Glossary - L
- Land transfer tax
- Land transfer tax is basically payable on the price of new homes. It refers to a duty enforced on real estate property and is usually computed on the value of the property that is being listed with the land registration office. However, not all provinces may enforce the land transfer tax and even the method of computing the tax may differ from one provincial jurisdiction to another.
- Late charge
- A late charge denotes a fee charged on an account for a payment that is either made behind schedule or is not made at all. In real estate context, the term refers to a fee charged by the mortgagee or lender when a mortgaged payment is not received on the due date. Although the lender determines the amount of the late charge, this penalty may be as high as five per cent of the mortgage payment. Hence, it is essential to ensure that mortgagors make their payments on time.
- The term lease is a written agreement whereby a real property owner (lessor) permits a tenant (lessee) an exclusive right to use the asset for a particular period of time in exchange for a preset rent. In other words, a lease is an agreement between a landlord and a tenant for the occupation or use of the landlord's asset or part of an asset by the tenant for a particular period of time and for a precise concern. A long-term written lease, often called a deed, develops a leasehold interest that itself can be traded or mortgaged. A lease may also be mentioned as a tenancy agreement.
The objective of a lease is to set up a written evidence of a contract between the concerned parties for a tenancy understanding contained by a definite period. It may be noted that a lease or a tenancy agreement may be unwritten or written, expressed or implicit. The lease document for all real properties - residential, commercial and industrial - is actually a comprehensive deed that spells out the duties of the concerned parties, the amount of rent to be paid as well as the obligations of the landlord and the tenant together with an assortment of stipulations regarding notices, remedies and termination of the contract.
- Lease buyout
- In the context of real estate, the expression lease buyout refers to a procedure whereby a landlord, tenant or a third party makes payments to end the tenant's outstanding lease liabilities and rights as per the present lease agreement. The term also denotes the tenant making a cash payment or any other defrayal to the landlord to end the lease agreement. On the other hand, the term even denotes a cash payment or any other settlement of the residual part of the tenant's lease by the landlord with a view to provide an incentive to the tenant to shift to a new place.
- Leasehold mortgage
- The term lessee, also known as a tenant, refers to a person who is renting or leasing a real property. In the instance of capital leases, the lessee also denotes a 'debtor' to the lessor.
- The expression lessor refers to an owner or title holder of a leased asset or property. In matters pertaining to real estate, the tem denotes a landlord who grants the use of his or her real property to a tenant as per the terms and conditions of a lease agreement. In the case of capital leases and operating leases, the lessor also denotes the lender and the secured party. However, in the case of leveraged leases, the lessor does not hold the title of the property, but it is possessed by a third party.
- Letter of commitment
- Generally speaking, the term letter of commitment, also called loan commitment letter, refers to a written undertaking from a lender to a borrower that the former will make available a particular amount at a specific interest rate to the borrower when the latter demands it on the condition that all prerequisites mentioned in the offer are conformed. Usually, the borrowers make use of this confirmation of commitment to secure bridge financing (short-term loans), while the lenders have to be paid a commitment fee for the service.
In the context of real estate, the term letter of commitment denotes a written commitment from a lender corroborating the stipulation under which he or she will provide a mortgage loan to a borrower. Characteristically, the conditions include a precise rate of interest accompanied by a time period that the lender is obligated by the promise. The term letter of commitment is also frequently mentioned as a mortgage loan commitment and the certificate also includes particulars pertaining to any explicit rights, for instance repayment privileges, survey requirements, necessity of fire insurance, loan processing charges and some particular stipulations.
- Letter of credit
- In simple terms, the phrase letter of credit refers to an agreement between a bank and a borrower that enables the borrower to use money on the bank's credit. In other words, the term letter of credit denotes a letter or a deed issued by a lending organization in support of a customer empowering the individual named to withdraw a particular amount of money depending on definite agreed terms and conditions. Usually, letters of credit are associated with business enterprises. In commercial ventures, it is a binding document that a buyer is able to request from his or her bank with a view to assure that the payment for goods will be transferred to the seller. In fact, a letter of credit gives the seller reassurance that he or she will receive the payment for the merchandise.
- Letter of guarantee
- In general, a letter of guarantee is a document that is basically used in the Far East nations by which an importer necessitates itself to receive and pay a bill of exchange on its presentation at a specific bank. The purpose of the letter of guarantee is to obtain the particular bank's approval of an exporter's draft for making payments through its correspondent bank or the bank where the draft will finally be presented.
In the context of real estate, a letter of guarantee is regularly used in development projects where the local municipality is involved. In such situations, the letter of guarantee promises the availability of funds and offers a type of assurance on the part of the lending organization to mediate and conclude the development project utilizing its own funds, whenever it is needed. Considering the fact that the lender is ready to support the developer's company as well as it project, the lending organization offers this guarantee to comfort the municipal authorities regarding the financial stability of the developer.
- Letter of intent
- In common terms, the phrase letter of intent refers to a letter from one firm to another conceding eagerness and aptitude to do business. In most cases, a letter of intent is issued as an acceptance of the fact that a merger between the two companies or an acquisition is being sincerely mulled over. It may be noted here that a letter of intent, a written, common understanding between parties spelling out different stipulations, covenants, terms and other issues that may eventually set in motion a detailed agreement between the concerned parties, is not a contract and cannot be enforced. It is basically seen as an initial agreement between the concerned parties stating a sincere intention to carry out specific business activities.
For instance, a letter of intent may be used in real estate deals to offer a general agenda between a land owner, commercial landlord or a prospective tenant and a developer. By and large, a letter of intent is just a statement of general understanding and does not represent a formal agreement. A letter of intent also does not give rise to any responsibility or liability, if not such conditions are described explicitly.
- The term license, also called permit, is a permission granted by an appropriate authority to engage in a definite activity. In other words, the expression license denotes an authorization granted to an individual to enable him or her to operate in a certain manner that would have not been legally possible otherwise. A license is, however, not a right as the licensor may not possess the legal authority to grant all necessary permissions that constitute a legal right. In addition, a license is also not a lease and is not transferable by the licensee.
In the context of real estate, the term refers to a permission granted by a licensing authority to an individual or a corporation to undertake by means of a distinct capacity in real estate trade. By tradition, real estate practitioners as well as the purchasers believe in terms of licenses, for instance, a broker's license or a salesperson's license. However, in actual fact, majority of the provincial regulatory agencies do not issue licenses to individuals or brokerages. On the contrary, these provincial regulatory bodies register the individuals and brokerages as per the appropriate provincial real estate Act. Consequently, all such individuals and brokerages who have been registered by the provincial regulatory bodies are known as registrants.
- Lien refers to a legal claim on someone else's property or the legal right to sell someone else's asset as a security for loans, judgments or claims. Liens are an impediment that needs to be cleared before an owner is able to sell a property or transfer its title to an ensuing buyer. In a number of instances, the creditor will retain lawful claim against a property, but in reality will not possess its ownership. In other instances, the creditor will actually hold on to the property till the time the loan is cleared in full. The former instance is a more widespread understanding, especially when the property is fruitful, as the borrower would desire that the asset be used to yield an income to pay off debt instead of just holding it in possession and not making use of it. In fact, liens those are a subject of public record on a property for sale show on an asset's preliminary report.
- Life cap
- In the context of real estate, life cap refers to the ceiling that establishes the maximum amount the interest rate and monthly payment of an individual's adjustable rate mortgage can swing up or down during the term of the loan. The life cap is actually distinct from the periodic cap that restricts the degree to which an individual's mortgage interest rate is able to amend up or down in any one adjustment time or phase. A life cap may also be defined as an absolute interest rate, like the highest lifetime rate of 12 per cent that is known as an interest rate ceiling or as a maximum proportion change in the interest rate from the original interest rate on the loan. When the life cap is referred to as the highest percentage change from the original interest rate, it is also capable of being applied to interest rate reductions.
- Lifetime advances
- Lifetime advances are only applicable in a reverse mortgage where predetermined monthly loan advances are made to a borrower for the remaining part of his or her life.
- Line of credit
- A line of credit, also known as a credit line, may be broadly defined as an understanding between a bank and a customer whereby the financial institution proffers a specific sum of unsecured loan to a particular borrower for a precise period of time. The term also refers to the utmost amount that a customer is allowed to borrow and be indebted. In fact, a line of credit functions like a loan, but, in reality, is dissimilar to any loan. Moreover, a line of credit generally does not require the borrower to pay any interest on the credit they don't use. It is more suitable as a short-term loan rather than a long-term credit.
In matters pertaining to real estate development, a line of credit is made use of either in place of mortgages and related advances or in other ways. In this case, the amount of money given as an advance is protected by demand notes or promissory notes extending to a ceiling made specific by the pertinent lender. As mentioned earlier, a line of credit is able to fulfill provisional financial requirement or balance the current arrangements. In a line of credit, the interest rates are much higher than that charged by the traditional mortgages. It is very usual to find the interest rates of a line of credit one or two per cent higher than that charged in conventional mortgages, but the rate of interest largely depends on a number of conditions related to a project, including the borrower and the lender.
The promissory notes that are essential in a line of credit may be issued for a precise period of time. In most cases, a declared amount of credit is set up and all demand notes are processed corresponding to that ceiling. Characteristically, all such promissory notes are on a demand basis or, in other words, the credit can only be arranged according to the lender's decision. In this case, it is normal to evaluate the fiscal standing of the borrower every six months or annually.
- Listing, Listing the property, Marketing the property
- Loan advances
- Loan advances are applicable only in the case of reverse mortgages and refers to the monthly payments made by a mortgagee (lender) to a mortgagor (borrower) or any other party on behalf of the mortgagor.
- Loan originator fee
- A loan originator fee refers to the money charged by lenders to process new loans. In other words, the term denotes the fees paid to a lender for originating a loan and is usually anything between 0.4 per cent and three per cent of the value of the loan. A loan originator fee is one of the numerous add-on charges that a lender often imposes on a home mortgage borrower. The loan originator fee was introduced by the Federal Housing Administration in the 1950s and is reasonable in more than a few different ways, including costs for administrative needs, setting up the loan file, creating the mortgage, entering the loan into the lender's books, getting ready documents, loan endorsing, or simply as a service charge.
- In the context of real estate, the term lock-in, also known as rate lock, refers to a commitment by a lender to the mortgagor pledging a particular interest rate with the condition that the loan would be closed within a specific time frame. It is essential for a lock-in to specify the number of points the need to be paid at the close of the loan. In order to have the benefit of locking-in the rate beforehand, the borrower may make a small interest rate payment.
- Lump sum
- The term lump sum denotes a single payment against the total outstanding amount. The term denotes the reverse of making a series of payments at regular intervals. In the context of real estate, the expression lump sum denotes a particular credit advance at the closing of a specific reverse mortgage loans.