Real Estate Glossary Terms Beginning With – L

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Updated: November 22, 2021

Terms Beginning With - L

Property Development & Investment Glossary, Terms & Definitions

Laches

An equitable theory utilized by courts to bar or prevent the assertion of a right or claim owing to unreasonable delay or failure to assert the right or claim. Laches is comparable to the statute of limitations, which is a legal (rather than an equitable) law used to preclude a claim filed after a statutory amount of time has passed.

Lacustrine Wetland

A wetland is one that is connected with bodies of standing water, such as ponds, lakes, and reservoirs.

Lag time

An intended pause between the completion of the predecessor activity and the commencement of the successor activity.

Lanai

A balcony, veranda, porch, or covered patio is a common term in the western or southern regions.

Land

A plot that does not have any structures but may have some improvements to the land.

The part of the earth's surface that isn't covered in water.

Everything on the earth's surface, including trees, crops, and water, as well as the minerals beneath the soil and air right above it, reaches all the way to the planet's core. Real property encompasses not just the ground itself, but also all the structures built on it, such as buildings, fences, and other fixtures, as well as any and all rights related to the property itself, such as easements, rents, and profits. The term "land" has come to be used interchangeably with "real property" and "real estate."

Land acquisition loans

Loans to fund the acquisition of raw land; possibly the riskiest type of real estate loan.

Land bank

Purchased land for future development. In some places, the government will condemn and bank scenic property in order to prevent negative development and to limit urban or suburban expansion or sprawl.

Land banker

A developer is someone who improves raw land for building purposes and keeps a stock of these kinds of lots as part of their business.

Land banking

The acquisition of land for future use.

Land capacity

An important first step in evaluating a property's highest and best use is assessing the land's capacity to accommodate both capital and labor.

Land contract

Legal and equitable ownership are retained by the seller in an installment contract for the sale of a property, while the buyer receives equitable ownership (record title).

A property transaction in which the seller keeps title to the property while the buyer is given possession and receives ownership after a set debt payoff.

Land Cover

The materials that cover the ground, such as plants and concrete.

Land description

A written description of a certain piece of real estate. In a deed, an assignment of a lease, or a mortgage, the legal description of the property should be complete. In a sales contract, on the other hand, the description only needs to be enough to identify the property. Often, a street address is enough for this.

Land development

The commercial activity of purchasing vast areas of property, subdividing them, and selling off individual smaller portions. Subdivision is another term for subdivision.

The process of clearing, grading, and installing utilities on raw ground in preparation for the construction of improvements.

Land development loans

Loans to fund the installation of on-site and off-site land improvements required to prepare the property for building.

Land economics

The scientific study of land and methods for assessing and implementing the highest and best use of land.

Land grant

A government grant of public lands, usually for highways, railroads, or agricultural institutions (thus the term land-grant college).

Land lease

A ground lease is a contract that allows you to rent land

Land leaseback

A creative financing mechanism (typically employed with raw land that a developer wishes to enhance) in which a developer sells the land to an investor who leases it back to the developer under a long-term net lease and subordinates the fee ownership to the lender who provides development financing. The ultimate result of the land leaseback transaction is maximum leverage, including 100% land financing and, because the land is subordinated to development finance, most likely 100% development financing as well.

Land packaging

The combining of numerous smaller plots of land into a bigger plot for a specific purpose.

Land planner

Sets out the fundamental "plan" for how the property will be used, including the location of roadways, utilities, structures, water retention areas, and other aspects.

Land poor

The state of not having enough money because you own too much real estate that doesn't bring in any money but keeps costing you money every month.

Land residual technique

A way to figure out the value of real estate that is similar to the building residual technique of capitalization, except that the amount of income earned by the improvements at the highest and best use of the site (the return on and recapture of the capital investment) is subtracted from the annual net income. The resulting number (the land residual) is then capitalized at the land capitalization rate and added to the cost of the improvements to get the real estate's appraised value.

Land sale leaseback

The sale of property and the subsequent leaseback of the land by the seller, who then becomes the landowner's tenant.

Land trust

A trust set up by the owner of real estate and made up of only real estate. As with all trusts, a deed in trust gives the trustee legal and equitable ownership of the property.

The beneficiary, who is usually the trustor, has the right to use the property in the trust (that is, the person who created or established the trust). Most of the time, only living people can set up a land trust, but both living people and corporations can be the beneficiaries. A land trust's beneficial interest in real estate is considered to be personal property. The person who gets the property has the right to use it, get money from it, and sell it. In a land trust agreement, the trustee can only do anything with the property if the beneficiary gives written instructions. The trustor and the trustee both sign the land trust agreement. A beneficial interest in a land trust can be transferred without a deed and all its formal requirements. This is done by assigning the interest. It can be used as collateral for a loan without having to file a mortgage (through a collateral assignment). Courts have said that real estate in a land trust cannot be split up by the beneficiaries because their interest is not in real estate but in personal property.

A land trust usually lasts for a set amount of time, like 20 years. If the trust term doesn't get extended by the beneficiary, the trustee is usually required to sell the property and give the beneficiary the net money from the sale.

Land trusts are popular among people who own more than one piece of land and want to protect themselves from what happens if one owner gets divorced, loses a court case, or goes bankrupt. Since ownership is kept secret, a land trust is sometimes used to keep things quiet when putting together different pieces of land. Land trusts can also help avoid title liens and partition suits, cut down on probate costs, and help people who don't live in the state where the land is located avoid extra probate costs and inheritance taxes there. If the real estate is to be sold, the trustee should sign the contract of sale and the deed.

A type of real estate ownership that allows for restricted responsibility, conventional tax status, and private ownership.

Land usage

zoning restrictions govern the purpose for which land is used.

Land-use

The human activities that take place within a certain region of the terrain.

Land-use controls

Controls on land use enforced by the government in order to ensure orderly growth.

Land-use intensity

A way to use land that is based on local zoning laws or comprehensive development ordinances and is meant to connect land, building coverage, and open space. The land-use intensity (LUI) scale gives a series of density ratings (percentages) for floor area, open space, living space, and recreation space. When land-use intensity is used, the floor area ratio determines how much floor space a building can have in relation to the size of the lot on which it will be built. Minimum requirements for open space are based on a percentage of the actual floor area that can be built on a certain zoned lot. The LUI has become an important tool for making planned unit developments happen (PUDs).

Land-use map

A map that shows the different types and amounts of land use.

Land-use plan

A plan that a developer of a planned real estate project sends to a local government agency as part of the process of getting a permit under local comprehensive development ordinances.

Land, tenements, and hereditaments

The total possession of all the rights in a freehold estate; a medieval expression used to characterize all sorts of immovable realty, including the land, buildings, and all appurtenant rights thereto.

Landlease communities

The term "community" or "park" refers to a grouping of prefabricated homes where the property on which the homes are situated is leased by the owners. It's common for the owner to provide a pad for the residence, as well as utility hookups for the home (electricity, plumbing, and water).

Landlocked

Land that can't be reached by a public road or way, like parcel C in the figure below.

If parcel C used to be a part of parcel A or parcel B, a court would give the owner of parcel C an easement of necessity over the parcels it used to be a part of. This easement of necessity only lasts as long as necessity does. When land is taken for a limited-access highway, it can sometimes lead to the creation of landlocked parcels.

A property that does not have access to a public roadway is said to be in this state.

Landlord

A person who owns a rental property.

The person or company who owns a property that is leased to a tenant.

The person who rents out the space or the owner. The landlord keeps a reversionary interest in the property, which means that when the lease is up, the property will go back to the landlord.

Landmark

There are several ways to describe land boundaries; the most common are metes-and-bounds, where a feature of the terrain or property serves as a symbol of the place.

Landscape architect

An architect who specializes in the design and placement of trees, other plants, and other aesthetically pleasing items on land. The focus is usually on creating the grounds for a structure or set of buildings.

Landscaping

Plants like shrubs, bushes, and trees on the land around a building. In general, landscaping costs can be spread out over 15 years, but this depends on the situation. Most of the time, though, land itself is not a tax-deductible expense.

Lane

A tiny road with no curbs or sidewalks; common in older developments.

Larger parcel

A term that is used in condemnation cases when the court looks at the amount of severance damages when only part of the land has been taken. Most of the time, ownership, use, and proximity must all be the same. But it has been decided that integrated use, not physical proximity, is the way to figure out if a piece of condemned land is part of a single tract that deserves severance damage.

Late charge

A fee that a borrower has to pay if they don't pay a regular loan payment when it's due. It is usually not thought of as interest, but as a fee for the extra work and trouble that the creditor had to go through. The courts, on the other hand, won't enforce excessive late fees, like 10% or more of the unpaid principal, because that would be considered a penalty.

Late date order

The promise that a title insurance company will give a buyer an owner's title insurance policy that covers the seller's title as of the date of the contract. This is also called a later-date policy. At the closing, the buyer tells the title company to record the deed and expand its search to show that the buyer is the current owner of the property.

Late fees

Fees are charged for typical home loans when payments are received after the 15th of the month in which they are due. Commercial mortgages contain this term as well.

Late finish (LF)

The latest feasible time for an activity to be performed without causing a delay in another activity or the project's completion date.

Late start (LS)

The latest potential time for an activity to commence without interfering with another activity or the project's completion deadline.

Latent defects

Hidden flaws that will manifest themselves in the future.

Hidden structural problems that the seller knows about but the buyer doesn't, and that are hard to find during an inspection. If the seller or the broker knows about problems like termite damage, a broken water heater, or a dangerous staircase behind a basement door, they must tell the person who wants to buy the house. If you don't tell the buyer these things, it's a hidden lie, and the buyer can get out of the contract.

Lateral and subjacent support

The help that one piece of land gets from the land next to it is called "lateral support." It is not a right in the land of a neighboring owner. Instead, it is a right that comes with owning the land that gets the support. Subjacent support is the help that the surface of the earth gets from the strata that are below it.

Both types of support follow the same basic rules. In essence, a neighbour who owns land next to yours or who owns mineral or other rights under your land has a duty to keep your land in its natural state. This duty of support doesn't apply directly to any of the improvements on the land, but it does make the landowner responsible for damage to improvements on the neighbor's land if the land would have sunk anyway because of the excavation, even if the improvements weren't there. In general, if a property owner wants to dig on their property, they can reduce their risk of being sued by giving their neighbors enough notice so they can take the necessary precautions.

Lath

Thin pieces of wood or metal that are nailed to rafters, ceiling joists, or wall studs to make a base for slates, tiles, shingles, or plaster.

Law

That set of rules that people follow to run their own lives. Real estate law comes from state and federal constitutions, state and federal laws, rules from federal and state boards and commissions, county and city ordinances, and, most importantly, court decisions. Private law is the law that the parties make for themselves in their legal documents. For example, the bylaws and house rules of a condominium spell out in detail how the owners should act, and if someone breaks these rules, the owners can take legal action against the person who did it.

Law day

The date when a debt must be paid; sometimes called the closing date. Under common law, the person who owed the mortgage had to pay it off by the law day. If the borrower doesn't pay on time, the mortgagee has the right to take possession of the property. The defeasance clause says that if payment was made by the law day, the mortgage would be null and void, and the mortgagee would lose all rights to the property.

Law of agency

The legal rights, obligations, and liabilities of the principal, agent, and third parties arising from an agency relationship.

Law of descent

The rules and procedures that govern how a state distributes a decedent's inheritance among heirs in the absence of a testament.

Lawful interest

This is the maximum amount of interest that can be charged by law without being considered usurious.

Layer

Spatial data of a common type or subject in a geographic information system.

Leaching cesspool

In plumbing, a cesspool that doesn't keep water out and lets liquid waste percolate into the soil around it.

Lead lender

Usually, a local lender who pays the first part of a large loan and sets up the rest of the financing with one or more institutional lenders. The loan is taken care of by the lead lenders.

Lead poisoning

A blood test can find out if someone has this serious disease, which is caused by having a lot of lead in their bodies. Lead can cause a lot of health problems, especially in young children who have trouble learning. Lead is often found in lead-based paint, lead pipes that leak into water, and lead solder.

Lead time

A purposeful hastening of the commencement of a successor work after the predecessor activity has been completed (in part).

Lead-Based Paint Hazard Reduction Act (LBPHRA)

A federal law that lays out a comprehensive plan for reducing exposure to lead paint hazards. The act and the rules that go along with it require sellers, landlords, real estate agents, and renovators to take action if they disturb more than two square feet of old paint in homes built before 1978. This is to make sure that lead-based paint hazards are taken into account when homes and apartments built before 1978 are sold or rented out. The HUD booklet Protect Your Family from Lead in Your Home must be given to each tenant or buyer.

The law says that you have to tell people about any tests for lead and/or the possibility of lead-based paint, but it doesn't say that you have to test, remove, or fix the problem. Even though the buyer is not the tenant, the buyer must be given the chance to test for lead-based paint within ten days or at a time that both parties agree on, or the chance may be taken away. Real estate agents are responsible for making sure that sellers and landlords follow the rules. If you don't, you could be fined up to $11,000 per mistake. A rule that went into effect in April 2010 says that all contractors and maintenance workers who work on homes, child care centres, and schools built before 1978 that have lead-based paint must be trained on how to follow safe work practices. The rule applies to renovations, repairs, and painting, but not to minor maintenance or repairs, which are defined as less than six square feet of lead-based paint in a room or less than twenty square feet of lead-based paint on the outside.

Some owners of homes built before 1978 don't have to make the disclosures. This includes owners of homes for the elderly, vacation homes, and rental properties that have been certified as "lead-based paint free."

Leakage

The proportion of total spendable income that is unsatisfied by existing retail offerings and travels to shops outside of the local trade area.

Lease

A legal instrument that grants a restricted permission to utilize a property. The document normally specifies all lease conditions as well as permissible use.

the formal agreement that allows one party to utilize another's property in exchange for a fee.

A contract that grants the lessor (the tenant) the right of possession for a set amount of time in exchange for the lessee paying rent (the landlord).

A lease agreement for the use of rented property.

A written or unwritten contract that gives someone the right to own and use real estate for a certain amount of time. The lessor (landlord) gives the lessee (tenant) the right to use the property, but he or she can take it back after the lease term is over (reversionary right). In practice, the lease is both a deed (which transfers the right to live in a place) and a contract (to pay rent and assume other obligations). In exchange for rent, you get to use the land and make money from it. The right to get back the contract rent and the reversion is what makes up the lessor's leased fee estate. The lessee's interest is called the leasehold estate, and it includes the right to use and live in the leased estate without sharing it with anyone else. An "agreement for a lease" means that a lease will be signed at a later date.

In the past, landlord-tenant relationships grew out of early agricultural leases. Under these leases, the landlord's only responsibility was to let the tenant live in peace. In exchange, the tenant agreed to pay rent. The landlord wasn't expected to help run the land, and leased land was in the sole control of the tenant. The landlord wasn't allowed to get in the way. In the simplest terms, the relationship between a tenant and a landlord was just one of possession and payment. If a tenant didn't pay their rent, they would be kicked out. This was a good plan for a place in the country.

Today, contract law decides whether or not a lease is valid. Even though no special words are needed to make a landlord-tenant relationship, a lease should be written down. If it isn't, the law will tell the people involved what to do. The lease can be written, spoken, or implied, depending on the situation. However, the laws of the state in which the property is located must be followed. As the owner of the property, the lessor is usually bound by an implied covenant to let the lessee enjoy the property in peace. By this agreement, the lessor says that the lessee can't be kicked out by someone who claims to be the real owner of the property and has a better title than the lessor. A valid lease has the same requirements as a contract, which are, in general, the following:

Capacity to contract: Both parties must have the legal right to make a deal. (It's important to note, though, that a minor can usually sign binding contracts for necessities, and housing may be seen as one of the most important ones.)

Mutual agreement: Both sides must agree on the same thing and back it up with valid consideration.

Legal goals: The goals of the lease must be legal. For example, it is usually against the law to rent a building to make and sell methamphetamines, so a lease with that goal would be invalid.

Act against frauds: Most state laws about fraud apply to leases. They usually say that leases for more than one year (one year plus one day) or leases that can't be fully carried out within one year of the date they were made must be in writing. A one-year lease might not meet the requirements of the statute of frauds if the first day of the lease starts after the date the agreement is made. In the same way, a lease for less than a year may be covered by the statute of frauds if more than a year goes by between the date it was signed and the date it ends. No matter how long the lease is, it should be written down to avoid disagreements and misunderstandings. Most of the time, a lease that doesn't follow the statute of frauds isn't enforceable.

Signatures: The landlord (and his wife in a dower state) must sign the lease because the courts see it as a transfer of real estate. Even though it's a good idea for the lessee to sign the lease, they don't have to because taking possession of the property and paying rent shows that they agree to the terms of the lease. When two or more tenants sign a lease, they become jointly and severally liable. The only way to avoid this is to sign separate leases that spell out what each tenant has to do.

Description of the leased property: A clear description of the leased property should include only the street address and/or apartment number for homes, apartments, and small commercial properties. Large commercial site leases, on the other hand, must be more detailed and include things like a floor plan, total square footage, storage areas, parking, and so on. If the lease has to do with land, like a ground lease, it should have a legal description.

Use of the property: The lessor can put rules in the lease about how the leased property can be used. This is especially important when the property is a store or a commercial space. For example, a lease might say that the property can only be used for "a Big Belt buster Burger Bonanza Bazaar drive-in restaurant, and nothing else." If the lease doesn't say what the property can be used for, the tenant can use it for any legal purpose.

Term of lease: The term of the lease is the length of time the lease will be in effect. It should be stated clearly, preferably with the start and end dates of the term as well as the total length of the lease "for a period of 30 years, from June 1, 1968, to May 31, 1998."

"Courts don't like leases that last forever and will rule that such leases are not valid unless the words of the lease and the circumstances around it make it clear that this is what the parties wanted. The laws of each state govern leases and they must be in line with those laws. Some state laws limit the length of agricultural leases and leases for 100 years or more. Most of the time, neither the landlord nor the tenant's death changes the length of the lease.

Possession of rented property: In most states, the landlord has to let the tenant live in or have control over the rented property. So, if the premises are occupied by a holdover tenant or an adverse claimant on the date of a new lease, the landlord has a duty to the new tenant to take whatever action is necessary to regain possession and pay the costs of this action. In a few states, though, the landlord is only required to give the tenant the right to possession. It is then up to the tenant to go to court if necessary to get actual possession. This right to have the property all to yourself is what makes a lease different from a simple license to use property.

Consideration: Paying rent isn't necessary as long as consideration was given when the lease was made, but some courts have said that rent is any support for the lease, not just a set amount paid each month. Once a lease is signed, most courts will not enforce an agreement to lower or raise the rent during the term for which it was written. Most courts see the lease as a contract, which means it can't be changed unless the changes are put in writing and both parties agree to them. Most modern leases say that rent should be paid ahead of time. Most land leases and long-term leases require the tenant to pay all property charges, like real estate taxes, special assessments, water and sewer taxes, and all insurance premiums needed to protect the property, in addition to the rent. Most leases include some kind of security, like putting a lien on the tenant's property, requiring the tenant to pay a portion of the rent in advance, requiring the tenant to post security, or requiring a third party to guarantee the rent payment.

There are three main types of leases, which are:

1. Leases based on the type of property, such as office leases, ground leases, proprietary leases, and residential leases.

2. Leases that are put into categories based on how long they last, like short-term and long-term leases. Most short-term leases are gross leases, which mean that the landlord is responsible for all taxes, fees, and operating costs (such as most apartment leases). Long-term leases (usually ten years or more) are usually net leases that give the tenant more rights and responsibilities. Especially in long-term leases, both parties should pay attention to their rights if the leased space is taken away by the government.

3. Different types of leases based on how rent is paid.

Generally, leases can be recorded in the county where the leased property is located. However, most leases are not recorded unless they are for a long time (three years or more) or are security for a mortgage.

Unless the lease says otherwise, a lessee can give the lease to someone else or rent the property to someone else. When a tenant gives away the whole remaining lease term, they assign the lease. When they give away most of the term but not all of it, they sublet. Most leases say that the tenant can't give or take over the lease without the landlord's permission. When a lease is transferred, the new owner becomes the main debtor, and the original lessee becomes a surety.

If the landlord sells the property, the new owner takes over the lease and is responsible for all of the lease's rules. When renters make changes to a landlord's property, they usually do it for the landlord's benefit. If these changes are considered fixtures, they become part of the real estate. But the terms of the lease may allow a tenant to put in trade fixtures or chattel fixtures. It is common for the lease to say that trade fixtures can be taken out by the tenant before the end of the lease, as long as the tenant puts the building back in the same condition it was in when the tenant took over.

In leases for agricultural land, the courts have said that even if the tenant damages or destroys the improvements, they still have to pay rent until the end of the lease. Most states have made this rule apply to leases of land on which the tenant has built a building or leases that give the tenant full possession of a building. Since the tenant is renting the whole building, the courts have decided that the tenant is also renting the land where the building is. When the leased premises are only a part of the building, like an office or business space or an apartment in an apartment building, the tenant doesn't have to pay rent after the leased premises are destroyed. Also, in some states, if the landlord was careless and caused damage to the property, the tenant can sue the landlord for damages. Most commercial and industrial leases say that the renter is responsible for keeping the inside and, often, the outside of the building in good shape.

You can get out of a lease by

  • when the term is up;
  • the leasehold and fee estates were combined;
  • destroying or condemning the building;
  • abandonment;
  • both parties agree (surrender);
  • Forfeiture because the tenant didn't pay rent or broke the terms of the lease (note that tenant bankruptcy is no longer a valid reason for default under the federal Bankruptcy Act); and
  • commercially useless, like if the proposed use is made illegal (but not if the tenant cannot obtain a needed business license).

Lease concession

A gift provided to a renter in order to entice him to sign a lease; usually in the form of one month or more of free rent.

Lease option

A clause in the lease that lets the renter buy the property under certain conditions. Here are some of the most important parts of a lease option:

  • It usually goes with the land, so if the lease is given to someone else, the option to buy goes with it.
  • It usually doesn't last longer than the length of the lease.
  • The paid rent can be used as a supporting point. If the rent isn't paid, the option could be taken away.
  • It can be given away without affecting other parts of the lease.

The person who is giving the lease or option must make sure that the deal is set up in a way that makes it more like a lease than a sale. For example, if the total payments under the lease are almost the same as the purchase price payment under the option, and if the payments apply to the purchase price, the IRS may see the deal as a sale because the lessee has no other economic choice but to exercise the option.

An option in a lease is part of the whole lease contract and can't be separated from it. If the lease is extended, the option is usually extended as well, unless the lease says otherwise.

There is also an option to buy with a lease, but there are also options to renew and extend. Under the second option, the terms of the original lease are kept the same, including the extension clause. With an option to renew, the lessee has the right to a new lease with set terms, but not the original renewal provision.

Lease purchase agreement

A contract in which part of the rent payment goes toward a set price to buy the property. When the lessor gets the agreed-upon total price, the title passes from the lessor to the lessee.

Lease with option to purchase

A lease that grants the lessee the right to purchase the property at an agreed-upon price and within an agreed-upon time frame.

A lease that gives the lessee the right to acquire property at a certain price and on predetermined terms at a predetermined date.

Lease-up

The time when a real estate rental property is put on the market, leases are signed, and tenants start moving in.

Leased fee

The lessor's interest and rights in the property they have leased. The person who owns the property has the right to rent it out and to take it back at the end of the lease. The value of the rent payments plus the property's value at the end of the lease period (the reversionary interest) is the leased fee interest, which can be sold or mortgaged as long as the tenant's rights are respected. When figuring out the value of the leased fee, the appraiser usually adds the value of the land or land and building at the end of the lease term to the present value of the lessor's income (the annuity method of capitalization). The land's reversionary value is hard to predict, so it is usually calculated to be the same as its current value, which is then discounted to its current value by multiplying the value by the right Inwood factor.

Leased fee estate

The landlord's collection of rights in a leased property, consisting largely of the right to receive rental payments throughout the lease period and, eventually, the right to repossess the property at the conclusion of the lease term.

Leasehold

Tenant's right to leased property

A tenant owns a piece of real estate that is less than freehold. A lease gives the tenant a leasehold estate and gives the landlord a reversion estate. Estates in personal property are usually used to describe leasehold estates. Some states, on the other hand, say that certain leasehold estates are real property even though they still have some of the traits of personal property. Under common law, an estate was called a "chattel real" for a long time and was seen as a piece of personal property.

The estate for years, the periodic tenancy (estate from year to year), the tenancy at will, and the tenancy at sufferance are the four main types of leasehold estates. The estate for years runs for a certain amount of time, the periodic tenancy runs for an unspecified number of time periods, the estate at will runs for an unspecified amount of time, and the estate at sufferance runs until the landlord does something.

The leasehold is different from other ways to use land because it is a transfer of the exclusive right to possession, not just the right to use the land. So, a hotel guest is not the same as a renter. Different types of permission to use property (licenses, easements, profits, and leases) make a difference when it comes to what can be done if a contract is broken. The only way to get rid of a leasehold tenant is to follow strict legal steps, while a license can usually be taken away at any time.

The length of a leasehold estate depends on what it is being used for. Many residential apartment leases are short-term, lasting only one year or from month to month. On the other hand, ground leases can last 55, 75, or even more years. For an FHA leasehold-mortgage to work, the minimum length of the lease must be longer than the fixed rental term of the loan. The assignment of lease, not a deed, is used to move these long-term leases. The person who is giving away the leasehold estate and the person who is getting it must both sign the assignment of lease. This is because the assignee takes over the responsibilities of the assignor under the lease.

Under common law, the lessee's improvements to the leased property would belong to the landlord when the leasehold estate ended. In the reversion clause of many ground leases, however, the lessee is given the right to take down all improvements at the end of the lease term. This rule makes it easier to set up financing and talk about extending or renewing a lease.

In places where leaseholds are common, like Hawaii and Maryland, it is common for leasehold estates to be subject to a recorded declaration of restrictions. This is usually done by referring to the book and page number of the recorded declaration in the lease. A buyer should look at the lease and all related documents well before the closing date so that they know exactly what they are buying.

A lease is a legal agreement between a renter and the owner of an interest or estate.

Leasehold estate

A lessee's or tenant's interest or rights in leased property, including possessory interests that are a transitory conveyance of the rights of exclusion, use, and enjoyment but not the right to dispose. These privileges are granted to the renter in exchange for payment of rent.

A tenant's estate in a rented property.

Leasehold improvements

The changes that the person who rents the property makes to it. These changes, which are usually tax-deductible by the lessee, can be written off over the cost recovery period.

Leasehold interest

Tenant's interest in a rented property.

Leasehold mortgage

A loan that is put on the lessee's share of the leased property. Leasehold mortgage financing is a type of secondary financing that is unique because the mortgage comes after the fee owner. Life insurance companies, major mutual savings banks, and major commercial banks are the main lenders for leasehold financing.

When a big project is being built, the fee owner may rent the land to a developer and put the fee behind the leasehold mortgage. The subordination might only apply to certain types or terms of loans, like a construction loan but not a refinancing loan, or it might not happen until the proposed improvement is completely built. Most of the time, the lender tries to get the fee owner to mortgage both the fee and the leasehold mortgage.

The tenant's interest in the property is encumbered by a lien.

Leasing

A written agreement for the rental of a property.

Leasing agent

A person in charge of leasing office space in a building.

Leeward

On or toward the side that is out of the wind. This is the opposite of windward.

Legacy

A will that gives money or property to someone else, such as a bequest. This person is called the "legatee."

Legal age

The legal age at which a person can vote and no longer be considered a minor.

Legal description

A description of a piece of real estate that is accepted by the courts in the state where the property is located and can be used in documents to transfer the property. Most of the time, the description is detailed enough that an independent surveyor can find and name that exact piece of land. Oral testimony can't be used to give a more detailed description of the property, unless it's a case of fraud or a mistake. Most of the time, these descriptions are based on what a surveyor or civil engineer wrote down in the field. Lot, block, and subdivision, government survey, and metes and bounds are all ways to describe land.

All deeds, lease assignments, and mortgages, as well as most contracts for deeds, must have a legal description. Most of the time, street addresses, tax-bill descriptions, and general descriptions (like "the Smith farm") aren't good enough to use in recorded title documents because they might not last forever. Using these kinds of temporary descriptions could make it hard for someone to look up the chain of title or find the property in the far future. In general, any document that needs to be recorded should have a legal description. If the description is wrong, the document may not be indexed correctly. This means that, according to recording laws, the document may not give enough notice to a third party.

When legal names don't match, there are some general rules to follow.

Monuments, whether natural or man-made, take precedence over routes and lengths.

Natural monuments triumph over man-made monuments.

Distances are set by the courses, and

The least reliable way to describe a parcel is by its acreage or area.

A property description that allows it to be located on government surveys or documented maps.

Legal life estate

A life estate formed through legal action.

Legal name

The first name plus the last name, also called the family name. Under common law, a middle name or initial is not important to the validity of a conveyance document if it is added, left out, or misspelt.

When applying for a state exam or license to be a real estate salesperson or broker, most people have to give their full legal name. It is not a good idea to use only initials, especially for common last names like Smith, Lee, Brown, and the like. This policy is meant to stop applicants with similar names from being confused with each other or wrongly identified.

For formal reasons, this is the name.

Legal notice

Notice that is implied or required by law because someone has property or because a document has been recorded. When deeds are recorded, the information in them is made known to anyone who buys the property afterward. Under the law about recording, legal notice is another name for constructive notice.

Other parties must be notified using the means authorized by law.

Legal rate of interest

The rate of interest set by state law, which takes effect if there is no other agreement about the rate. For example, a state law might say that money due after a promissory note's due date must be paid with interest of 6%. The amount of interest that is legal is called the usury limit.

Legal title

Property ownership; in the case of real estate, a legal claim supported by evidence of ownership.

Legally permissible

As part of the highest-and-best-use analysis, the property must be used in a way that is allowed by the law.

Legatee

A person who inherits property through a will.

One who inherits money or property from a will.

Legend

A description of the symbols, colors, and styles used on a map or plan, generally in the form of a box adjacent to the map or plan.

Legend stock

A security certificate that has a note on it saying that it can't be given to just anyone. Most of the time, these stocks can't be sold until a certain time has passed or until they are registered. Securities that don't need to be registered with the SEC under the intrastate exemption or the private offering exemption must have a note saying that they can't be sold to just anyone.

Lender

A person or company that loans money to a borrower in exchange for a fee and expects to be repaid in the future.

Lender’s mortgage insurance (LMI)

The borrower pays insurance to safeguard the lender in the event that the borrower defaults on the loan.

As long as you agree to take out mortgage insurance, some lenders will give you up to 95% of the money you need for a loan (LMI). This is a one-time payment that is usually made at the time of the deal being done. The figure is based on things like the amount of money you owe, the value of your home, and the exact LVR (i.e. the figure between 80 percent & 95 percent ). This payment lets the lender get back the unpaid principal if the borrowers don't pay, and the mortgage insurance company takes over the debt.

Lender's yield

The implicit discount rate, or rate of return, on a loan, given all cash inflows and outflows to the lender.

Less-than-freehold estate

The property that someone who rents or leases property owns. In this group are an estate for years, an estate at will, an estate at sufferance, and a periodic tenancy.

Lessee

The person who has a leasehold interest in a property. A renter is a general term for a person who rents out their home.

The person who rents out a property.

The person who rents or leases a piece of property. In most residential leases, this person is called a tenant.

The occupant of a leased property.

Lessor

A property owner who distributes some rights to a renter for a short time. A landlord is a general term for a person who owns property.

the person or entity who grants a lease

In a lease agreement, the landlord.

The one who rents or leases out property to another. In the case of residential leasing, such a person is commonly referred to as a landlord.

The person who grants a lessee a lease.

Let

To be rented out.

Letter of credit

A letter of credit is an agreement or promise made by a bank (the issuer) to a customer (the account party) that the bank will honor draughts or other demands for payment from third parties (the beneficiaries) as long as the conditions in the letter of credit are met. With its letter of credit, the bank promises to pay the seller's draught, which means that the bank's credit will be used instead of the buyer's. This is usually done by sending a letter from a bank in one part of the country to a bank or business in another part of the country, naming the person, vouching for the customer, and stating how much money should be loaned.

A letter of credit is only given to customers with the best credit ratings and comes with a small fee every year. Letters of credit are not like direct loans in that the bank does not have to report letter of credit obligations as liabilities on its financial statements. The bank also does not have to keep a certain amount of cash on hand to back up its letter of credit obligations.

Letters of credit are covered in depth in Article 5 of the Uniform Commercial Code.

Letter of intent

A nonbinding declaration of intent subject to the approval and additional documentation of a third party.

A statement that you want to invest, build, or buy something, but you are not legally required to do so. It could be about a specific project or just a general letter of intent that doesn't mention any particular project. This is the kind of language that can be used in a letter of intent to get out of any legal obligation to follow the letter's terms:

Since this document is just a statement of what we both want, it is clear that no liability or obligation of any kind is meant to be made between any of the parties. This letter is not a binding agreement to complete the transaction described here, nor is it an agreement to sign a contract. The parties plan to move quickly and in good faith to finish making plans for the proposed development, but their only legal obligations will be those that are written in the signed contract and lease. If a contract and lease aren't signed, we won't be responsible for the developer's costs or any charges or claims that come from this letter of intent, the proposed financing, or any other reason, and the developer won't be responsible to us in any way, either.

Letter of patent

A patent is a legal document that gives the person named in the patent the right to own land from the United States or a single state.

Letter report

1. A short appraisal report that only talks about the property's features, its value, and any suggestions.

2. A report from a title company about the state of the title as of a certain date, but it doesn't cover the title.

Level payment mortgage

During the amortization phase of a mortgage, the same payment is payable each month.

A loan with equal monthly payments that is fully amortizing.

A mortgage that is paid back over time in equal payments that include both the principal and the interest. When you make a payment, the money goes first to the interest on the decreasing principal balance. This means that the amount of money going to the principal gradually goes up, while the amount going to the interest gradually goes down. Most conventional, VA, and FHA loans include taxes and insurance in the mortgage payment, along with the principal and interest.

Leverage

The use of mortgage debt to assist in the financing of a capital investment.

Investing a small amount of funds and borrowing the rest to get the best return on your investment.

How borrowing money changes the return on an investment. Borrowing money to buy property with the hope that the value of the property will go up, so that investors will make a profit not only on their own money, but also on the money they borrowed. The practice of borrowing money to make a smaller investment earns a higher rate of return.

When an investor puts down a very small amount of money, this is often called "high leverage."

Danita buys a condo for $75,000 with a $4,000 down payment and a five-year, interest-only contract for deed for the rest. Danita hopes to sell the house for $85,000 and make a profit by using money from other people. Her expected return on the purchase price of $75,000 is 13%, but the return on her main investment of $4,000 is 250%. This shows the benefit of using leverage. Danita can also get tax breaks for the whole improvement through depreciation (including the leveraged portion). When an investor pays a higher interest rate to borrow money than the rate of net income from a property, this is called "reverse leverage." You can also call this "debt financing."

The use of borrowed funds to make a purchase.

Levered cash flows

The net rental revenue of the property after deducting any payments owed to the lender.

Levy

To evaluate; to seize or gather. To levy a tax, you have to look at a property and decide how much it should be taxed. To "levy an execution" means to legally take someone's property to pay for something. Most of the time, sheriffs seize and take control of the personal property of a judgment debtor. Levying is not a judicial act; it is a ministerial one.

To levy or get access to a tax on a person or a piece of property.

Liability

1. In a double-entry accounting system, all amounts that are owed show up on the credit side. In a personal financial statement, "net worth" is the difference between "assets" and "liabilities."

2. Being held accountable for what you did.

A broad phrase that refers to all sorts of debt and liabilities.

Liability insurance

Insurance coverage for a property that covers any claims arising from personal injury or damage to the property of others.

Liber

Latin means "book." Most of the time, this word refers to the books at the county recorder's office that have copies of all the documents that have been recorded about real estate in that county. A document is given a liber volume and page number when it is recorded (also called folio). Then, anyone who wants to look at this document can find an exact copy of it by looking up the right liber and page number.

LIBOR

The London Interbank Offering Rate is a short-term interest rate for loans among international banks located in London and is a typical gauge of interest rates for income producing property.

License

Privilege to access a licensee's land in order to accomplish actions that would otherwise be deemed trespassing.

The right to use another person's land for a defined and restricted purpose.

Authority.

1. Permission or authority to perform a specific act on another's land or property, usually on a nonexclusive basis. A license is a personal, revocable, and non-assignable right, although it is not considered an interest in the property itself, unlike an easement. A license rather than an easement is often considered when a right to use another person's land is granted orally. Unless it has become irrevocable via estoppel, the landowner may cancel such a right at any moment. A license expires at the death of either partner and is canceled by the licensor's sale of the land. A landowner who allows a buddy to enter his property for hunting reasons, for example, grants the friend a license to use the land. If an owner builds a rock wall across the boundary line, encroaching on the neighbor's land, the owner may be required to pay the neighbor for a license to keep the rock wall in place. This arrangement should be formalized into a signed and recorded encroachment agreement that runs with the land.

2. Formal authorization from a constituted authority (such as a state real estate commission) to operate in a certain activity or business.

License laws

All states, the District of Columbia, and certain Canadian provinces have passed laws granting the states the ability to license and regulate real estate agents, salesmen, and appraisers. Certain details of the legislation differ from state to state, but the major requirements of each are nearly identical. The general goals of license laws are to (1) protect the public from dishonest or incompetent real estate practitioners, (2) regulate specific licensing standards and qualifications, and (3) elevate the real estate profession's standards.

All states require licensing candidates to complete an exam designed to assess their real estate knowledge and competency in relation to federal and state-specific real estate legislation. Qualified individuals, as well as partnerships and organizations, are granted licenses or registration certificates. These licenses are legal permission to conduct a real estate brokerage firm in accordance with state legislation. To discover whether a license is required for actions such as appraising, mortgaging, auctioning, or exchanging real estate, each state's law must be analyzed. Municipal governments' attempts to assess local licensing fees are frequently preempted by state licensing.

Licenses are awarded for specific periods of time and must be renewed within those time frames. Each license is a personal right that expires upon the individual's death or the dissolution of the partnership or corporation. While a license or registration certificate is in existence, each licensed person or entity's activities are subject to the oversight of authorized state officials in accordance with state law. As a result, every licensed individual must be well-versed in the applicable state license laws. In most cases, violations of license law provisions result in the refusal, revocation, or suspension of a real estate license. A misdemeanor conviction for acting as a real estate broker or salesperson without a license is normally penalized by a fine and/or jail.

Certain people are exempt from license laws under state law. Owners dealing with their own property are normally exempt, as are trustees, executors, receivers, and others acting under court orders, public officials acting in the course of their duties, and, in some situations, attorneys.

Many states demand annual continuing education to renew or reactivate a license. Certified and licensed real estate appraisers are currently subject to state licensing rules.

The laws of a state that control real estate salespersons' activity.

Licensee

A person who possesses a current real estate or appraisal license. A real estate licensee can be an active or inactive salesperson or broker, as well as an individual, business, or partnership. Individuals can only be licensed as appraisers.

Licensing laws

State legislation that allows anyone who satisfies certain standards to run a business or practice a profession.

Lien

A voluntary (as in the case of a mortgage) or involuntary (as in the case of a lien for unpaid property taxes) encumbrance against a property that serves as security for sums owing to the lien holder.

Claim against a property that permits the proceeds of a forced sale of the property to be used to pay off a debt.

A real estate interest that acts as security for a loan obligation. In the event of a default, the lien holder has the right to have the property auctioned to settle the obligation.

The right to keep property as security until the obligation secured by it is paid off. A mortgage is one example of a lien.

A debtor's claim against a property.

A charge or claim placed on the property of another (lienee) as collateral for a debt or obligation by one person (lienor). A lien is always the result of a debt and can be created by the parties' agreement (e.g., a mortgage) or by operation of law (e.g., a tax lien). A lien might be either generic or specialised. A general lien covers all of the lienee's real and personal property. A unique lien solely affects one property, such as a mortgaged house. Statutory or equitable liens can also be voluntary or involuntary. A mechanic's lien, for example, is an involuntary, statutory special lien, whereas a mortgage is a voluntary, equitable special lien. If, on the other hand, the mortgage lien was foreclosed and the proceeds from the foreclosure auction did not satisfy the amount, the resulting deficiency judgment, when recorded, would be a general lien on all of the debtor's property. Each state's statutes govern the lien procedure. Liens do not transfer title to the property; the debtor retains title until foreclosure. Unless a foreclosure suit is filed, certain statutory liens (mechanics' liens and judgments) become unenforceable after a period of time from the date of genesis or recording.

The date of recordation is usually used to determine lien priority. As a result, it is critical to record the necessary document as soon as the lien is created. State property tax liens and assessments, on the other hand, take precedence over all other liens, including those previously recorded. As with mechanics' liens, state law can vary the order of precedence. Because the lien is an encumbrance on the title, the lienor should execute and register a satisfaction of the lien (at the lienee's expense) as soon as the lien is paid to remove this cloud on the title.

Lien statement

A document detailing the unpaid balance of a promissory note backed by a property lien, as well as the status of interest payments, maturity date, and any claims that may be brought. Also known as an offset statement.

Lien theory

A mortgage is seen as a lien rather than a transitory conveyance of title under legal theory.

Lien theory states

Those states see a mortgage as nothing more than a security interest in the property being mortgaged, with the owner of the property keeping the title. The person who took out the mortgage has the right to all rents and profits from the property. The lien theory, also called the equitable theory of mortgages, says that the debt is the most important thing and that the mortgage is just security. It makes the person who took out the mortgage the owner of the equitable title and the person who took out the mortgage just the holder of a lien on the property as security for the debt. This is different from a title-theory state, where the legal title is actually given to the mortgagee and is only given back to the mortgager when the mortgage debt is paid off.

Life estate

A life renter is given complete property rights for the rest of his or her life.

Any estate in real or personal property that is limited in duration to the owner's or another designated person's life. A life estate per autre vie is one in which the estate is measured by the lifetime of someone other than the owner. A life estate is not an estate of inheritance, while being defined as a freehold estate because it is a possessory estate of infinite existence. For example, Hai transfers his home to his son Quan while retaining a life estate for himself. Hai (the life tenant) has a life estate in the property, and Quan has a reversionary interest in it. When Hai dies, Quan inherits the fee simple property.

A life estate can be created by agreement of the parties (as with homestead, courtesy, or a wife's dower rights), or it can be created by operation of law (as with homestead, courtesy, or a wife's dower rights).

A life tenant

  • She is entitled to ownership, ordinary uses, and profits of the land as if she were the fee owner;
  • Obligated to keep the premises in a fair state of repair and clear of trash so that the realty can be returned to the grantor or remainderman in roughly the same condition in terms of its qualities and worth;
  • Obligated to pay ordinary taxes, encumbrance interest (but not mortgage principal amortization), and a pro rata share of special assessments (together with the remainderman);
  • Prohibited from acquiring any interest in the property that exceeds the measuring life; and
  • There is no requirement to insure the premises for the benefit of future interest holders, who have independent, insurable interests and must seek their own insurance.

Life tenants may sell or encumber their interest subject to any deed limitations, and the interest is susceptible to execution sale if the life tenant has a money judgment against them. The transferee receives no more interest than the life renter had - that is, an estate that ends when the measuring life expires. As a result, selling or financing a life estate is complicated. As a result, the mortgagee of a life tenant's interest would almost certainly need the life tenant to name the mortgagee the beneficiary of a term life insurance policy.

A life tenant deducts depreciation over the usable life of the property rather than over the tenant's life expectancy for tax reasons. The remainder receives the deduction following the death of the life tenant.

When a taxpayer makes a gift of real property but retains a life estate, the entire value of the property is included in the estate of the deceased taxpayer for federal estate tax purposes.

The death of the person whose existence is the measuring life terminates a life estate.

Although no probate procedure is required to establish title in the remainderman (the person now entitled to the property), recording a death certificate to show the fact of death is good title practice.

The life estate is dissolved by merger if the life tenant obtains a fee simple title to the property. A surrender deed is used to combine a life estate with a reversion or residual interest.

A freehold interest in real estate that will terminate upon the owner's death or the death of another person.

Life tenant

Individual who has complete property rights in a certain property for the rest of his or her life.

A person who owns a life estate.

A person who has the right to utilize property for the rest of his or her life or the life of another person.

Life-care facility

A housing development designed to serve senior citizens with medical and skilled nursing care. Residents are offered a continuing care contract that includes independent living units for a monthly fee.

Lifestyle cluster

Population classification based on prospective consumer location (urban, suburban, rural, or small town), work (white or blue collar, retired), education (high school diploma versus college diploma), affluence and wealth, age, social status, and psychographics.

Lifting clause

A provision in a junior loan instrument that allows the underlying mortgage or deed of trust (senior loan) to be replaced or refinanced as long as the amount of the new senior loan does not exceed the amount of the first lien outstanding at the time the junior loan was issued.

Light and air

Owners have no natural right to light and air, and they have no recourse if a neighbor erects a construction that blocks their light and air. To avoid this risk, some adjacent property owners attempt to obtain a light and air easement over the neighbor's property. An easement of this type should be granted in writing. For example, an owner with a lovely view of the mountains may request an easement of light and air over the neighbor's property from the neighbor. If the easement was properly formed and recorded, neither the neighbor nor any successor would be able to construct a structure in this airspace. A light and air easement cannot be gained by prescription; that is, a person cannot claim to have acquired a prescriptive right to airspace just because he used the view for the prescriptive statutory time of, say, 20 years. 

Light industry

A zoning category for industrial use that includes primarily unobjectionable light manufacturing as contrasted to industries that create noise, air, or water disruptions, or pollution. Bakeries, dry cleaning, and food processing are examples of "clean" industries.

Like-kind exchange

Exchanges of assets judged to be of similar kind under Internal Revenue Code Section 1031. Gains or losses on like-kind asset swaps must be delayed until the newly acquired (substitute) asset is disposed of. Transactions that are only partially like-kind may result in the recognition of complete or partial profits or losses. Also known as Section I 03 I exchanges or tax-free transactions.

A common way of delaying capital gains taxes that allows owners to swap their properties for another and avoid paying capital gains taxes at the time of the purchase under specific conditions.

Like-kind property

A federal word referring to the essence of real estate as opposed to its quantity or quality. Only like-kind property is eligible for a real estate exchange and the tax benefits that come with it.

Like-kind property is defined as any real property, whether improved or unimproved, held or to be held for investment or income purposes by the taxpayer, excluding dealer property and homes. The property must only qualify as like property to the party seeking the tax-deferred benefit of like-kind swaps. Personal dwellings are ineligible for exchange treatment as either leg of the transaction.

One property could be upgraded while the other is raw land, or one could be a shopping complex while the other is an apartment building. Both properties, however, must be owned by the same person. As a result, a fee simple interest cannot be exchanged for a leasehold interest. An IRS regulation, however, states that a leasehold interest of 30 years or longer is to be considered fee simple. The exchange of general partnership interests in partnerships with basically the same underlying assets has been upheld by the tax court. Current regulations require that the replacement property be a U.S. property if the swapped property is a U.S. property; however, exchange of foreign property for foreign property is permitted.

Property that is of the same type in a trade.

Limitations of actions

Time limit within which legal actions must be filed or else the action is barred.

Limited access highway

A highway with access only at regular intervals, typically through ramps. This type of highway is intended to benefit through traffic while avoiding interference from adjoining traffic. A controlled access roadway is another name for it.

Limited common elements

That unique class of common elements in a condominium complex that is reserved for the exclusive use of one or more residences. This includes allocated parking slots, storage units, and any common areas and facilities available to one or more, but not all, unit owners.

Any change to the condominium declaration that impacts the limited common elements requires the unanimous approval of all those who have reserved the usage. Any addition or modification to a limited common feature typically necessitates prior approval from the board of directors, which acts on behalf of the unit owners' association.

Limited liability

The investor's liability is restricted to the amount invested.

Limited liability company (LLC)

A hybrid form of ownership that combines the corporate advantages of limited liability with the tax advantages of a partnership.

A hybrid company entity that combines the qualities and benefits of limited partnerships and S corporations. An LLC, unlike a corporation, does not exist in perpetuity. The operating agreement, which is analogous to a corporation's bylaws, is the primary governing document of an LLC.

Limited partners

Investors who have no personal liability beyond their participation in a limited partnership.

Limited Partnership (LP)

A partnership in which one or more general partners and one or more limited partners share ownership. General partners are fully liable for the partnership's obligations and have complete control over operations, whereas limited partners' responsibility is limited to the amount of money contributed to the partnership or additional liability voluntarily undertaken.

In a partnership, one party (the general partner) undertakes limitless responsibility in exchange for authority over all material decision making. The responsibility of the limited partners is restricted to the amount of stock contributed to the company. Flow-through income and taxation benefit all parties involved; that is, the partnership is not taxed.

In this type of partnership, the limited partners' personal liability is limited only to the amount of money they put in.

A partnership arrangement in which one person (referred to as the general partner) or a group of people organizes, runs, and is accountable for the whole joint effort. The other members of the partnership are essentially investors who have no role in the operation's organization or direction. These passive investors, known as limited partners, receive a portion of the profits and reward the general partner for his work. Unlike a general partnership, in which each member is personally liable for the syndicate's total losses (if any), limited partners stand to lose only the amount of their individual investments - usually nothing more. The general partner is thus entirely liable for any large-scale losses incurred by the investment. However, if a limited partner receives cash distributions from the partnership, either upon dissolution or during the investment period, and the partnership's creditor obligations remain unsatisfied, the limited partner may be required to return such distributions in order to satisfy creditor claims.

The limited partnership has become popular in the syndication of real estate ventures because it allows investors with limited capital to participate in real estate projects that require significant capital and management expertise, limits their potential liability to their contribution, and allows "pass-through" of tax benefits of real property ownership.

The limited partnership's organizer must ensure that the IRS does not recognize the partnership as an association taxable as a corporation (resulting in double taxation of income). An expert real estate tax attorney should carefully construct the limited partnership agreement to ensure that the partnership receives the proper tax status, in which all earnings and losses pass through the partnership and are taxed solely at the individual level. Thus, partnership status combines the direct tax benefits of an instant write-off of losses, if any, with the removal of a second corporate tax.

The Uniform Limited Partnership Act has been adopted by several states to govern the establishment and operation of limited partnerships. A certificate identifying the names and investments of each partnership participant must be filed with the business registration division or county recorder's office, according to the act. A limited partnership does not become operational until a certificate is filed. Because a limited partner's interest is considered personal property, her death does not result in the dissolution of the partnership. Furthermore, judgments and federal tax liens against a partner have no effect on partnership property, but they may affect the partner's claim to earnings.

The passive loss requirements apply to limited partnerships under the Tax Reform Act of 1986. Losses from limited partnerships can only be used to offset income from other "passive investments," not to conceal income from wage, interest, and dividends, as previously allowed by law. Passive investments are defined as any trade or business in which the taxpayer does not participate materially, as well as any rental activity in which the taxpayer participates materially. A limited partner's interest is immediately classified as passive.

Because the sale of a limited partnership interest involves the sale of a security, it is subject to state and federal securities laws and must be registered with the SEC and the appropriate state securities authorities unless exempt.

A partnership in which the contributions and liabilities of some partners are restricted.

A partnership arrangement that allows a group of investors to pool their resources and participate in one or more assets. The general partner (GP) is required to have unlimited responsibility, whereas the other partners (LPs) are only required to have limited liability. The investment vehicle is free of taxes.

Limited power of attorney

A limited power of attorney for a specific task, such as the transfer of a certain tract of property. In real estate transactions, most lenders and title insurance companies favor the use of limited or special powers of attorney over broad powers of attorney.

Limited referral agent

A salesperson with a valid real estate license who connects prospective buyer or seller leads to a brokerage firm in exchange for a referral fee upon closing. The lead is passed on to a full-time agent, and the referral agent no longer represents the client.

Limited service broker

A broker who provides fewer services to the consumer than a typical real estate broker would. Limited services could involve explaining the usual offer form, producing adverts, assisting a buyer in obtaining financing, and following up in escrow. They may or may not entail advertising, displaying, or hosting open houses.

Limited warranty deed

A deed that includes warranties for the duration of the grantor's ownership.

Line of credit

A line of credit is a versatile transactional mortgage that allows you to access your cash via credit card, check, or EFTPOS. A line of credit is an excellent alternative for homeowners who want to use the equity in their existing property for investment or other uses such as repairs, vacations, or automobile purchases.

The most money a bank will grant to one of its more dependable and creditworthy customers without requiring a formal loan application. The borrower is thus assured of prompt loan service without the delay of a credit evaluation prior to fund distribution. A customer's credit line is subject to periodic evaluations of the customer's credit history and overall banking relationship.

Line stakes

Stakes placed along the metes and bounds boundary lines of a plot of land.

Line-of-sight easement

A right that prohibits the use of land inside the easement area in any way that obstructs the view.

Lineal

1. In familial ties, it refers to direct-line descendants, such as children or grandchildren, as opposed to "collaterals" (nephews, cousins, etc.); it also refers to living descendants (blood or adoptive), regardless of distance from the deceased.

2. In terms of measurements, it refers to a line measurement. A square with four feet on each side has a lineal measurement of sixteen feet. Linear measure is also known as linear scale.

Linkages

Relationships that need the transportation of goods or persons from one area to another.

The attractions or critical access requirements that one land use has for another land use.

Linked sites

Sites connected by connections; that is, sites connected by the need to transport products or persons from one place to another.

Lintel

A horizontal board that supports the weight over an opening like a door or window.

Liquidated damages

The entire amount of compensation that an aggrieved party should get if the other party breaks a defined section of the contract as determined by the parties to an agreement. In construction contracts, the parties frequently foresee the potential of a breach (for example, a delay in completion by a specified date) and stipulate the amount of damages to be paid in the case of the violation.

To be enforceable, the liquidated losses clause must include an amount that bears a reasonable relationship to the actual damages estimated by the parties; otherwise, the amount is treated as a penalty for failing to comply. If a defaulting buyer put earnest money in excess of 20% of the purchase price and failed to consummate the contract, the courts would very certainly allow the buyer to recover some of the deposit money on the grounds that the seller would be unfairly rewarded if he kept it all.

Penalty clauses are viewed negatively by courts and are frequently declared void and unenforceable. As a result, the clause should clarify for what damage the party is being reimbursed (loss of rent, attorney fees, and the like). A liquidated damage clause in an installment contract or contract for deed will generally not be enforced by a court if the clause tends to result in the forfeiture of all installment payments made.

A seller who chooses to keep deposited earnest money as liquidated damages may be barred from pursuing other remedies, including extra money damages. For example, if a buyer puts $1,000 in earnest money on a $75,000 house and then fails, the seller who retains the $1,000 as liquidated damages and then sells the house for only $70,000 cannot later recoup the difference in the two purchase prices from the original buyer.

Some contract of sale forms include a unique box for the parties to initial if they want to treat the earnest money as liquidated damages. Some states have statutory guidelines regarding what constitutes a reasonable amount for liquidated damages; for example, in California, if the amount exceeds 3% of the sale price, the seller bears the burden of proving that such excess is reasonable; otherwise, it is treated as a penalty and returned to the buyer.

In the case of a contract violation, one party will compensate the other for an agreed-upon amount.

A monetary reward established in a contract to be granted to the harmed party in the case of either party's violation.

Liquidity

A metric for how easy and frequently assets may be exchanged. It is determined by the amount of time it takes to complete a certain action as well as the capacity to exchange the asset at market pricing.

The ability to turn an asset into cash without suffering a loss.

The capacity to rapidly sell an item for fair market value.

Assets that can be turned into cash quickly.

The ability to sell an asset for a price near to its true value and convert it into cash. Publicly traded equities (as opposed to stocks in tiny or closely held firms) are a reasonably liquid investment. Real estate has generally been thought of as a longer-term investment that is not very liquid.

A ratio that assesses a person's immediate debt-paying ability is one test of a person's (or company's) liquidity. It analyses cash on hand and everything that can be converted into cash quickly, known as fast assets. Quick Assets: Current Liabilities is the quick ratio. A quick ratio of one to one is often appropriate for a business.

Liquidity Risk

The danger that only a small number of purchasers will be interested in purchasing an asset if and when the existing owner decides to sell it, and hence the risk that an asset owner will be unable to sell it.

The danger that an owner will be unable to rapidly sell an item for its fair market worth.

Lis pendens

Suit pending (Latin).

A recorded legal document that serves as constructive notice in a state or federal court that an action touching a specific piece of property has been filed. Lis pendens is Latin for "waiting action," and it is similar to a "quasi lien." A person who later acquires an interest in that property does so pursuant to any judgment that may be entered; in other words, a purchaser pendente lite (waiting a litigation) is bound by the outcome of the action. The reasoning behind lis pendens is that several lawsuits can be avoided if all parties who may get involved with the property are first made aware that it is the subject of a litigation.

A lis pendens notice is not the same as putting a lien on or attaching real property. It is just a notice of a pending action affecting real property title or ownership. The action must affect real estate title or the right to possession. As a result, it could not be utilized to recover legal costs or real estate commissions in a lawsuit. A lien, on the other hand, is a charge or security interest on the property, but an attachment is a method of preserving the property for collection purposes. However, the end result of filing a lis pendens is the same: the property cannot be freely transferred or encumbered, and title is effectively rendered unmarketable throughout the litigation.

The names of the parties, the subject of the case, and a description of the affected property must all be included in the notice of pending action. Before issuing a lis pendens, several states need a court hearing. The purchaser or encumbrancer of the affected property is regarded to have constructive notice of the pendency against the specified parties from and after the time of recording the notice. Before filing a lis pendens, check with an attorney; an incorrectly filed lis pendens may result in a lawsuit by the property owner for defamation of title or malicious prosecution. A lis pendens of this type could be expunged from the record by filing a "motion to purge."

List

In order to obtain a list.

Listed Real Estate Investments

Property investments that are exchanged on stock exchanges and valued according to supply and demand for company shares.

Listing

The act of putting a property up for sale on the open market.

A legal agreement between a property owner and a real estate broker permitting the broker to find a buyer or tenant for a specific piece of real estate. Open listings, exclusive-agency listings, and exclusive-right-to-sell listings are all types of listings. The exclusive right to sell listings is preferred by the majority of brokers.

Although not expressly unlawful, net listings are unenforceable under many state statutes of frauds and are thus not generally recommended.

To avoid receiving listings signed by unauthorized individuals, a broker should carefully examine the genuine ownership of the property at the time of listing. It is critical that all registered owners sign the listing agreement. In addition, the broker has a legal and ethical obligation to inspect the listed property to ensure that all information provided in the listing agreement is correct and comprehensive. Owners should not be depended on to affirm the veracity of technical or complex things about which they are unaware, such as the legal impact of some recorded restrictions on the property.

Listings are personal service contracts that cannot be transferred to another broker. This does not preclude the broker from transferring the responsibility of finding buyers for the property to the sales office.

If discussions to sell the property are ongoing at the time the listing expires, the time limit under the listing agreement is extended by implication.

The advertisement normally mentions how much commission the seller will pay the broker if certain conditions are met. If a listed property is sold involuntarily, such as through foreclosure, condemnation, or tax sale, the broker is usually not entitled to a commission.

In a buyer's listing, the buyer hires a broker to find a property.

At the time of signing, the broker must provide a copy of the listing agreement to all parties signing it. The broker should not show the buyer the listing contract (even MLS listings) because the listing is a confidential employment contract between the seller and broker.

A contract that allows an agent to sell a property on behalf of the owner.

Listing contract

A contract between a real estate owner and a real estate broker that obligates the broker to sell the property under specified conditions and terms. It requires the property owner to pay a commission to the broker if the broker is successful in locating a ready, willing, and able buyer for the property on the conditions provided or terms acceptable to the seller.

Listor

A real estate broker or salesperson who secures a listing for a specific property. In most brokerage firms, the listor earns a portion of the total commission if the property is sold - even more if the listor is also responsible for the sale (the "selling broker"). Lister is sometimes written lister.

Lithosphere

The solid component of the earth or other spatial body, as opposed to the atmosphere and hydrosphere.

Littoral land

Land that borders a sea or ocean and is consequently impacted by tide currents. Littoral land differs from riparian land, which is located on the bank of a river or stream.

Livability space ratio

The minimal square footage of non vehicular outdoor area in a development that is supplied for each square foot of total floor area for site planning considerations.

Live load

A weight that moves or changes and can be safely added to the weight of a building.

For example, a modern high-rise office building may be able to hold 60 pounds per square foot of office furniture and equipment.

Livery of seisin

An ancient method of conveying title to real estate. Conveyance was achieved in the Middle Ages by a legal process known as an enfeoffment, with livery of seisin essentially a handing over of the fee with delivery of the seisin (possession of a freehold estate). The transfer was frequently represented by the simple ceremony of transferring a handful of dirt, a piece of grass, or a twig from a tree on the land in front of a witness. 

Living trust

A trust arrangement in which a property owner (trustor) transfers assets to a trustee who is responsible for administering the asset. The revenue generated by the trust property is distributed to or utilized for the benefit of the specified beneficiary after operational expenses and trustee's fees are paid.

Load

The amount of weight sustained by a structural component, such as a load-bearing wall.

Load factor

Another term for the ratio of rentable to useable office space in a building. To calculate rentable area, multiply the factor by the tenant's useable space.

Loading dock

The space used for shipping or receiving merchandise and moving merchandise between the warehouse area and trucks or rail cars, either within an industrial building and close to its loading doors or outside the structure.

Loan

A loan of money for a specific period of time.

Loan application

A documented application that includes all of the information a lender requires before providing a loan commitment.

Loan balance

A loan's outstanding principle balance. If the loan is interest-only, it will always be equal to the initial sum. If the debt is self-amortizing, it decreases over time.

Loan balance table

A table that shows the remaining balance on an amortized loan; sometimes known as a remaining balance table.

Loan broker

Individual who, for a charge, places loans with main lenders.

Loan commitment

A lender's obligation to provide particular amounts at a later period. Terms might be stated, or they can be the terms in effect on the date funds are advanced.

A written agreement in which the lender agrees to making a loan to the borrower if the borrower meets the commitment's terms and conditions.

A written promise by a lender to lend a given amount of money to a qualifying borrower on a specific piece of real estate for a certain period of time under certain conditions. It could be a conditional or qualified commitment or a strong commitment. It is more formal than a pre-approval loan. The lender usually decides whether to make a commitment to lend the required amounts after analyzing the borrower's loan application. This application includes the borrower's name and residence, place of employment, salary, bank accounts, credit references, and other information.

A mortgage loan agreement is a written contract created by a lender that outlines the terms and conditions of the loan.

Loan constant

The yearly debt service on a loan multiplied by the loan's initial amount.

The monthly mortgage payments that amortize a loan are calculated using a factor or multiplier.

Loan correspondent

A loan negotiator for traditional lending institutions or other lenders. The correspondent frequently continues to service the loan on behalf of the lender and acts as the collector.

Loan origination fee

A fee imposed by a lender at the moment a loan promise is made or funds are advanced.

Loan pool

A collection of loans held in trust as security for the issuance of mortgage-backed securities. The loans could represent a subset of mortgage loans, such as all new homes, or a geographically diverse group of loans. The cash flows generated by the allocated loans are passed through to the holders of the securities either directly or sequentially, depending on the principal and interest generated. Loan pools fund more than half of residential mortgage loans and are having little success supporting commercial loans and other types of debt (such as credit cards and car loans).

Loan pooler

A corporation that assembles huge blocks of loans for the purpose of holding them in trust as collateral for the issuing of a series of mortgage-backed securities. Loan poolers are often huge financial institutions with the resources to put together multimillion-dollar loan blocks. Despite the fact that loan poolers may issue creditworthiness, the majority of poolers seek credit enhancement from one of the big federal underwriters.

Loan proceeds

The loan's face amount less sums deducted by the lender for factors such as loan origination costs or discount points.

Loan servicing

All acts and activities involved with the administration of a mortgage loan, such as payment collection, monitoring insurance and tax responsibilities, and notifying delinquent borrowers. This role is frequently performed by a separate entity from the company that owns the mortgage.

Loan submission

A group of important papers and documents about a specific property or properties that are given to a lender to look over and think about in order to get a mortgage loan. Most of the time, the following papers and documents are included: letter of transmittal; appraisal; financial statements; credit reports and/or Dun & Bradstreet reports; application; sales or purchase agreements on existing properties; leases, if applicable; photographs; plat plan and survey; cost breakdown, if applicable; set of plans and specifications on proposed construction; and zoning ordinances, utilities map, strip maps, aerial photographs, and any other relevant information that would help the lender decide on a particular property.

Loan underwriting

The lender evaluates the riskiness of the expected mortgage payments. A determination of the potential borrower's desire and ability to make scheduled mortgage payments is required.

Loan underwriting process

The procedure through which a potential borrower files a formal loan application, and the lender evaluates all pertinent information before deciding whether or not to commit to the loan.

Loan-To-Value (LTV) Ratio

The amount owed on a mortgage as a percentage of the property's estimated value.

The difference between the value of the property funded by the loan and the price paid by the borrower to buy the property, which gives the borrower a measure of equity in the asset that guarantees the loan. The higher the LTV ratio, the less equity the borrower has at risk and the less protection the lender has under the security agreement.

The link between the amount of a mortgage loan and the value of the real estate on which it is secured; the loan amount divided by market value.

The proportion of a mortgage loan principal to the appraised value or sales price of a property, whichever is lower. Loan-to-value ratios are determined by individual lender policies as well as federal banking rules. Lenders believe that the larger a borrower's equity in a property, the less likely the borrower is to default and lose the property through foreclosure. When private mortgage insurance is applied, the lender can sometimes offer loan-to-value ratios of 90 to 95 percent (typically limited to owner/occupants). Investors may qualify for up to 80% financing, FHA ratios are set by statute, and a veteran with a VA loan may borrow up to the purchase price or 100% LTV.

The proportion relationship of debt money to overall project value.

This is the ratio of the amount of the loan to the value of the house or land. For example, if you borrowed $160,000 and your home is worth $200,000, the LVR would be 80%.

The proportion of a property's appraised worth that a lender will lend to a borrower.

Loanable funds

Money held by financial intermediaries in excess of statutory reserves; accessible to borrowers.

Lobby

1. A place where people can wait or meet in hotels, motels, apartment buildings, office buildings, or other buildings with similar layouts.

2. To work for or against the passage of a bill or resolution before a legislative body.

Local economic activities

In a city, activities that benefit local companies and residents.

Local improvement district

A separate legal entity that is set up by the people who live in a certain area according to state law. The district is run by a board of directors, and in many ways, it is like a city, especially when it comes to taxes. Most of the time, the district issues its own bonds to pay for improvements like water distribution systems, drainage structures, irrigation works, and a whole lot more. To pay back the money they borrowed by selling bonds, these districts have the power to assess all the land in the district based on its value.

Location

A reference to a site's comparative advantages in terms of ease, transportation, and social benefits, among other things.

Location quotient

The proportion of employees in a certain type of work or job classification in a community to the proportion of employees in the same type of work or job classification nationally. If the ratio surpasses one, the activity is classified as a basic economic activity.

Market analysis method used to compare local workforce estimates with national averages, determined by dividing the percentages of the workforce engaged in each major industry group locally by the percentages of the workforce employed in those industry groups nationwide.

Locational advantages

Advantages gained by an occupant purely as a result of a site's locational appeal.

Locational benefits

The advantages received from the utilization of real estate that are appropriately attributed to the site location's appeal.

Locational obsolescence

Loss of value caused by a bad external effect (e.g., a commercial use abutting a residential property).

Lock-in clause

1. A provision in a promissory note that forbids the note from being prepaid.

2. A contract provision stating that the buyer and seller have the right to notify the lender in order to fix the amount of points as of the date of the notice.

Lock-Out Period

The period following the loan's origination during which the borrower is unable to prepay the debt.

Lockbox

A customized secured container placed on the door of a listed property to help the broker exhibit that property. The house keys are kept in a lockbox that can be unlocked with a code or a magnetic stripe card.

Liability for property damage, theft, or personal harm could occur from a lack of ordinary care in installing the lockbox or issuing the combination or unique key. A particular lockbox liability endorsement is now available on some mistakes and omissions insurance plans.

Lockout provision

A mortgage clause or provision that prohibits prepayment of the mortgage for a set length of time following its origination.

Locus sigilli

In some formal legal documents, the abbreviated form, L.S., is used at the end of the signature line instead of the actual seal.

Loft

Unfinished building space; also refers to open space, generally on the first or second level and used for a low-cost industrial business. The renter pays a cheaper rent for loft space than for finished space, and the cost of finishing the area is amortized over the lease time. Typically, banks, savings and loan institutions, and retail establishments rent on a loft-space basis.

London Interbank Offered Rate (LIBOR)

The interest rate at which big multinational banks in London lend to one another. LIBOR rates are available for a variety of deposit maturities.

Long run

The length of time required for market forces to operate in order to establish equilibrium is an economic phrase.

Long-term capital gains

In tax accounting, this term refers to profits earned on the sale of assets held for longer than six months.

The gain on a capital asset kept for a specific amount of time for income tax purposes.

Longitudinal studies

The study of relationships between variables and the measurement of changes in the variables across time. They include taking repeated measurements of the same phenomenon to track any changes over time. Also known as time series research.

Loop

A looped route with two entrance points from the same road.

Loss factor

A commercial leasing word, sometimes known as the load factor or partial floor factor, that expresses as a percentage the square-footage discrepancy between the rentable and usable area. For example, a floor in an office building with a rentable space of 10,000 square feet and an useable area of 9,000 square feet has a loss factor of 10% because toilets, hallways, and elevator shafts consume 1,000 square feet.

The loss factor is a simple metric that a tenant can use to compare different rental properties that may have comparable rentals but vastly different loss factors.

Loss payee

The person on an insurance policy who will get paid if the property that is insured gets damaged or destroyed. Most of the time, a secured lender will ask a borrower to insure the property that is used as security and name the lender as the loss payee.

Lost-grant doctrine

An uncommon real property law rule relates to a claim of title to real property against the sovereign. Its application to realty has been acknowledged in the United States primarily in claims relating to lands allegedly held under now-lost grants from the Spanish Crown prior to the extension of American sovereignty over such territories. The lost-grant doctrine, like adverse possession, requires that the possession be actual, open, and exclusive. However, a higher level of proof is required for a claim against the sovereign (for example, a chain of conveyance and payment of taxes). The claimant is only required to demonstrate the legal potential of a lost award, not its actual presence.

Lot

A parcel, tract, or area of land defined by a plat or other legal means.

Lot and block

A means of identifying a piece of property.

Lot Frontage

The area of a lot that is near to a roadway.

Lot split

The split of land into separate portions by separating ownership or otherwise dividing it. Local ordinances often govern lot dividing. Also known as land division.

Lot, Block, and Subdivision

A real property description that identifies a piece of land using lot and block numbers seen on maps and plats of documented subdivided land. "Lot 6, Block 8, Breezy Hills Subdivision, Serene County, Any state, according to the plat thereof on file and of record in the office of the Registrar of Deeds in and for the said county and state," for example.

A lot is a single parcel of land that is meant to be sold in its entirety to a prospective buyer. As in a city block, a block is often a set of contiguous property connected by streets. Roads or other built or natural features such as creeks or ditches separate blocks.

Lottery

A system in which one pays a fee in exchange for the possibility to win a prize. In credit-constrained markets, sellers may resort to the lottery technique to sell their real estate. Many jurisdictions' real estate license acts specifically prohibit real estate brokers from selling real estate through a lottery or offering prizes for listing or selling real estate.

Title 18, Section 1302 of the United States Code forbids any reference to a lottery or a similar operation in any publication that uses the United States mail. A lottery offering of real estate cannot be conveyed or announced by mail. Violations of this statute may result in a fine of up to $1,000 or imprisonment for up to two years, or both. A second offense carries a maximum sentence of five years in jail.

Louver

Over an opening, slats or fins that are angled to keep rain or snow out but still let air in. A sunshade with fins on a building or the grill on fluorescent light fixtures that lets light spread out. Also spelled louvre.

Love and Affection

Ordinary consideration A gift differs from valuable consideration when it is intended. The distinction between the two is significant in areas of the law that require a valued consideration, such as recording acts, which safeguard the rights of bona fide purchasers for value. A gift transfer of the family home by a father to his son "for love and affection" is a common example of a grant deed supported by love and affection.

Low doc loans

People who can't say how much money they make every month should use this loan. Instead of providing tax returns or detailed financial statements, borrowers can sign a form that says they make a certain amount of money.

Low rise

A one to three-story structure that is typically found in rural places.

A building with two or three stories.

A structure with one to three levels and usually no elevator.

Low-Doc Loan

A loan given to a property buyer whose income cannot be fully verified through documentary evidence.

Low-e glass

Window glass that has been coated with a thin layer of metal that is almost clear. This coating filters the sun's rays and blocks the harmful ultraviolet rays. Low-E glass windows are better at keeping heat in because they stop heat from radiating out.

Low-income housing

Households with low or moderate incomes are prioritized for housing.

Luck-in period

A certain amount of time during which a debt cannot be repaid.

Luminous ceiling

A ceiling that emits light from its full surface by using fluorescent lighting atop translucent glass or plastic.

Lump sum

A one-time revenue or expenditure that occurs during a certain time period.

Lump sum payment

Paying off a debt all at once, including the principal and any interest that has built up. In a straight note, the interest may be paid on a regular schedule and the principal may be paid all at once.

Glossary Index

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