant refers to an occupant, not necessarily a renter.

tenant fixtures

"Fixtures" added to leased real estate by a "lessee" that, by contract or by law, may be removed by the lessee upon expiration of the lease. Example: Joseph leased a building to use for a dry-cleaning business. Much of Joseph's equipment had to be attached firmly to the building; however, since the fixtures were used in his business, they were "tenant fixtures," and he could remove them when the lease expired.

tenant improvements

A commercial or an industrial property manager often is called on to make tenant improvements. These are alterations to the interior of the building to meet a tenant's particular space needs. Such construction alterations range from simply repainting or re-carpeting to completely gutting the interior and redesigning the space by erecting new walls, partitions and electrical systems.

tenants in common

A form of concurrent ownership of property between two or more persons, in which each has an undivided interest in the whole property. This form is frequently found when the parties acquire title by descent or by will. Each cotenant is entitled to the undivided possession of the property, according to his or her proportionate share and subject to the rights of possession of the other tenants. No cotenant can exclude another cotenant, or claim ownership of a specific portion of the property. Each cotenant holds an estate in land by separate and distinct titles, but with unity of possession. Their interests may be equal, as in joint tenancy, or unequal. Where the conveyance document does not specify the extent of interest of each cotenant, there is a rebuttable presumption that the shares are equal. Unlike a joint tenancy, there is no right of survivorship in a tenancy in common. Therefore when one of the cotenants dies, the interest passes to his or her heirs or beneficiaries and not to the surviving tenants in common. The property interest of a tenant in common is thus subject to probate. Also, unlike joint tenancy, dower rights may exist in property held in common.

tender

1. An "offer" to perform an obligation, together with actual performance or evidence of present ability to perform.
2. To perform under a contract.
3. To pay or deliver. Example: Abel thought Baker would "default" under the "sales contract" but did not know for certain until Baker "tendered" the deed.

tenement

A common law real estate term that describes those real property rights of a permanent nature. These rights relate to the land and pass with conveyance of the land, such as buildings and improvements.

tenure

The nature of an occupant's ownership rights; an indication of whether one is an owner or a tenant. Example: For economic analysis, one may differentiate the occupied housing stock by "tenure:" one portion may be owner-occupied; the other portion may be tenant-occupied.

tenure in land

The mode in which a person holds an "estate" in lands. Example: If one purchases all rights to real estate, "tenure in land" is "fee simple" ownership. A tenant's "tenure in land" is a "leasehold."

term

The period of time during which something is in effect. Example: Fowler leases an apartment for a "term" of one year. At the end of the year, Fowler moves from the apartment and buys a house. To finance the purchase, Fowler gets a mortgage loan with a "term" of 30 years. At the end of 30 years, the loan will be paid off.

term loan

One with a set maturity date, typically without "amortization." Example: Terry purchased a tract of land for $15,000, and borrowed $10,000 form a lender with a 5-year "term loan." The interest rate is 10% annually; the entire principal is due at the end of the 5-year term.

term, amortization

For a loan, the period of time during which "principal and interest" payments must be made; generally, the time needed to amortize the loan fully. Example: "Amortization terms" of 25 and 30 years are commonly used on real estate mortgage loans. Monthly principal and interest payments are set to fully liquidate loans over the term.

termite inspection

A visual check of a property for the presence of termites. Usually performed by a licensed exterminator. Buyers often make a termite inspection a condition of a sales contract, and require a pest control report or a clearance letter showing the property to be clear of any live, visual infestation. The VA, FHA and Fannie Mae all require a termite inspection as a condition of a loan.

terms

Conditions and arrangements specified in a "contract." Example: A "sales contract" will generally include "terms" relating to the price, "financing" available to the buyer, contingencies based on the condition of the property, "how to prorate closing costs," and items of personal property included in the sale. See also "as is," "cancellation clause," "contingency clause."

testament

A "will." Generally, to dispose of personal property. Common usage employs the words "will," "testament," and "last will and testament" as synonyms. Example: Ewen wrote her "testament," which directed the disposition of her property upon her death.

testamentary trust

A trust established by will.

testate

Having made and left a valid will.

testator

A person who has made a valid will. A woman often is referred to as a testatrix, although testator can be used for either gender.

theme/festival center

These centers typically employ a unifying theme that is carried out by the individual shops in their architectural design and, to an extent, in their merchandise. The biggest appeal of these centers is to tourists; they can be anchored by restaurants and entertainment facilities. These centers, generally located in urban areas, tend to be adapted from older, sometimes historic, buildings and can be part of mixed-use projects.

third party originator

Third-party originators prepare loan applications for borrowers and submit the applications to lenders.

Thirteenth Amendment to the United States Constitution (1868)

Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction. Section 2. Congress shall have power to enforce this article by appropriate legislation. (See Fourteenth Amendment)

three-day notice

Notice to quit, quit or cure, or quit or pay rent. Three-day notice must be given before an unlawful detainer action. (See unlawful detainer action)

thrift

Another name for a savings and loan association; a financial institution established to promote "thrift" by accepting savings deposits, and to make home mortgage loans. (See savings and loan association)

tier (township strip)

A strip of land six miles wide, extending east and west and numbered north and south according to its distance from the base line in the rectangular (government) survey system of legal description.

time is of the essence

A contract clause that emphasizes punctual performance as an essential requirement of the contract. Thus, if any party to the instrument does not perform within the specified time period (the drop-dead date), that party is in default, provided the non-defaulting party has made a valid tender of performance. If no tender is made, then the clause may be waived. The clause may also be waived by the subsequent acts of the parties such as accepting tardy payments or signing escrow instructions that allow for extensions of time in which to perform.

time value of money

A concept that money available now is worth more than the same amount in the future because of its potential earning capacity. See "present value of one," "present value of annuity."

time-sharing

A modern approach to communal ownership and use of real estate that permits multiple purchasers to buy undivided interests in real property (usually in a resort condominium or hotel) with a right to use the facility for a fixed or variable time period. Under time-sharing forms of ownership, potential purchasers of property buy fixed or floating time periods for use of a specific apartment within a project.

time-weighted annual rate of return

The yield for a year calculated by geometrically linking the previous four quarters' returns.

time-weighted compound average annual rate of return

The constant annual return over a series of years that would compound to the same return as compounding the actual annual returns for each year in the series.

timing

Refers to the length of time one must wait to receive cash flow from an investment.

title

Evidence that the owner of land is in lawful "possession" thereof; evidence of ownership. See also "adverse possessions," "certificate of title," "clear title," "color of title," "cloud on the title," and "marketable title."[Example: "Title" to land does not merely imply that a person has the right of "possession," because one may have the right to possession and have no title. Title does ordinarily signify rights to possession in addition to evidence of ownership. Example: Abel sold land to Baker. "Title" to the property was transferred at closing by the deed Baker received.

title defect

An unresolved claim against the ownership of property which prevents presentation of a marketable title. Such claims may arise from failure of the owner's spouse (or former part owner) to sign a deed, current liens against the property, or an interruption in the title records to a property. Example: Prior to the closing, the attorney for the title insurance company discovered a "title defect' which delayed the transaction. It seems the property had once been owned by the seller's parents and a deed had never been signed over to the seller.

title insurance

A comprehensive indemnity contract under which a title insurance company warrants to make good a loss arising through defects in title to real estate or any liens or encumbrances thereon. Unlike other types of insurance, which protect a policyholder against loss from some future occurrence (such as a fire or auto accident), title insurance in effect protects a policyholder against loss from some occurrence that has already happened, such as a forged deed somewhere in the chain of title. Needless to say, a title company will not insure a bad title any more than a fire insurance company would insure a burning building. However, if upon investigation of the public records and all other material facts, the title company feels that it has an insurable title, it will issue a policy. (See extended coverage policy, mortgagee's title insurance, standard coverage policy)

title report

A document indicating the current state of the "title," such as "easements," "covenants," "liens," and any "defects." The title report does not describe the "chain of title." See "abstract of title." Example: A buyer wishes to assure receipt of "clear title" to a property. The buyer authorizes a "title search" by an experienced attorney. The attorney examines the public records for all recorded encumbrances and past claims. The attorney renders to the buyer a "title report."

title search

The examination of public records relating to real estate to determine the current state of the ownership.

title theory

Some states interpret a mortgage to mean that the lender is the owner of mortgaged land. Upon full payment of the mortgage debt the borrower becomes the landowner.

topography

The state of the surface of the land; may be rolling, rough, flat, etc. Example: The "topography" in Oklahoma is mostly flat; in West Virginia, mountainous; in Ohio, rolling.

Torrens system

A method of evidencing title by registration with the proper public authority, generally called the registrar, named for its founder, Sir Robert Torrens, an Australian who developed the system in 1857. Torrens took the idea from the system of registering title to shipping vessels. A legal system for the registration of land, used to verify the ownership and encumbrances (except tax liens), without the necessity of an additional search of the public records. The purpose of the Torrens Act pertaining to registration of title to land is to conclusively establish an indefeasible title to the end that anyone may deal with such property with the assurance that the only rights or claims of which he or she need take notice are those so registered. The Torrens system of registration is the title itself; it differs from a title insurance policy, which is only evidence of title. In other words, a person does not acquire title to Torrens-registered real property unless that person registers the title. The distinctive feature of registered property is that title does not pass, and encumbrances (such as mortgages) are not effective against the property until such encumbrances or conveyances are noted on the registered certificate of title. A party who suffers loss through an error made by the governmental registrar can recover damages from the state through an assurance fund. The registrar, however, will not personally defend against litigation or reimburse the landowner for litigation expenses, which is one reason why most mortgagees require title insurance even for Torrens-registered titles. Under the Torrens system, the landowner initially petitions a state court to register his or her property, giving notice to all interested parties. After a search of title is filed with the court, there is generally a hearing to determine the status of the title and the court's determination is made in the form of a court decree. The procedure is similar to a quiet title suit. The initial use of the Torrens system is optional. But once property is registered, all subsequent transfers must follow the registration procedures. Approximately 10 states have adopted the Torrens system. It is also popular in Canada, Australia and Great Britain. In some states, Torrens-registered property is not subject to a general judgment lien, nor can title be lost through adverse possession.

tort

A wrongful act that is neither a crime nor a "breach of contract," but that renders the perpetrator "liable" to the victim for damages. Examples: nuisance, trespass, negligence. An example of negligence is a landlord's failure to fix reported defective wiring. The law provides remedy for damages from any resulting fire.

total acres

All land area contained within a real estate investment.

total commitment

The full mortgage loan amount that is obligated to be funded if all stated conditions are met.

total floor area

Also known as "total occupancy area." The area of the entire retail center, including inside common areas, mechanical areas, and the areas of all department stores and outparcel buildings that are not owned by the center but are an integral part of the center. [ULI]

total inventory

Total square footage of rentable space, vacant and occupied, ready for tenant finish. Often, a minimum size requirement is defined. Does not include space under construction or in planned projects. Includes owner-occupied space.

total principal balance

The total amount of indebtedness, including the original mortgage amount adjusted for subsequent funding, principal payments, and other unpaid items (e.g., interest) that are allowed to be added to the principal balance by the mortgage note or by law. Also known as "Legal Balance."

total retail area

Total floor area of a retail center less Common Area. It is the area from which sales are generated, and includes any department stores or other areas (such as banks, restaurants, or service stations) not owned by the center. [ULI]

total return

The sum of the quarterly income and appreciation returns.

townhouse

A type of dwelling unit normally having two floors, with the living area and kitchen on the base floor and the bedrooms located on the second floor; a series of individual houses having architectural unity and a common wall between each unit.

township

A division of territory, used in the government (rectangular survey system of land description, which is six miles square, and contains 36 sections, each of which is one mile square and consists of 23,040 acres.

township line

Lines running east and west, parallel to the base line and six miles apart. (See base line)

township squares

When the horizontal township lines and the vertical range lines intersect, they form squares. These township squares are the basic units of the rectangular survey system. Townships are 6 miles square and contain 36 square miles (23,040 acres).

township tiers

Township lines form strips of land called township tiers. These township tiers are designated by consecutive numbers north or south of the base line. (See base line, township line)

tract

A "parcel" of land, generally held for "subdividing;" a "subdivision." Example: Reynolds, a builder, purchases a "tract" of land. For marketing purposes, she subdivides the "tract" into lots.

trade fixture

An article of personal property annexed or affixed to leased premises by the tenant as a necessary part of the tenant's trade or business. At the termination of a lease, a tenant must leave most fixtures in the premises; however, trade fixtures are removable by the tenant before expiration of the lease, and the tenant is responsible for any damages caused by their removal. However, a tenant cannot usually remove replacement fixtures, that is, improvements installed to replace worn-out ones. For instance, if a tenant installs a new bar to replace an old bar in a tavern the tenant leases, the tenant cannot remove the bar upon termination of the lease. If the tenant fails to remove trade fixtures within a reasonable time of lease expiration, the fixtures will be considered abandoned and will become the property of the landlord.

trading on the equity

The practice of agreeing to buy real estate and then assigning the purchase agreement to another buyer before closing takes place; thus turning a profit by "selling the paper."

transaction broker

A transaction broker (also referred to as a non-agent, facilitator, coordinator or contract broker) is not an agent of either party. A transactional broker's job is simply to help both the buyer and the seller with the necessary paperwork and formalities involved in transferring ownership of real property. The buyer and the seller negotiate the sale without representation.

transaction costs

The costs associated with buying and selling "real estate." Examples: "appraisal" fees, "brokerage" commission, legal fees, mortgage "discount points," mortgage "origination fees," recording fees, "survey" fees, "title search."

transfer tax

A state tax imposed on the transfer or conveyance of realty or any realty interest by means of deed, lease, sublease, and assignment, contract for deed or similar instrument. One purpose of the tax is to acquire reliable data on the fair market value of the property to help establish more accurate real property tax assessments.

Treasury bill, note, bond

Treasury bill issued for less than a year; Treasury note issued for from one to five years; Treasury bond issued for from five to ten years.

trespass

Unlawful entry of or injury to the property of another.

triple-net lease

A net-net-net lease where, in addition to the stipulated rent, the lessee assumes payment of all expenses associated with the operation of the property. This includes both fixed expenses, such as taxes and insurance, and all operating expenses, including costs of maintenance and repair. In some cases, the triple-net tenant even pays the interest payments on the lessor's mortgage on the property leased. Strictly speaking, the term triple-net lease is redundant because "net lease" adequately describes the situation. Rather than rely on labels, however, the parties must examine the provisions of the lease to discover the extent of the tenant's responsibilities.

triplex

A building comprised of three dwelling units, each having a front and rear (or side) door and yard; similar to row houses.

trust

An arrangement whereby legal title to property is transferred by the grantor (or trustor) to a person called a trustee, to be held and managed by that person for the benefit of another, called a beneficiary.

trust account

A separate bank account segregated from a broker's own funds, in which the "broker" is required by state law to deposit all monies collected for clients. In some states, called an "escrow account." Example: A broker who fails to deposit "earnest money" into a separate "trust account" may be held "liable" for penalties under the state's real estate "license" laws.

trust deed

Also called a deed of trust. A legal document in which title to property is transferred to a third-party trustee as security for an obligation owed by the trustor (borrower) to the beneficiary (lender). A trust deed is similar to a mortgage—the main difference is that it involves three parties. When a borrower repays the note secured by a trust deed, the trustee must reconvey title back to the borrower by way of a deed of reconveyance.

trust deed lien

A lien on the property of a truster that secures a deed of trust loan. (See lien)

trust fund bank account

An account set up by a broker, attorney or other agent at a bank or other recognized depository, into which the broker deposits all funds entrusted to the agent by the principal or others; also called an earnest money or escrow account. (See earnest money, escrow account)

trust funds

Money or other things of value that are received by a broker or salesperson on behalf of a principal or any other person, and which are held for the benefit of others in the performance of any act(s) for which a real estate license is required.

trust ledger

Ledger where a property manager records monies paid out on behalf of an owner.

trustee

1. One who holds property in trust for another as a fiduciary and is charged with the duty to protect, preserve and enhance the value and the highest and best use of the trust property.
2. One who holds property in trust for another to secure the performance of an obligation. In those states using trust deeds as security devices, the trustee holds bare legal title to the property pending the borrower/trustor paying off the underlying debt or promissory note. The trustee is usually a lending institution, trust company or title insurance company.

trustee's deed

A deed executed by a trustee conveying land held in a trust.

trustor

The person who creates a trust and gives the instructions to the trustee.

truth-in-lending law

A body of federal law effective July 1969 as part of the Consumer Credit Protection Act, and implemented by the Federal Reserve Board's Regulation Z. It was amended in 1982 by the Truth-in-Lending Simplification and Reform Act and later amendments. The main purpose of this law is to ensure that borrowers and customers in need of consumer credit are given meaningful information with respect to the cost of credit. In this way consumers can more readily compare the various credit terms available to them and thus avoid the uninformed use of credit. This law creates a disclosure device only, and does not establish any set maximum or minimum interest rates or require any charges for credit. (See Regulation Z)

turnkey project

A development in which a "developer" completes the entire project on behalf of a buyer; the developer turns over the keys to the buyer at completion. Example: Many government-owned public housing projects are "turnkey projects." A private developer undertakes all activities necessary to producing the project, including land purchases, permits, plans, and construction, and sells the project to the housing authority.