Continued from…
Real Estate Glossary P [Part 1]
Percentage Lease
Rent payments that comprise both the minimum of base rent and overage as a percentage of gross income that surpasses a particular threshold. It’s a regular occurrence with huge rental stores.
Lease in which rental payments are dependent on the tenant’s gross sales.
A lease where the rent is based on a percentage of the monthly or annual gross sales on the property. Large stores, especially those in shopping centres, often have percentage leases. The percentage lease is based on the idea that both the landlord and the tenant should benefit from the good location of the rented space. There are many different kinds of percentage leases: the straight percentage of gross income, with no minimum (this is rare), the fixed minimum rent plus a percentage of the gross, the fixed minimum rent against a percentage of the gross, whichever is greater, and the fixed minimum rent plus a percentage of the gross, with a cap on the percentage rental (among others).
The Institute of Real Estate Management, the International Council of Shopping Centers, the Urban Land Institute, and other real estate management groups publish percentage lease tables (see an example table below), which can be used as general guides when negotiating lease terms. For instance, the percentage ranges for bowling alleys could be 8 to 10 percent, 7 to 10 percent for cocktail lounges, and 10 to 12 percent for movie theatres.
Because it’s hard to figure out what a “profit” is, most percentage leases are based on a percentage of gross sales, not gross profits. Gross sales must be fully and correctly defined with the utmost care. It is especially important to be clear about how the percentage applies to sales on credit, sales at other stores, credit card discounts, mail orders, trade-ins, gift certificates, and transactions between stores. Most of the time, sales and excise taxes are not included in the definition of “gross income.” Gross sales is usually defined as “the gross amount of all sales made in, from, or at the leased premises, whether for cash or on credit, after deducting the sales price of any returned merchandise where a cash refund is given.”
The landlord should think about protective clauses that cover: the tenant’s duty to act in good faith; the tenant’s duty not to open a competing store nearby; regular reports of sales volume; the landlord’s right to look at the tenant’s books and records; a tax participation clause; the landlord’s right to stop the tenant from assigning or subletting the space without permission; and the landlord’s right to reclaim the space.
The percentage rent requires detailed auditing procedures that are hard to use for small businesses, hard to enforce, and don’t apply to businesses that provide personal services, like real estate brokers or lawyers.
A lease in which the rent is calculated as a proportion of the lessee’s gross revenue.
Percentage rent
Amount paid by a retail tenant above and beyond the standard rent. It’s usually expressed as a percentage of tenant retail sales above a predetermined threshold.
Perch
In land surveying, a rod is a unit of length that is equal to 16.5 feet.
Percolation Rate
The pace at which water travels into soil through the walls of a test pit; used to assess the appropriateness of soil for wastewater disposal and treatment.
Percolation Test
A field soil permeability test used to verify a material’s suitability for wastewater disposal and treatment.
A perk test is a way for a hydraulic engineer to find out how well the soil can absorb and drain water. This information helps figure out if a site is good for certain kinds of development and for putting in septic tanks or injection wells for sewage treatment plants. A percolation report must be part of the application for registering a subdivision with HUD.
Percolating water is water below the surface that doesn’t stay in a well-defined channel or bed. If the water stays in a channel or bed, it’s called a lake or stream. An escrow in which the escrow agent has all the documents, funds, and instructions needed to close the deal.
A test for determining the drainage properties of soil.
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Perfect escrow
An escrow in which the escrow agent has all the documents, funds, and instructions needed to close the deal.
Perfecting title
The process of getting rid of all claims against a title. For example, a wife could sign a quitclaim deed to give up any possible dower claim. To “perfect” something means to make it official, like when you file a UCC financing statement or an affidavit of a surviving joint tenant.
Performance bond
A bond is usually put up by someone who is going to do work for someone else. It guarantees that a project or task will be done the way it was agreed upon. A performance bond is often asked of a contractor to make sure that a project will be finished. Usually, the bond says that if the contractor doesn’t finish the job, the surety company will either finish the job or pay damages up to the amount of the bond. Usually, a performance bond is combined with a labor and materials bond. This guarantees the owner that the surety company will pay all bills for labor and materials contracted for and used by the contractor if the contractor doesn’t do their job. So, the performance bond is the best way to protect the owner from subcontractors who file mechanics’ liens.
Most of the time, a performance bond costs about 1% of the total cost of building something. To get one of these bonds, a contractor must have a good track record.
A bond offered by an insurance company to ensure that a building contract is completed.
Performance report
Collecting and sharing project performance data to assist assure project success.
Performance standard
Limiting harmful activities is a method of land use regulation that addresses concerns about urban systems such as traffic, watershed, green space, air quality, and other aspects of the environment.
Performing
A loan or other receivable for which the borrower has made all of the loan’s scheduled interest and principal installments.
Perimeter space
A defined region around the outside of a structure.
Periodic caps
Adjustable rate mortgages have provisions that limit the amount of change in the contract interest rate from one change date to the next.
Periodic costs
Taxes and insurance are examples of fixed property costs that happen regularly but not very often.
Periodic tenancy
Any leasing arrangement that renews automatically each period unless one of the parties gives notice of cancellation.
A lease that lasts from one period to the next, such as from one month to the next or from one year to the next. All of the tenancy’s rules and conditions carry over from one period to the next and stay in place until the right notice is given to end the lease. This element of continuity is what makes the periodic tenancy what it is. If a yearly rent is set, the lease is for a whole year, whether the rent is paid monthly or three times a year. This rent deposit is what makes a periodic tenancy different from a tenancy at will.
A periodic tenancy can happen if both parties agree to it, but it usually happens by default when the rent is set at a certain amount per week, month, or year but there is no agreement on how long the tenant will be able to stay.
Permanence potential
The preference for leasing residential units to households with a track record of long-term occupancy.
Permanent financing
In contrast to an interim short-term loan, a long-term loan. Certain lenders specialize in providing short-term financing for the construction of condominiums, shopping malls, and other large projects. Other lenders specialize in long-term financing to “take out” the interim or construction lender. Permanent loans used to be 20 to 30 years long with fixed interest rates. Nowadays, a variable interest rate can be used, or a rate can be set for a set period of time and then renegotiated.
With construction loans, there is frequently a tri-party agreement covering the permanent lender, interim lender, and borrower to ensure joint use of documents; the interim lender agrees not to assign the loan to another lender; and the interim loan is assigned to the permanent lender within a specified time upon completion of construction and satisfaction of specified conditions.
A mortgage on a piece of real estate that is for a lengthy period of time.
Permanent loan
Mortgage finance with a long term horizon.
A long-term real estate loan used to fund a completed development ( as opposed to a construction loan).
Permeability
The pace at which groundwater is transmitted through soil or rock ( or gravity water in the area above the water table).
Permissive waste
The failure of renters or life tenants to take care of and fix up the real estate they are responsible for. Also known as careless waste or passive waste. For example, a tenant’s failure to keep the property well-protected during the winter can lead to damage to the plumbing and improvements. This is called “permissive waste.” In this case, the landlord could sue for damages or, in some cases, try to get a court order to stop the waste from happening again.
Perpetuity
A never-ending flow of money or revenues.
Person
Person is defined differently by different laws because a legal person doesn’t have to be a single person. It can also be a corporation, a government or government agency, a business trust, an estate, a trust, an association, a partnership, a joint venture, two or more people with a common interest, or any other legal or business entity.
Personal assistant
A person who works for a licensed real estate agent and does things like handle paperwork, set up appointments, coordinate marketing efforts, and take care of the top producer’s personal business. If the personal assistant isn’t licensed, the person who hires them must set clear rules about what the assistant can and can’t do, based on state license laws. Most of the time, these assistants must be treated as employees because they don’t meet the safe harbor rules for independent contractors.
Personal consumption expenditures
Individual spending on commodities such as food, shelter, and clothes is described as an economic phrase.
Personal guarantee
An individual’s pledge to endorse a note or obligation.
Personal income tax rates
The federal tax rates that are applied to individual income in order to calculate the government’s tax burden.
Personal liability
Borrowers incur liability, allowing lenders to sue them personally for contract compliance.
The duty to pay off a debt with all of one’s own money and property. Most of the time, shareholders in a corporation and limited partners in a limited partnership syndication are not personally responsible for the debts of the corporation or syndication. With a nonrecourse loan, the borrower doesn’t have to pay back the loan (the lender must look solely to the sale of secured property for recovery of amounts owed). A guarantor is personally responsible if the borrower doesn’t pay back the loan.
Personal performance (contract)
A contract that mandates one party to provide a service or take action. This includes, for example, leases and mortgage loans that demand monthly payments. In most cases, these contracts aren’t entirely assignable because the lessee or mortgagor is still responsible for the obligation.
Personal property
Other than real estate, ownership rights in all other types of property. Securities, a partnership stake in a corporation, and ownership of a car are all examples. Also known as personality.
Furniture and tenant fixtures are frequently acquired in connection with real estate acquisitions since they are transportable and not permanently fastened to the land or structure.
Tangibles and movables, such as chattels, that are not considered real property (also called personality). In contrast to a deed for real estate, a bill of sale is used to transfer ownership of personal property.
Items of personal property are frequently the subject of disagreements between buyers and sellers, most often because the seller attempts to substitute a similar item or because an item is considered a fixture. When purchasing a home, some buyers include a condition in their contracts stating that they will receive the appliances “as currently installed and used in the premises.”
When a tree is cut down, it is no longer actual property, but rather personal property. However, when lumber is combined and utilized to build a house, it once again becomes a fixture or real property of the owner.
Personality is a possession or object that is not actual property.
Personal representative
The name for the person named in a will or chosen by a court to settle the estate of a person who has died. Before there were uniform probate court rules, this person was called an executor or administrator.
Personal residence
A home that is currently occupied by the owner.
Personal rights
Personal liberties are essentially drawn from the United States Constitution’s Bill of Rights and other amendments and sections.
Personality
Everything that isn’t firmly tied to the land.
Petition
A formal request or application to a governing body, like a court, for help or to right a wrong. A petition to a court of equity for the division of real estate, a petition filed in circuit court by a respondent in a state discrimination hearing, or a petition to the local zoning board for a change in zoning are all common petitions in real estate.
PFR
Property Funds Analysis.
Phantom income
Taxable income that may or may not have been received.
Phase I audit
A preliminary assessment of a property site to determine potential contamination or noncompliance with environmental laws and regulations, which is frequently required by lenders for commercial and industrial properties.
Formal standards have yet to be established. The American Society of Testing and Materials recommends that the Phase I environmental site assessment be performed by or under the supervision of an environmental consultant and include a review of public records, site reconnaissance (for evidence of hazardous waste, underground storage tanks, leaks, and suspicious features), interviews with current owners and operators, evaluation, and report preparation. To determine the extent of contamination, approximately 20% of the properties require a more detailed Phase II assessment. Corrective actions, including removal, are part of the Phase III assessment.
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Photogrammetry
The art or science of acquiring accurate measurements using photography.
Photosynthesis
The process by which green plants synthesize water and carbon dioxide and turn them into plant components in the form of sugar and carbs using the energy from absorbed light.
Physical depreciation
The depreciation of property as a result of the passage of time and the activity of the elements.
Physical deterioration
Appraisers use this term to denote any decrease in value caused by physical wear.
The loss of a building’s worth due to wear and tear over time, as measured by its reproduction cost.
A kind of financing in which private mortgage insurance is not included (PMI). One loan is “piggybacked” on top of another, with a first mortgage covering 80% of the value. Loans are frequently issued by the same company. There are lower closing costs because the loans are being made at the same time. Additionally, the interest paid on the second loan reduces taxable income, while the PMI payments do not.
Physical durability
The ability of a structure to tolerate physical wear and tear.
Physical life
The length of time that a building remains structurally sound, which is determined by the quality of its upkeep.
When a building is considered habitable, it is older than it is economically.
Physiography
A physical geography word that has traditionally been used to define the composite aspect of the terrain over wide areas.
Pier
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A column is a piece of support that goes under a building and is usually made of steel-reinforced concrete. Foundation piers are made by digging holes in the ground to a certain depth and filling them with concrete. Some foundation piers, like those that hold up bridges, can be above the ground.
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The part of a wall that supports the weight of the wall between windows or other openings.
Piggyback
When it comes to industrial properties, a system in which goods are moved from one place to another by loading truck trailers with goods onto rail flatcars.
Piggyback loan
A second mortgage loan is formed at the same time as a first mortgage loan, with the latter having a maximum loan-to-value ratio of 80%. The “piggyback” second mortgage allows a buyer to get a loan amount more than 80% without having to pay mortgage insurance on the first loan.
A type of loan that tries to stay away from private mortgage insurance (PMI). The first loan, for 80% of the home’s value, is “piggybacked” with a second (or third) loan for the same amount. Most loans come from the same company. Since the loans are made at the same time, there are fewer closing costs. Another benefit is that interest paid on the second loan lowers taxable income while PMI payments do not.
A loan that can be used for both construction and permanent purposes.
Pilaster
A vertical architectural member or projection from one or both sides of a wall that is used to make the wall stronger by adding support or stopping it from buckling.
Pipeline risk
The period of time between committing to a loan and selling the debt. During this time, the mortgage banker faces significant risk.
Pitch
Roof slope is calculated by dividing the vertical distance in inches (rise) by the horizontal distance in feet (span).
PITI
The monthly principle and interest payment on a house mortgage loan, as well as monthly escrow payments for annual property taxes and hazard insurance.
This is an abbreviation for principal, interest, taxes, and insurance. It was originally used in a mortgage payment that included everything. Private mortgage insurance (PMI), mortgage insurance premiums (MIP), flood insurance, and dues to a homeowners’ association can also be part of the monthly payment.
Place
A dead-end street that is longer than 125 feet and serves more than three lots.
Placement fee
A fee that a mortgage broker charges for helping a borrower and a lender work out a loan.
Plain language law
A federal or state law that says that certain consumer contracts have to be written in a clear and logical way, using words that people understand, and divided into sections with clear titles. Some states, like Hawaii and New York, require that real estate rental contracts and consumer loan contracts be written in easy-to-understand language.
Plaintiff
The person who files a lawsuit; the person who is being sued.
Planned Unit Development (PUD)
A planned, created, operated, and maintained area with one or more structures and common areas; may incorporate several land uses (for example, commercial, residential).
A development project that generally involves a combination of land uses and densities that are not authorized by standard zoning. It is permitted since the entire development is seen as a whole.
A fairly new idea in housing that aims for a high density of homes, the best use of open spaces, and more flexibility for residential land and development. This usually leads to cheaper homes with less upkeep costs. PUDs are often written into zoning laws or listed as a conditionally permitted use. They are also sometimes called “planned development housing.”
The proposed PUD zone needs to be approved by the local government. The common areas are taken care of by a community association that isn’t for profit. The developer files a declaration of covenants and restrictions and a subdivision plat, which says that common areas are only for association members and not for the general public.
The PUD idea is actually a “overlay” zoning that lets a developer get a higher density (and sometimes a mix of commercial and industrial uses) than the underlying zoning allows. Because most buildings are close to each other, there is more green space for parks and other activities.
Compare, for example, the two pictures on page 329. The first is a version of a subdivision with a typical layout and 368 housing units. Note that it uses 23,200 linear feet of street and only leaves 1.6 acres for parks. Compare this to the PUD, the second figure. The size and shape of both subdivisions are the same. But by slightly shrinking lot sizes and grouping them around cul-de-sac streets with limited access, the number of housing units stays almost the same at 366. The street areas shrink by 17,000 linear feet, and open space grows by 23.5 acres. Also, this clustered plan could be changed to make room for 550 patio homes or 1,100 townhouses using modern building designs.
A PUD is very different from a condo. In a PUD, each unit is a lot. This means that the people who live in PUDs own the land under their homes. In a PUD, there is also no direct interest in the common areas, the community association is a corporation, and the PUD is created by covenants in the deed or master lease. In a condo, the unit is an air space, and there is a share of ownership in the common areas. This means that owners do not own the land directly under their units. Most of the time, the owners’ association is not a separate legal entity, and the condominium is made by recording a declaration. This is how state condominium laws work. PUDs are also used to build housing at resorts and even shopping centres.
Most underwriters say that a de minimis PUD is one where the community association has little or no effect on the value of the property. This term is also used by Fannie Mae and Freddie Mac. Fannie Mae’s definition of a PUD is: “A planned unit development with a small amount of common property and improvements, which have little effect on the value of individual units in the development, so that the owner’s association has a small amount of financial responsibility for maintaining the common property and improvements.” Fannie Mae and Freddie Mac both let appraisers use the Uniform Residential Appraisal Report (URAR) to value a unit instead of their special condo/PUD appraisal forms because the PUD part doesn’t change the value of the unit much. As a rule of thumb, when underwriters try to figure out what “little effect on value” means, they use 2% or less.
A zoning designation that permits a subdivision’s design to be more flexible.
Planning commission
A government group that is usually set up at the city, county, or regional level to make a master plan and control how land is used, designed, and built.
Plans and specifications
Plans include all the drawings for a proposed development, like the building, the mechanical and electrical drawings, and so on. Specifications are the written instructions to the builder that tell him or her everything about the size, materials, workmanship, style, fabrication, colours, and finishes. They add to the information on the working drawings.
Plant
The place where a title insurance company keeps all of the full title records for the properties in its area. The plants also keep copies of the original title reports (called “starters”) that the company and sometimes other companies have made. Many of the bigger title insurance companies have their own “title plants,” or record rooms, where they keep copies of all instruments that have been recorded. Most of the time, these title plants record hundreds of new documents every day, and many of them have made good computer systems for indexing by parcel of land. This makes it easier to look up titles in the grantor-grantee indexes, especially when the parties have the same last name. Some plants have computers that are linked to the computer at the government recording office. This way, as soon as a new document is put on record, the title plant knows about it.
Plaster finish
The last thin layer of fine-grain plaster used as a decorative finish over several coats of coarse plaster on the lath base. Most finishing plaster has more lime than sand, while coarser plaster has more sand. Plaster is soft when you put it on the wall, but as it dries, it gets hard. Plasterboard or gypsum board are often used instead of plaster in newer buildings because they don’t have to harden.
Plat
A planned subdivision diagram showing the placement of all roadways, sites, and easements.
A subdivision or site plan map or maps.
A map or plan of a certain land region.
Plat book
A public record of maps of divided land that show how the land is divided into blocks, lots, and parcels and how big each parcel is.
A public record that includes maps of land and street divisions.
A city or county maintains a register of documented plat maps that depict the borders, forms, and sizes of property lots.
Plat lot and block number
Unambiguous way of providing a property description that identifies each parcel on a surveyed map of a subdivision.
Plat map
A town, section, or subdivision map that shows the location and boundaries of individual properties. A plat typically depicts details such as lots, blocks, sections, streets, public easements, and monuments. A plat may also include dates and scales, engineering data such as floodplain location, restrictive covenants, elevation, and adjoining owner names. Plats and platting are commonly used in subdivision procedures, which often require the sub-divider to submit a preliminary plat for review. After the improvements have been completed and approved by the appropriate officials, the sub-divider files a final plat.
Plate
A flat piece that forms the bottom of a support. The sole plate or sill rests on the foundation and is where the studs start. The wall plate goes on top of the wall studs and gives the rafters a place to rest.
Plaza
A public square or gathering place that is usually in the middle of an area and is often a shopping complex.
Pledge
Transfer of property to a lender in order to secure repayment of a debt. Hypothecations, such as a mortgage, are distinct from pledges in that the property subject to the hypothecation is pledged as security rather than ceded.
When the borrower, the seller, or another party promises sufficient funds to cover the excess amount, certain savings and loan associations will lend more than their legal maximum. However, the pledgor is unable to withdraw monies from the pledge account unless the pledge agreement permits it. As a result, the lender is able to better manage its assets.
Stock certificates issued to a lender are a popular kind of pledge.
Pledged Account Mortgage (PAM)
The mortgagor must commit a quantity of money at loan closing to be set aside to support periodic mortgage payments.
Plot plan
A plot is a plan that shows how the improvements on a property site are set up. Usually, the plot plan shows the location, size, parking spots, landscaping, and other details.
A graphic depicting the projected or current usage of a particular piece of land.
Plot ratio
the building area to site area ratio
Plottage value
Land value is increased by combining small lots into bigger ones.
When two or more adjacent lots are combined or consolidated into one larger lot, their usability and value go up. Plottage is also called assemblage, but the word assemblage is usually used to talk about the process of consolidation. This term is often used in eminent domain cases to talk about how lots that are close to each other have more value.
Plumbing walls
The walls that are given along sections where there are no preparations for pipe shafts, such as in the kitchen and bathrooms.
Pocket license card
The state real estate licensing agency gives out what is sometimes called a “wallet card” as proof of a real estate license. A licensee should always have this card with them and show it to anyone who asks for it when they are doing business with them about real estate.
Pocket listing
A listing that the listing broker or salesperson keeps for themselves and doesn’t share with other brokers in the office or with other members of a multiple listing service. This is a bad idea in the business world, and many brokers’ offices won’t let you do it. Under MLS rules, a member must report any new listing within a short amount of time, usually two or three days, unless the seller says otherwise in the listing agreement.
Point of beginning (POB)
A street intersection or a specific monument that serves as the starting point for a metes-and-bounds description of property. To be complete, a legal description of a property must always return to the beginning to accurately describe the area.
Point of switch
When one rail track separates from another and diverges (for example, a spur track leaving a drill track), this is the initial point of separation.
Point Source
Water contamination caused by a single source, such as a sewage treatment facility or a stormwater outfall.
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