Glossary of Real Estate Terms

Acceptance: Consent to the terms of an offer

Account Sales: A statement provided by an agent to a principal (vendor) giving full account for all deposit money received in a sale less commission, advertising costs and other disbursements

Affidavit: A written statement in the name of the person who signs it and swears or affirms to its truth

Agency Authority: Written agreement for the agency to act on behalf of a landlord

Agent’s Representative: An employee who is authorised in writing to act on behalf of an estate agent and to perform the functions of that agent as specified. Not a licensed agent.

Appraisal: An opinion of the market worth of a property without resorting to a full-scale valuation.

Authority to Act: A document signed by an estate agent and given to an employee (agent’s representative or another estate agent), authorising the employee to perform the functions of an estate agent as set out in section 4 of the Estate Agents Act 1980.

Authority to Lease: A legally binding document that is signed by the landlord. It details the agreement between the landlord and the agency. Many aspects of the authority, such as commission, advertising costs and the authority period are negotiable between the parties.

Authority to Sell: A legally binding document that is signed by the vendor. It details the agreement between the vendor and the agency. Many aspects of the authority to sell, such as commission, advertising costs and the authority period, are negotiable between the parties.

Bond: An amount paid as an assurance that the tenant will not breach the conditions of the tenancy, for example the tenant will pay rent and on vacating will leave the premises in a state of good repair and order.

Breach of Contract: The breaking of one or more of the terms or conditions of a contract.

Building Permit: A permit issued by local government authorities for the erection of a building or for structural alterations of a building.

Caveat: A not on the title that an interest in the land is claimed by a third party.

Caveat Emptor: A Latin expression that means ‘let the buyer beware’; it is the purchaser’s responsibility to assess the quality of the purchase (the property or business) before buying.

Certificate of Completion: A document issued by a building surveyor on completing the final mandatory inspection of the property. It is not evidence that the building complies with the Building Act 1993 or building regulations.

Certificate of Occupancy: A document issued by a building surveyor, which shows that the building is suitable for occupation. It is not evidence that the building complies with the Building Act or building regulations.

Certificate of Title: A document that shows who owns the property, the size of the land and whether there are any limitations on the title such as mortgages, easements or encumbrances.

Chattels: Moveable personal property or furniture. Also referred to as ‘goods’ in the context of the sale of property.

Common Law: The system of laws originated and developed in England and based on court decisions, on the doctrines implicit in those decisions, and on customs and usages rather than on codified written laws.

Common Property: Areas of a property that are used by and belong jointly to all the owners of a strata title property. This applies to common driveways, paths, courtyards, stairs, passageways, lifts, lobbies, fences, common garden areas and other facilities in multi-dwelling complexes.

Company Title: Each owner in a block of flats has shares in a company that has total ownership of the land and buildings of the flats. The owners receive a parcel of the shares with rights attached. Each owner is entitled to exclusive occumpation of a flat, but this is subject to the company’s Memorandum and Articles of Association.

Condition Report: A report on the current condition of residential property to be leased where a bond is to be taken. The condition must be completed by the agent and given to the tenant before the tenant takes possession of the property. The tenant must sign and return one copy of the condition report within three business days of occupying the premises.

Contract of Sale of Real Estate: A legal document prepared by the vendor’s solicitor that outlines the conditions of the sale. The contract of sale is legally binding when signed by both the purchaser and the vendor.

Conveyancing: Transferring the ownership of a property from the vendor to the purchaser. It is often performed by a solicitor or conveyancer.

Cooling-off Period: The period of three clear business days after the purchaser signs the contract of sale for residential or rural property of not more than 20 hectares, during which the purchaser may withdraw the purchase. The cooling off period does not apply in certain circumstances, including where property is sold by auction.

Counter Offer: A new offer as to price, terms or conditions made in reply to a prior unaccepted offer.

Covenant: In real estate, a covenant is an agreement that creates an obligation on the owner of a property not to do something. For example, a covenant could state that no more than one dwelling may be built on the land. A covenant runs with the land and the liability to comply with it or the right to take advantage of it passes from owner to owner.

Deed: A document in writing where an agreement is reached, obligation entered into or property conveyed. It is signed under a seal.

Defect of Title: Any matter, for example an encumbrance or an illegal structure built without a permit, which restricts the purchaser from obtaining a clear title to the property.

Deposit: An amount of the purchase price paid by the purchaser, usually at or around the time of making a written offer. It is usually 10% of the purchase price. The deposit must be held in a trust account by an estate agency or by the solicitor or conveyancer, or may be held jointly in a trust account by the vendor and the purchaser.

Disbursements: Expenditure by the estate agent on behalf of the principal including, for example, advertising expenses, rates, taxes and insurance.

Easement: A right held by one person to make use of the land of another. For example, land set aside for drainage and sewerage pipes.

Encumbrance: A third party’s right that obstructs the unencumbered use or transfer of a property. Examples are easements, mortgages and caveats.

Estimated Selling Price: The price an estate agent estimates a property will attract. It must be recorded on the authority to sel as either a single figure or as a range where the difference between the top and bottom figures does not exceed 10%, for example, $200,000 – $220,000.

Exclusive Agency Authority: The vendor appoints a single agency and, regardless of who is the effective agent of the sale or lease (including the principal or another agency), the appointed agency is entitled to the commission.

Fee Simple/Freehold: The fullest and highest possible ownership of property. Ownership of unlimited duration, where the ownership passes to heirs or beneficiaries on the owner’s death. First Home

Owner’s Grants: https://www.sro.vic.gov.au/first-home-owner/applying-first-home-owner-grant

Fittings: Items that can be removed without damaging the property, such as garden ornaments, lighting and drapes. They must be listed in the contract of sale if the purchaser wants them to remain with the property.

Fixed Term Tenancy: A tenancy where there is an agreement that ends on a specified date. Except where the tenant has breached the law or the tenancy agreement, the landlord is not entitled to terminate the tenancy agreement before the expiry of the fixed term. On expiry, a fixed term tenancy automatically continues as a periodic tenancy unless a new fixed term agreement has been entered into.

Fixtures: Items that are attached to the property and cannot be removed without causing damage to the property, such as bathroom suites, built-in wardrobes and kitchen stoves. They are usually included in the sale.

General Law Title: The original system of land titles. A general law title comprises all the documents that show a property’s complete historical record of title ownership. For the title to be ‘clear’ it must be traceable for a minimum of 30 years without a break, up to and including the current ownwership. When the property is resold, the title will be converted to a Torrens title. See Torrens Title.

Goods and Services Tax (GST): A consumption tax of 10% levied on the final consumer of the goods or services. The supplier of the transaction is responsible for collecting the GST and sending it to the Australian Taxation Office.

Improvements: All work done or material used on and for the benefit of the land that improves the values of the land. Does not include work done or materials used for the benefit of the land by the Crown or by any statutory public body. Improvements can take the form of, for example, buildings, fences, driveways and retaining walls.

Joint Tenants: The form of ownership where two or more people purchase a property in equal shares and if one dies, that person’s share of the property passes to the surviving owner/s.

Leasehold: Property held under a lease that is to continue for a period of time.

Liability for trust money: The principal estate agent (of a sole trader or partnership) and the officer in effective control (of a corporation) are personally liable for any trust money received by the agency.

Mortgagee Sale: If the mortgagor (borrower) defaults on the mortgage, the mortgagee (lender) can seek to recover the debt by selling the property that was the security for the loan under the mortgage.

Notice to Vacate: Notice given by the landlord to the tenant advising that the landlord wants to end the lease or tenancy agreements and wants the tenant to vacate the property.

Officer in Effective Control: The title given to the principal estate agent responsible for the financial and day-to-day management of an estate agency business that is a corporation.

Outgoings: (i) Any costs incurred by the vendor or landlord in addition to the agent’s commission, for example, advertising costs. All outgoings are negotiable. (ii) Any costs in addition to rent, for which a tenant is responsible under the terms of the lease, for example, rates and insurance premiums.

Owners Corporation: The body corporate that has collective ownership of the common areas in a subdivision of land or buildings. It is responsible for the administration, upkeep and insurance of the common areas share by all the owners (the common property).

Party in Default: The party to the contract that in in breach of the contract or terms of the contract.

‘Passed In’: The circumstance where a property for auction is not sold, usually because it has not reached the vendor’s reserve price.

Periodic Tenancy: Where a tenancy agreement has a commencement date and continues from one rental period to another. Notice to terminate the agreement may be given by either party during this period as set out in the governing tenancy legislation.

Private Sale: A property or business sold by direct negotiations undertaken privately with prospective purchasers. Not sold by auction. An agent might or might not be involved in the sale.

Purchaser: The buyer; the person who acquires title to or ownership of a property or an interest in a property.

Reserve Price: A vendor’s minimum sale price for the property. It must be recorded on the authority appointing the agency.

Residential Tenancy Agreement: Lease prescribed under the Residential Tenancies Act for residential property.

Sale by Tender: A sale where tenderers put their offers in writing by a specific time and date, and pay a deposit. The most suitable offer acceptable to the vendor obtains the property, usually subject to a reserve price.

Settlement: The occasion when ownership of a property passes from the vendor to the purchaser and the balance of the purchase price is paid to the vendor.

Special Condition: A condition that must be met before a contract is legally binding.

Stakeholder: An estate agent, solicitor or conveyancer who received or holds money in trust on behalf of any person in respect of a transaction, pending the completion of that transaction.

Stamp Duty: A state government tax based on the sale price of a property and paid by the purchaser when ownership of the property is transferred.

Statute: An Act as made by Parliament.

Statutory Body: A government agency established through an Act of Parliament.

Strata Title: Individual ownership of an apartment or unit within a block or multi-unit complex. This is separate from and additional to the joint ownership of common areas shared by al the property owners in the building or complex.

Stratum Title: Each owner has a Certificate of Title and is the absolute owner of a freehold flat. A service company has the title to the residual land and each flat title holder has a responsibility to the service company. The service company, in which each flat title holder has shares, administers, manages and maintains the property in which each owner’s flat is registered. See Company Title.

Subdivision: Dividing land or buildings into lots. The subdivision must be approved by local council.

Tenant: Any person paying rental in exchange for accommodation or in possession of property with the owner’s permission.

Tenants in Common: A form of joint ownership of a property in which each person owns a share of the property, equally or unequally. On the death of one owner, the deceased’s share passes to heir/s, who assume the role of tenant in common with the other existing owner/s.

Title: A legal document that identifies who has a right of ownership of a property.

Torrens Title: A system of title by registration that is governed by the Transfer of Land Act.

Transfer of Land: A document that records the change of ownership of a property from the vendor to the purchaser.

Trust Money: Money received by an estate agent as a stakeholder or on behalf of another person (principal or third party). It must be paid into the estate agent’s trust account in an approved financial institution and recorded in the agency trust accounting records. Deposits on sales, residential bonds paid in cash, rents and prepaid advertising are all examples of trust money.

Unregistered Mortgage: May be a loan from a friend or relative to cover the cost of purchasing a property; secured by a written mortgage document but not registered on the title.

Valid Contract: A contract that has been executed in compliance with all the legal formalities and is binding on, and enforceable by, the individuals who executed it.

Valuation: An estimate of the value of a property prepared by a valuer, usually for a fee. A valuation may be used to obtain a mortgage or insurance, or in a legal contest.

Valuer: A person (in Victoria) who has passed the accredited degree course, completed up to two years of supervised practice and passed a professional interview with the Australian Property Institute (API). Once qualified, valuers are Associates or Fellows of the API and are called Certified Practising Valuers.

Vendor: The person selling the property.

Vendor Bid: A bid made on behalf of the vendor. Vendor bids can only be made by the auctioneer and only when the auction rules allow it. The auctioneer makes this statement before bidding starts and announces each vendor bid as, or before it is made.

Vendor’s Statement: Information that the vendor must provide to the purchaser advising of restrictions such as covenants and easements, outgoings such as rates, and any other notices such as compulsory acquisition. The required information is specified under Section 32 of the Sale of Land Act.

Wear and Tear: The depreciation of an asset due to ordinary usage.