Glossary of Real Estate Terms:  D - I

A - C    D - I    J - Q    R - Z    References

 

DATE OF SETTLEMENT - The date on which a contract of sale is finalised and final payment is made.

DEED - A document executed under seal. For example, a conveyance.

DEPOSIT - Percentage of total consideration, or an agreed amount, paid on exchange of contract for purchase of an asset.

DEPRECIATION - (a) In accounting terms, the writing down of the original cost of an asset systematically over the life of that asset; ( b) An effect caused by physical deterioration, or obsolescence, or both; (c) In valuation terms, the writing down of the current cost of an asset to calculate its current value. The accumulated effect on the value of an asset due to physical, functional, technological and economic obsolescence.

DEVELOPMENT APPROVAL - Approval from the relevant planning authority to construct, add, amend or change the structure of a property.

DISBURSEMENTS - Recoverable costs. For example, in the case of real estate sales, expenses paid by an agent on behalf of an owner, such as advertising, rates and taxes.

DISPLAY HOME - A building which represents a completed example of a dwelling type offered for sale.

DRY ROT - Decay of seasoned wood caused by fungus.

EASEMENT - A right to use the land of another (not involving the taking of any part of the natural produce of that land, or any part of its soil) or a right to prevent the owner of that land from using that land in a particular manner. Most commonly used where Government authorities have the right to run, for example, electrical mains or drainage through private property. Some form of compensation may be payable.

EFFECTIVE AGE - The age of an item, such as a building, as indicated by its physical condition and utility compared to its useful life, in contrast to its chronological age. The amount of maintenance and care given to the building will help determine its effective age. A 5-year old building may have an effective age of 10 years due to poor maintenance of the building.⁵

EFFECTIVE CAUSE OF SALE - Where the efforts of a particular real estate agent are considered to have been an essential element in a purchaser entering into a binding contract with a vendor for the sale of a property. An agent considered to be the effective cause of sale will usually be entitled to a commission in respect of that sale.

EFFECTIVE DATE - The date something commences or closes.

EGRESS - The exit point from a property.

ENCUMBRANCE - A charge or liability on a property; for example, a mortgage or a special condition on the use to which it may be put (e.g. easements, restrictions and reservations).

ENVIRONMENTAL IMPACT STUDY - A multi-disciplinary assessment of existing environmental conditions and the likely effect on a specified environment of the introduction of a proposed development or actions which may change the existing environmental conditions and ecological balance.

EQUITY - (a) A synonym for a share (as distinct from fixed interest) investment3; (b) the interest or value that an owner has in an asset over and above the debt against it. For example, a home-owner has equity in that part of the value of his or her house above the amount borrowed from a lender.⁷

ESTATE AGENT - See Agent.

EVICTION - The removal of a person from a property.

EXCHANGE OF CONTRACTS - A formal legal process that creates a binding contract for the sale of real property on agreed terms. The vendor and purchaser each sign a copy of the sale contract and then exchange these documents, after which time the contract becomes legally binding on the parties. The parties are then bound to proceed to settlement, subject to any cooling off period that may apply. A deposit is usually also paid by the purchaser to the vendor during the exchange process. Any party that unilaterally declines to proceed to settlement may forfeit deposit monies or be subject to a damages claim.

EXCLUSIVE AGENCY - See Exclusive Listing.

EXCLUSIVE AGENCY AGREEMENT - The agreement between an agent and a vendor establishing an Exclusive Listing.

EXCLUSIVE LISTING - Where a single agent only is appointed to sell or lease a property under an Exclusive Agency Agreement. Under the terms of an Exclusive Agency Agreement, the appointed agent is usually entitled to any commission resulting from a transaction relating to the property, even if it is sold / leased by another agent or the vendor during the term of the agreement. Also known as an Exclusive Agency or a Sole Agency.

EXTENSION OF LEASE - An agreement extending or renewing the terms of a lease for a period beyond the expiration date.

FIRE RESISTANCE RATING - Means the minimum period of time during which an element of a structure may be expected to function satisfactorily while subjected to a standard fire test, as set down by the relevant authority.

FIREPROOFING - The use of incombustible materials to protect structural components of a building so it can withstand a complete burn-out of contents without losing structural integrity.

FIRST REFUSAL (RIGHT OF) - The right granted to a person to have the first privilege to buy or lease real estate, or the right to meet any offer made by another.

FITTINGS - Installed items that may be removed from real estate without causing irreparable damage to the land, structure or use of the premises.

FIXED INTEREST RATE - An interest rate that remains unchanged for a set period, for example, for the whole term of the loan, or the first year of a loan.

FIXTURES - Those parts of a property affixed to structures or land, usually in such a manner that they cannot be independently moved without damage to themselves or the property housing supporting or pertinent to them. Fixtures are usually included in a sale and commonly include items such as carpets and awnings.⁶

FLAT - A self-contained dwelling unit in a multi-unit building.

FORECLOSE - Removing the right, title and interest of the owner of a property or asset, usually due to a default of due payments.

FOREIGN INVESTMENT REVIEW BOARD - An Australian Government entity that reviews foreign investment proposals and advises Government on foreign investment policy.

FREEHOLD - Absolute ownership subject to limitations imposed by the state; also known as a fee simple estate. An estate held for perpetuity.⁵

GAZUMPING - Where the vendor agrees to sell a property, but then sells it to another party on more favourable terms.

GEARING (LEVERAGE) - A measure of indebtedness i.e. the extent of borrowings as against the equity held by a person or company in an asset. Usually expressed as a ratio. Positive gearing refers to the magnification of financial gain resulting from borrowing when the cost of capital (borrowed) is less than the return on capital and leads to magnification of returns to equity. Negative gearing refers to the same relationships but where the cost of capital exceeds the return on capital. Persons would normally only negative gear in the expectation of positive returns in the future.

GENERAL LAW TITLE - See Common Law Title.

GOING CONCERN - An operating business that will remain in operation for the foreseeable future. It is assumed that the entity has neither the intention nor the necessity of liquidation or of curtailing materially the scale of its operations. Properties sold as a going concern may be treated differently for taxation purposes.

GOODS AND SERVICES TAX (GST) - A consumption tax imposed by the Commonwealth levied on the provision of goods and services.

GRACE PERIOD - A period when a mortgage payment or other debt becomes past due and before it goes into default.

GRADUATED LEASE - A lease which provides for a certain rent for an initial period, followed by an increase or decrease in rent over a stated period.

GUARANTOR - A person who undertakes to fulfil a contract if the main party defaults.

HAMMER PRICE - The purchase price paid when land or goods are sold at auction.

HEAD LEASE (OR MASTER LEASE) - A lease to an entity that will subsequently grant leases to sub-lessees who will be tenants in possession.

HOLDING DEPOSIT - An amount given by a buyer to the estate agent acting for the seller. It shows the buyer's serious commitment to the property and is commonly 10% of the purchase price.

HOUSE - A single, self-contained place of residence detached from other buildings. A house generally consists of enclosing walls with a roof to shelter occupants against both climate and intruders⁹.

IMPLIED COVENANT - A covenant implied rather than expressly written into a lease. On the part of the lessor this could include the asset being fit for the purpose for which it is let and allowing for quiet enjoyment. On the part of the lessee it could include keeping the premises clean.

IMPLIED EASEMENT - An encroachment upon property that has been left unchallenged for a long period of time. One that is apparent by long and continued use.

INGRESS - The entry point to a property.

INTEREST - The payment made by a borrower to a lender in return for the loan of money, in addition to the principal repayments.

INTEREST ONLY LOAN - Only the interest on the principal is repaid during the term of the loan. At the end of that time the principal is repaid as a lump sum.

INTEREST RATE - The rate of return earned on an investment, or charged by a lender, expressed in the form of a percentage per annum.³

INVESTMENT PROPERTY - Property (land or a building - or part of a building - or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both.⁶