Real Estate Glossary

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Advanced cancellation

This is understood to be the advanced amortisation of the amounts agreed to in a loan. A percentage of the amount advanced is usually charged in order to compensate the financial loss involved in the amortisation schedule initially agreed to. In the case of loans at a variable rate of interest, the maximum legal percentage is 1%.

Agency contract

The contract whereby a party (agent) acts in representation of another (principal) under the authority of the latter.

Amortisation of the loan

Regular payment which is made in order to return the capital of a mortgage loan over a determined period of time.

Assignor

The person who assigns a thing or a right to another person. It is more usual to speak of assignor in relation to rights: assignment of credit, assignment of a contract, assignment of a rental, etc.

Boundary Marking

Effect of placing signals, landmarks or boundary marks which indicate the limits or boundaries of property. Generally, boundary marking is preceded by the demarcation of limits, which can be carried out by an agreement of the owners of the neighbouring properties, and formalised in a public document or by judicial resolution.

Buildability

This is defined as the square metres of roofing constructed divided by square metre of the ground. This is defined for the surface area constructed on the building line, except when expressly stated otherwise.

Building

This is any type of solid, durable construction capable of housing one or several spaces for the development of any activity.

Building Book

The graphic and written documents which give details on and describe a recently constructed building, and is handed over to the buyers so that they might have information on and maintain the building. It is obligatory for the promoter to hand this over ton the Owners’ Community pursuant to the Law on the Development of Building. The Building Book will contain the following:

• The project and all the modifications to the work.
• The reception of the work.
• The list of the agents who have intervened in the work.
• The instructions for the use and maintenance of the building and its installations.

Built surface

The sum of the surface areas including the thickness of the walls, and sometimes the balconies, galleries and/or patios and the ventilation pipes.

Built surface with common parts

This is the built surface without common parts plus the corresponding proportional part in accordance with the quota of the surface area of the common components of the building.

Built surface without common parts

This is the useful surface area occupied by the interior components mentioned in this definition, including the outer walls at 100% or at 50%, depending on whether these are, respectively, façade walls or separating walls, or walls shared with other components of the same building.

The exterior covered spaces will be calculated at 50% of their average surface area of the horizontal projection of their covering

Building for a determined use

This is any building in which the surface area on the building line assigned to a determined use is equal or greater than two thirds of the total surface area on the building line.

Building in construction

This is any new building work commenced and not terminated, which has the relevant licence, and is made with a project approved by the relevant professional association.

Building in project

This is any type of construction (new work or rehabilitation) which will be made on a determined terrain or property in accordance with a project approved by the relevant professional association. For these purposes, rehabilitation work will be understood to be the work which complies with the requirements stated in the definition of property under rehabilitation.

Calculable surface area

This is the built surface area plus the proportional part of common areas (hall, stairway, etc) corresponding to the co-owner in accordance with the quota.

Cancellation of the mortgage

Once the mortgage finalises and all the quotas have been paid, the mortgage must be cancelled through a document and a registration in the Property Registry.

Capital gains tax on the value of land

A municipal tax which encumbers the increase in the value of land. It is applied exclusively to the sale-purchase and is paid by the seller, unless otherwise agreed to, which must be recorded in a public document. It is known as capital gains.

Certificate

The document in which it is certified that the work executed is in consonance with the project and, in all cases, with the legislation in force, and is used to classify the officially protected housing.

Charge

The obligation which necessarily accompanies a determined situation or legal relationship. This is called a property charge when it is inherent to or encumbers property, which will be forfeited in the event of non-compliance of the debtor even when the debtor is not the owner of the property. The following are property charges: mortgages, easements, termination conditions, etc. Third efficacy as regards third parties depends on whether they are registered in the Property Registry.

Charge "Propter Rem"

This Latin term includes all the charges, taxes (rates and community costs, monthly and extraordinary invoices, water, electricity, depending on the specific case).

These charges "propter rem" must be paid and the property free of these at the time it is transferred to a new owner. It is usual to request a certificate from the President of the community to testify that the charges are paid up.

Common components of a building

These are all the spaces which are not for private use and must be taken into account as regards the calculation of the surface area.

Common components / horizontal property

Parts of a building constituted as horizontal property which belong to all the owners of the building.

Common wall

A wall which is common to two houses or other contiguous constructions. This term is also applied to the enclosure, fence, or hedge common to two bordering rustic properties (estates).

Commissions

Percentages of the total amount of the loan which the financial entity can charge the borrower, on several items, on condition that these are expressly included in the loan contract.

Community of Owners

The totality of the owners of one building who are governed by the Law on Horizontal Property, as well as by the norms or statutes agreed to by them. The collective made up of the co-owners of a building divided up under the regime of horizontal property.

This is organised corporately and does not have legal personality. It is regulated by statutes, which deal with the details regarding coexistence and the proper use of the services and common components

Component of a building

This is any physical, functional or registry unit which forms part of a building composed of more units for the same or other uses, and which may be sold individually.

Conditioning work

The work for improving the habitability conditions of a building through the replacement, restoration or modernisation of its construction components and installations, and those which are intended to substantially modify the configuration of the building, regardless of whether these extend the built surface area or not.

Condominium or Co-ownership

This occurs when the ownership of property belongs to several persons pro indiviso so that each person is the owner of a part.

As regards horizontal, which usually has a community of owners, the owner of each flat has a participation in the totality of the building, a quota by which he contributes to the maintenance expenses of the building

Co-ownership (See Condominium)

Creditor

The one who has the right to request compliance with an obligation, especially one of payment or the satisfaction of a debt. In mortgage terms, the lender of the mortgage.

Declaration of new development

A notary document authorised by the contractor or promoter of a building, whereby the characteristics of the property built, its surface area and tax evaluation are recorded.

Definitive classification certificate

This is a certificate issued by the Departments of Housing in the Autonomous Communities, and specifies the characteristics of Public Promotion Housing, as well as their maximum sale and rental prices.

Definitive or Provisional Classification

The official determination that a building of houses acquires the Provisional category (until the termination of the work) or Definitive (once the work is terminated) of Officially Protected Housing.

Delimit

Indicate the limits of terrain or a homestead.

Differential

The percentage which is added to the value of the reference index, normally the Euribor, at the time of the revision of the interest rate, as regards the loans contracted at a variable or mixed rate.

Draft project

The preparatory work for a final, definitive project.

Earnest money

A down payment or sum which the buyer hands over to the seller as a guarantee of a sale-purchase, which has been agreed to but is pending formalisation. Depending on its finality and effects, it is termed.

• Confirmatory earnest money: When it has binding force for the buyer and the seller, and either of these may request the other to comply with the obligation. The sum handed over is part of the price.
• Penalisation earnest money: When it acts as a penalisation clause in favour of the seller, who, in the event of the buyer’s failure to pay, can demand that the buyer comply with his obligation and take possession of the earnest money received, which, in these cases, does not form part of the price.
• Forfeitable earnest money: When either of the parties can desist from the contract. This is regulated in article 1454 of the Civil Code, which provides that, if the buyer desists from the contract, he loses the amount handed over as earnest money, and, if it is the seller who desists, he is obliged to return double the amount received.

Easements

Charge or encumbrance which is imposed on a property (servient tenement) to the benefit of another property (dominant tenement) belonging to a person or community other than the owner.

Effective Annual Interest Rate

Transformation of the financial conditions to their annual equivalent, depending on expenses and commissions.

Estate

The land, buildings, roads, constructions and mines, and the adornments, devices or rights to which the law attributes the consideration of estate.

Evaluation

The value which a house has which has been evaluated by a specialised company.

First residence

This is the habitual property and is officially recorded as the residence of the owner.

Habitability certificate

A document issued by the Public Administration in order to control the health and hygiene conditions of the buildings used as houses and for accommodation. It is essential to obtain this in order to contract water, gas and electricity services. (See Licence of first occupation).

Hectare

A surface area measurement equivalent to 10,000 square metres.

Hidden flaws

I.- Flaws in a recently terminated construction which are not visible and normally appear after some time. In order to rectify these and ensure safety, the Law on the Development of Building a Decennial Insurance Policy by the promoter of the building.

II.- A hidden defect which a thing sold has and which renders it unsuitable for its purpose, or impairs its use or value, and entails the obligation of the seller to correct this (article 1484 of the Civil Code l).

Homestead

An old expression used to refer to rustic properties.

Horizontal division

An act documented in a public instrument, whereby a property is divided into several, independent, registered properties with the assignment of co-ownership coefficient or participation in the totality of the property. It is registered in the Property Registry.

House

A place or premises used by a person or family to live, where they live privately and it constitutes their home or the centre of their domestic lives.

Housing cooperative

A non-profit making company whose finality or purpose is to obtain a house or premises with their corresponding buildings and complementary installations for its members. It may also have the finality of restoring houses and the conservation of components.

Housing promoter

A professional or entrepreneur who assumes the task of coordinating the work of the persons interested in housing.

In diviso

A fund which belongs to two or more persons and is divided into quotas, and cannot be divided.

Information of the promoter

Documentation which can be requested from the promoter of a building of houses. In the case of a new house, the following information may be requested.

• Name or registered name of the promoter, address and registration data in the Mercantile Registry.
• Plans of the location of the house and the house itself, a description of the house and the built and useful surface area of the building, services and supplies, and common areas, etc.
• Data of the Property Registry.
• Copies of licences required for the construction and occupation of the houses.
• Community statutes (if the building is constructed).
• Total price of the sale and method of payment.
• If there is a planned subrogation of the mortgage, the data of the mortgage is required.
• The form planned to document the contract, with its general and special conditions, expressly and clearly stating:
  • that the consumer will not pay the previous expenses which correspond to the seller by law.
  • the stipulations in articles 1279 and 1280 of the Civil Code, which entail the right of the buyer to demand the authorisation of the public instrument.
  • the right to choose the Notary, which, in these cases, always corresponds to the buyer.

In the case of a second hand house, the following information can be requested:

• The latest receipt of the Property Tax.
• Justifications which show that the expenses of the Owners’ Community are paid up.
• A Certificate of Ownership and Charges showing that there is no failure to pay the Municipal Capital Gains Tax.
• A copy of the Statutes which regulate the regime of the Owners’ Community.
• If the house has been inherited or had been recently acquired, it must be verified that the relevant tax has been paid.
• In the event that the property is mortgaged, it is necessary to present a certificate of the state of the debt issued by the credit entity.

Inseparable annex

A dependence of a house which is not physically integrated with the house and which cannot be sold or encumbered unless this is done together with the property it is ascribed to.

The most common example is a storeroom, which, although it is separate from the house, it forms part of the house as if it were another room

Joint-owner

Joint owner. The person who belongs to a Community of Owners.

Land Registry Value

I. The evaluation which appears in the Land Registry of a determined property, or the value assigned to a property or taxable good. This is often a percentage of the market value determined by law.

II. Value established by the application of the technical norms of specific evaluation for the calculation of the land registry value for tax purposes. This is related to tax evaluation.

Law on Horizontal Property

The Law which regulates the area of housing included in multi-family buildings.

Law on the Development of Building

The Law which regulates the actions of the agents involved in a construction and the rights of the buyers.

Lessee

The person who acquires the use of the property or the right to the work or service he is obliged to pay. When the property is commercial premises or houses, he is also referred to as a tenant.

Lessor

The person who assigns the use and enjoyment of property or who provides a service or carries out work for another in exchange for a determined price.

Licence

The administrative authorisation required to construct or reform a property for houses or industrial use, or for the execution of infrastructure work. The work licence is granted once it has been verified that the use intended is in consonance with the town planning even though the right to build already exists.

Licence of First Occupation

The licence whereby the Administration permits the building to be occupied or the licence whereby the Town Hall accredits that the house complies with the conditions required in the building licence once it has been verified that the new construction complies with the requirements. (See Habitability certificate).

Maintenance

This includes the expenses and the actions executed in order to maintain a property in the condition to efficiently carry out the service for which it is used.

Management of projects and construction

This manages and coordinates all the parts involved in the project phase of the work: ownership, town planners, architects and engineers, and considers the correct estimation of the strategic, logistic and tactical aspects of the project.

Mortgage

A legal instrument which uses real estate as a guarantee of a loan.

Mortgage document

An official document issued by a notary, where the clauses and conditions which have been agreed to by the creditor and debtor of a loan or a mortgage loan are recorded.

Mortgage insurance

This protects the lender (normally a bank) in the event that the borrower fails to comply.

Mortgage loan

An amount of money generally granted by a bank to a natural or legal person with the additional guarantee of real estate. The loan may have several finalities, but the most usual is the financing of the purchase of property.

Mortgage Loan Reference Index

There are three types of Mortgage Loan Reference Indices: banks, savings banks and the totality of entities. It is calculated by measuring the interest rates of the new mortgage loans, with a period greater than three years, without counting the external values of the entities referred to.

Mortgage quota

Amounts paid by the holders of the loan monthly, quarterly or annually.

Municipal Work Licence

A document issued by the Town Hall whereby the right to build and commence work, accrediting the administrative verification that the work authorised is subject to the town planning and technical conditions established by the municipal ordinances which regulate its location.

Neighbouring

Property which physically borders with another property or properties.

New work

A public document which declares the existence of a building or the construction of a new building. Its registration in the Property Registry supposes the creation of a property which can be registered due to the disappearance of the registered property it came from.

Official Housing Plan

A plan developed by the Administration in order to facilitate the acquisition or rehabilitation of habitual houses, by persons who have determined economic and family circumstances[1]. The web site of the Ministry of Housing shows the 2005-2008 Housing Plan.

Officially Protected Housing

I. Houses whose typology, dimensions and prices are regulated by the Administration as a condition for the buyers to access certain economic and tax advantages, and the buyers must have certain conditions as regards the ownership of real estate, family income, etc.

II. This refers to the houses which are habitual and permanent homes which have a maximum useful surface area of ninety square metres and comply with the conditions established regarding prices and quality. In order to access these houses, the buyers may not exceed certain income levels.

Original property

Land or building from which the independent properties or divisions, constituted through new work and the horizontal division of the original property.

Owner

This is the owner of a property and the person who has all the rights over it.

Ownership powers

The powers inherent to the right of ownership.

Period of grace

In financial terms, this is the period which normally occurs at the commencement of the life of a loan in which the client only pays interest, and does not pay back capital, sometimes during the period of grace, the client does not pay interest either.

The period of grace is only advisable when the client has cash difficulties as regards paying back the loan during the first few years. A negative aspect is that the client must pay higher quotas on the termination of the period of grace.

Plot

This is a delimited area of urbanised land where it is possible to construct in accordance with the regulations. A portion of urban land which can be built on.

Period for revision of interest

In mortgage loans with variable interest rate, this is the period in which the interest rate is modified.

Plotting

Division of property into several plots due to an administrative licence.

Private component / horizontal property

Parts of a building which do not form part of the horizontal property, basically, the flats, premises, garage spaces and storerooms.

Promoter

The natural or legal person who decides, programmes and finances the building work. The resources may be the promoter’s or from others. This point includes the owners who construct in their own benefit, the owners’ communities and housing cooperatives.

Public protection

This is any legal regime which limits the sale or rental price of the property which is the subject of evaluation.

Purchase option

The right to purchase a property on a determined date at an agreed price. Te purchase option is normally acquired by paying a certain amount of money of the total price of the property in advance. Having a purchase option on the property permits the person to have more time to contract a loan or look for a better property.

Project

The documents whereby the technical conditions of the building to be executed are determined.

Property

A term used in the Property Registry in order to identify all real estate (house, premises, offices, terrain, rustic land, etc).

Property tax

A municipal tax levied on the ownership of the house. It is calculated by applying a percentage to the land registry value of the house. The seller must have paid up this tax before transferring ownership of the house. It is charged annually depending on the land registry value assigned to the property.

Quality Report

A document which describes the nature and quality of the materials which are going to be used in the work. Tit is also the document which describes these for the buyer. The promoter is obliged to hand this over.

Quota of participation

As regards the charges and benefits of the community this is the module which determines these, and is attributed to each flat or premises in relation to the total value of the property and is referred to as hundredth parts of the total.

Real estate

This is property which cannot be moved without the impairment of its nature (real estate by nature); property which is incorporated into or used by the former (real estate by incorporation or use); in addition, administrative assignments and property rights are considered to be real estate. Within real estate by nature, there is an important distinction between rustic and urban property.

Real Estate Agency

A company specialised in real estate transactions, especially the rental and sale of property, and which charges a percentage for its services.

Real Estate Agent

A liberal professional who acts as an intermediary in a real estate transaction and normally charges a percentage of the price of the transaction (commission).

Real estate group

A business group or a group of companies engaged in the construction sector, and the management of all kinds of real estate.

Real estate investment funds

These are Collective Investment Institutions of a non-financial nature, whose main characteristic is that they invest their assets in the acquisition of real estate – houses, commercial premises, car parks – for exploitation through rental.

The revenue from the rental of the properties constitute the yield, which is shared out proportionally among the participants. Although these products re not very liquid, the payment of participations must be guaranteed to be, at least, annually.

Registration certification

This document is issued by the Property Registry and testifies to the registration situation of the property.

Rental

A contract whereby a person temporarily assigns to another the right to use and enjoy property (movable and/or real estate) or undertakes to provide a service or carry out work in exchange for a determined price.

Right of first refusal

This is another right of preferential acquisition whereby its holder has a period of time to acquire the property which is going to be sold. for example, the owner of a flat notifies the tenant of his decision to sell it at a determined price and the tenant, who is the holder of the right of first refusal, has a period of time in which to acquire it.

The difference with the right of pre-emption lies in the fact that the right of pre-emption is exercised after the sale-purchase has taken place, and the right of first refusal is exercised beforehand. In many cases, the same person is the holder of both rights

Right of habitation

This is the right to use one or more rooms or dependencies of a house. This is a personal untransferable right which, if it is constituted in a public document, may be registered in the Property Registry and acquires property rights as regards third parties.

Right of pre-emption

This is a right of preferential acquisition whereby the holder of the right, without participating in the sale-purchase, can acquire the property sold in the same conditions as the buyer, and is subrogated in his position, paying the same price plus the expenses required for the sale-purchase.

The pre-emption can be legal or conventional: it is legal when it is established by law, and it is conventional when it is established between private persons by any type of agreement made between them.

Examples of legal pre-emption is: joint owners (the owners of a property have the preferential right to acquire the part sold by one of them), adjoining owners, co-heirs, etc.

There is also legal pre-emption as regards the lessees of rustic and urban properties, whereby they have the right to acquire it in the event that the owner might decide to sell it.

Right of way

This is the right to pass through property (servient tenement) which the person does not own nor has a right to use and enjoy, in order to go to another neighbouring property (dominant tenement). This may be permanent or temporary.

Ruinous defects

Those which affect work, and endanger its stability and security, affecting the structure, soundness, habitability and stability of the construction.

Sale based on plans

The sale of a product made based on the graphic definitions (plans) and/or quality report before the construction of the product.

Second residence

This is the property which is not for the habitual or official use of the owner of the house. As regards applying for a mortgage loan, this means that the entities normally lend a lower percentage of the total value of the house.

Servitude easement of light and view

This is the right to enjoy the views on the property of another, or to open and maintain lights or windows in ceilings and walls. This easement implies the right to prohibit the owner of the servient tenement to build constructions which might prevent the exercise of the easement. The civil or administrative regulations which indicate the form and distances of the openings which serve for views and lights are not easements.

Size

The surface area of a property. This is expressed in square metres and their multiples.

Subrogation by sale-purchase

This occurs in the purchase of a new house directly from the promoter of the house, who has obtained a mortgage loan in order to finance the construction. Moreover, when a house is purchased from a private person with a mortgage in force. In this case the person who substitutes acquires all the rights and all the obligations.

Subrogation is also applied to the case in which the borrower changes his loan to another financial entity which improves the interest rate conditions

Subsidies

Amounts paid by the Public Administration to the financial entities as part of the payment of interest on the loans for financing the purchase of officially protected housing.

Tax on construction/installations/work

A tax levied on the execution of any work, installation or construction within the municipal area which requires the obtaining of a work or town planning licence.

This is an indirect, municipal tax, established voluntarily and managed exclusively by the municipality which establishes the tax

Technical Control Organism

The control entity capacitated to provide technical assistance for the verification of the quality of the project, of the materials and of the execution of the work in accordance with the project and the applicable legislation, and according to the Law on the Development of Building.

Tenant

The person obliged to pay a rent for the right of use of property he does not own. (See Lessee)

Town planning licence

An administrative act whereby the possibility of dividing into plots, building, demolition, occupation, use, etc. acquires effect, with the previous specification of what is established in the laws, town planning and other urban legislation.

Transfer tax

This is levied on the sale-purchase of real estate among other things. The second and successive sale-purchases of real estate (second hand) are subject to this tax.

In general, the current rate is 6% but certain Autonomous Communities establish special rates and conditions.

Under ground level property

Any construction built under ground level. In town planning terminology: any surface area constructed under ground level. Normally this is not calculated for the purposes of buildability.

Untilled land

Relative to the right of common use of certain rustic properties, generally pasture land and woods, by the inhabitants of a village or community in the rural environment.

Urban certificate

The document which certifies the urban legislation applicable to determined land. It refers to the planning which affects this land, and states the authorised use, buildability, occupation, maximum heights, etc.. This certificate is obtained from the Town Hall.

Urban property

The surface area of land, limited materially, and used to satisfy the requirements of the activities of man, in cities and towns, therefore, it is located on urban ground.

Urban rental

A rental modality in which the subject of the contract is urban property. Since the Law on Urban Rentals of 1994, a distinction is made between the rental o a house and rental for use other than that of a house.

Urban territorial rates

A municipal tax or levy paid annually which affects the ownership of urban and rustic real estate, it is commonly referred to as property tax.

Urban verification

This is the consultation of the urban plans of the locality in which the property is situated. This consultation is recommended in case there is a plan which might affect the property the client wishes to acquire.

Useful surface area

The surface are occupied by fixed interior walls, by vertical structural components, by piping or ducts with a horizontal cross section greater than 100 centimetres and the surface of the floor whose free height is less than 1.5 metres will not be considered to be useful surface.

The uncovered exterior spaces will not be considered to be useful surface areas either.

Verified surface

This is the area measured by the evaluator taking into account the definitions of useful or built surface area and the corresponding demarcated plan.