Property Glossary

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Active Income - Income from salary, wages, tips, commissions and other activities in which the taxpayer participates.
Accrued Interest - The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date.
Alienate - The Alienation of Land Act 68 of 1981 governs the alienation of immovable property. In terms of this Act, 'alienate' means “sell, exchange or donate” the property.
Amortization - The repayment of loan principle through equal payments over a designated period of time.
Annual Debt Service - The total amount of principal debt and interest to be paid each year to satisfy the obligations of a loan contract.
Annuity - Regular fixed payments or receipts over a designated period of time.
Appreciation - An investment’s increase in value.
Appreciation Potential - The possibility that real estate investment or probability will increase in value during the holding period.
Arbitration - The procedure whereby parties to a dispute appoint an arbitrator to settle the dispute. The arbitrator’s decision is final and the parties are bound by it.
Asset - It is the Capital Item that you invest in, i.e., the physical property you own.
Auction - Method of selling a property to a person that makes the highest bid.

Body Corporate - The controlling body of a sectional title scheme. Consisting of a chairman and trustees.
Business Risk - The uncertainty associated with the possible profit outcomes for a business venture.
Buy To Let - The investment strategy of buying a residential property, with the intention, to be let for profit... more

Capital Gain - This is the profit that results from the appreciation of a capital asset from its purchase price.
Capital Gains Tax (CGT) - A capital gains tax (abbreviated CGT) is a tax charged on capital gains; the profit realized on the sale of an asset that was purchased at a lowerprice (first R1.5 million gains on primary residence is not subject to taxation).
Capitalization Rate - A percentage that relates the value of an income-producing property to its future income, expressed as net operating income divided by price.
Cash Flow After Taxes - The periodic amounts of money received by an investor after taxes from the operations of a real estate investment.
Cash Flow Before Taxes - The periodic amounts of money received by an investor before taxes from the operations of a real estate investment.
Cash Proceeds From Sale - The selling price less the sale costs, mortgage balance and tax liability on sale. Also called “the sale proceeds after tax”.
Close Corporation - A business entity registered in terms of the Close Corporations Act 69 of 1984. It may conclude agreements of sale or lease in its own name. Members managing the business of the CC are treated in the same way as directors for taxation purposes. (EAAB)
Compound Interest - Interest computed on the original principal and accumulated interest.
Compounding - A type of calculation in which interest earned is reinvested and earns additional interest.
Commercial Property - A property used for business or office purposes, not for residential purposes.
Common Law - The law which applies automatically unless excluded or amended by legislation or unless the parties have enforced an agreement. South African common law is Roman Dutch law.
Company - A business entity registered in terms of the Companies Act 61 of 1973. A company may enter into agreements for sale or lease in its own name.
Contract - A legally enforceable agreement, i.e., an agreement of lease or sale of property. In terms of the Alienation of Land Act 68 of 1981, a ‘contract’ refers to a sale of land on instalments where the purchase price is payable by the purchaser to the seller in more than two instalments over a period exceeding12 months. (EAAB)
Conveyance - A written instrument, such as a deed or lease, which transfers some ownership interest in real property from one person to another. You are typically charged a conveyance tax on the transfer.
Conveyancer - An attorney who has qualified as a conveyancer can attend to deed office transactions such as the transfer of a property from a seller to a purchaser and the registration of mortgage bonds and servitudes.
Conveyance Tax - A tax imposed on the transfer of real estate property.
Cooling Off Right - In terms of the Alienation of Land Act 68 of 1981, certain purchasers of immovable property have the right to withdraw/cancel an offer to purchase within 5 days after the offer or sale agreement was signed by the purchaser. It is referred to as the ‘cooling off right’. It applies only in respect to properties that are used (or intended to be used) mainly for residential purposes and purchases for less than R250 000. The right does not apply in circumstances in which the buyer is a company, close corporation or a trust. (EAAB)

Deed - A written document in which a person transfers ownership or real property to another. A deed must be properly executed and delivered in order to be effective.
Defects - A patent defect is a defect that is clearly visible.
Depreciation - With reference to the fact that assets with finite lives lose value over time.
Disclaimer - A written document denying legal responsibility or a limitation of rights that might otherwise be claimed.
Diversification - A method of reducing risk by investing in unrelated (uncorrelated) assets.
Domicile - The place where a person is deemed to be permanently resident.
Double Up - The double up shows you what happens when you double your monthly payment. Doubling up does not mean that you pay off your bond in 10 years instead of 20 years. You actually repay your total bond in less than 5 years! Few people may be able to afford to double up their payment but Life is all about choices. If you can pay off your car, which sometimes is as expensive as a house over a 5-year period, why not use the same strategy on your house? You will be the winner.

Economic Obsolescence - The reduction in a property’s value due to external circumstances such as legislation or changes in nearby property use.
Endorsement - Endorsement on a title deed is a note made on the title deed of a property by the Registrar of Deeds. It is an attachment to a document that amends or adds to it.
Eviction - The dispossession of a tenant of leased property by force or through the legal process.
Equity - What we own in the property or the market value, less the mortgage.

Financial Leverage - The use of borrowed funds to acquire an investment... more
Financial Risk - The possible change in an investment’s ability to return principal and income, i.e. as analysed with IGrow Wealth software.
Fixed Expenses - Costs that do not change with a building’s occupancy rate. They include property taxes, insurance and some forms of building maintenance.
Fixture - A permanently fixed piece of furniture or equipment incorporated into a property. Removing it would cause damage to buildings or land and is therefore regarded as legally part of it.
Freehold - Outright ownership of a property. This type of tenure contrasts with leasehold where the lease holder has the rights to occupy a property for a specified period of time.
Functional Obsolescence - The reduced capacity of a property or improvements to perform their intended functions due to new technology, poor design or changes in market standards.
Future Value - The amount to which money grows over a designated period of time at a specified rate of interest.

Gross Operating Income - The total amount of cash generated by the operations of a property.

Habitable - Suitable and fit for a person to live in and free of any faults that might endanger the health and safety of occupants.
Huur Gaat Voor Koop - ‘Lease Goes before Sale’ Where leased premises are sold before the lease has expired, the tenant may, in terms of the ‘huur gaat voor koop’ rule, remain in occupation of the premises until the lease expires. In the case of a long lease, i.e. a lease for a period of 10 years or longer, this rule only applies if the lease is in writing and registered against the title deed for the leased premises or if the purchaser at the time of the conclusion of the sale knew that the lease was a long lease.
Hypothec - Right of security over movable. In the case of a lease the lessor has a hypothec (right of security) over the lessee’s movable goods on the lease premises as security against non-performance (payment of rent) by the lessee.

Immovable Property - Land and everything permanently attached to it.
Industrial Property - Property used for industrial purposes,e.g., factory premises.
Inflation Rate - In economics, the inflation rate is the rate of increase of the average price level (a measure of inflation).
Initial Investment - The outlay of cash needed to acquire an investment.
Instalment Sale - Sale where the purchaser pays the purchase price (or a portion thereof) to the seller in instalments (usually monthly).
Insolvent - A person who is unable to pay his debts and whose estate is declared insolvent in terms of the Insolvency Act 24 of 1936.
Insurable Value - The value of the portions of the property that are physically destructible.
Interest-Only Loan - A method of loan amortization in which interest is paid periodically over the term of the loan and the entire original loan amount is paid at maturity.
Interest Rate - The lender’s rate of return on borrowed funds.
Interest Rate Ceiling - The absolute maximum rate of interest that a financial institution can charge for an adjustable mortgage or loan. This is regulated by the government. When a borrower is charged interest above the established legal rate they are usually dealing with a loan shark.
Investment Real Estate - Real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a primary residence, while others are used to generate rental income and profits through price appreciation. Common examples of investment properties are apartment buildings and rental houses, in which the owners do not live in the residential units but use them to generate ongoing rental income... more

Joint Ownership - This is a single property owned by two or more persons. A joint ownership is established by joint purchase, a marriage in community of property, or in terms of a will.

Landlord - The owner of property that is leased or rented to others.
Lessor - The owner renting out the property.
Lease - A contract by which an owner of a property conveys exclusive possession and use of it for a specified rent and for a specified period – after which the property reverts to the owner.
Legal Duty - The responsibility to act according to the law.
Leverage - The use of borrowed funds to finance a portion of the cost of an investment.
Lien: Right Of Retention - Where a person has improved someone else’s property or has incurred certain expenses in respect thereof and he has a legal claim to the property, he may retain possession of such property until the debt due to him has been paid. The right to retain possession is called a ‘Lien’.
Limited Real Right - A registered right over someone else’s property. Servitude’s and mortgage bonds are limited real rights.
Liquidation - The legal process leading to the dissolution of a company or close corporation. A company or close corporation declared insolvent is said to be ‘in liquidation’. A company or close corporation can, however, also be wound-up on grounds other that insolvency.
Liquidation Value - The likely price that a property would bring in a forced sale (foreclosure or tax sale). Used when a sale must occur with limited exposure time to the market or with restrictive conditions of sale. The value of a project or asset if it were immediately liquidated. Also referred to as the liquidation value. The abandonment value is generally a cash value, or equivalent, associated with an asset. This value is important for companies when analyzing the profitability of particular projects or assets and deciding whether they should be maintained.
Liquidity - The ability to convert an investment into cash quickly without loss of principal.
Loan Balance - The amount of money that remains to be paid on an amortizing loan at a given time.
Loan Or Mortgage Value - That portion of the value of real property recognized by the lender when used to secure a loan.
Loss Of Use - Circumstances where a property cannot be occupied in the normal way through the negligence or wrong doing of another party.
Lucky 13th Payment - The lucky 13th payment is exactly what it says: a 13th instalment divided by 12 and enables you to adjust your monthly payment so that it incorporates a 12th of your monthly payment every month. Paying a 13th payment at year-end will not have the same effect, as you do not save all the interest that the additional 12th of the amount saves you on a monthly basis.
Lump Sum Payment - This in short is an extra payment you make towards your bond. This can be a bonus you received or money paid to you. If you are wondering what to do with surplus money, the best investment decision you can make, if compared against traditional investments like endorsement policies or structured saving plans, is to invest the surplus money in your bond. This will outperform any ordinary investment. Even if the bond interest rate you pay is 12%, you pay on the daily balance, monthly compounded, and this is a much higher percentage if compared to any ordinary savings plan. You can get hold of your money by speaking to a Qualified Risk Advisor to determine whether you could not perhaps free an amount by stopping unproductive policies.

Mandate - An instruction or authority given to an estate agent to render a particular estate agency service for a client.
Managing Risk - The steps taken by an investor or manager to control or reduce investment risk.
Market Risk - The possibility that downward market trends will reduce an investment’s market value.
Market Value - The most probable price that a property would bring in a competitive and open market under “fair sale” conditions. Market value also refers to an estimate of this price.
Marketability - The ability to sell an investment quickly regardless of its sales price.
Mortgagee - The person or financial institution (Bank) lending money to someone else against registration of a mortgage bond over the property. The mortgagee then holds a mortgage bond over the property.
Mortgagor - The person who borrows money (normally the buyer) and who allows registration of a mortgage bond (by the mortgagee) over his property to secure repayment of the loan.
Mortgage Broker - The matchmaker between a home buyer and a lender whose goal is to originate a mortgage loan. The broker draws from a pool of various lenders to find the right match. Do not confuse a mortgage broker with a mortgage banker. A mortgage broker brings together both the parties of a loan but does not actually originate or service the loan, while a mortgage banker originates and services the loan.

Negative Leverage - Borrowed funds are invested at a rate of return lower than the cost of funds to the borrower.
Net Asset Value - It is the value of the property after deducting the outstanding loan/bond.
Net income - This is the annual net income after all annual expenses and bond repayments. This will exclude equity in the property and annual growth.
Net return on Investment - The equity Less capital expenditure plus Profit/Loss.
Null and void - Without any legal effect. Any agreement of which is null and void is not valid in any respect and cannot be enforced by either party.

Occupancy - Holding, possessing, or occupying premises.
Occupant - Someone who occupies a particular property or place.
Occupational interest - When a purchaser takes occupation of a property before it is registered in his name, he/she is usually required to pay a monthly amount for such occupation to the seller. This amount is referred to as occupational interest (or rent).
Offeree - The person owning the property who receives the offer to purchase. The person making the offer is the offeror.
Operating expenses - Money outlays necessary to operate and maintain a property.
Opportunity cost - The “cost” of selecting one alternative is the benefit foregone from the next best alternative.

Passive income - Income from rental activity, limited business interests, or other activities in which the investor does not materially participate.
Park your Salary - Are you working smart with your salary? Are all your Debit orders etc scheduled to be deducted from your charge account on the first of the month? Why? If you could arrange for debit orders to become payable on say the 10th day of each month and for your salary to be deposited (parked) directly into your access Bond, you can save massively on interest charges, as interest is charged on the daily balance of your Bond account. By the time the debit order becomes due you merely withdraw it from your Bond account and deposit it into your Regular Account. You need to specify the amount that you are able to leave in the Bond account for the time being and for how many days per month it can remain there. (See IGrow Wealth Software!!)
Portfolio income - Income from interest, dividends, royalties, or the disposition of property held for investment.
Positive leverage - Borrowed funds are invested at a rate of return higher that the cost of the funds to the borrower.
Potential rental income - The total amount of rental income for a property if it were 100% occupied and rented at competitive market rates.
Premises - A building or part of a building, usually including the adjacent grounds.
Price - The amount that was offered, asked, or actually paid for a property.
Principal - The portion of a loan payment used toward reducing the original loan amount.
Property type - The classification of commercial investment real estate. The four primary property types are: retail, industrial, office and residential.

Rate of return - The percentage return on each Rand invested, also known as yield.
Real right - A right over or in respect of property. Real rights over or in respect of immovable property are registered against the title deed of the property.
Reasonable wear and tear - Damage sustained in the course of normal use.
Refinancing - The replacement of an existing debt obligation with a debt obligation bearing different terms. The most common consumer refinancing is for a home mortgage... more
Registered right - A right over property registered in a deeds office against the title deed of the property. The purchaser of immovable property is bound by the rights registered over the property whether or not he knew of their existence at the time of the sale.
Registration against title deeds - A right is registered against the title deed of a property when details concerning such right are stipulated on the title deed by the Registrar of Deeds in terms of the Deeds Registries Act 47 of 1937.
Residential Property - A property used for residential purposes, not for business or office purposes.
Resolutive Condition - A clause in an agreement of sale or lease which stipulates that the agreement will terminate on the occurrence of an event specified in the clause. A typical example of a resolutive condition is a condition in an agreement of sale of a proposed sectional title unit stating that the agreement will terminate if the sectional title plan is not registered before or on a certain date.
Repossess - To take possession again of a property or goods after non-payment of money owned. This might follow a court order.
Reverse Mortgage - A special type of loan used to convert the equity in a home into cash. The money obtained through a reverse mortgage is usually used to provide seniors with financial security in their retirement years. The reverse mortgage is aptly named because the payment stream is reversed. Instead of the borrower making monthly payments to a lender, as with a regular mortgage, a lender makes payments to the borrower. While a reverse mortgage loan is outstanding, the borrower owns the home and holds title to it, without having to make any monthly mortgage payments.
Richman’s Secret payment - When you obtain a new bond there is a time-lapse between the last payment of your previous bond and the first payment of the new bond. This period could be up to 60 days. During this time interest is added to the balance, increasing the actual bond amount approved. Do not skip that month as the banks would suggest you do, rather make your monthly payment(as usual) as soon as the account has been activated. The banks will however perceive this as an extra payment and in turn, it will reduce the bond period with a substantial number of months and save you thousands of rands in the long run!
Risk - The probability that actual cash flow form an investment will vary from the forecasted cash flow.

Sale cost - The brokerage commissions and fees, and any additional transaction costs that are incurred during the sale of the property.
Servitude - A right which a person has over the immovable property of another and which is registered against the title deed of the owner. It usually entitles the holder of the servitude to do something on the property. A common example is a registered right of way to travel over property owned by another person.
Subdivision - When land is subdivided, it is divided into two or more portions .A specific legal and technical procedure must be followed.
Sublease - A lease that is given by a tenant of part or all of the leased premises to another person for a period shorter than the original lease, while still retaining some interest.
Suspensive condition - A clause in an agreement of sale or lease in terms of which the agreement will become enforceable only if the event stipulated in the clause occurs. A typical example is a clause in an agreement of sale of a house stating that the agreement is subject to the suspensive condition that the purchaser obtains a loan from a financial institution on or before a certain date.

Taxable income - Adjusted gross income less personal deductions and exemptions.
Tenancy - The temporary possession or occupancy of property that belongs to another.It also refers to the period of a tenant’s possession.
Time value of money - An economic principle recognizing that a Rand today has greater value than a Rand in the future because of its earning power.
Title Deed - A legal document as evidence of ownership of property and filed in a deeds office containing details of a property and its owner. It indicates the purchase price, restrictive conditions of title and limited real rights. A title deed is proof of ownership of a defined property; if other persons or an institution have rights over the property, i.e., where a bank or other institution holds a mortgage bond over the land, details thereof are also endorsed on the title deed.
Transfer of ownership - Ownership passes to a purchaser on registration of the property in his name in the deeds office.
Trust Account - A bank account in which money is held in trust for another person by the account holder until the occurrence of a specified event. The money held in such an account is referred to as trust money. Every estate agency business or Attorney must have a trust account which must be audited by an auditor annually.
Trust Deed - A formal document that outlines the terms of a trust agreement. A common way to structure real estate purchases where the title to a property is held in trust.

Voetstoots (As is) - If a voetstoots clause is included in an agreement of sale of immovable property, it means that the seller cannot be held liable for defects which are not visible upon a reasonable inspection of the property, ie. leaking roof. A voetstoots clause does not exclude the sellers liability if he failed to disclose defect that he was aware of in order to defraud the purchaser.

Yield - To calculate the yield on your property simply divide the annual rent by the purchase price and multiply by 100 to give you a percentage.

Zoning - Zoning limits the purpose for which a property may be used, 1) commercial, 2) industrial, 3) residential , 4)educational, etc. You may not build an industrial building in a residential zoned area.

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Property Glossary