GLOSSARY OF REAL ESTATE TERMS

LEASEHOLD ESTATE
A possessory interest in a parcel of real property created by a lease agreement and generally of a fixed duration. Notable leasehold estates include the tenancy at will (characterized by an uncertain lease term and a right of either party to the lease to terminate upon proper notice) and the tenancy at sufferance or holdover tenancy (characterized by a tenant who remains in possession of the leased property after the expiration of the lease term). Compare freehold estate.

LEGAL DESCRIPTION
A description of a parcel of real property that is sufficient to locate and identify it. Unplatted land is described by relation to known monuments, baselines and meridians. Such a description proceeds by courses and distances (metes and bounds). Platted and subdivided land is generally described by lot and block.

LESSEE
A tenant. The holder of a leasehold estate by virtue of a lease agreement. Compare lessor.

LESSOR
A landlord. One who grants a lease to another, thereby transferring an exclusive right of possession of certain land, subject only to the rights expressly retained by the lessor in the lease agreement. Compare lessee.

LETTERS
With regard to real estate, a written instrument evidencing the authority (by court order) of an individual or entity to act on behalf of another. Letters of conservatorship authorize one to act on behalf of a protected person – one who is legally incompetent to manage his or her own affairs. Letters testamentary or letters of administration authorize one to act on behalf of a deceased person (the former if the decedent left a will and the latter if he or she did not).

LIEN
A hold or claim that one person has upon the property of another to secure payment of a debt or other obligation. A lien may be voluntary (consensual), as in the case of a deed of trust, financing statement or mortgage; or it may be involuntary (non-consensual), as in the case of a judgment, mechanics’ lien or tax lien. The holder of the lien may enforce the right to payment by foreclosing on the property. See foreclosure and tax sale.

LIFE ESTATE
See freehold estate.

LINE OF CREDIT
A financing arrangement characterized by (1) the ability to draw funds periodically from an available loan balance; and (2) the ability to repay the outstanding balance in-full without terminating the loan agreement or discharging the security instrument. A line of credit is essentially a secured credit card.

LIQUIDATED DAMAGES
A sum of money stipulated in a contract and agreed to by the parties thereto, which sum is a reasonable estimation of damages owing to one party in the event of a breach by the other. Compare specific performance.

LIS PENDENS
Litigation pending. When a third party acquires an interest in property from someone involved in a lawsuit, that third party holds the interest subject to adjudication of the rights of the litigants. For example, a purchaser of real property would have an interest in the property by virtue of a signed contract. However, the purchaser’s rights under the contract are subject to the court’s decree or judgment. Recordation of a “notice of lis pendens” effectuates this legal doctrine.

LLC
Limited liability company.

LLP
Limited liability partnership.

LOAN ASSUMPTION
A financing arrangement whereby the purchaser of a parcel of real property takes over the debt obligation of the seller (to the seller’s lender). By assuming a mortgage rather than taking title subject-to it, the purchaser becomes personally liable on the underlying debt. A necessary pre-condition of a formal loan assumption is an assumable loan. Most conventional loans are not assumable. Compare subject-to mortgage and wrap-around financing.

LOST INSTRUMENT BOND
A surety bond issued to a Colorado public trustee by an insurance company as a substitute for a lost original promissory note. Colorado law provides that the release form submitted to a public trustee to discharge the lien of a deed of trust must be accompanied by the original promissory note secured thereby. Certain qualifying entities (lending institutions) may indemnify the public trustee in lieu of presenting an original note.