The purchase and sale of a home is one of the largest transactions that most of us will ever be involved in. Over the course of the next several articles, I will be providing definitions and explanations of some terminology used in real estate transactions to clarify some of the aspects of the transaction you will encounter.

Essential terms

Adjustment Date: The date specified in the contract of purchase and sale upon which prepaid or outstanding expenses in relation to the property will be adjusted as between vendor and purchaser. Generally, but not always, the same date as the date of completion/date of possession. Items normally adjusted for include prepaid or outstanding property taxes, community fees, rents and damage deposits.

Amortization: The length of time over which the entire principal balance of a mortgage or loan will be repaid in full with interest. For example, most mortgages are at least initially amortized over 20 or 25 year periods, although 35-year amortizations are becoming common. The shorter the amortization period, the higher the payments will be, but the less interest in total will be paid.

Appraisal: A determination by a qualified professional of the market value of a property, which generally is the expected sale price between a willing vendor and a willing purchaser, given a reasonable period of exposure on the market. The determination is made by a comparison to other similar properties, and by other methods to obtain a value.

Appreciation: The increase in the value of a property over time.

Assessment: A determination by the taxing authority of the value of a property for purposes of determining the real property taxes to be charged against the property by the authority each year.

Assumption of Mortgage: An agreement between seller and buyer in which the buyer assumes responsibility for payment of future payments towards the existing mortgage registered against the seller’s title at and from the date of completion of purchase, rather than obtaining a new first mortgage.

The assumption of the mortgage by the buyer may be subject to approval by the mortgagee.

Cash Difference: The difference between the total purchase price, of a property, and the net proceeds of any mortgage to be placed by the purchaser, less any deposit already paid, calculated after adjustments for the taxes and the like, and payable by the purchaser to the vendor on closing.

Cash Balance: The balance of the purchase price to be paid by a purchaser after deposit and cash difference has been accounted for, usually realized through the placement of a new mortgage or other financing.

Deed: The title to your property. Although the title document is referred to as a deed in some other jurisdictions, in Alberta, the title document is generally referred to as a Certificate of Title.

Default: A breach by one party to the contract of a provision in the contract, which will generally give rise to rights or remedies available to the other party, depending upon the nature of the breach and wording of the contract.

Deposit: An initial “down payment” made by a purchaser, at the time of acceptance by the vendor of the Offer to Purchaser, as an indication of the purchaser’s good faith, or intention to complete the contract. The deposit is held in trust pending closing, and is released in accordance with the contract provisions to the vendor on closing.

Duplicate Certificate of Title: Is an official duplicate of the original title, held at the Land Titles Office, which could be released to a property owner, as evidence of ownership, if the property was free of any financial charges on encumbrances. The duplicate certificate is required to be returned by the owner to the Land Titles Office before property could be re-mortgaged, sold, or otherwise dealt with. The duplicate Certificate of Title was abolished, and is no longer a part of the Land Titles system in Alberta.

Easement: A right of way or right of access granted over an owner’s land, allowing another party access or use when necessary. For example, easements are commonly granted to Utility Corporations, or to Telus to allow access for servicing of underground utilities, or underground telephone lines.

–Michael C. Dunkley is a Calgary lawyer who has practiced exensively in the area of Real Estate Law for more than 23 years, and may be reached at (403) 291-0006.