Glossary of Terms: A - L
B
Base Rent: This is a specific amount which is used as a minimum rent in a lease which uses a percentage for additional rent.
Base Year: The year of a lease term that is used as the standard when implementing an escalator clause. Operating costs are judged higher or lower during the next year when compared to the base year.
Basis Point: Basis point refers to a one-hundredth of a percent. Generally, interest rate fluctuations are quoted in basis points.
Bay: An unfinished area or space between a row of columns and the bearing wall. Usually the smallest area into which a building floor can be partitioned
Base Year: The year of a lease term that is used as the standard when implementing an escalator clause. Operating costs are judged higher or lower during the next year when compared to the base year.
Basis Point: Basis point refers to a one-hundredth of a percent. Generally, interest rate fluctuations are quoted in basis points.
Bay: An unfinished area or space between a row of columns and the bearing wall. Usually the smallest area into which a building floor can be partitioned
Besa: Bond Exchange of South Africa.
Beetle Certificate: Legally required in some coastal provinces before transfer of a property can take place, confirming that its structure is free of wood borer or termite infestation
BER BCI: Bureau for Economic Research Building Cost Index. Measures pre-contract non-residential building-construction prices and as such it includes the profit margin of contractors. This index is one of the best indicators of the health of the building construction industry. If it accelerates faster than input costs (Haylett Index), then contractors are stretching their profit margins as a result of sufficient work, and vice versa.
Building construction: the construction of buildings like houses, office blocks, factories, shopping centres, schools, hospitals. See also civil construction.
Bulk: The market value of office and shopping-centre land is generally expressed as the value per bulk square metre. Bulk square metres refer to the gross building area (GBA) of a building. According to The Sapoa Method for Measuring Floor Areas in Commercial and Industrial Buildings, GBA covers: “The entire building area, but it excludes patios, plant boxes, sunscreening, escape stairs, machine rooms, parking (basements or above ground), lift motor rooms, service rooms, caretakers’ flats, etc. GBA is mainly used by planning consultants in order to plan and execute a building in accordance with the permissible Floor Area Ratio (F.A.R) as derived from the zoning of the property.GBA is fixed for the life of the building but it should be noted that different local authorities may interpret the National Building Regulations which regulated the F.A.R definition in a slightly different manner.”
Beneficial occupation (BO) is a rent-free period, normally given a month prior to a lease commencing, that enables the tenant to have access to the premises for the purpose of fit-out (setting up the premises to their needs and requirements). ... No rent is paid during the beneficial occupation period.
Body Corporate: The body corporate of a sectional title scheme is made up of all the owners of units in the sectional title complex. The body corporate is the community of unit owners in a specific sectional title scheme.
As soon as a unit in a sectional title scheme gets registered in the name of a new owner, that owner automatically becomes a member of the body corporate for the scheme.
When a member of the body corporate sells his/her unit, and ownership of the unit gets transferred to the buyer, he/she ceases to be a member of the body corporate, while the purchaser takes his/her place as a new member of the body corporate.
An owner of a sectional title unit cannot refuse to become a member of the body corporate or resign from the body corporate while owning a unit in the sectional title scheme.
A body corporate has a legal identity of its own. The body corporate can therefore legally act as a separate person from the individual members that make up the body corporate.
The body corporate comes into existence as soon as the first unit in a sectional title scheme gets registered in the name of an owner other than the sectional title developer.
The controlling body of a sectional title scheme is known as the body corporate. Every owner of a unit in the scheme belongs to the body corporate and participates in every major decision regarding the scheme. The developer remains a member of the body corporate until the last unit is sold.
As soon as a unit in a sectional title scheme gets registered in the name of a new owner, that owner automatically becomes a member of the body corporate for the scheme.
When a member of the body corporate sells his/her unit, and ownership of the unit gets transferred to the buyer, he/she ceases to be a member of the body corporate, while the purchaser takes his/her place as a new member of the body corporate.
An owner of a sectional title unit cannot refuse to become a member of the body corporate or resign from the body corporate while owning a unit in the sectional title scheme.
A body corporate has a legal identity of its own. The body corporate can therefore legally act as a separate person from the individual members that make up the body corporate.
The body corporate comes into existence as soon as the first unit in a sectional title scheme gets registered in the name of an owner other than the sectional title developer.
The controlling body of a sectional title scheme is known as the body corporate. Every owner of a unit in the scheme belongs to the body corporate and participates in every major decision regarding the scheme. The developer remains a member of the body corporate until the last unit is sold.
Breach Clause: This is a condition in a contract which obliges a seller to give a defaulting buyer written notice to remedy his breach of contract within a specific period (usually 7 days) before he can cancel the sale.
Breach of Contract
This is a failure to perform a contract in whole or part without a legal excuse.
This is a failure to perform a contract in whole or part without a legal excuse.
Bridge Loan
Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favour is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.
Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favour is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.
Bridging Finance
This is a short-term interim loan made between a short-term and a long-term loan and the proceeds of the sale are taken out upfront to procure emergency funding.
This is a short-term interim loan made between a short-term and a long-term loan and the proceeds of the sale are taken out upfront to procure emergency funding.
Broker: As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.
C
Deed-in-Lieu: Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.
Deed of Trust: A legal document that conveys title to real estate to a disinterested third party (a 'trustee') who holds the title until the borrower has repaid the debt.
Deed Restriction: A clause in a deed which limits the use of the property in certain respects. Also known as a restrictive condition of title.
Deeds Office: Ownership of any asset needs to be capable of being proved in one way or another. With regards to property, this proof is normally by way of a title deed. In South Africa, this has developed into a sophisticated process, aimed at guaranteeing right and title to property owners and potential lenders. All properties are recorded at the various Deed Registries that are found in the major centres in South Africa. A transfer of property occurs only when that transaction is recorded at the Deeds office and the appropriate Title Deed is issued.
Ownership of the property only vests with the new owner when this process has occurred. Banks have established a sophisticated payment mechanism to ensure that transfer and payment occur simultaneously. Only qualified conveyancers are permitted to undertake this activity. The whole process is particularly secure but is at the same time costly. This cost needs to be borne in mind by prospective buyers. While all mortgage bonds are recorded on the title deed, to perfect its security, the bank will retain the original title deed together with its mortgage document. Future transfers of the property will not be possible without the cancellation of any prior mortgage bonds.
Deeds Office Registration Fees:
These fees are charged by the Deeds Office for registering the mortgage bond/home loan and the title deed.
Deeds Registry: The South African Deeds Registry is a governmental department with regional offices in Cape Town, Pietermaritzburg, Pretoria, Johannesburg, Bloemfontein, King William's Town and Vryburg. Documents relating to the registration of immovable property are lodged at these regional deeds registries. Other documents, such as ante-nuptial contracts, are also registered in the deeds registry.
The South African Deeds Registries guarantee that the owners of South African real estate are the registered owners of those properties.
Default: Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default.
Defects: A defect which is clearly visible is a patent defect. A defect which is not visible upon a reasonable inspection of the property is a latent defect.
C
Capitalization rate (Standard): It is the
expected net operating income for year 1, assuming the entire building is let at open market rentals, divided by the purchase/transaction price, normally expressed as a percentage. This calculation ignores VAT, transfer duty and income tax, and assumes a cash transaction (in contrast to a paper-based sale).
CBD: Central business district or downtown. This is an area of concentrated high economic activity. The user can differentiate between the metropolitan CBD (e.g. the Johannesburg CBD) and a decentralized CBD (like the Sandton CBD).
Civils: colloquial for civil construction.
Civil construction: the construction of physical infrastructures like roads, bridges, dams, the laying of stormwater pipes, electricity and water reticulation. See also building construction.
Cyclical trend: A short-term growth path of an economic variable. Normally refers to the business cycle, as distinct from a secular trend.
Cancellation Clause
A provision in a lease that confers upon one or both of the parties to the lease the right to terminate the lease upon the occurrence of the condition or contingency set forth in the said clause.
A provision in a lease that confers upon one or both of the parties to the lease the right to terminate the lease upon the occurrence of the condition or contingency set forth in the said clause.
Cancellation Figures
Outstanding amount on the mortgage, interest and any other costs required to settle the mortgage bond.
Outstanding amount on the mortgage, interest and any other costs required to settle the mortgage bond.
Canvassing
- Canvassing sellers: the procedure whereby an estate agent contacts property owners for a mandate to sell their properties.
- Canvassing purchasers: the procedure whereby an estate agent enquires from a person whether he wishes to buy property or a particular property.
Cap
Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps." Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap.
Capital: Money used for investment purposes.
Capital Expenditure: The cost of an improvement made to extend the useful life of a property or to add to its value.
Capital Gain: This is the profit that results from the appreciation of a capital asset from its purchase price.
Capital Gains Tax (CGT): A capital gains tax (abbreviated CGT) is a tax charged on capital gains; the profit realized on the sale of an asset that was purchased at a lower price (First R1.5million gains on a primary residence is no subjected to taxation).
Capital Loss: Decrease in value of a capital property (a property other than a principal residence). May be set off against capital gains or against regular income according to the tax rules.
Capitalisation in Perpetuity: This is the capitalisation procedure used to determine the value of the property with an infinite time period.
Capitalization: The process of ascertaining the value of a property by the use of a proper investment rate of return and the net income expected to be produced by the property. The formula of net annual income divided by proper capitalization rate is express: Income/Rate=Value.
Capitalisation Rate:
This is the ratio that represents the relationship between a particular year's cash flow and the present value of the cash flow. It is the rate at which the net income of the building is capitalised to derive the market value of the property.
Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps." Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap.
Capital: Money used for investment purposes.
Capital Expenditure: The cost of an improvement made to extend the useful life of a property or to add to its value.
Capital Gain: This is the profit that results from the appreciation of a capital asset from its purchase price.
Capital Gains Tax (CGT): A capital gains tax (abbreviated CGT) is a tax charged on capital gains; the profit realized on the sale of an asset that was purchased at a lower price (First R1.5million gains on a primary residence is no subjected to taxation).
Capital Loss: Decrease in value of a capital property (a property other than a principal residence). May be set off against capital gains or against regular income according to the tax rules.
Capitalisation in Perpetuity: This is the capitalisation procedure used to determine the value of the property with an infinite time period.
Capitalization: The process of ascertaining the value of a property by the use of a proper investment rate of return and the net income expected to be produced by the property. The formula of net annual income divided by proper capitalization rate is express: Income/Rate=Value.
Capitalisation Rate:
This is the ratio that represents the relationship between a particular year's cash flow and the present value of the cash flow. It is the rate at which the net income of the building is capitalised to derive the market value of the property.
Capital Redemption:
Repaying the capital amount in addition to the monthly bond repayments.
Capped Rate :
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan.
Repaying the capital amount in addition to the monthly bond repayments.
Capped Rate :
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan.
Carrying Charges (Costs): The expense required to maintain a property over a given period of time, including property taxes, maintenance, insurance payments, interest charges on financing, etc.
Certificate of Occupancy: These are documents issued by the municipality indicating that the new dwelling is suitable for occupation which must comply with local building, safety and health bylaws.
Clearance Certificate: This is issued by the municipality or local authority to confirm that all rates, taxes and levies are paid up to date when a property transfer takes place. This also relates to a certificate that is required from the engineer where reinforced concrete is being used.
Client: The person who has given an estate agent a mandate to render an estate agency service for him.
Close Corporation: A business entity registered in terms of the Close Corporations Act 69 of 1984. It may conclude agreements of sale or lease in its own name. Members managing the business of the CC are treated in the same way as directors for taxation purposes.
Close Corporation: A business entity registered in terms of the Close Corporations Act 69 of 1984. It may conclude agreements of sale or lease in its own name. Members managing the business of the CC are treated in the same way as directors for taxation purposes.
Closing: The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands, also called settlement. Closing costs usually include an origination fee, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement.
Closing Costs: Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.
Common Areas: Those portions of a building, land, and amenities owned (or managed) by a sectional title project's homeowners' association (or a cooperative project's cooperative corporation) 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 Law: The law which applies automatically unless excluded or amended by legislation or unless the parties have enforced an agreement. The South African common law is the Roman-Dutch law.
Common Law: The law which applies automatically unless excluded or amended by legislation or unless the parties have enforced an agreement. The South African common law is the Roman-Dutch law.
Common Property: It is all the land in a sectional title complex, as well as those parts of the buildings which are not included in a particular section or unit. Common property can include stairwells, lifts or elevators, carports, swimming pools, gardens, etc.
Comparative Market Analysis (CMA): This is the appraising of the value of a property by comparing the prices of similar types of properties that have recently been sold using data derived from statisticians and software programs. The similarity of locations and physicality of the property and the terms of sale are important considerations.
Competent Party: A person legally able to contract being of legal age and of sound mind.
Competent Party: A person legally able to contract being of legal age and of sound mind.
Compliance Certificate: An electrical compliance certificate is issued by an electrician and it is a requirement by law for the property to be transferred to the buyer’s name, and which is for the seller’s account. Other compliance certificates include a beetle/infestation certificate.
Compound Interest: Interest computed on the original principal and accumulated interest.
Compounding: A type of calculation in which interest earned is reinvested and earns.
Concessions: During negotiations, these are the items that each party is willing to give up in order to get the items each party really wants.
Compound Interest: Interest computed on the original principal and accumulated interest.
Compounding: A type of calculation in which interest earned is reinvested and earns.
Concessions: During negotiations, these are the items that each party is willing to give up in order to get the items each party really wants.
Condition: A clause that renders the operation and consequences of the contract as a whole dependent on an uncertain future event. A suspensive condition suspends the operation of the contract for a period of time, subject to the occurrence of a future event, and only if and when the condition has been fulfilled will an enforceable contract exist. In the case where a resolutive condition is stipulated, the contract is immediately binding and will remain binding unless the condition is not fulfilled.
Consolidation: This occurs where the customer owns two properties next to each other and would like them joined into one property. A new property description will be given and will be depicted on a Surveyor General Diagram.
Cooling off Period: In terms of the Alienation of Land Act 68 of 1981 certain purchasers of immovable property have the right to revoke an offer to purchase or terminate a sale agreement within 5 days after the offer or sale agreement was signed by the purchaser. This is generally referred to a 'cooling off right'. The right to cool off applies only in respect of properties which are used (or intended to be used) mainly for residential purposes and only if the purchase price is R250 000 or less (a higher amount may be prescribed by the Minister of Trade and Industry from time to time). The right does not apply in certain instances, for example where the buyer is a company, close corporation or a trust.
Cooperative (co-op) : A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Cooperative (co-op) : A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Cost Approach: The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the replacement cost of the building, less depreciation.
Counter Offer: A counteroffer is the rejection of one offer and substitution of it with another offer as part of the negotiation for the property.
Coverage: Determines the maximum area that a building should cover to leave a functional amount of private or semi-private space open on the site.
Counter Offer: A counteroffer is the rejection of one offer and substitution of it with another offer as part of the negotiation for the property.
Coverage: Determines the maximum area that a building should cover to leave a functional amount of private or semi-private space open on the site.
D
Decentralized: A Rode abbreviation. Town and regional planners differentiate between local decentralization (from the metropolitan CBD to the suburbs) and regional decentralization (to outlying areas of the country).
Deflation: Deflation occurs when prices are declining over time. This is the opposite of inflation and could be catastrophic. When the inflation rate (by some measure) is negative for a period, the economy is in a deflationary period. See also disinflation.
Deseasonalized: Seasonal fluctuations have been removed. In the case of retail sales, this is essential in order to be able to compare sales pertaining to different months of the year, as opposed to comparing sales of one quarter or month with the same quarter or month a year earlier.
Discount rate: The rate used to express an expected future cash stream in present value terms. In most instances, the discount rate is equal to the hurdle rate. Mathematically, the hurdle rate of a property is the sum of its market capitalization rate and the expected constant growth rate of its cash flow in perpetuity.
Disinflation: Disinflation occurs when the inflation rate is declining over time. See also deflation.
Deed of Sale: A written document in which a person transfers ownership or real property to another. A deed must be properly executed and delivered in order to be effective. Trust Deed A formal document that outlines the terms of a trust agreement. A common way to structure real estate purchases where the title to a property is held in trust.
- South African law specifically requires that any contract involving the sale of fixed property must be in writing
- In all property transactions there needs to be a written contract
- This is generally referred to as "The Deed of Sale"
- Normally the estate agent selling the property would complete the document for signature by the buyer
- In that form it would represent an offer that would be presented to the seller
- If the seller finds the offer acceptable, the seller would then countersign the document to indicate their acceptance of the offer
- It would now be considered a binding deed of sale (subject to any cooling off period or suspensive conditions)
Ensure that the Deed of Sale contains all pertinent details including:
- Full details of the buyer and seller
- The sale price
- Description of the property
- Details on how the purchase price will be paid
As most offers are subject to the approval of a bond, the deed would indicate:
- The value of the bond required and a date by which evidence of its approval is required.
- Any other suspensive conditions or material aspects
Unless the bond application is in respect of a further advance, the bank will require to be provided with a copy of The Deed of Sale. This can be obtained from any source, i.e. estate agent; broker; attorney; directly from buyer/seller; etc. Confirm that:
- All pages are included
- All parties have signed
- Deed of Sale is dated
- All fields are completed
- All changes are signed by all parties
Deed-in-Lieu: Short for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.
Deed of Trust: A legal document that conveys title to real estate to a disinterested third party (a 'trustee') who holds the title until the borrower has repaid the debt.
Deed Restriction: A clause in a deed which limits the use of the property in certain respects. Also known as a restrictive condition of title.
Deeds Office: Ownership of any asset needs to be capable of being proved in one way or another. With regards to property, this proof is normally by way of a title deed. In South Africa, this has developed into a sophisticated process, aimed at guaranteeing right and title to property owners and potential lenders. All properties are recorded at the various Deed Registries that are found in the major centres in South Africa. A transfer of property occurs only when that transaction is recorded at the Deeds office and the appropriate Title Deed is issued.
Ownership of the property only vests with the new owner when this process has occurred. Banks have established a sophisticated payment mechanism to ensure that transfer and payment occur simultaneously. Only qualified conveyancers are permitted to undertake this activity. The whole process is particularly secure but is at the same time costly. This cost needs to be borne in mind by prospective buyers. While all mortgage bonds are recorded on the title deed, to perfect its security, the bank will retain the original title deed together with its mortgage document. Future transfers of the property will not be possible without the cancellation of any prior mortgage bonds.
Deeds Office Registration Fees:
These fees are charged by the Deeds Office for registering the mortgage bond/home loan and the title deed.
Deeds Registry: The South African Deeds Registry is a governmental department with regional offices in Cape Town, Pietermaritzburg, Pretoria, Johannesburg, Bloemfontein, King William's Town and Vryburg. Documents relating to the registration of immovable property are lodged at these regional deeds registries. Other documents, such as ante-nuptial contracts, are also registered in the deeds registry.
The South African Deeds Registries guarantee that the owners of South African real estate are the registered owners of those properties.
Default: Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default.
Defects: A defect which is clearly visible is a patent defect. A defect which is not visible upon a reasonable inspection of the property is a latent defect.
Deposit / Collateral: The deposit is the part of the purchase price of the property that you pay in cash up front and reduces the amount that you will need to lend. Banks prefer a deposit as it means that the borrower has a financial commitment in the property and the home loan required is less than the current market value of the property. For this reason, the loan to value concept is an important factor in negotiating rate concessions and obtaining loan approval with minimum supporting documentation. Collateral other than the property is also taken into account when calculating your loan to value ratio. When a borrower does not have cash available for a deposit, other acceptable types of collateral security include, but are not limited to the following: Shares, fixed deposit, bank/company/government guarantees, debt-free immovable property, and life assurance policies.
Depreciation :
A decline in the value of the property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.
Depreciation :
A decline in the value of the property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.
Developer: A real estate developer is someone who initiates the development of improvements to land.
In terms of a sectional title scheme, the owner of the land on which the sectional title scheme will be built is regarded as the developer of the scheme. The first purchasers of units in a new sectional title scheme will be buying their sectional title units directly from the developer.
The Sectional Titles Act also regards the owner of a section 25 right to extend the sectional title scheme, or his/her successor in title, as the developer of the sectional title scheme.
Development Rights: The legal ability to develop a parcel of land, usually as confirmed by the applicable town planning scheme and purchased from the owner of a vacant tract of land by the developer.
In terms of a sectional title scheme, the owner of the land on which the sectional title scheme will be built is regarded as the developer of the scheme. The first purchasers of units in a new sectional title scheme will be buying their sectional title units directly from the developer.
The Sectional Titles Act also regards the owner of a section 25 right to extend the sectional title scheme, or his/her successor in title, as the developer of the sectional title scheme.
Development Rights: The legal ability to develop a parcel of land, usually as confirmed by the applicable town planning scheme and purchased from the owner of a vacant tract of land by the developer.
Domicilium Citandi et Executandi: Domicilium Citandi Et Executandi is a Latin phrase which refers to the address at which you ordinarily live, and at which you will accept service of a summons or other legal documents.
Often referred to simply as domicilium or domicile. This is the address for service and delivery of documents and summons where a person is deemed to be permanently resident.
The choice of domicilium should not be taken lightly as, once its has been selected, letters and notices can be served on this address and you will be deemed to have received them, even if you did not, in fact, do so. Similarly, therefore, once you have chosen a domicilium address, be sure to notify any other party to a contract in writing of any change to your domicilium, should this be necessary. Remember a judgment could even be taken against you by service on a domicilium address, without your knowing about it. The domicilium must be a physical address, not a P O Box number.
Often referred to simply as domicilium or domicile. This is the address for service and delivery of documents and summons where a person is deemed to be permanently resident.
The choice of domicilium should not be taken lightly as, once its has been selected, letters and notices can be served on this address and you will be deemed to have received them, even if you did not, in fact, do so. Similarly, therefore, once you have chosen a domicilium address, be sure to notify any other party to a contract in writing of any change to your domicilium, should this be necessary. Remember a judgment could even be taken against you by service on a domicilium address, without your knowing about it. The domicilium must be a physical address, not a P O Box number.
E
Erf Number: Erf number refers to the unique number identifying a piece of land within a Suburb.
Erf Size: Erf size refers to the size of a piece of land measured in square meters.
Escalation Clause: A clause in a contract providing for increases or decreases in rent payments in accordance with fluctuations of certain costs or expenses of the landlord.
Erf Size: Erf size refers to the size of a piece of land measured in square meters.
Escalation Clause: A clause in a contract providing for increases or decreases in rent payments in accordance with fluctuations of certain costs or expenses of the landlord.
Escalation rate: The rate by which a rental is hiked once a year in terms of a lease. The ruling market escalation rate can be seen as an attempt by the market to forecast the growth in market rentals over the duration of the lease, but this attempt is obviously rarely successful. Thus it is important to differentiate between an escalated rental and a market rental.
Exclusive Listing: A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.
Exclusive Use Area: The owner of a sectional title unit can never become the owner of any portion of the common property, but they can acquire the right of the exclusive use of a certain portion, such as gardens and parking bays.
F
Forward (income) yield: A bourse term, hence it is typically applied to listed properties. In the non-listed property market, its approximate equivalent is the capitalization rate. It represents the expected net income of year 1 (the following 12 months) divided by the current price/value. It stands to reason that existing leases would largely determine the net income of year 1. See also historic (income) yield.
Fundamental value (FmV): It is a subjective value based on the investor’s own, subjective forecast of rentals and maybe the investor’s unique or different inhouse discount rate/capitalization rate. A FmV higher than the objective market value (MV) is a buy signal to an investor. The calculation of the FmV is especially indicated where the economy, or property market, changes gear, e.g. a secular change in inflation rate or the real-rental cycle bottoming out. These are instances where any market is notoriously poor at forecasting trends. An alternative term is intrinsic value.
FICA: As part of the South African government's fight against money laundering, the Financial Intelligence Centre Act, 2001 (FICA) was promulgated and came into full effect on 30 June 2003.In broad terms, FICA provides for the establishment of an anti-money laundering regulatory body and introduces mechanisms aimed at preventing money laundering. This in effect enforces compliance by institutions that might otherwise be exploited for money laundering purposes.All accountable institutions as defined by FICA will have to comply and adhere to certain stringent requirements, which include:
- Identifying all customers;
- Verifying all information gathered in the identification process above;
- Keeping records of all this information and documentation.
Fixtures and Fittings: A permanently fixed piece of furniture or equipment incorporated into a property. Removing it would cause damage to buildings or land and is therefore regarded as legally part of it. If it is permanently attached, nailed or screwed into the floor, wall or ceiling, it is a fixture.
Floor Plan: A sketch of an existing or proposed building showing the design and layout of the building and the specifications of each room. May also show doors, windows, stairways and other features.
Freehold: Outright ownership of a property. This type of tenure contrasts with leasehold where the lease holder has the rights to occupy a property for a specified period of time.
G
Geometric mean: A measure of central
tendency calculated by multiplying the series of numbers and taking the nth root of the product, where n is the number of items in the series. The geometric mean is defined only for sets of positive numbers. For example, the geometric mean of 6 and 7 is the square root of (6*7). The geometric mean of 6, 7 and 8 is the cube root of (6*7*8); and so forth. See also arithmetic mean and median.
Geometric mean return: It is also called the time-weighted rate of return or the average compounded rate of return. It is calculated by taking the geometric mean of a portfolio’s subperiod returns. Where there is a great variance in subperiod returns, this is a better return measure than the arithmetic mean return. Unlike the internal rate of return, it is not influenced by the timing and weights of money-flows.
Gearing: Also referred to as leverage. The employ of debt instruments to fund growth/acquisitions - typically the ratio of the long-term funds with a fixed interest charge. A company is said to be highly geared when its fixed interest capital is dominant and low geared when its capital is predominantly in ordinary shares.
Green Building: This is the practice of increasing the efficiency with which buildings use resources — energy, water, and materials — while reducing building impacts on human health and the environment during the building's lifecycle, through better placement, design, construction, operation, maintenance, and removal. Green buildings are designed to reduce the overall impact of the built environment on human health and the natural environment by:
- Efficiently using energy, water, and other resources
- Protecting occupant health and improving employee productivity
- Reducing waste, pollution and environmental degradation
A similar concept is natural building, which is usually on a smaller scale and tends to focus on the use of natural materials that are available locally. Other commonly used terms include sustainable design and green architecture. The related concepts of sustainable development and sustainability are integral to green building. Effective green building can lead to 1) reduced operating costs by increasing productivity and using less energy and water, 2) improved public and occupant health due to improved indoor air quality, and 3) reduced environmental impacts by, for example, lessening storm water runoff and the heat island effect. Practitioners of green building often seek to achieve not only ecological but aesthetic harmony between a structure and its surrounding natural and built environment, although the appearance and style of sustainable buildings is not necessarily distinguishable from their less sustainable counterparts.
Gross Income : Total income before taxes or expenses are deducted.
Gross Income Multiplier: That number which, when multiplied times the gross income, would give an indication of property value. It is strictly a guide and frequently abused.
Gross Leasable Area: The total usable, rental space in a building.
Gross Lease: A lease of property whereby the lessor is to pay all property charges regularly incurred through ownership.
Gross Operating Income: The total amount of cash generated by the operations of a property.
Gross Profit: Gross profit is calculated by subtracting total cost from total sales. Essentially, it is the 'pure profit' of a business.
Gross Rent Multiplier: A figure that produces an estimate of the property's value when used as a multiplier of the gross income of a property.
Gross Rental: The total rental payable by the tenant, excluding VAT, the tenant’s own electricity and water charges, but including other operating costs recovered by the landlord (if any), as well as promotion expenses payable by the tenant in the case of shopping centres.
Ground Lease: A lease (usually of long duration) of land to a tenant who covenants to erect a building on the premises. The building is security for rentals. If the tenant defaults, the landlord may foreclose on the lease (see Subordinated ground lease).
Ground Rent: Portion of rent attributable to the land alone.
Gross Income : Total income before taxes or expenses are deducted.
Gross Income Multiplier: That number which, when multiplied times the gross income, would give an indication of property value. It is strictly a guide and frequently abused.
Gross Leasable Area: The total usable, rental space in a building.
Gross Lease: A lease of property whereby the lessor is to pay all property charges regularly incurred through ownership.
Gross Operating Income: The total amount of cash generated by the operations of a property.
Gross Profit: Gross profit is calculated by subtracting total cost from total sales. Essentially, it is the 'pure profit' of a business.
Gross Rent Multiplier: A figure that produces an estimate of the property's value when used as a multiplier of the gross income of a property.
Gross Rental: The total rental payable by the tenant, excluding VAT, the tenant’s own electricity and water charges, but including other operating costs recovered by the landlord (if any), as well as promotion expenses payable by the tenant in the case of shopping centres.
Ground Lease: A lease (usually of long duration) of land to a tenant who covenants to erect a building on the premises. The building is security for rentals. If the tenant defaults, the landlord may foreclose on the lease (see Subordinated ground lease).
Ground Rent: Portion of rent attributable to the land alone.
Guarantee: A formal letter issued by a financial institution to the transferring attorney, undertaking to pay the purchase price (or outstanding amount) on registration of transfer of the property into the name of the buyer.
H
Haylett index: A measure of the movement of all input costs in the building industry, especially material and labour costs. Designed to recompense the building contractor for in-contract rises in input costs. Official designation: JBCC CPAP Haylett Formula (Work Group 180). Does not include profit margins for contractors.
Historic or trailing (income) yield: A bourse term, hence it is typically applied to listed properties. It represents the net income of year 0 divided by the current price/value. See also forward (income) yield. In a market of rising net incomes the historic yield would be expected to be lower than the forward yield.
Hurdle rate: The minimum total return (income yield plus expected capital appreciation) required by potential investors to induce them to invest in a property. Also known as the required rate. As such this is normally the correct rate to use when doing discounted cash flow (DCF) analyses. This is a similar concept to a company’s cost of capital, and it is not to be confused with the cost of money (say, overdraft interest rate). One way of measuring the total return on an investment, ex-post or ex-ante, is the internal rate of return (IRR) method. See also discount rate.
Hectare: A hectare (symbol ha) is a unit of area equal to 10,000 square meters (107,639.1 sq ft), or one square hectometre (0.1 kilometre, or 100 meters, squared), and commonly used for measuring land area. A square 100 m on each side is one ha, the most common and convenient SI area multiple used in the surveying profession for day to day legal documents such as land deeds, mortgage surveys, town planning, environmental protection, and other necessary property considerations under the law. Square kilometres are often too large to work with conveniently, and square meters are similarly too small.
Height Restriction: Maximum floors or height of building in metres.
Index: Describes the method of standardizing the base for comparative data in a time series, usually equating the initial measure to 100 and then expressing all other data in exact relation to that base, e.g. the index for office rentals in any year by comparison with a base-year value of 100 might stand at 90 or 110, indicating a fall or rise of 10% respectively.
Industrial-building grades:
• Prime: A property in which space is easily lettable because it satisfies each of the following prerequisites:
a. Generally in a good condition;
b. Satisfactory macro access (i.e. access to freeway);
c. Satisfactory micro access (i.e. from street to building);
d. Proper loading facilities;
e. Eaves >4 m (excluding micro/ mini units);
f. Clear spans;
g. On ground level;
h. Adequate three-phase electrical power.
The eight conditions above are prerequisites for space to be considered prime. However, a building may possess additional enhancements that could improve lettability through increasing the size of the potential tenant pool. Such enhancements could include sufficient office accommodation, adequate parking, sprinkler systems, masonry up to sill height, adequate floor loadings, roof insulation, sufficient yard space and a good location (as opposed to access).
• Secondary: This is industrial space which is not classifiable as prime because it does not satisfy all eight prerequisites for prime space listed above. Such space is typically old buildings or structures, which have been haphazardly renovated. It would have poor access, too little yard space or office accommodation, inadequate goods lifts, no three-phase power and obsolete electrics and ablution facilities. Such space is often (but not exclusively) found in highly urbanised areas. grading of industrial and office space
Industrial
|
Offices
|
Prime +
|
A
|
Prime
|
B
|
Prime -
|
C
|
Secondary
|
D
|
Industrial park: An industrial park is a multi-tenanted complex of industrial buildings, typically surrounded by a security fence with access control and possibly some greenery.
Initial yield: The first year’s expected net operating income (based on existing leases and other income reasonably expected) divided by the purchase price. Therefore the initial yield and the capitalization rate are only the same in those rare cases where a building is let at open-market rentals.
Internal rate of return (IRR): A performance measurement that takes cognisance of the time-value of money. Technically, it is that rate which equates the inflows with the outflows of a cash flow. Also known as the money-weighted rate of return because of the timing and weights of the money-flows influence the return. See also geometric mean return.
Immovable Property: Land and everything permanently attached to it.
Income Approach: The process of estimating the value of an income-producing property by capitalization of the annual net income expected to be produced by the property during its remaining useful life.
Income Property: Real estate developed or purchased to produce income, such as a rental unit.
Income Property: Real estate developed or purchased to produce income, such as a rental unit.
J
JSE: JSE Securities Exchange South Africa.
K
L
Leaseback: A fully repairing and insuring lease (tenant pays all operating costs) for 10 years or longer (with typically 5- yearly rent reviews or fixed annual escalations) with a tenant with a strong covenant.
Lessee: A person or other entity to whom space is rented under a lease. A tenant. See also lessor.
Lessor: One who rents space to another under a lease. A landlord. See also lessee.
Lease: A lease is an agreement between a property owner and a tenant. It stipulates the conditions for property rental, and includes details such as maintenance obligations, the monthly rental rate and the deposit payable. Lease agreements are usually effective for one year, with a mutual notice period of usually approximately one or two calendar months.
A lease can also be used when an individual finances the purchase of a vehicle by leasing it instead of buying it. In this scenario, the owner of the vehicle (known as the lessor) permits the use of the vehicle by a lessee for a specified period of time. During this period the lessee retains the vehicle and pays a rental fee for its use. At the end of the lease term, the lessee must extend the lease period or, alternatively, purchase the vehicle. The lessee also has the option of purchasing the vehicle before the end of the lease, in which case the contract will be terminated early.
Lease Agreement: A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.
Lease with Option to Purchase: An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.
A lease can also be used when an individual finances the purchase of a vehicle by leasing it instead of buying it. In this scenario, the owner of the vehicle (known as the lessor) permits the use of the vehicle by a lessee for a specified period of time. During this period the lessee retains the vehicle and pays a rental fee for its use. At the end of the lease term, the lessee must extend the lease period or, alternatively, purchase the vehicle. The lessee also has the option of purchasing the vehicle before the end of the lease, in which case the contract will be terminated early.
Lease Agreement: A written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.
Lease with Option to Purchase: An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.
Letter of Intent: A letter stating a buyer's intent to make an offer to acquire a certain property. It is not a binding contract.
Leverage: The use of borrowed funds to finance a portion of the cost of an investment.
Levy: This is the owner's proportionate share of the costs incurred by the Sectional Title complex for the month.
Leverage: The use of borrowed funds to finance a portion of the cost of an investment.
Levy: This is the owner's proportionate share of the costs incurred by the Sectional Title complex for the month.
Land Lease: A rental agreement for the use of land but not the improvements thereon.
Land Sale-Leaseback: An arrangement where a person sells property to another but immediately rents it from the purchaser.
Land Surveyor: A qualified professional who is trained to establish, measure and draw out the boundaries of properties and the improvements (buildings and other features) located thereon based on land records and site examinations.
Land Trust: A form of ownership whereby property is conveyed to a person or an institution called a trustee, to be held and administered on behalf of another person called the beneficiary.
Land Use Planning: An effort by a municipality to establish guidelines for the use and development of land within its boundaries.
Land Use Succession: The gradual change in the use of land in an area over a period of years.
Landlord: The owner of property that is leased or rented to others.
Landlord’s Lien: The right of the landlord to retain the possessions of a tenant in the leased premises until the tenant pays his or her outstanding rental
Land Sale-Leaseback: An arrangement where a person sells property to another but immediately rents it from the purchaser.
Land Surveyor: A qualified professional who is trained to establish, measure and draw out the boundaries of properties and the improvements (buildings and other features) located thereon based on land records and site examinations.
Land Trust: A form of ownership whereby property is conveyed to a person or an institution called a trustee, to be held and administered on behalf of another person called the beneficiary.
Land Use Planning: An effort by a municipality to establish guidelines for the use and development of land within its boundaries.
Land Use Succession: The gradual change in the use of land in an area over a period of years.
Landlord: The owner of property that is leased or rented to others.
Landlord’s Lien: The right of the landlord to retain the possessions of a tenant in the leased premises until the tenant pays his or her outstanding rental
Lien: Right of Retention - Where a person has improved someone else’s property or has incurred certain expenses in respect thereof and he has a legal claim to the property, he may retain possession of such property until the debt due to him has been paid. The right to retain possession is called a ‘Lien’.
