Glossary of Real Estate Terms: Ownership Residential Property Types
Housing products can be described by a variety of terms, many of which are marketing-oriented, regional in nature or reflect local market jargon. Essentially, there are two main types of housing: Single-family and multi-family. The basic definition calls for single-family homes to be those that are not attached to another home, while multi-family units are, in various configurations. Both are wholly-owned properties, and both may have a condominium form of ownership. Quite often builders will refer to an attached product, such as a townhome, as a single-family home and the term "condominium" has been colloquially utilized to describe a type of dwelling, i.e., an apartment that is part of a large multi-family building. While this is, in essence accurate, it is misleading. The following attempts to clear the muddle with respect to residential property types.
Single-Family Home - The most common definition of a single-family home is: An individual, freestanding, unattached dwelling unit, typically built on a lot larger than the structure itself, resulting in an area surrounding the house, known as a yard. A derivative of this definition includes the single-family unit that has a condominium ownership structure. In this case, the land associated with whole ownership of the home comprises only that which supports the structure's foundation. In other words, the "yard" is co-owned in common with the rest of the residents of the community. In many markets, adjacent units that share walls and other structural components are considered to be single-family homes. While these homes have separate access to the outside and do not share plumbing or heating equipment, they do not meet the strict definition of a single-family home and are considered part of the multi-family genre.
Zero-Lot-Line Home - The strict definition of a zero lot line home relates to the placement of the home on the building lot. In order for a small building lot to provide usable yard space, one side of the home is placed as close to the property line as possible. This placement typically allows marginal space between two homes on adjacent lots. Therefore, there are generally no windows on the sides of the homes closest to the property line. The zero lot line method of development has also been utilized for attached homes, which are commonly known as duplexes in which case the two homes share a common wall that is aligned with the center of the two adjoining lots.
Patio Home - There are many names associated with this product type including garden home, garden villa, courtyard home, club home, cottage, and more. In any case, "patio home" most commonly refers to a single-story, single-family unit sited on a building lot that is typically not much larger than the building foundation. These products generally have a condominium ownership structure and building exteriors are typically maintained by the homeowners association. While the strictest definition focuses on the single-family configuration, the term is also used to describe multi-family products that are generally built with two to four homes per building that share at least one sidewall. In this regard, the terms villa, garden home, garden villa and club home may also apply.
Villa - The "villa" has a significant history. In Roman times, the villa was an upscale country house; after the fall of the Empire, the term came to define a small, fortified farming compound, gradually re-evolving back into a luxurious country home in the Middle Ages. The definition of the present day villa in a suburban community environment has many connotations, the most common of which focuses on the traditional configuration of a multi-story, single-family home. But the term appeals to people of all economic levels and therefore, the various configurations associated with the villa are largely dependent upon location and market position, i.e., pricing. At the lower end of the price spectrum, the villa mirrors the Patio Home, i.e., a single-story, single- or multi-family product with little or no surrounding land. In the resort community environment, this product type can be an elaborate, multi-story mansion replete with a private swimming pool on several acres. In development and marketing parlance, the term has essentially become hackneyed and one must be prepared for the unexpected when considering the "villa."
Cottage - The cottage has traditionally indicated a modest structure. These single-family homes may have one or two stories, but "small" is integral to the description. The lot size associated with this product type is largely dependent upon the location. In high density environments the cottage can be a zero lot line or patio product; in more rural locations, the diminutive cottage may be sited on five acres. The term is meant to evoke a sense of coziness and charm versus urban sophistication. In this regard, the cottage is found commonly in rural mountain and seaside locations.
Cabin - The eco/green movement has spawned the resurgence of the cabin. This freestanding single-family product type is usually small, typically containing a second-story sleeping loft, and is more rustic in design than the cottage. Generally a second home option, the cabin can be found in a variety of rural communities and resorts throughout the country and is very prevalent in the ski resort environment. The term "cabin" has been noted in a few instances to be used for attached dwellings in buildings comprising two to four units. Attached or detached, the cabin is generally constructed of wood or logs and has a decidedly bucolic persona.
Courtyard Home - This style of home is typically defined as a single-family patio home product, but can also be a multi-family (attached) product. The distinction of the Courtyard home is the private nature of the entry that is encompassed in a gated, enclosed courtyard. The larger single-family courtyard product may have an attached guest suite inherent in its design. The courtyard home is typically owned as a condominium and developed as a "maintenance-free" housing option. That said, the courtyard design has become increasingly popular at the high end of the market and can also be found under the "villa" category. Large villas with private courtyards are generally developed as single-family, wholly-owned properties.
Multi-Family Housing Products - The multi-family housing category includes many configurations ranging from side-by-side townhomes and villas to high-rise buildings containing an abundance of apartment flats, and various and sundry types in between. Many of the terms used to define a particular multi-family housing product are interchangeable, making their definitions somewhat dubious. What follows represents definitions that are generally accepted by the US building industry. That said, the terms do, vary from region to region and community to community.
Duplex, Triplex, Quadraplex - These multi-family housing terms simply define the number of units contained in a multi-family building. A duplex consists of two units per building; a triplex, three units per building; and a quadraplex, four units per building. While the duplex and triplex are generally built side-by-side in a row, the units in a quadraplex are generally constructed back-to-back.
Townhome/Townhouse - The term townhome-or townhouse-originated in the United Kingdom and simply denoted exactly what it was - a home in town. The townhome was generally owned by a peer or member of the aristocracy, as an alternative residence to their country home, to be used when parliament was in session. The original townhouse units were attached side-by-side in a row creating the illusion of one massive building. Many have since been converted to tenements, aka rental apartments. Thanks to its urban roots, the design of the townhouse remains distinct, being relatively narrow, tall (multi-storied) and uniform. This configuration is also known as a "rowhouse." This term is not common in the US as the perception of a rowhouse is that it is smaller and less luxurious than a townhouse. In recent years, the townhouse/townhome has evolved to represent non-uniform units in suburban areas that are designed to provide the perception of a single-family home in spite of the product's inherent "attachment." The units themselves have also grown in size. While the traditional townhouse apartment is defined as a two bedroom unit with the living room in the front on the lower level, the kitchen in the back, and two bedrooms on the front and back of the upper level with a single bathroom between, contemporary designs now include three and four bedrooms, an equal number of bathrooms, and floor plans of great variety. Most modern townhomes also accommodate a one or two car garage.
Apartment/Apartment Flat - Apartment is a generic term that can be applied to any multi-family product, including the multi-level townhome. However, in the strictest sense, apartments are "flats", i.e., single-level units, stacked on top of each other in multi-story buildings. This is the configuration for many condominium buildings, ergo the misperception that a "condominium" is an apartment rather than a form of ownership. Apartment flats are diverse in size and design, and include studio/efficiency units, and one, two, three, and more, bedroom floorplans. The modern apartment flat can be as large as a single-family home and can include a family room, den, home office, and/or formal dining room.
Carriage Home/Coach Home - These terms are interchangeable and a hint as to their configuration lies in the moniker. This housing type traditionally had three stories; two living levels above a ground floor space used to store carriages and coaches. Today, the ground floor space contains a single-level apartment unit while the top two levels typically comprise a townhome. Some carriage/coach home buildings have just two stories, accommodating only single-level designs. While the typical carriage/coach home building will consist of four to six units - two or three single level ground floor units and two or three townhomes -- in some cases there are more single-level ground floor apartments than townhomes, giving the building a unique architectural flair. Another unique aspect of this design is the ground level entry to the top level living quarters. In this regard, many carriage/coach homes include private elevators.
Condo-Hotel Residences -The condominium hotel concept took root at the height of the real estate boom as a way for the hotel developer to create cost-efficient inventory of overnight accommodations. Nevertheless, the condo-hotel unit is fee-simple deeded real estate. While the initial concept appeared to favor high-rise buildings in urban locations, this product type can take many physical forms including suites, studios and multi-bedroom designs in an apartment flat configuration, as well as attached and detached villas in a variety of locations, including destination resorts in rural and seaside areas. The key component of this concept is the management aspect that appeals to the investor and second home buyer. In this regard, the unit can be put into a management program and the unit rented out by the hotel on an overnight basis. The net proceeds from the rental are typically split between the hotel and the owner of the unit. The owner of a condo-hotel unit generally has access on demand, but may be limited to a particular period of time during the course of a given year. Branded residences, i.e., those that are marketed under the hotel brand name such as Four Seasons, Ritz-Carlton and St. Regis tend to garner the highest prices.
Private Resort/Hotel Residences-The private resort residence is a wholly-owned, private property located within the confines of a full-service hotel or resort. Unlike the condo-hotel residence, the private resort/hotel property is not managed by the hotel, and therefore, is not rented out on a nightly basis. These properties can take a single-family or multi-family configuration, condominium ownership generally applies providing maintenance-free ownership, and all hotel services are available to the owner including in-room dining, valet and concierge. Branded private residences-those that are developed in conjunction with a branded hotel component-are a product that can suffer a tendency toward the extreme, with prices commonly in excess of $1 million.
Private Residence Club (PRC) - Contrary to the term, this product definition is not founded in club membership. The PRC is an upscale form of fractional ownership of fee-simple, deeded, vacation property. The PRC residential product is generally larger than the standard fractional ownership unit and is decidedly more luxurious, generally resulting in higher prices. The programs associated with this product typically allow for eight to 12 co-owners per unit providing four to six weeks of guaranteed access. This usage period is more limited in comparison to the lower priced fractional products, which are often sold in quarter-shares (four owners per unit) in recognition of the fact that the upscale consumer generally has more money than time. While this may appear to be a contradiction in value, this form of ownership is indeed designed to provide a sense of exclusivity. The PRC typically does not permit overnight rental to the general public and instead preserves a sense of private ownership. This perception has theoretic value, thus equating to higher prices. The typical PRC product in a luxury resort environment is a three-bedroom/three bathroom single-level apartment unit approximately 2,500 square feet in size. Owners are referred to as "members" and as such have access to all of the amenities associated with the Private Residence Club. These typically include golf, tennis, swimming and fitness facilities. Similar to condominium ownership, an annual fee is charged for maintenance and repairs.
Housing Cooperative (Co-Op) - A housing cooperative is a legal entity, usually a limited liability corporation (LLC) that owns real estate consisting of a number of individual units in one or more buildings. Each shareholder in the legal entity has the right to occupy one housing unit, often subject to an occupancy agreement, which is similar to a lease. A Co-Op shareholder does not own real estate, but a share of the legal entity that does own the real estate. Cooperative housing has a long history in the US as a means of homeownership and resident control. Beginning in the early 1900s, the concept was the most prominent form of homeownership in multi-unit buildings until the advent of the condominium movement. Historically, cooperatives have been largely confined to urban locations. Abraham Kazan, (1889-1971) is considered to be the "father of US cooperative housing." Kazan grew up an eyewitness to appalling tenement conditions in New York City. As president of the Amalgamated Clothing Workers Credit Union he formed Amalgamated Housing in the Bronx in 1927 to provide affordable housing for the middle-class workforce. New York is well known for its co-ops and more than 100,000 people live in homes today built by Kazan's efforts. Large housing cooperatives are generally managed by a board of directors elected by and from among the shareholders. In smaller co-ops, all members sit on the board. There are essentially two methods of purchasing a housing co-operative share: Market rate and limited equity. With market rate, the share price is permitted to rise on the open market and shareholders may sell at whatever price the market will bear. The Dakota, where Beatle John Lennon made his residence, is emblematic of an upscale, market-rate co-op. With a limited equity share, the co-op governs the pricing. The motivation associated with this type of arrangement lies in maintaining the property's affordability and income restrictions often apply to the buyers. Housing co-operatives are found all around the world, but are most prevalent in the US, Canada, India, Germany and the Nordic countries (Sweden, Finland and Norway.)
Timeshare/Interval Ownership - The informal practice of joining with friends and family to own vacation property has been around for decades, but the development concept is comparatively new. This relatively novel development approach has many buyers confused as the terms tend to overlap and are often misunderstood. There is a distinct and vital difference between Timeshare/Interval Ownership and Fractional/Private Residence Club ownership and it has to do with what you actually own. The terms Interval and Fractional furnish hints. One alludes to a time period (interval) while the other is commonly used with respect to the co-ownership of tangible (real) property. In development parlance, Interval ownership generally refers to the Timeshare product while Fractional ownership relates to the Private Residence Club (PRC) product - not to be confused with a Destination Club, which is a separate an uniquely defined product altogether. The difference between Interval and Fractional ownership lies in the "product" that is co-owned. While Fractional ownership provides fee-simple ownership of real property evidenced by a deed, Timeshare is exactly as its name implies -- the right to use a property for a particular period of time. In this regard, the emphasis is on "time" not real property. While a time "share" is a saleable commodity and may or may not appreciate over time, it does not constitute ownership of the actual real estate. Other differences between the two include the guaranteed usage period. In the case of Timeshare, usage is generally purchased in one-week increments. The usage period may be placed in rotation so that the timeshare "owner" has access to the property across all seasonal periods. Alternatively, some programs adjust the purchase price dependent upon a selected period of use, which is guaranteed. When units are not in use by the shareholders, they are rented out to the general public. In comparison, the guaranteed access period inherent in Fractional ownership is significantly longer, ranging from a month to as many as three months, generally sub-divided into two- to four-week periods spread across all four seasons. While Fractional units can be rented out to the public, the most upscale fractional properties are not, and are instead reserved for the exclusive use of the co-owners. Further information about timeshare is available from ARDA.
Destination Clubs - Once the exclusive domain of the über rich, Destination Clubs have evolved to be more inclusive, and as more and more Baby Boomers have reached their peak earning years they have opted for this less-time-consuming alternative to maintaining a vacation home. Another appealing aspect of the concept is the variety that most Destination Club portfolios provide as the properties can be located around the globe. The definition of the Destination Club has its basis in club membership, and there are essentially two basic membership structures: Equity and Non-Equity. The first Destination Club membership offering was launched in 1998. Private Retreats, since purchased by Ultimate Resort and reorganized to become Ultimate Retreats, was a non-equity program that essentially mirrored a country club membership providing the member with a right to use the club's assets. The assets of a Destination Club tend to be million-dollar-plus vacation homes. Members do not own an interest in the homes nor do they participate in any potential appreciation of the properties. Non-Equity Destination Club members pay an upfront membership fee (deposit) giving them the right to reserve and use the properties subject to availability and the Club's reservation policies. Upon resignation, a non-equity member typically receives 75% to 100% of the fee paid. However, there is no assurance that the refund will be immediately available at the time of resignation. If there are several members seeking to resign and no new members to take their places, a resigning member may have to wait to exit. The industry standard for resignation is "three in/one out" meaning for every three new members, one member may resign. In the Equity model, the member's deposit represents an interest in the club's property portfolio and any appreciation in the membership value. When exiting the club, the refundable portion of the fee may be adjusted to reflect the appreciated value of the real estate portfolio or the increase in the membership deposit for new members. Both membership structures call for the payment of annual or monthly "dues" which are used to maintain the properties. Many Destination Club properties are located in destination resorts. In this regard, members have access to the amenities on a pay-as-you-go basis. If the home is located in a private community, access to the recreational amenities may be restricted and/or require additional membership fees to use specific amenities such as the golf course, when in residence. The typical Destination Club program calls for a member-to-unit ratio of 7 to 1, and members generally have 21 to 60 days of guaranteed usage throughout the year. The predominant Destination Club property type has traditionally been a single-family home in the 2,000 to 4,000 square foot size range, but condominiums and condo-hotel suites are increasingly becoming a part of the Destination Club portfolio. The largest Destination Club is Exclusive Resorts, which has 350 properties in 40 locations. The latest incarnation within the Destination Club model is the activity-centric club. For example, The Markers has homes in 16 locations, all of which are golf communities or destination golf resorts. One of the newest hybrids is not only activity centric, but acts more like a Timeshare in that it is "points-based." The Presnell Sporting Collection offers members access to high-end fishing and hunting-oriented sporting travel experiences. Instead of buying properties to accommodate members, the Club buys blocks of time in hunting and fishing lodges around the world. Vacation time at each lodge is priced in "privileges" and membership fees escalate dependent upon the number of "privileges", i.e., length of stay in a given destination. Destination Clubs have been characterized as a "rapidly accelerating luxury-access revolution" that is being fashioned to meet demand as the concept evolves. For more information on Destination Clubs, visit DestinationClubs.org.
Land Lease - A land lease is a type of financial arrangement in which the ground under a structure is leased, rather than sold. In this regard, the land and the structure are owned separately and independently by more than one entity. This practice occurs most commonly when an investor wants to retain title to the land but does not necessarily wish to be the developer. The investor might work with a developer to build a structure and rent or sell it, with the understanding that the land is leased and does not come with the building. This type of arrangement is common with respect to farms in rural areas, while in urban areas it is often associated with cooperatives or tenant-owned residences. Land leases are also prevalent in mobile home parks where the housing is not permanently anchored to the land, and resorts, particularly that portion dedicated to the amenities, may be constructed on land leased from a third-party or a local government. In this regard, any condo-hotel units or private residences located within the resort may be subject to the terms of the lease as well. Lease terms generally range upward to 99 years.
Common-Interest Developments (CIDs) - The fastest growing segment of the housing industry has been common interest developments (CIDs), more commonly known as condominium developments. (See "Condominium Ownership") The common denominators between the terms are the form that ownership takes and the governance of the community, which can include freestanding and multi-family dwellings. In a CID, homeowners own their residence and the land upon which it is built, but co-own, "in common" the common areas, i.e., roads, sidewalks, parks, playgrounds, clubhouses, and any other amenities. This form of ownership was pioneered in the early 1960s as developers lobbied for increased density in suburban settings. A chief motivator was the Federal Housing Administration's authorization of federal home mortgage insurance in 1963 exclusively for condominium homes in subdivisions with a qualifying homeowner association. In the 1970s, escalating land costs prompted developers to increase community density, i.e., build more homes on less land, while retaining a suburban feel, spawning the popularity of "cluster homes" surrounding open green areas, maintained by the HOA. This form of development and ownership is found in all types of master-planned PUDs including golf, retirement, and resort communities. For further information on common-interest developments, visit the Community Associations Institute.
Homeowner Association (HOA) - Since 1964, homeowner associations (HOAs) have become increasingly common as residential development has become more structured and formalized. The Community Associations Institute trade association estimates that HOAs governed 23 million American homes in 2006. A Homeowner Association (HOA) is an organization initially created by the developer of a master-planned community (MPC) or planned unit development (PUD) for the purpose of providing benchmarks for governance of the development, management, and sales of a residential project. Creating the governing entity allows the developer to exit the project financially and legally by transferring ownership of the association to the homeowners. This is typically accomplished after a pre-established number of properties have been sold. Most HOAs are incorporated and subject to state law governing not-for-profit corporations, but are implemented by a Board of Directors comprised of the residents (members). HOAs provide services, regulate activities, levy assessments and have the right to impose fines. Each member (resident) of a homeowners' association pays assessments that are used to cover the expenses associated with the maintenance of the development. Common expenses include landscaping of common areas, upkeep of the community amenities, insurance, management company or on-site manager costs, security personnel, etc. There are varying degrees of conformity required in a HOA-governed development. Housing style, size and color, landscaping, fencing, etc., are typically mandated, and restrictions as to the use of the property may also be imposed including the types of vehicles that may be kept at the home, and pet restrictions. When a homeowner purchases a home governed by a HOA, he/she signs a document agreeing to the covenants, conditions and restrictions associated with the development. If the property is sold, the seller ceases to be a member of the association and the new owner becomes a member. For further information about homeowners associations, visit the American Homeowners Association website.
Covenants, Conditions and Restrictions (CCRCs) - CCRCs are the governing documents that dictate how the homeowner's association operates the community. The documents provide the policies, procedures, rules and regulations that the owner, their tenants and guests must follow. When buying a home, it is important to understand the restrictive covenants, i.e., deed restrictions that are in place for the real estate being purchased, as they dictate how one can and cannot use the property. Some common residential community deed restrictions include mobile homes and commercial uses. A more specific example would be the numbers of structures permitted on a given building lot. In some cases, a guesthouse would be permitted, while in others the building lot may be restricted to a singular unit. It is the responsibility of the elected Board of Directors to enforce the rules and regulations set forth in the CCRCs. Policies communicate, organize and focus the resources of the HOA. Procedures are set to accomplish a particular objective. For instance, each resident is a member of the homeowners' association and as such pays assessments to cover the expenses associated with the maintenance of the community. The procedure for the collection of these assessments would be outlined in the CCRCs. Rules, regulations and restrictions are set forth within the CCRCs to define the allowable uses of the common elements of the community, the architectural guidelines for the residences, and the behavior of residents and guests. Some examples include pets, parking, noise, exterior modifications, use of the common facilities, tenant and guest activities. If a homeowner breaks a rule, penalties can include a fine, forced compliance, and even a lawsuit. The Covenants, Conditions and Restrictions serve to provide a residential development with a standardized appearance and control over the activities that take place within its boundaries. When enforced, CCRCs effectively serve to protect property values. A buyer should receive a full copy of the CCRCs prior to closing on the purchase of property.
Homeowner Association (HOA) By-Laws - The HOA by-laws set forth precise guidelines with respect to how the homeowners' association operates. Issues that are typically defined in the by-laws include the composition of the Board of Directors, the method by which the Board is elected, the terms of office including term limits, the handling of Board vacancies, when elections should take place, how the removal of Board members should be performed, and when/how often meetings should take place and the associated requirements of notification. Other issues addressed in the by-laws include voting rights and qualifications, the requirements for a quorum, ballot tallying procedures, an explanation of how funds will be handled, and by-law amendment regulations and adoption procedures.
Amenities - Any tangible or intangible benefit associated with real property, particularly those that increase its attractiveness or value and contribute to its comfort or convenience, is deemed an amenity. In a residential community, tangible amenities may include golf, a swimming pool, tennis courts, dining and fitness facilities, a clubhouse, parks, dedicated walking/biking trails, a lake or fishing streams, and a manned, gated entrance. Intangible amenities may include views, nearby activities, a highly rated school, and services such as concierge, valet, and on-site program directors and instructors. Examples of amenities relative to individual homes include appliances, window treatments, specialized flooring, cabinetry and countertops, fireplaces, enclosed exterior living areas, garages, and a swimming pool or hot tub. Both community and individual home amenities add to the value of property.
Wellness Amenities - Wellness and health-related activities have become increasingly popular in both residential and resort environments, particularly with the Baby Boom generation. Guided hiking and biking, fishing and kayaking, fitness facilities and programs that include classes in Yoga, Tai Chi, spinning, health and cooking, meditation, etc. are becoming common in upscale residential communities. The Spa is perhaps the most popular wellness amenity and residential communities are meeting the demand by providing Spa services if not full-service on-site Spa facilities. Family participation in wellness is being encouraged with multi-generational programs that focus on everyone from the children to the grandparents.
Security - Security is a major issue with respect to today's living conditions, and in this regard, nearly all newer subdivisions, master-planned communities, and PUDs are now gated. The term "controlled access" refers to a manned gate or an electronic gate that lifts when a qualified auto with an electronic device or sticker approaches, or upon the insertion of a dedicated key card. A manned gate is typically operated by a full-time staff, generally supported by a computer system that provides the names of all residents that have property access, and accommodates guest access by resident request. Roving security guards are often employed to maintain a sense of safety on a 24-hour basis. Security staff services are typically procured from an outside resource and become an expense to the HOA. In the alternative, community watches are often established utilizing the volunteer services of the residents.
Common Area - In condominium and cooperative housing projects, common areas are those that are not owned by an individual owner of a residential unit but shared by all owners, either by a percentage interest or owned by the management organization (HOA). In multi-family projects, such as condominium apartment buildings, the common areas can include the lobby, hallways, parking garages, laundry rooms, gathering spaces, etc. In residential communities, common areas may include recreational facilities, clubhouses, community centers, parks and other outdoor open space, parking, landscaping, fences, and all other jointly used space. Management of the common areas is the responsibility of the homeowners' association or the cooperative Board of Directors, which collects assessments from the owners that are applied to the maintenance, insurance, and reserves for replacement of improvements within the common areas.
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