Rental Terms Glossary

You’ll hear a variety of terms when you’re buying, marketing, and renting out a home. Knowing what they mean could be crucial to your success. Below are some of the terms you’ll want to be familiar with.

A

Abandonment: When a tenant vacates a rental property without notice and prior to the end of their lease term, often leaving behind personal belongings and ceasing to pay rent.

Abatement: The reduction or elimination of rent payments that a tenant is required to pay, typically as a result of the property not being in a habitable condition or due to the landlord’s failure to make necessary repairs.

ADA: ADA stands for Americans with Disabilities Act, a civil rights law enacted in 1990 in the US. This law prohibits discrimination against individuals with disabilities in all areas of public life in order to ensure that people with disabilities have the same rights and opportunities as everyone else.

Adaptive Reuse: The process of reusing an old site or building for a purpose other than what it was initially designed for.

Addendum: An addendum is a section added to a lease or another legal agreement that provides new information without altering the original document.

Adjustable Rate Mortgage (ARM): An ARM is a type of mortgage loan where the interest rate adjusts over time based on an index, which can lead to changes in the monthly payments landlords owe.

Administration fee: This fee, which is most commonly non-refundable, is often charged to applicants by landlords or property managers to cover the costs associated with operational expenses, such as processing rental applications, preparing lease documents, and other management-related activities.

Affordable Housing: Housing units that are affordable for those whose income is below the median household income.

Affidavit of Title: A legal document provided by the seller of a property that formally declares their ownership of the property and confirms there are no legal claims against it, such as liens or disputes.

Amenities: Additional features or facilities provided to enhance a renter’s living experience. Examples of amenities include on-site services like laundry or fitness centers, as well as in-unit conveniences like air conditioning, hardwood floors, or stainless-steel appliances.

Appreciation: The increase in value a property might have over time. This is typically based on several factors, such as market demand, development in the area, and inflation.

Average Rent: The median monthly payments that renters typically pay in a specific area. The average rent is a reflection of the market’s general pricing trend.

B

Background Check: A background check is a process landlords use to verify a potential tenant's credit history, criminal record, and previous rental behavior to assess their reliability and suitability as a renter.

Base Rent: Base rent refers to the initial or minimum amount of rent agreed upon between a landlord and tenant, not including any additional costs such as utilities, maintenance fees, or other charges.

Building Code: Building codes are sets of regulations concerning construction, maintenance, and occupancy standards to ensure the safety, health, and welfare of the public and tenants within buildings.

Build-to-Rent (BTR): Development of residential properties specifically for the rental market rather than for sale to individual homeowners.

Bridge Loan: A short-term financing option used to bridge the gap between immediate cash flow needs and future income. A bridge loan is often used to quickly purchase a new property before selling an existing one.

Broker: A broker is a licensed real estate professional who managers other real estate agents.

C

Capitalization Rate (Cap Rate): A key metric used in the real estate industry to indicate the rate of return that is expected to be generated on a real estate investment property. This ratio helps investors evaluate the risk and potential return of different properties.

Cash Flow: The net amount of cash being transferred into and out of a landlord's investment over a period, considering all revenue from rents and all expenditures.

Cash for Keys: A strategy where a landlord offers a tenant payment to vacate the property willingly, avoiding the need for legal eviction processes.

Certificate of Occupancy: A document issued by a local government agency or building department certifying a building’s compliance with applicable building codes and other laws, indicating it to be in a condition suitable for occupancy.

Closing: Also known as a settlement, closing is the final step in a real estate transaction where ownership officially transfers to the buyer once all closer terms are met.

Concession: A discount or incentive offered by a landlord to a tenant, such as reduced rent, to make the lease agreement more attractive. Concessions are often used in competitive markets or to fill vacancies quickly.

Condemnation: The legal process by which the government authorities take private property for public use, providing fair compensation to the owners. This is often associated with the exercise of eminent domain.

Co-Living: A modern form of communal living where residents share living spaces and amenities while leasing private bedrooms.

Consumer Price Index (CPI): An index measuring the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Landlords might use the CPI to adjust rents in long-term leases.

Constructive Eviction: A situation where the living conditions become so uninhabitable that a tenant is forced to leave before the lease ends. It can occur through deliberate negligence or failure of the landlord to maintain the premises.

Contingency: A contingency is a condition or event that must occur before a contract becomes legally binding. When purchasing real estate, contingency clauses may be added to a purchase agreement that specifies conditions or actions that must be met for the contract to proceed to closing.

Co-signer: An individual who agrees to take legal and financial responsibility for a lease agreement if the primary tenant fails to make rent payments or breaches the lease in any other way.

Co-Tenant:  An individual who shares rental property rights and responsibilities with one or more tenants under the same lease agreement. All co-tenants are equally liable for fulfilling the terms of the lease.

Covenant: A legal promise in a lease or deed that certain activities will or will not be carried out on the leased property, or that a condition will be met or not met.

Covenant of Quiet Enjoyment: This legal principal is part of most lease agreements, ensuring tenants can peacefully use and enjoy their rented property without interference from the landlord or other parties claiming ownership of the property. This covenant implies that the tenant’s possession and use of the property will not be disturbed by anyone with a superior title to the property, including the landlord.

Credit History: A record of a person’s ability to repay debts and demonstrated responsibility in managing finances. Landlords review a potential tenant’s credit history to assess their likelihood of paying rent on time.

Curb Appeal: The attractiveness of a property and its surroundings when viewed from the street, which can impact first impressions and perceived value.

D

Deferred Rent: An arrangement where a renter is allowed to postpone payment of rent for a specified period, often leading to a graduated payment schedule where earlier payments are lower and increase over time.

Depreciation: The decrease in the value of a property over time due to wear and tear, age, or obsolescence. Depreciation is often used by landlords when determining tax deductions for rental properties.

Double Occupancy: The use or rental of a property by two individuals who share a single living space or room.

Due Diligence: The comprehensive appraisal of a business or property, conducted by a prospective buyer to establish its assets and liabilities and evaluate its commercial potential. In real estate, this often involves verifying the condition of the property, legal title, and compliance with zoning laws.

Duplex: A residential building divided into two separate units, each with its own entrance and living spaces, shared within a single structure.

E

Effective Rent: The actual rental rate net of incentives and concessions provided by the landlord to the tenant. It is used to measure the real cost to tenants over the term of the lease.

Eminent Domain: The right of the government or its agent to expropriate private property for public use, with payment of compensation.

Encroachment: A situation where a structure or improvement crosses onto another’s property without permission, potentially leading to legal disputes.

Equal Credit Opportunity Act: A US federal law ensuring all consumers are given an equal chance to receive credit. This prohibits discrimination against applicants on the basis of race, color, religion, national origin, sex, marital status, age, or because they receive public assistance.

Equal Opportunity Housing: Equal opportunity housing refers to the principle and legal requirement that housing and rental opportunities must be made available to all individuals without discrimination based on race, color, religion, sex, national origin, disability, familial status, or other protected classes, ensuring fair and equal treatment in the housing market.

Equity: In real estate, the difference between the current market value of a property and the amount the owner owes on any mortgages. It represents the owner’s interest in the property.

Escalator Clause: A provision in a contract that allows for an automatic increase in rent, based on predetermined criteria such as inflation rates, cost of living adjustments, or performance metrics.

Escrow: A financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction. It helps make transactions more secure by keeping the payment in a secure escrow account which is only released when all of the terms of an agreement are met as overseen by the escrow company.

Eviction: The legal process by which a tenant is required to vacate a rented property, typically due to violation of the lease agreement.

1031 Exchange: Also called a like-kind exchange, a 1031 Exchange is a strategy that allows an investor to defer paying capital gains taxes on the sale of an investment property by reinvesting the proceeds into another similar property.

Expense Tracking: The systematic recording and monitoring of all income and expenditures related to owning and managing rental properties. This process includes documenting rental income, property maintenance costs, repairs, utilities, insurance premiums, property taxes, mortgage payments, and any other expenses associated with the rental property.

F

Fair Credit Reporting Act: A US federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit information.

Fair Housing Act: U.S. legislation that prohibits discrimination in renting or selling properties on the basis of race, color, national origin, religion, sex, familial status, or disability.

Fair Market Value: The estimated price at which a property would sell in a fair sale, i.e., when both buyer and seller are willing, knowledgeable, and not under undue pressure.

Fintech Integration: Use of financial technologies to streamline investment, financing, and payment processes in real estate transactions.

Fixed-Term Lease: A rental agreement for a predetermined period, usually one year. Both landlord and tenant are bound to the terms of the lease for its duration, unless legally terminated earlier.

Flex Space: A space that offers a combination of uses, allowing flexibility for tenants.

Foreclosure: A legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments by forcing the sale of the asset used as the collateral for the loan.

G

Garden Apartment: A residential unit that is located on the ground floor or basement level of an apartment building, typically featuring direct access to a back yard or garden space.

Green Leasing: This term refers to lease agreements that include terms promoting sustainable practices.

Gross Income: The total income generated from a property before any expenses are deducted.

Gross Rent Multiplier (GRM): A pricing model used to assess the value of an income-producing property by dividing the property's sale price by its gross annual rental income.

Guest Policy: A set of rules or guidelines established by landlords or property managers that outline the conditions under which tenants can have guests in their rental home. This policy typically covers the duration of a guest's stay, the number of guests allowed, and any requirements for notifying the landlord about long-term guests.

H

Habitability: The requirement that landlords must provide and maintain a safe and livable environment for tenants.

Homeowner Association (HOA) Fees: Fees collected from homeowners within a community for maintaining and improving property and amenities shared by the community.

Housing Voucher: A government-funded program designed to assist low-income families, the elderly, and disabled individuals in affording decent, safe, and sanitary housing in the private market. Participants are free to choose any housing that meets the requirements of the program, and the subsidy is paid directly to the landlord on behalf of the participating family or individual. The voucher covers a portion of the rent, and the tenant may be responsible for paying the remaining balance.

HVAC: HVAC stands for Heating, Ventilation, and Air Conditioning; an integral system in residential and commercial properties that provides a comfortable indoor environment.

I

Implied Covenant: Obligations or promises that, while not explicitly stated in a contract, are understood to be included based on the nature of the agreement and the intent of the parties involved.

Income Restricted: Housing options where eligibility to rent is based on the applicant's income level, such as in affordable housing programs.

In-Unit Laundry: The presence of a washer and dryer located within an individual apartment or rental home, allowing residents to do their laundry privately without needing to use shared laundry facilities.

Investment Property: Real estate property purchased with the intention of earning a return on the investment either through rental income, the future resale of the property, or both.

J

Joint Tenancy: A rental agreement where two or more tenants sign the same lease agreement and share equal responsibility for the rent and care of the property. This means that each tenant is individually and collectively responsible for the full amount of the rent and for adhering to the terms of the lease.

K

Key Money: In the US, this is another term for a security deposit. It is a payment made by a tenant to a landlord in exchange for securing a lease or rental agreement.

L

Landlord: The property owner who rents out the property to a tenant.

Landlord Insurance: A specialized insurance policy covering risks specific to landlords, including theft, fire, and legal issues.

Landlord Retaliation: The term used when a landlord takes punitive action against a renter in response to the renter exercising their legal rights, such as reporting code violations, organizing with other tenants, or requesting repairs. Examples of landlord retaliation include raising the rent, decreasing services or amenities, or otherwise making the living situation difficult. In many jurisdictions, landlord retaliation is illegal.

Landlord-Tenant Law: The legal framework governing the rights and responsibilities of landlords and tenants.

Late Fee: A charge levied on the tenant for not paying rent on time as stipulated in the lease agreement.

Lease Agreement: A legally binding contract between the landlord and tenant outlining terms and conditions of the rental arrangement.

Leaseback: This financial transaction, often referred to as a sale-leaseback, is where the owner of a property sells it and then leases it back immediately from the buyer. The seller becomes the tenant and pays rent to the new owner (the buyer), who now holds title to the property.

Leasehold Improvements: Alterations made to a rental home to suit the needs of a tenant.

Lease Option: A contract in which a landlord agrees to give a tenant the option to purchase the rental property during the term of the lease or at the end of the lease term.

Lease Renewal: The process of extending the lease agreement beyond its original term, often involving new terms and conditions.

Leasing Agent: Someone who works on behalf of property owners or management companies to assist in the marketing and leasing of rental properties. The leasing agent’s responsibilities include showing available units to prospective tenants, explaining lease terms and rental policies, conducting property tours, processing rental applications, and negotiating lease agreements.

Lessee: An individual or entity that enters into a lease agreement with a lessor to rent or lease property. The lessee is also known as the renter or tenant.

Lessor: An individual or entity that owns property or assets and enters into a lease agreement with a lessee to allow the lessee to use the property in exchange for regular rental payments. The lessor, also known as the landlord or property owner, transfers possession and use of the property to the lessee for an agreed-upon period and terms outlined in the lease contract.

Lien: A legal right or claim against a property by a creditor, securing the payment of a debt or obligation with the property.

M

Market Rent: The average current rent price for similar properties in a specific location.

Market Value: The current price at which a property would sell in a competitive market under normal economic conditions. It represents the estimated value of a product or service based on what buyers are willing to pay and what sellers are willing to accept for it.

Mediation: A voluntary, informal process where a neutral third party helps disputing parties to reach a mutually satisfactory settlement. Often used in landlord-tenant disputes to avoid court litigation.

Mixed-Use Zoning: Zoning regulations that allow for more than one type of use within a specific area, such as residential units above commercial or retail spaces.

Month-to-Month Lease: A rental agreement that provides for tenancy from month to month, allowing either party to change or terminate the agreement with proper notice, typically 30 days.

Move-in Checklist: A document used by landlords, property managers, or tenants to record the condition of a rental property before a new tenant moves in. The checklist typically includes a list of all rooms and areas in the property, along with specific items and fixtures, such as walls, floors, appliances, windows, doors, and any existing damages or issues.

Multiple Listing Service (MLS): A platform, like Apartments.com, that features a list of properties either for rent or for sale. An MLS for rentals allows property managers, landlords, and real estate agents to list rental properties and connect with potential tenants.

N

Necessary Repairs: Repairs required to maintain the property’s habitability and safety, ensuring it meets basic living and legal standards.

Net Operating Income (NOI): A calculation used to analyze real estate investments that generate income. NOI equals all revenue from the property minus all reasonably necessary operating expenses.

Notice Period: The amount of time given to a tenant or landlord before certain actions, such as eviction or rent increase, take effect.

Notice of Entry: A formal notification provided by a landlord to a tenant, indicating the landlord's intent to enter the rental property for specific purposes (such as inspection, maintenance, or repairs) within a specified timeframe, in accordance with local laws and lease agreements.

Notice to Quit: A document given by a landlord to a tenant, ordering the tenant to vacate the premises by a certain date due to breach of lease.

Notice to Vacate: A written notification from a tenant to a landlord indicating the tenant’s intention to leave the rental by a specified date.

O

Occupancy Limits: Regulations that set the maximum number of people who can live in a rental unit, often based on the size of the property.

Open House: An event where a house or an apartment that is available for sale or rent is showcased to potential buyers or tenants in a structured, open-invitation format.

Operating Income: The total income from property operations after subtracting necessary operating expenses but before deducting taxes and interest charges.

P

Passive Income: Earnings derived from a source that requires minimal effort to maintain or generate. In other words, it is income that is received on a regular basis with little to no active involvement once the initial setup or investment has been made. Passive income streams can come from various sources, including rental properties.

Pet Policy: A set of rules or conditions outlined by a landlord or property manager regarding the allowance of pets in the property.

Pet Rent: An additional monthly fee charged by some landlords to tenants who have pets, intended to cover the potential costs of wear and tear caused by the animal.

Property Management: The operation, control, maintenance, and oversight of real estate and physical property by a third party or owner.

PropTech: Short for Property Technology, this term encompasses a range of innovative technologies designed to streamline

Prorated Rent: A portion of the monthly rent payment calculated based on the actual number of days a tenant occupies the property within a partial month.

Q

Quiet Hours: Specific times during the day or night when tenants are expected to keep noise levels to a minimum to ensure peace and quiet for both residents and neighbors. These designated quiet hours are typically outlined in the lease agreement or rental agreement by the landlord or property management company to establish guidelines for acceptable noise levels within a rental property.

R

Real Estate Crowdfunding: Gathering small amounts of capital from a large number of individuals to finance real estate investments.

Real Estate Investment Trusts (REITs): Companies that own, operate, or finance income-producing properties, offering investors a way to invest in real estate without owning physical property.

Rentable Square Footage: The total square footage for which a tenant pays rent, often including a portion of the building’s common areas in addition to the actual private space occupied by the tenant.

Rental Application: A form completed by individuals seeking to rent a property, providing personal information, rental history, employment details, and consent for background checks to help landlords assess the suitability of potential tenants for their rental properties.

Rental Property: A property from which the owner receives payment from occupants, known as tenants, in return for occupying or using the property.

Rent Abatement: Also known as rent reduction or rent relief, rent abatement is a temporary or partial forgiveness of rent provided by a landlord to a tenant in response to certain issues or circumstances that affect the habitability or usability of the rental property. Rent abatement is typically granted when the tenant experiences disruptions, inconveniences, or damages to the property that significantly impact their ability to use the premises as intended.

Rent Comparable: A rent comparable or rent comp report compares similar homes in an area by square footage, number of bedrooms and bathrooms, and other factors to give a landlord a clear idea about how to price a rental in that area.

Rent Control: Regulation by government authorities that limits the amount landlords can charge for leasing properties and restricts the ability to evict tenants without cause.

Rent Roll: A document or report that provides a detailed breakdown of rental income generated from a property over a specific period, typically on a monthly basis.

Rent Stabilization: A government-regulated system that limits how much landlords can increase rent on certain residential properties, aiming to protect tenants from excessive rent hikes and maintain affordable housing options.

Rent to Income Ratio: A financial metric used to evaluate the affordability of housing by comparing an individual's or household's monthly rent payment to their gross monthly income. It helps determine the percentage of income that goes towards rent, with lower ratios indicating more affordable housing costs and higher ratios suggesting potential financial strain on the tenant.

Rent-to-Own: An agreement, also known as lease-to-own or lease-option, that gives a tenant the option to purchase the property they are renting within a certain time period, usually at a predetermined price. During the lease term, a portion of the rent payments may be allocated toward the future purchase amount.

Renters’ Insurance: An insurance policy purchased by the tenant that provides coverage for their belongings and liability within the rented property.

Right of Entry: A landlord's legal authority to enter a rented property under specific circumstances, typically outlined in the lease agreement and governed by landlord-tenant laws. This right allows landlords to inspect the property, make repairs, show the unit to prospective tenants or buyers, or address emergencies, while also respecting the tenant's right to privacy and providing reasonable notice before entry in most cases.

Right of First Refusal: Sometimes included in a lease agreement, the Right of First Refusal gives the tenant the option to purchase the rental property before the landlord sells it to an outside party. If the landlord decides to sell the rental, they must first offer the tenant the opportunity to buy it under the same terms and conditions as any other potential buyer.

Roommate: An individual who shares living space with one or more people. In a rental property, all roommates might sign the lease together or one might be the principal tenant with others as subtenants.

S

Screening Process: The evaluation of prospective tenants based on criteria such as credit history, criminal background, rental history, and employment verification to determine their suitability.

Security Deposit: A sum paid by the tenant prior to moving in, held by the landlord for the duration of the lease to cover any potential damage incurred by the tenant.

Section 8: A U.S. government-funded program aimed at assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. Participation by landlords is optional.

Self-Help Eviction: An illegal eviction method where a landlord attempts to remove a tenant from a rental property without following the proper legal procedures, such as obtaining a court order for eviction. A self-help eviction often includes actions like changing the locks, shutting off the utilities, or threatening the tenant with force. Self-help evictions are prohibited by law in most jurisdictions.

Short-Term Rentals: Space rented out for brief periods. These rentals are typically fully furnished and are leased out for a short time, often for a few weeks or months. These rentals typically cater to those traveling for either business or pleasure who only need a rental for a short time.

Single-Family Home:  A standalone residential structure designed to house one family or household, typically detached from other dwellings. This type of property is not connected to any other residential units and offers private living spaces, including bedrooms, bathrooms, a kitchen, and common areas, all within the same structure.

Smart Home Technology: A suite of devices, systems, and applications that utilize internet connectivity to enable remote management and monitoring of home appliances and systems.

Sublease: An agreement where the original tenant rents out the premises to another person while their name remains on the lease.

Sustainable Development: Practices and principles that minimize the environmental impact of buildings while promoting healthier living spaces.

T

Tenant: An individual who occupies or possesses property rented from a landlord.

Tenant Screening: The process conducted by landlords or property managers to evaluate prospective tenants’ qualifications.

Title Insurance: Insurance that protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances, or defects in the title to the property.

Turnover Rate:  The frequency at which tenants vacate rental properties and new occupants take their place. A high turnover rate can signify a variety of conditions, such as tenant dissatisfaction, changes in the local rental market, or a property management strategy that emphasizes short-term leases. A low turnover rate often indicates tenant satisfaction and stability in the rental property, which could reduce a landlord’s operational costs associated with finding new tenants.

U

Utilities: Services such as water, electricity, gas, and trash collection that tenants may be responsible for paying in addition to rent.

Utilities Included: A term used in rental agreements to indicate that the cost of essential services such as water, electricity, gas, and sometimes even internet or cable TV is covered by the landlord as part of the rent.  

Uninhabitable: Refers to a rental property that is not suitable for living due to severe conditions such as lack of basic amenities, safety hazards, or code violations.

V

Vacancy Rate: The percentage of all available units in a rental property, such as an apartment complex, that are vacant or unoccupied at a particular time.

Virtual Tours: A digital walk-through experience that allows a landlord to showcase a rental property to potential tenants without them having to be physically present at the property.

W

Wear and Tear: The gradual deterioration of a property that occurs naturally over time through use. It includes minor damages or changes that are expected to happen naturally with regular occupancy and use of the property.

Warranty of Habitability: Legal requirement for landlords to provide safe and livable rental units for tenants.

Walkthrough Inspection: A thorough inspection of the rental property before a tenant moves in or after they move out. This walkthrough helps determine the cost for repairs and the tenant’s security deposit refund amount at the end of the lease.

Water Damage Clause: This common lease-agreement clause outlines the responsibilities for water-related damages. It often specifies that the landlord is not liable for damage or injury caused by issues like breakage, leakage, or obstruction of water or sewer pipes due to the tenant's negligence or carelessness.

Withholding Deposit: The act of retaining part or all of a security deposit due to damages or unpaid rent.

X

Xeriscaping: A landscaping practice that involves designing outdoor spaces to minimize water usage and maintenance, which can reduce water bills and upkeep costs.

Y

Yield: In real estate, yield refers to the return on an investment property, typically calculated as a percentage based on rental income and property value.

Z

Zoning Ordinances: Laws that define how property in specific geographic zones can be used. Zoning ordinances may limit commercial or industrial use of land in order to prevent oil, manufacturing, or other types of businesses from building in residential neighborhoods.