Glossary of Rental Terms
Once you start on your real estate investment journey in the USA, you need to know the various terms associated with the industry.
These terms apply to your rental agreement are essential for protecting your rights as a landlord.
What makes you a landlord?
A landlord is a person who owns the property and allows another person to use it for a fee monthly.
A tenant is an individual using the property.
For this reason, the landlord and a tenant sign a Lease or Rental agreement.
Read through this glossary to see if you are familiar with the terms for rental property.
The tenant’s remedy of moving out of a rental unit that is uninhabitable and that the landlord has not repaired within a reasonable time after receiving notice of the defects from the tenant.
Accounts Receivable (AR)
These are the rentals and fees owed to the property by its tenants in property management.
Affordable housing is housing offered by a federal or state agency to support and manage rents for those who meet specific predetermined criteria.
The criteria are median household income or below as rated by the national government or a local government by a recognized housing affordability index.
In real estate and lodging, an amenity is a desirable function or service considered benefiting the property and increases its value – exercise center, community areas, and common areas.
Amount of advance notice
The number of days’ notice must be given before a change in the tenancy can take effect. Usually, the amount of advance notice is the same as the number of days between rent payments.
For example, in a month-to-month tenancy, the landlord usually must give the tenant 30 days’ advance written notice that the landlord is increasing the amount of the security deposit.
Apartment and Office Building Association (AOBA)
The leading membership organization representing commercial office building and multi-family residential real estate offices in the DC area
A request to a higher court to review a lower court’s decision in a lawsuit.
Application for Waiver of Court Fees and Costs – a form that tenants may complete and give to the Clerk of Court to request permission to file court documents without paying the court filing fee.
Using a neutral third person to resolve a dispute instead of going to court. Unless the parties have agreed otherwise, the parties must follow the arbitrator’s decision.
A neutral third person agreed to by the parties to a dispute, who hears and decides a dispute. An arbitrator is not a judge, but the parties must follow the arbitrator’s decision (the decision is said to be “binding” on the parties). (See arbitration.)
An agreement between the original tenant and a new tenant by which the new tenant takes over the lease of a rental unit becomes responsible to the landlord for everything the actual tenant was responsible for. The original tenant is still accountable to the landlord if the new tenant doesn’t live up to the lease obligations. (See novation; compare to sublease.)
Uncollected rental income for non-payment is a monetary amount owed to a creditor unlikely to be paid and for which the creditor is not willing to take legal action to recover.
Break-Even Occupancy Rate
Breakeven occupancy is an important metric for lenders, developers, and operators as it is the point at which the property shifts from an operating deficit to an operating surplus.
The Breakeven Occupancy Rate calculates the occupancy level needed to earn enough to pay the operational expenses and debt service.
Break-Even Rent Per Square Foot
Calculates the rent per square foot needed to pay the operating expenses and debt service.
A broker is a real estate professional or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the agreement.
Eliminating the market value of a property by applying a proper investment rate of return to the annual net operating income expected to be produced by the property.
Capital Expenses (CE)
Non-recurring capital expenditures such as appliance replacement, renovations, roofing.
A rate of return used to measure property’s value based on its NOI
Often used to evaluate the cash flow from income-producing assets, the cash-on-cash return is the ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage.
The claim of Right to Possession
A form that the occupants of a rental unit can fill out to temporarily stop their eviction by the sheriff after the landlord has won an unlawful detainer (eviction) lawsuit.
The occupants can use this form only if: the landlord did not serve a Prejudgment Claim of Right to Possession form with the summons and complaint; the occupants were not named in the writ of possession, and the occupants had lived in the rental unit since before it filed the unlawful detainer lawsuit.
Housing that conforms to the market rate of the area’s housing.
An analysis is weighing the cost against the possible resulting benefits.
A report prepared by a credit reporting agency that describes a person’s credit history for the last seven years (except for bankruptcies, which are reported for ten years).
A credit report shows, for example, whether the person pays his or her bills on time, has delinquent or charged-off accounts, has been sued, and is subject to court judgments.
Credit Reporting Agency
A business that keeps records of people’s credit histories and reports credit history information to prospective creditors (including landlords).
Debt service or a mortgage or loan payment (principal and interest)
Unpaid rent and fees–can be expressed as a percentage of rents due, a portion of tenants owing, or as a value such as the total amount of outstanding or complete tenants late.
Department of Fair Housing
The state agency that investigates complaints of unlawful discrimination in housing and employment.
A judgment issued by the court, without a hearing, after the tenant has failed to file a response to the landlord’s complaint.
A legal response that a tenant can file in an unlawful detainer lawsuit to test the legal sufficiency of the charges made in the landlord’s complaint.
Discrimination (in renting)
Denying a person housing, telling a person who housing is not available (when the housing is public), providing housing under inferior terms, harassing a person in connection with housing accommodations, or providing segregated housing because of a person’s race, color, religion, sex, sexual orientation, national origin, ancestry, source of income, age, disability, whether the person is married, or whether there are children under the age of 18 in the person’s household. Discrimination also can be a refusal to make reasonable accommodation for a person with a disability.
Effective Gross Income (EGI)
The amount of Gross Potential Rent (GPR) less vacancy, concession, collection loss, and non-revenue units plus other income
A bank account into which a tenant deposit withheld rent, to be withdrawn only when the landlord has corrected uninhabitable conditions in the rental unit or when the tenant is ordered by a court to pay withheld rent to the landlord.
A court-administered proceeding for removing a tenant from a rental unit because the tenant has violated the rental agreement or did not comply with a notice ending the tenancy (also called an “unlawful detainer” lawsuit).
Eviction notice (or three-day notice)
A three-day notice that the landlord serves on the tenant when the tenant has violated the lease or rental agreement. The three-day notice usually instructs the tenant to leave the rental unit or comply with the lease or rental agreement (for example, by paying past-due rent) within three days.
Fair Housing Act
The Fair Housing Act is the federal law enacted in 1968 that prohibits discrimination in the purchase, sale, rental, or financing of housing (private or public)—based on race, age, color, sex, nationality, or religion. In 1988 the statute was amended to include disability and family status.
Fair housing organizations
City or county organizations that help renters resolve housing discrimination problems.
An order of a federal bankruptcy court temporarily stops proceedings in a state court, including an eviction proceeding.
Gross Potential Rent (GPR)
Defined as the amount of rental income that a real estate investor will expect to collect if a property was 100% occupied and all tenants pay the current market rent.
A person who does not have the rights of a tenant, such as a person who stays in a transient hotel for fewer than seven days.
Housing Assistance Payments (HAP) Contracts
The Housing Assistance Payment (HAP) is social housing support provided by all local authorities so that those under the voucher program can receive government help and supplement.
Housing and Urban Development (HUD)
The Department of Housing and Urban Development (HUD) is the principal federal agency responsible for programs concerned with housing needs, fair housing opportunities, and improving US communities.
A rental unit that is fit for human beings to live in. A rental unit that substantially complies with building and safety code standards that materially affect tenants’ health and safety is said to be “habitable.” See uninhabitable and implied warranty of habitability.
A deposit that a tenant gives to a landlord to hold a rental unit until the tenant pays the first month’s rent and the security deposit.
Income Capitalization Approach
Used methods, techniques, and mathematical procedures to analyze a property’s ability to generate income and convert future earnings to present-day dollars.
Implied Warranty of Habitability
A legal rule that requires landlords to maintain their rental units in a condition fit for human beings to live in. A rental unit must substantially comply with building and housing code standards that materially affect tenants’ health and safety.
The bare minimum requirements for a rental unit to be habitable are listed in the Dealing With Problems section.
An inspection by the landlord before the tenancy ends to identify defective conditions that justify deductions from the security deposit. The landlord must perform an initial assessment if the tenant requests it.
Item of Information
Information in a credit report that causes a creditor to deny credit or take other adverse action against an applicant (such as refusing to rent a rental unit to the applicant).
A business or person who owns a rental unit, and who rents or leases the rental unit to another person, called a tenant.
Key Performance Indicator (KPI)
A performance measurement
When a property is constructed, the budget guides activities during lease-up
A rental agreement, usually in writing, establishes all the terms of the contract, and that lasts for a predetermined length of time (for example, six months or one year).
Compare to a periodic rental agreement.
Legal Aid Organizations
Organizations that provide free legal advice, representation, and other legal services in noncriminal cases to economically disadvantaged persons.
When a landlord locks a tenant out of the rental unit intending to terminate the tenancy, lockouts, and all other self-help eviction remedies, are illegal.
A person who lives in a room in a house where the owner lives. The owner can enter all areas occupied by the lodger and has overall control of the house.
A process in which a neutral third person meets with the parties to a dispute to assist them in formulating a voluntary solution to the conflict.
Memorandum to Set Case for Trial
A court document that notifies the parties in an unlawful detainer lawsuit that the case has been set for trial.
The document states whether the plaintiff (the landlord) has requested a jury trial.
Motion to Quash Service of Summons or Motion to Show Cause
A legal response that a tenant can file in an unlawful detainer lawsuit if the tenant believes that the landlord did not adequately serve the summons and complaint.
National Apartment Association
A non-profit trade association of apartment communities, owners, and suppliers
Net Operating Income (NOI)
The total net revenue that remains operating expenses are deducted from total income
A person’s carelessness (that is, failure to use ordinary or reasonable care) resulting in injury to another person or damage to another person’s property.
in an assignment situation, a novation is an agreement by the landlord, the original tenant, and the new tenant that makes the new tenant (rather than the actual tenant) solely responsible to the landlord.
Units unable to generate revenue because they cannot be leased – not due to vacancy
Operating Expenses (OE)
Includes all expenses, fixed and variable, incurred in the course of managing the property.
Operating Expense Ratio
An expense to income ratio showing the percentage of adequate gross income (EGI) needed for operating expenses
Other Income (OI)
Income from items other than rent–laundry, vending, parking, late fees, pet fees
Petty Cash Fund
A fund of cash to handle onetime, minor expenses such as gas or incidental office supplies
Periodic Rental Agreement
An oral or written rental agreement that states the time between rent payments – for example, a week or a month – but not the total number of weeks or months that the deal will be in effect.
Prejudgment Claim of Right to Possession
A form that a landlord in an unlawful detainer (eviction) lawsuit can have served along with the summons and complaint on all persons living in the rental unit who might claim to be tenants, but whose names the landlord does not know.
Occupants who are not named in the unlawful detainer complaint, but who claim a right to possess the rental unit, can fill out and file this form to become parties to the illegal detainer action.
Prepaid Rental Listing Services
Businesses that sell lists of available rental units.
Replacement Reserve (RR)
An account used to set aside money for expected future expenses
Return on Investment (ROI)
Measures the rate of return based on a property’s income
Relief from Forfeiture
An order by a court in an unlawful detainer (eviction) lawsuit that allows the losing tenant to remain in the rental unit.
Based on the tenant’s convincing the court that the eviction would cause the tenant severe hardship and that the tenant can pay all the rent that is due, or to otherwise fully comply with the lease.
Rent Control Ordinances
Laws in some communities that limit or prohibit rent increases, or that limit the circumstances in which a tenant can be evicted.
The tenant’s remedy of not paying some or all of the rent if the landlord does not fix defects that make the rental unit uninhabitable within a reasonable time after the landlord receives notice of the defects from the tenant.
An oral or written agreement between a tenant and a landlord, made before the tenant moves in, which establishes the terms of the tenancy, such as the amount of the rent and when it is due. See lease and periodic rental agreement.
Rental Application Form
A form that a landlord may ask a tenant to fill out before renting that requests information about the tenant, such as the tenant’s address, telephone number, employment history, credit references, and the like.
The time between rental payments, for example, a week or a month.
An apartment, house, duplex, or condominium that a landlord rents to a tenant to live in.
Insurance protecting the tenant against property losses, such as losses from theft or fire. This insurance usually also protects the tenant against liability (legal responsibility) for claims or lawsuits filed by the landlord or by others alleging that the tenant negligently injured another person or property.
Repair and Deduct, Remedy
The tenant’s remedy of deducting from future rent the amount necessary to repair defects covered by the implied warranty of habitability. The amount deducted cannot be more than one month’s rent.
Retaliatory Eviction or Action
An act by a landlord, such as raising a tenant’s rent, seeking to evict a tenant, or otherwise punishing a tenant because the tenant has used the repair and deduct remedy or the rent withholding remedy, or has asserted other tenant rights.
Section 504 of the Rehabilitation Act
States that qualified individuals cannot be excluded from participation in denied benefits of or subjected to discrimination in federally subsidized housing
A deposit or a fee that the landlord requires the tenant to pay at the beginning of the tenancy.
The landlord can use the security deposit, for example, if the tenant moves out owing rent or leaves the unit damaged or less clean than when the tenant moved in.
Legal requirements and procedures that seek to assure that the person to whom a legal notice is directed receives it.
A written notice from a landlord to a tenant telling the tenant that the tenancy will end in 60 days.
A sixty-day notice rarely has to state the landlord’s reason for ending the tenancy.
A separate rental agreement between the original tenant and a new tenant to whom the initial tenant rents all or part of the rental unit.
The new tenant is called a “subtenant.” The agreement between the original tenant and the landlord remains in force, and the actual tenant continues to be responsible for paying the rent to the landlord and for other tenant obligations. (Compare to the assignment.)
An order from the court that requires the recipient to appear as a witness or provide evidence in a court proceeding.
Total Rent Revenue
The amount of Gross Potential Rent (GPR) less vacancy, concession, collection loss, and non-revenue units plus other income.
The tenant’s exclusive right, created by a rental agreement between the landlord and the tenant, to use and possess the landlord’s rental unit.
A person who rents or leases a rental unit from a landlord.
The tenant gets the right to the exclusive use and possession of the rental unit during the lease or rental period.
Tenant Screening Service
A business that collects and sells information on tenants, such as whether they pay their rent on time and whether they have been defendants in unlawful detainer lawsuits.
A written notice from a landlord to a tenant telling the tenant that the tenancy will end in 30 days. A thirty-day notice rarely has to state the landlord’s reason for ending the tenancy.
A rental unit that has such serious problems or defects that the tenant’s health or safety is affected.
A rental unit may be uninhabitable if it is not fit for human beings to live in, or if it fails to substantially comply with building and safety code standards that materially affect tenants’ health and safety. (Compare to habitable.)
Unlawful Detainer Lawsuit
A lawsuit that a landlord must file and win before he or she can evict a tenant (also called an “eviction” lawsuit).
US Department of Housing and Urban Development
The federal agency that enforces the federal fair housing law, which prohibits discrimination based on sex, race, religion, national origin, familial status, or mental handicap.
A unit or property that no one resides in
Vacancy, concession & collection loss (VAC)
The total value of rent loss from vacant units, concessions, collection losses, and non-revenue units
A reduction of the recognized value of an asset or account
Writ of Possession
A document issued by the court after the landlord wins an unlawful detainer (eviction) lawsuit.
They serve the writ of possession on the tenant by the sheriff.
The writ informs the tenant that the tenant must leave the rental unit by the end of five days, or the sheriff will extract the tenant.
To sign a written document (a “waiver”) giving up a right, claim, privilege, etc.
For a waiver to be effective, the person giving the waiver must do so knowingly and must know the right, claim, privilege, etc. that he or she is giving up.