The world of real estate can feel like a foreign language, even for those who’ve bought or sold property before. From acronyms like LVRs and LIMs, to jargon like ‘sunset clauses’ and ‘cross leases’, the industry is packed with technical terms that can quickly confuse first-time buyers and seasoned investors alike. Understanding these terms is crucial, not just for navigating contracts and listings, but for making informed decisions in what’s often the biggest financial transaction of your life. Here, we break down some of the most commonly misunderstood real estate terminology to help you cut through the confusion.

Types of property ownership

1. Freehold The most desirable form of property ownership in New Zealand. You own both the land and any structures on it outright, with no ongoing lease or rent payments to a third party.

2. Leasehold You own the dwelling but lease the land it sits on from someone else (the lessor). You pay ground rent and may face rent reviews or increases.

3. Cross-lease A shared form of ownership where multiple parties collectively own the land, and each leases their portion back from the group. Changes to the property may require consent from other owners.

4. Unit Title (Strata Title) Common in apartments and townhouses. You own your individual unit and a share of common areas like driveways, stairwells, or gardens. Governed by a body corporate that manages maintenance and shared expenses.

5. Turnkey Property A fully finished home that’s ready for immediate move-in at settlement. You pay the full amount at the end, no progress payments or construction involvement.

6. Tenure The legal method of land ownership, such as freehold, leasehold, or unit title. Tenure affects what rights you have and how the property is managed.

7. Joint tenancy and tenants in common There are two ways to divide ownership of property, joint tenancy or tenants in common. With tenants in common you each own a portion of the property - for example two friends may own half each, or one may own a bigger share. With joint tenants you each own the property and do not have a divisible share.

Legal and documentation terms

8. Title Search A legal document showing who owns the property and any registered interests, such as mortgages, easements, or caveats.

9. Encumbrance A claim or restriction on a property’s title. It might be a mortgage, easement, or covenant that limits how the property can be used.

10. Caveat A legal notice lodged on a property title to warn others that someone else has an interest in the property.

11. LIM Report (Land Information Memorandum) A report from the local council that includes zoning, building consents, flooding risk, historic issues, and more.

12. CCC (Code Compliance Certificate) Issued by the council to confirm that building work complies with the building consent. If missing, it could be a red flag to buyers and insurers.

13. Zoning Local council regulations that dictate what the land can be used for, such as residential, commercial, rural, or industrial. Zoning can affect renovation plans, development, and value.

14. Easement A legal right for someone else to use part of your land for a specific purpose, like shared driveways, drainage, or utility access.

15. Offer Back/First Right of Refusal In cases where public land is no longer needed, it must often be offered back to the original owner or their heirs. Common in Treaty-related or council sales.

16. Sunset Clause A sunset clause is a condition included in a property sale contract, typically for off-the-plan purchases, that sets a deadline for the development to be completed, and the title transferred to the buyer. If the project isn’t finished by that date, either the buyer or the developer can cancel the contract, depending on how the clause is worded.

Buying, selling and lending

17. Valuation Report/Registered Valuation A formal property value assessment by a licensed valuer. Often required by banks before approving a home loan, especially for high-LVR lending.

18. CV/Capital Value This is the estimated value of a property determined by the local council for rates purposes.

19. Progress Payments Payments made in stages during the construction of a home. Each payment is tied to the completion of a particular stage (e.g., foundation, framing, roof).

20. Appraisal An appraisal is a process a real estate agent undertakes to provide an estimate of what your home could sell for. To decide on a value, they’ll view the property and look at recent comparable sales in your suburb.

Property features and issues

21. Chattels vs. Fixtures Chattels are removable items like appliances or curtains; fixtures are permanently attached, like cabinets or light fittings. Sale agreements should specify what’s included.

22. Builder’s Report / Pre-Purchase Inspection A report from a licensed building inspector detailing the property’s structural condition. Helps buyers avoid costly surprises after purchase.

Financial and credit-related terms

23. Credit Score A rating usually between 0 and 1,000 that reflects your credit history. A strong score improves your chances of getting a mortgage; a low score may mean rejection or higher interest rates.

24. Hard Inquiry A formal credit check when you apply for finance.

25. Default When you fail to repay a loan or bill, the missed payment is marked on your credit file. Defaults typically stay on your record for 5 years.

26. Clean Slate Period Negative information on your credit report, like defaults or missed payments, generally disappears after 5 to 7 years, allowing your score to recover if you maintain good financial habits.

27. Revolving Credit A revolving credit is a home loan feature that works a bit like a mega overdraft. You can make as many extra repayments as you’d like, then withdraw those repayments at any time up to a certain limit.

28. Debt-to-income ratio Debt to income ratio or DTI are a measure of the amount of debt you have relative to your annual income. For example, if you earn $100,000 and your debt is $400,000 your DTI is 4. The Reserve Bank passed new laws requiring banks to do no more than 20% of their total lending to investors with a DTI higher than 7 and owner occupiers higher than six.

29. Loan to value ratio (LVR) Your loan to value ratio or LVR is a measure of the size of your loan VS the amount of your mortgage. To work yours out simply divide the amount of your loan by the value of your property.

Auction and sale terms

30. Auction Reserve The minimum price a vendor is willing to accept at auction. If bidding doesn’t reach the reserve, the property may be “passed in.”

31. Passed In When a property doesn’t sell at auction because it didn’t meet the reserve price. The vendor may negotiate with the highest bidder afterward.

32. Private Treaty A standard sale method where the property is listed with an asking price (or price by negotiation). The buyer and seller negotiate directly, usually through agents.

33. Tender Buyers submit confidential written offers by a deadline. The seller then selects the most favourable offer, often used for high-end or development properties.

Navigating the property market can be complex, but having a solid grasp of real estate terminology makes the journey far less daunting. From understanding ownership structures to interpreting reports and financial metrics, knowing the language puts you in the driver’s seat.