Real Estate Terms Explained
The exciting process of purchasing and selling real estate can involve potentially complex legal transactions, and from time to time you may come across terminology in contracts and legal paperwork that you’re not familiar with.
Here are some of the most common terms you may encounter and their meaning:
Acceptance: An acceptance of an offer according to its terms which usually leads to a binding agreement or contract.
Agent: A person given permission to act on behalf of an owner of a property in the sale, purchase, letting or management of real estate. Agents must be licensed from the relevant state agency.
Allotment: An area of land that is subdivided into smaller pieces. These smaller allocations of land are known as allotments.
Amenity: Is a feature of a neighbourhood. For example, a public swimming, school or park can be considered as amenities.
Apartment: A self-contained residential unit that is usually part of a shared building or complex.
Appreciation: The increase in the value of real estate caused by external economic factors and market forces.
Auction: A public sale in which property is offered for sale through a competitive bidding process.
Body corporate: A body of owners in a block of units. The council of the body corporate - elected by property owners in the block - meets at regular intervals to discuss various matters of administration, including repairs, maintenance and security.
Boundary: A line separating adjoining properties.
Breach of contract: Breaking the conditions of a contract.
Brick veneer construction: A system in which a timber frame is tied to a single brick external wall.
Bridging finance: Finance that is obtained for a short period of time as a "bridge" to long-term finance. This funding may be required if a home purchase completes before the owner’s sale.
Building regulations: Rules which are designed to maintain public safety, health and minimum acceptable standards of construction.
Caveat: Warns a person buying real estate that a third party has some right or interest in the property.
Caveat emptor: Buyer Beware - This principle of law requires that the buyer is satisfied with the property they wish to buy before completing the transaction. The buyer purchases the property on an "as is" basis.
Certificate of title: A document that confirms the ownership of land. It shows who is the legal owner and whether there are any easements, covenants, restrictions, mortgages or loans registered on it.
Chattels: Property other than real estate that is included in a sale, this can include items of furniture. Standard chattels are all fixtures and fittings remaining with the property.
Clear title: A title that isn’t encumbered with outstanding mortgages or loans.
Commission: A fee or payment made to a real estate agent on completion of the sale of a property.
Common area: A shared area that is available for use by more than one person, which might include the stairwell of an apartment block.
Common law title: Sometimes referred to as "old system title", a common law title consists of a series of title documents referred to as "a chain of title".
Compulsory acquisition (resumption): The power of central or state governments to purchase property from without the owner agreeing to sell. A compulsory acquisition order could be used for the building of new transport links.
Contract of sale: A document that lists the terms and conditions of a property sale between the vendor and the purchaser.
Conveyance: The legal process of transferring the ownership of property from the seller’s name to the purchaser’s.
Covenant: A requirement noted on the title of a property that forces the property's owner to adhere to named terms, conditions and restrictions regarding the property.
Cover note: A document issued by an insurance company to temporarily prove that a property has current insurance.
Deed: A legal document that is a record of an agreement, obligation or conveyance of property.
Deposit: The sum of money normally paid by the buyer at the time of exchanging contracts. It is typically between 5 and 10 percent of the final purchase price.
Depreciation: The decrease in the value of improvements on the property.
Dual occupancy: An area of land or an existing dwelling that is zoned in such a way that allows the owner to construct a building that has two separate living arrangements.
Fittings: Goods or articles that can be removed from a property without causing damage or an obvious reduction in its value. Some examples:
- Paintings or mirrors that are not bolted but hung or screwed to a wall.
- Free-standing refrigerators and washing machines
- Beds/sofas and other free standing items of furniture
- Television aerials and satellite dishes
Fixtures: Items such as baths, toilets and walk-in wardrobes that form part of the property and cannot be removed without causing damage. Some examples:
- Light fitments
- Central-heating boilers and radiators
- Built in wardrobes/cupboards (e.g. if they use a wall to form one of their sides and would thus be incomplete if they were removed)
- Bathroom suites (sinks/baths/toilets)
- Kitchen units
- Wall paintings
Free standing: A property that stands independently of others.
Interest only loans: The principal amount borrowed is not repaid until the end of the loan. Only interest is payable in the interim.
Investment: The purchase of an asset (like real estate) in order to produce capital gain.
Joint tenants: Joint tenancy is the holding of property in equal shares by two or more persons. On the death of one person, the property is owned by the remaining person.
Land tax: A State government tax payable by owners of property based on the unimproved capital value of the property.
Listing agreement: A contract between a property owner and a real estate agent that sets out the terms, conditions and commission associated with the sale of a specific property.
Mortgage: A legal document that gives a lender an interest over a property to secure the repayment of a loan.
Mortgagee: An entity that lends money on the security of a mortgage.
Mortgagor: An entity that borrows money offering the security of a mortgage.
Principal and interest loan: A loan whereby the lender repays a combination of interest and the principal borrowed throughout the term of the loan.
Private treaty sale: Sale of property through a real estate agent on the open market.
Progress payments: Funds paid by a loan provider in instalments to a builder - as the building work meets predetermined targets.
Property management: The management of a property on behalf of the owner.
Rates: The amount charged by the local council or water authority to provide services to a property.
Real property: Land with or without improvements on it.
Reserve price: This is the minimum price a seller has specified that they will accept to sell their property at auction.
Semi-detached: Two houses joined together by a common wall.
Settlement: When the sale of a property is legally finalised.
Stamp duty: A government tax administered by individual states. It is calculated according to the sale value on the contract of sale. For mortgages, however, it is calculated on the amount of the loan.
Strata title: A system of title that provides separate titles for an owner of a unit or apartment that specific unit of the building.
Survey: Shows the dimensions and boundaries of land and the exact location of buildings.
Tenancy: The right to occupy land or buildings as provided by the terms of a lease or other agreement.
Tenants in common: The holding of property by two or more owners, which sets out the % of the holding, eg 50/50, or 30/30/30. A persons' interest in the property can then be disposed of according to their Will.
Title Search: The process of investigating title to land in order to ascertain if the vendor has the right to transfer ownership.
Torrens title: The name of the government system of recording ownership of land.
Town House: Two-storey attached dwellings usually registered under a strata title.
Transfer of Land: A document registered at the Land Title Office recording the change of ownership to a property.
Unencumbered: Usually describes a property free of secured loans, caveats and mortgages.
Valuation: A written opinion of a property’s value – usually by a Licensed Valuer.
Vendor: The person registered on title as the legal owner, who offers the property for sale.
Villa/Unit: Single-storey dwelling usually registered under strata or community title.
Zoning: Description of the allowable uses of land, as set out by local councils or planning authorities.