Glossary Of Common Financial
and Legal Terms
Fourth Edition
A
ACCELERATION CLAUSE. A provision in a security agreement, mortgage, note, bond, trust
deed or credit agreement stipulating that the debt secured thereby, together with accrued
interest, may become due and payable upon breach of some condition.
ACCEPTANCE. With reference to contracts, acceptance to create a binding contract is the
assent to an offer by words or conduct on the part of the person to whom the offer is made, in
a manner authorized or requested by the offeror. If an acceptance modifies the terms or adds
new ones, it generally operates as a counteroffer. See “BANKER’S ACCEPTANCE”.
ACCRUED INTEREST. Interest that has been earned since the last payment but is not yet
paid.
ACTION. A legal proceeding in a Court of justice.
ADD-ON INTEREST. The nominal rate of interest tacked on to the principal amount of a debt
at the time of the loan and made payable in equal periodic instalments throughout the term
of the loan, and that remains the same even as the principal declines.
ADMINISTRATOR/ADMINISTRATRIX. A male/female person appointed by the Court to
manage the estate of a deceased person who did not appoint an executor under his or her will.
Legal writers now generally use administrator to refer to someone of either sex.
ADMISSION OF SERVICE. To acknowledge receipt of a true copy of a legal document prepared
for use in legal proceedings.
ADVANCE. To loan; to furnish capital; a loan actually given.
AFFIDAVIT. A written and signed statement of facts, made voluntarily, and confirmed by
the oath or affirmation of the party making it (the deponent), taken before a Notary Public or
Commissioner for Oaths.
AFFIDAVIT OF DEFAULT. An affidavit by a mortgagee (debtor), filed in support of an
application for an order nisi/order for sale, setting out the terms of the mortgage and that the
mortgagor (creditor) is in default under those terms.
AFFIDAVIT OF EXECUTION. An affidavit by a witness to the signing of an instrument by an
individual, attesting as to the authenticity of the signature and execution.
AFFIDAVIT OF RECORDS. An affidavit completed by a party to an action describing all
documents in such party’s possession or control that are relevant to the matter in dispute.
AFFIDAVIT OF RESIDENCY. An affidavit by a purchaser of real property as to his or her
residency status in Canada.
AFFIDAVIT OF SERVICE. An affidavit attesting that the deponent served a pleading or other
document upon a certain party.
AFFIDAVIT OF SUBSCRIBING WITNESS. See “AFFIDAVIT OF EXECUTION”.
AFFIDAVIT OF TRANSFEREE. An affidavit by the purchaser of real property attesting to the
true consideration paid for the land and the purchaser’s opinion as to the present value of
the land. In Alberta, this statement of value is the basis upon which the Land Titles Office
registration fee is calculated.
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AFFIDAVIT OF VALUE. An affidavit by a real estate appraiser filed in support of a foreclosure
action setting forth the value of the land and improvements thereon.
AGE OF MAJORITY. In Alberta, 18 years of age.
AGENCY. A relationship created by express or implied contract or by law in which one person
(the agent) acts for or represents another (the principal) by the latter’s authority, and bind that
person by words or actions.
AGENT. See “AGENCY”.
AGREEMENT. See “CONTRACT”.
AGREEMENT FOR SALE. Generally, an agreement that obligates someone to sell and that may
include a corresponding obligation for someone else to buy. Specifically with respect to land, an
agreement for the purchase and sale of land, whereby, rather than immediately transferring title,
the vendor agrees to transfer title at a future date upon completion of payment of the purchase
price. The legal positions of vendor and purchaser under an agreement for sale have elements of
similarity to those of mortgagee (creditor) and mortgagor (debtor).
AGREEMENT OF PURCHASE AND SALE. An accepted offer to purchase. See “OFFER TO
PURCHASE”.
ALIENATION CLAUSE. A provision forbidding a person, usually the mortgagor (debtor), from
transferring the property that is the subject of the document. In the context of a mortgage, the
mortgagee (creditor) is usually given the right to demand payment of the outstanding balance
including interest upon breach of the alienation clause. Also called a “due on sale clause”.
ALLPAAP. Acronym for “All Present and After Acquired Personal Property”. A continuing fixed
charge on the assets of the debtor under a security agreement that are presently owned by the
debtor and all future personal property of the debtor acquired from time to time.
AMORTIZATION. The gradual reduction of a debt by periodic payments over the term of the
loan.
AMORTIZATION SCHEDULE. An analysis of indebtedness showing the allocation of periodic
payments to interest and principal and indicating the balance due after each payment is applied.
ANNIVERSARY DATE. The yearly reoccurring date during the term of an agreement. In the context
of a mortgage, the first anniversary date takes place one year from the date interest starts to run
on the mortgage.
APPEAL. A complaint to a superior Court claiming that a lower Court did injustice. The
complainant is the appellant and the other party is the respondent.
APPELLANT. See “APPEAL”.
APPURTENANCES. All rights that go with the property, although not within the limits of a
transfer.
ARM’S LENGTH TRANSACTION. A transaction negotiated by unrelated parties, each acting in his
or her own interest.
ASSIGNMENT. A transfer by one party (the assignor) of his rights or title in property to another
(the assignee or assign). An assignment may take the form of a separate document or a clause in a
mortgage, security agreement, etc.
2 Glossary of Common Financial and Legal Terms
ASSUMPTION AGREEMENT. An agreement whereby a purchaser of property personally assumes
responsibility for a debt relating to the property and originally incurred by another person and
whereby such purchaser becomes bound by the same rights and obligations as the original party
debtor.
ATTACHMENT. The time when a security interest in collateral comes into existence. See
“PERFECTION”.
ATTACHMENT ORDER. A form of temporary pre-judgment relief under the Civil Enforcement
Act, which may act to prevent a debtor from disposing of or otherwise dealing with money or
property until trial or further Court order.
ATTESTATION. The act of witnessing an instrument in writing, at the request of the party making
the instrument, and subscribing it as a witness.
ATTORNMENT A tenant’s agreement to hold the land as the tenant of a new landlord.
B
BAILIFF. An individual employed by a civil enforcement agency under the Civil Enforcement Act
to carry out seizures, removals of seized property and evictions.
BAILMENT. A delivery of personal property by one person (the bailor) to another (the bailee) on
an express or implied condition that it be restored by the bailee to the bailor, or according to the
bailor’s directions, as soon as the purpose for which it is bailed is complete. Unlike the sale or gift
of personal property, a bailment involves a change in possession but not in title.
BANKER’S ACCEPTANCE. A short term credit instrument traditionally most commonly used
by persons or firms engaged in international trade, but now also frequently used to provide
alternative pricing of domestic credit. A bill of exchange payable at maturity that is drawn by a
creditor against his or her debtor. Banker’s acceptances are comparable to short term government
securities (for example, Treasury Bills) and may be sold on the open market at a discount. Banker’s
acceptances are made saleable on the market by financial institutions’ accepting or ‘stamping’
them and thereby agreeing to honour them as presented.
BANKRUPTCY. Proceedings under the Bankruptcy and Insolvency Act whereby the property of
an insolvent person is taken over by a trustee in bankruptcy for distribution among the bankrupt’s
creditors and by which the bankrupt is relieved of the unpaid balance of liabilities.
BEARER. The person in possession of a bearer instrument. See “BEARER INSTRUMENT”.
BEARER INSTRUMENT. A promissory note or other negotiable instrument or security payable to
bearer, payable to cash, or endorsed in blank. Payment of a bearer instrument may be claimed by
anyone who presents it.
BENEFICIAL INTEREST. The interest in property of a beneficial owner or a beneficiary, as contrasted
with the estate or interest of a nominal or legal owner, such as a trustee. Beneficial interest carries
with it all the profit, benefit or advantage resulting from a contract or the ownership of property.
BENEFICIAL TITLE. See “BENEFICIAL INTEREST”.
BENEFICIARY. A person who receives a benefit under a will, trust or agreement.
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BILL OF COSTS. A document in legal proceedings that sets out the claim for costs in an action.
BILL OF EXCHANGE. An unconditional order in writing, addressed by one person (the drawer) to
another (the drawee), signed by the drawer, requiring the drawee to pay on demand, or at a fixed
or determinable future time, a sum certain in money to, or to the order of, a specified person (the
payee) or to bearer. A cheque is the most common form of a bill of exchange.
BILL OF SALE. A written instrument evidencing transfer of title to personal property, even though
physical possession does not pass.
BLANKET MORTGAGE. A mortgage whereby two or more properties are pledged to secure a
single debt or loan.
BLENDED PAYMENTS. Periodic loan payments, combined as to principal and interest, and
constant in amount.
BONA FIDE PURCHASER FOR VALUE. One who purchases property of value without any notice of
defect in the title of the seller.
BONA FIDES. In good faith without deceit or fraud.
BOND. A written obligation to repay a loan under specific terms. Commonly, a bond is secured
by a mortgage. The term is also used with reference to an obligation entered into, by one party in
favour of a second party to whom a third party has or is to have some duty or obligation, and by
which the first party agrees to compensate the second party if the third party fails to perform.
BONUS. Something given in addition to what is ordinarily received (for example, a lump sum
payment to a lender, payable as consideration for making a loan and in addition to the interest on
the loan).
BREACH. The breaking or violating of a law, right, obligation, engagement, or duty (for example,
a breach of contract may arise if one party to a contract fails to carry out a term, promise or
condition of that contract).
BUILDER’S LIEN. (Known in other jurisdictions as a mechanic’s lien.) The statutory claim against
real property for the value of labour, services or materials supplied. The lien arises automatically
upon labour, services or materials being provided, but must be registered to be enforceable.
C
CAPITAL. The assets used for the production of profits. In reference to a business, capital
sometimes means the contribution of each shareholder to the business and other times means the
total assets of the business.
CAPITALIZED VALUE. The value of a property based on the net income accruing to the owner.
CASE LAW. The law as declared by the judges in cases which have been decided, and which
provides a precedent for subsequent cases.
CAUSE. Actions or other original legal proceedings between a plaintiff and a defendant.
CAUSE OF ACTION. The fact or combination of facts that give rise to a right of action.
CAVEAT. A warning. A formal notice to third parties of the caveator’s interest in land, and
registered against the title to the land.
4 Glossary of Common Financial and Legal Terms
CERTIFICATE OF ACKNOWLEDGMENT BY SPOUSE. A certificate signed by a Commissioner for
Oaths or Notary Public, attached to a “consent of spouse”, whereby the Commissioner or Notary
certifies that the spouse freely consented to the disposition of the homestead and release of the
spouse’s dower rights. See “CONSENT OF SPOUSE”.
CERTIFICATE OF LIS PENDENS. A certificate obtained from the Clerk of the Court and filed at the
Land Titles Office against a certain certificate of title warning that the land represented thereby
is the subject of litigation, and that any subsequent purchases or encumbrances are in danger of
being bound by an adverse judgment.
CERTIFICATE OF TITLE. A document held by the Land Titles Office which certifies ownership of
real property and which lists on its back those encumbrances, liens, estates, charges and interests
to which the ownership is subject.
CESTUI QUE TRUST. A person who benefits from a trust - i.e., the beneficiary. The one who has
the beneficial interest in certain property.
CHARGE. In the context of property law, a form of security for the payment of a debt or
performance of an obligation, whereby a creditor has the right to receive payment out of some
specified fund or out of the proceeds of sale of specific property. A charge includes a mortgage,
lien, or encumbrance and is usually given in relation to real property.
CHATTEL. An article of personal property that is movable.
CHATTEL MORTGAGE. A mortgage of a chattel as security for a loan or debt. See “SECURITY
AGREEMENT”.
CHOSE. An article of personal property, either in action or possession. See “CHOSE IN ACTION”
and “CHOSE IN POSSESSION”.
CHOSE IN ACTION. The right to bring an action in Court or to recover a debt or money. See
“CHOSE”.
CHOSE IN POSSESSION. Personal property for which title and possession unite in the same
person. See also “CHOSE”.
CIVIL ACTION. A court action brought to enforce private rights; refers generally to types of action
other than criminal proceedings.
CIVIL CLAIM. A Court document by which an action is commenced in the Provincial Court of
Alberta (Civil Division).
CIVIL ENFORCEMENT AGENCY. A private agency appointed by the Crown through the Sheriff,
which employs Bailiffs under the Civil Enforcement Act to carry out security and civil enforcement
proceedings, including seizures, evictions, landlord’s distress, sale of seized property, and
distribution of sales proceeds.
CLOSED MORTGAGE. A mortgage that does not allow the mortgagor (the debtor) to prepay
principal or make additional borrowing against the collateral at any time, such that the mortgagor
(debtor) is locked in for the entire term of the mortgage.
CLOSING. The point in a transaction at which consideration has been paid, title has been
transferred and any mortgage has been affected. Alternatively, it is a meeting of solicitors to
finalize a transaction between their respective clients.
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CO-INSURANCE. Insurance under which the insurer and insured jointly bear responsibility.
For example, a provision in an insurance policy which stipulates that the insurer shall be liable
for such proportion only, of loss or damage, as the amount of insurance bears to the value of the
property at risk or the interest of the insurer therein; the insured being held as co insurer to the
extent of any excess value above such insurance. Also denotes insurance provided jointly by two
or more insurers.
COLLATERAL SECURITY. Real or personal property pledged in addition to the primary security
or obligation, and subordinate to it, intended to guarantee validity, convertibility or performance
of the primary security or obligation. If the primary security or obligation then fails, the creditor
may exercise against the collateral security.
COMMISSIONER FOR OATHS. A person appointed or empowered to administer oaths and take
and receive affidavits, declarations and affirmations in Alberta. Barristers and solicitors, studentsat-law, members of Parliament, senators, members of legislative assembly, municipal council
members, school board trustees, justices of peace, commissioned officers of the armed forces, and
persons appointed as such by the inspector of legal offices, are Commissioners for Oaths.
COMMITMENT FEE. Amount paid to a lender by a borrower (in addition to interest) as a fee for
committing to make a loan.
COMMITMENT LETTER. A document by which the lender agrees to provide financing within a
specified time and according to terms and conditions contained therein.
COMMON LAW. In Canada, law that is not created by the enactment of the federal Parliament
or provincial Legislatures but consists of all case law and the statutory law of England adopted in
Canada.
COMPONENT FINANCING (OR SPLIT FINANCING). A device by which real estate is split into
separate interests and financed independently.
COMPOUND INTEREST. Interest upon interest i.e., interest on the sum of principal and accrued
interest.
CONDITION. A clause in a contract that is sufficiently important that failure of a party to comply
with the same entitles the other party not only to receive compensation in money but also to avoid
the contract, as contrasted with a warranty. See “WARRANTY”. The term is also used generally
to refer to provisions that must be fulfilled in an agreement.
CONDITIONAL SALES AGREEMENT. An agreement covering the sale of personal property, under
which, despite the fact that possession may pass to the purchaser, title to the property will only
pass to the purchaser when certain conditions (primarily the payment in full of the purchase
price) have been fulfilled. See “SECURITY AGREEMENT”.
CONDOMINIUM. A statutory form of ownership in fee simple of a specific unit of space in a
multi unit building, whereby a person owns such unit and also owns, as tenant in common with
all other owners of the building, the common elements of the property (including the land).
CONSENT OF SPOUSE. A document attached to a disposition (as defined by the Dower Act) by
act inter vivos that is required to be executed by the owner of the land disposed of constituting
a homestead, signed by the spouse of the transferor, stating that the spouse consents to the
disposition of the homestead and release of the spouse’s dower rights.
6 Glossary of Common Financial and Legal Terms
CONSIDERATION. The cause, motive, price or employing influence which induces a party to
enter a contract.
CONSTATING DOCUMENTS. The documents which establish a corporation. Under the Alberta
Business Corporations Act, articles of incorporation or articles of continuance.
CONSUMER GOODS. Personal property acquired primarily for personal, family or household
use.
CONTRACT. An agreement between two or more parties upon lawful consideration, to do or
refrain from doing some act.
CONVENTIONAL MORTGAGE. A contract by which a person binds, the whole of certain property,
or a portion of it only, in favour of another, to secure the execution of some engagement without
divesting possession. The term is also used to refer to a mortgage which is not a high ratio
mortgage. See “HIGH RATIO MORTGAGE”.
CONVEYANCE. The transfer of the ownership of property from one person (the conveyor) to
another (the conveyee) or the written instrument whereby such transfer is effected.
CORPORATE REGISTRY. The registry maintained by the Alberta Department of Consumer and
Corporate Affairs, where copies of the constating documents of all Alberta business corporations
are kept.
CORPORATION. Technically, a body incorporated under the business corporation legislation of
Canada or of various provinces, including the Alberta Business Corporations Act. All provincial
incorporations in Alberta since February 1, 1982 have been under the Alberta Business
Corporations Act.
COST OF FUNDS. A credit pricing alternative whereby the compensation to a lender for use of
funds by a borrower is based on the cost of the lender’s acquiring such funds.
CO-TENANTS. Either tenants in common or joint tenants. Such tenants have in common at least
a possessory interest.
COURT OF QUEEN’S BENCH OF ALBERTA. The superior level Court in Alberta having exclusive
jurisdiction over certain matters including those relating to land, wills and estates, and family law.
See “PROVINCIAL COURT (CIVIL DIVISION)”.
COVENANT. An agreement in writing, signed and delivered, by which one party (the covenantor)
pledges to the other (the covenantee) that something is either done, shall be done, or shall not be
done, or stipulates for the truth of certain facts. The term is currently used primarily with respect
to promises in instruments relating to real estate.
CREDIT. The right granted by one (the creditor) to another (the debtor) to incur debt and defer
its payment.
CREDITOR. A person to whom a debt is owing by another (the debtor).
CROSS COLLATERALIZATION. The process by which several loans advanced by one lender on
different properties are secured by charges against each of the properties. A default on one loan
normally constitutes default on another.
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D
DAMAGES. An amount of money claimed or awarded to a party in legal proceedings as a result of
damage done to or suffered by that party because of the actions of another party.
DEBENTURE. A written instrument evidencing indebtedness that is a direct obligation of the
issuer, which is either secured or unsecured, and which may be negotiable. Also denotes an
instrument acknowledging such a debt. Prior to the Personal Property Security Act, a fixed or
floating charge or both most frequently secured a debenture. See “SECURITY AGREEMENT”.
DEBENTURE INCOME BOND. Fixed interest bonds that are not secured by a mortgage or a specific
pledge of assets but are issued against the general credit of the issuer.
DEBT. A sum of money owing. A debt is an obligation of the debtor and a right of the creditor.
DEBT COVERAGE RATIO (LEVERAGE RATIO). Total liabilities divided by total equities.
DEBT INSTRUMENT. A generic term for any legal instrument evidencing or creating a debt.
DEBT SERVICE. The amount of principal and interest repayments made on a periodic basis, and
which may be constant (equal) or variable payments.
DEBTOR. One who owes a debt to another (the creditor), whether due or to become due.
DEED. A written legal instrument under a registry system, by which title to real property is
conveyed by one party to another. Deeds are not used in the Torrens system (such as that which
exists in Alberta).
DEED OF TRUST (OR TRUST DEED). A legal instrument whereby property is mortgaged to a
trustee who holds it in trust for the creditor beneficiary or beneficiaries. On repayment of the
debt, the trustee must return title to the debtor. A deed of trust contains all rights and obligations
of the parties including duties, responsibilities and compensation of the trustee. Trust deeds are
frequently used in cases where there are a number of creditors, in order that their dealings with
the debtor may be coordinated through one party (the trustee). See “TRUST DEED”.
DEFAULT. Failure to comply with the terms or covenants in an agreement, or occurrence of any
event, that makes a loan document enforceable.
DEFAULT JUDGMENT. Judgment obtained by a plaintiff when the defendant fails to file a
statement of defence or demand of notice.
DEFECT OF TITLE. An imperfection in a person’s ownership of property due to fraud, duress,
illegality or an encumbrance.
DEFENDANT. The party who is being sued in a civil law suit or an accused in a criminal case.
DEFERRED INCOME. Money received at a time later than when it was earned.
DEMAND DEPOSIT. Any bank deposit which the depositor may demand (withdraw) at any
time.
DEMAND NOTE. A promissory note which expressly states that it is payable on demand, on
presentation or at sight and for which no time of payment is expressed.
DEMAND OF NOTICE. A document delivered to a plaintiff by a defendant who does not file a
statement of defence, requiring that the plaintiff notify the defendant of all subsequent motions.
8 Glossary of Common Financial and Legal Terms
DEPONENT. A person who swears an affidavit.
DEPOSIT. Also used with reference generally to the delivery of property by one party to another
(for example, the deposit of money with a financial institution). See “PLEDGE”.
DISCHARGE OF MORTGAGE. A document executed by the mortgagee (creditor), and given to
the mortgagor (debtor) when the mortgagee (creditor) has agreed to discharge a mortgage. If the
mortgage is on land, the discharge can be registered at the relevant Land Titles Office provided the
mortgage was previously registered there.
DISCLOSURE STATEMENT. A statement used in connection with a consumer credit transaction,
to disclose complete credit terms and interest rates, usually as required by applicable law.
DISCOUNT LOAN. A loan under which the amount actually advanced to a borrower is less than
the face value of the loan because the lender receives compensation by way of discount at the time
of advance.
DISPUTE NOTE. A statement of defence filed in a Provincial Court of Alberta (Civil Division).
DISTRESS. The seizure of another’s property to secure the performance of a duty, such as the
payment of overdue rent.
DONEE. Most commonly refers to a party receiving a power of attorney; also called an attorney
or appointee.
DONOR. Most commonly refers to the party conferring a power of attorney; also called an
appointer.
DOWER. The right of a spouse of a married person to a “life estate” in the homestead property
of such married person, both before and after the death of that married person. The spouse is
entitled to remain on the homestead property, unless waived or released.
DOWER AFFIDAVIT. An affidavit by the one making a disposition of real property attesting to the
fact that he or she is not married or that the property being transferred is not a homestead.
DRAWEE. The person, bank or corporation on whom a bill, note or cheque is drawn (addressed)
and from whom payment is expected by the payee or an assignee of the payee.
DRAWER. The person, or corporation, who writes a note or cheque for payment to a third party.
In the case of a bill of exchange, the drawer is the creditor and is usually the payee.
DUE ON SALE CLAUSE. A clause in a mortgage, under which the mortgagee (creditor) has the
right to require the mortgagor (debtor) to pay the balance owing under the mortgage upon sale of
the mortgaged property. See “ALIENATION CLAUSE”.
DUPLICATE CERTIFICATE OF TITLE. The duplicate copy of the certificate of title issued by the Land
Titles Office. The duplicate certificate of title may be issued to any person owning the related land
free and clear of all encumbrances.
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E
E. & O.E. Errors and omissions excepted.
EASEMENT. A right enjoyed by the owner of land over the lands of another (such as a right to
pass over a certain portion of such lands).
EFFECTIVE INTEREST RATE. The actual annual interest rate which incorporates compounding
when calculating interest, rather then the stated rate or coupon rate.
ENCROACHMENT. The unauthorized extension of the boundaries of land by building a structure
on one’s land that extends onto the land of another.
ENCUMBRANCE. In a general sense, any claim or lien upon real property which diminishes its
value but does not prevent passing of the title. The term is also used in a more specific sense in
the Alberta Land Titles Act as meaning a charge on land to secure payment of money, much like a
mortgage. The encumberance remains after a property transfer.
ENDORSEMENT. The act of a payee, drawee or holder of a bill, note, cheque or other negotiable
instrument (the endorser), in writing his name on back of the same, with or without further or
qualifying words, and by which the property in the same is assigned and transferred to another
(the endorsee).
ENDURING POWER OF ATTORNEY. A power of attorney that empowers the donee to represent
or act in the donor’s stead in the event the donor becomes mentally incapacitated or unable to
manage his own affairs.
ENURE. To operate or take affect.
EQUITABLE INTEREST. See “EQUITABLE TITLE”.
EQUITABLE MORTGAGE. A mortgage that creates a charge on property but does not pass legal
title to the mortgagee (creditor) and is not registered (but may be caveated). Rights and remedies
as between the parties are essentially the same as in the case of a legal mortgage (that is, one which
passes legal title to the mortgagee (creditor), as is the effect of mortgages in some jurisdictions
other than Alberta) or a mortgage under the Alberta Land Titles Act. A deposit of title agreement
(and deposit of a duplicate certificate of title thereunder) is a common example of an equitable
mortgage. See “EQUITY” and “LEGAL MORTGAGE”.
EQUITABLE RIGHT. Right recognized by the law of equity as contrasted with a legal right that
is recognized by the common law. Historically, equitable rights had to be enforced by a Court of
equity and legal rights by a Court of law; however, Courts may now enforce both types of rights.
See “EQUITY”.
EQUITABLE TITLE (OR EQUITABLE INTEREST). The ownership interest of one who has equitable as
contrasted with legal ownership, as in the case of a trust beneficiary. See also “EQUITY”.
EQUITY. Justice administered according to fairness, as contrasted with the strictly formulated
rules of common law. Equity is based on a system of rules and principles, which originated in
England (as an alternative to the harsh rules of common law), and which were based on what was
fair in a particular situation. Equity was historically only the jurisdiction of the Court of Chancery;
however, any Court can now administer equity. Where there is any conflict between the rules of
law and equity, equity is to prevail. With respect to real estate, “equity” also refers to the interest
10 Glossary of Common Financial and Legal Terms
an owner of real property in the value of that real property, after deducting encumbrances and
creditors claims.
EQUITY OF REDEMPTION. The equitable right of a mortgagor (debtor) to redeem the mortgaged
property after the legal right to redeem has been lost by a default under the mortgage. See
“EQUITY”.
EQUITY PARTICIPATION. The share of gross or net profits given to a lender (in addition to interest)
to compensate the lender for unusual risks of the investment or the effect of inflation. Common
types of equity participation are interest participation as a percentage of gross income, rental
participation under a sale leaseback transaction or profit participation in a joint venture.
ESCROW. The holding in trust of a written agreement or other property (including money) by a
third party until specified conditions are fulfilled.
ESTATE. The degree, quantity, nature, and extent of interest that a person has in real or personal
property. The assets of a deceased person or of a bankrupt are also referred to as the estate.
ESTOPPEL CERTIFICATE. A written statement or certificate which states certain facts upon which
the receiver of the statement or a third party may rely because the doctrine of estoppel will
preclude the party who gives the statement from later denying the truth of the statement if it was,
in fact, relied and acted upon.
EX JURIS. Outside the jurisdiction.
EX PARTE. An application in a judicial proceeding made by one party in the absence of the
other.
EXACT DAY INTEREST. Interest calculated on the basis of 365 days per year or 366 days in a leap
year.
EXAMINATION FOR DISCOVERY. An examination under oath of parties to an action, held before
the trial and touching upon matters in dispute.
EXAMINATION IN AID OF ENFORCEMENT. An examination under oath of an enforcement debtor
for determining the extent and location of his assets and for ascertaining any information pertinent
to enforcement.
EXCULPATORY CLAUSE. A clause that excuses one party from personal liability in the event of a
negligent or wrongful act.
EXECUTION. Execution of a legal instrument involves doing what is required to give it validity,
including signing and delivering the instrument. Execution of a judgment or order is doing what
is necessary to put the judgment or order into effect. Can also refer to enforcement of a judgment,
often by collection of a money judgment.
EXECUTOR/EXECUTRIX. The male/female person designated in a will to administer the estate of
the testator in accordance with the terms of the testator’s will.
EXEMPTION CLAUSE. See “EXCULPATORY CLAUSE”.
EXIGIBLE PROPERTY. Non-exempt property or money capable of being seized or otherwise
collected under the Civil Enforcement Act.
EXPROPRIATION. The act of taking private property for public use by compulsion in return for
compensation.
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EXTENSION AGREEMENT. An agreement that provides for further time in which performance
of the basic agreement may be performed or extending the coverage of a mortgage to include
additional property.
F
FEE SIMPLE. The highest estate or absolute right in real property that a person can hold.
FIDUCIARY. A person placed in a position of trust and bound to exercise rights and powers in
good faith for the benefit of another.
FILE. In the context of litigation, to deliver to the appropriate Court officer a document prepared
for use in legal proceedings.
FINAL ORDER OF FORECLOSURE. The judgment obtained by a mortgagee (creditor) against a
mortgagor (debtor) for the total debt due under the mortgage plus the attendant costs.
FINANCING CHANGE STATEMENT. The document required by the Personal Property Security Act
to be filed at Personal Property Registry to change or delete a registration of a financing statement.
FINANCING STATEMENT. The document required by the Personal Property Security Act to be
filed at Personal Property Registry to perfect registration of a security interest.
FIRST MORTGAGE. A mortgage which, by reason of its position, has priority over all junior
encumbrances and the holder of which has priority over the proceeds upon foreclosure.
FIRST REFUSAL. See “RIGHT OF FIRST REFUSAL”.
FIXED CHARGE. A charge presently attaching property (commonly given, for example, in a
debenture), which may be contrasted with a floating charge.
FIXED RATE MORTGAGE. A mortgage that provides interest payable at a specified rate, rather
than a fluctuating rate.
FIXTURE. Any tangible personal property that becomes attached to real property. A fixture
is regarded as having become part of the land, but may be treated separately in certain
circumstances.
FLOATING CHARGE. A continuing charge on the assets of the grantor of the floating charge
(usually in a debenture), but permitting the grantor to deal freely with the property in the usual
course of business until the security holder intervenes to enforce the security or until there has
been an event of default.
FLOATING INTEREST RATE. A fluctuating rate of interest (usually a constant percentage above the
prime lending rate of the lender).
FORBEARANCE AGREEMENT. A legal agreement, usually between a secured creditor and a debtor,
whereby the secured creditor agrees to postpone or forbear from exercising security enforcement
under certain conditions.
FORCED SALE. A sale made without the consent or concurrence of the owner of the property, but
by virtue of judicial process, such as foreclosure proceedings.
12 Glossary of Common Financial and Legal Terms
FORECLOSURE. At common law, foreclosure is a remedy available to a mortgagee (creditor) upon
default of the mortgagor (debtor), by which the mortgagee (creditor) requires the mortgagor
(debtor) to redeem the mortgage within a certain period of time, failing which the mortgagor
(debtor) is foreclosed (or deprived) of equitable rights to redeem title to the mortgaged property.
Under the Alberta Torrens system, foreclosure involves obtaining a Court order transferring title
from the defaulting mortgagor (debtor) to the mortgagee (creditor) or a third party.
FORFEITURE. The deprivation of a person of his or her property as a penalty for some act
or omission.
FRAUDULENT CONVEYANCE. A voluntary disposition of property made by a debtor with the
intent of defrauding a creditor and made in circumstances wherein such disposition is prohibited
by law.
FRAUDULENT PREFERENCE. A payment, granting of security or other advantage given by a
debtor to one of his or her creditors which gives that creditor a preference over the debtor’s other
creditors, in circumstances wherein such payment, granting of security or other advantage is
prohibited by law.
FULLY AMORTIZED MORTGAGE. A mortgage wherein equal payments of principal and interest
are stipulated and are sufficient to fully repay the loan upon maturity of the mortgage.
G
GALE DATE. The date on which interest is charged and compounded on a mortgage loan.
GARNISHMENT. A remedy available to the creditor of a debtor, whereby the creditor serves a
third person who owes the debtor money (the garnishee) with a garnishee summons directing that
person to pay the money owed to the debtor into C ourt for application to a money judgment. The
debts owed the debtor can be ‘attached’ in this fashion after, and in some cases before, judgment.
GENERAL ASSIGNMENT OF ACCOUNTS OR BOOK DEBTS. An assignment whereby the assignor
grants a security interest to the assignee in all of its interests in debts owed to it. Such an assignment
usually gives the assignee the right to notify the assignor’s debtors that they are to make payment
to the assignee directly, although the assignee will frequently allow the assignor to continue to
collect its accounts until the assignor defaults under some agreement or debt with the assignee.
In Alberta, a financing statement must be registered at Personal Property Registry to perfect the
assignment.
GOOD FAITH. An honest intention to abstain from taking any advantage of another, even through
technicalities of the law, together with an absence of all information, notice, benefit or belief of
facts which render a transaction unconscionable.
GRANT. The transfer of property from one (the grantor) to another (the grantee) by an instrument
in writing.
GUARANTEE. A collateral promise by one (the guarantor) to answer for the debt or default of
another (the principal debtor).
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H
HIGH RATIO MORTGAGE. A mortgage that exceeds the usual loan to value ratio - e.g. eighty per
cent (80%). Mortgage insurance by the government agency or by a private mortgage insurance
company is often a prerequisite of high ratio mortgage financing.
HOLDBACK. The amount of money retained by an owner or a lender until a certain number of
days following satisfactory completion of work and supply of materials by a contractor. In Alberta,
the Builders Lien Act requires a holdback of ten per cent (10%) of the value of work performed and
materials supplied.
HOLDER. The holder of a bill of exchange, promissory note, cheque or other commercial paper,
who has legally acquired possession thereof by endorsement or delivery and who is entitled to
receive payment of the instrument.
HOLDER IN DUE COURSE. A holder who takes an instrument for value, in good faith, and without
notice that it is overdue or has been dishonoured or has any defence against it or claim to it on the
part of any person.
HYPOTHECATION. The pledging of something as security without delivery of title or
possession.
I
IMPROVEMENTS. Valuable additions made to real property amounting to more than mere repair
or replacement, and intended to enhance the value, beauty or utility of the property.
INCHOATE INSTRUMENTS. Instruments which the law requires to be registered or recorded are
said to be, prior to registration, “inchoate”, and good only between the parties thereto and persons
having notice thereof.
INDEMNIFY. To make good a loss which one person has suffered in consequence of the act or
default of another.
INDEMNITY. A collateral contract, security or assurance by which one party agrees to indemnify
another. See “INDEMNIFY”.
INDENTURE. A written agreement under which bonds, debentures and mortgages are issued,
setting forth maturity date, interest rate, and other terms, and often granting security.
INDORSEMENT. See “ENDORSEMENT”.
IN FEE SIMPLE. See “FEE SIMPLE”.
INJUNCTION. An order or decree by the Court, by which a party to an action is required to do, or
refrain from doing, a particular thing.
IN PERSONAM. Personal proceedings or actions. In modern usage, all legal proceedings and
actions except those involving specific recovery of land (with respect to which see “IN REM”).
IN REM. Real proceedings or actions. In modern usage, legal proceedings and actions involving
specific recovery of land, as contrasted with personal proceedings or actions (with respect to
which see “IN PERSONAM”).
14 Glossary of Common Financial and Legal Terms
INSOLVENCY. Generally, the inability to pay one’s debts, usually because liabilities exceed
the value of assets. Insolvency is given a more technical definition under the Bankruptcy and
Insolvency Act as a precondition to an assignment or petition into bankruptcy.
INSTRUMENT. A formal legal document in writing.
INSURED MORTGAGE. See “HIGH RATIO MORTGAGE”.
INTEREST. The compensation allowed by law or fixed by the parties for the use of money.
INTEREST ADJUSTMENT DATE. A date prior to commencement of the regular monthly payments
under a mortgage, when accrued interest is computed on the various mortgage advances and
becomes due.
INTEREST ESCALATION. Rate of interest on a loan is raised periodically during the term of the
loan so as to encourage early repayment.
INTEREST IN LAND. Any estate, right or title in real property. A claim against the land as opposed
to a claim against the owner thereof.
INTEREST ONLY LOAN. A loan whereby the borrower’s periodic payments are applied to interest
only.
INTERIM FINANCING. A loan used to bridge the gap between a construction loan and a permanent
loan.
INTERLOCUTORY. An act or decision of the Court that is made after a legal proceeding has been
commenced but before it is completed.
INTERPLEADER. Under the Alberta Rules of Court, a method of paying money or property into
Court when two or more people are making adverse claims to the money or property. See
“PAYMENT INTO COURT”.
INTESTATE. One who has died without a valid will.
INTER VIVOS. Literally, between living persons, or during the lifetime of.
J
JOINT AND SEVERAL LIABILITY. A liability which allows the plaintiff to sue one or more of the
parties to such liability separately, or together with all other such parties, at the plaintiff’s option.
JOINT AND SEVERAL NOTE. A promissory note on which there are two or more promissors who
are jointly and severally liable.
JOINT LIABILITY. Liability whereby one joint obligor has a right to insist that another co obligor
be joined as a co defendant with him.
JOINT TENANCY. The ownership of an interest in land by two or more persons, whereby each
person has an undivided interest in the land with equal rights to possession and equal title
acquired by the same conveyance. Joint tenancy includes the right of survivorship - i.e., on the
death of one joint owner, the land as a whole vests in the survivor or survivors, and can only be
disposed of by will by the last surviving owner.
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JOINT VENTURE. An association of persons or companies jointly undertaking some particular
commercial enterprise for mutual profit. Similar to a partnership except that a joint venture does
not involve a continuing relationship among the parties.
JUDGMENT. The order of the Court in a civil matter; the sentence of the Court in a criminal
matter.
JUDGMENT CREDITOR. A creditor who has obtained a judgment against the debtor.
JUDGMENT DEBTOR. A person against whom judgment has been given, which judgment
remains unsatisfied.
JUDICIAL DISTRICT. A geographical territory over which a Court of original jurisdiction has
authority.
JUDICIAL SALE. A sale of property conducted under a judgment, an order, or the supervision of
a Court.
JURAT. The ending of an affidavit or statutory declaration, beginning with the words “sworn” or
“declared”, that attests when, where, and before whom the affidavit or statutory declaration was
sworn or declared.
JURISDICTION. The area over which the Court may exercise its authority, both as to geographic
area and the type of case the Court is empowered to hear.
L
LACHES. Negligent or unreasonable delay in putting forward a legal right that results in causing
prejudice to an adverse party and operates as a bar to action according to equity.
LANDLORD. See “LESSOR”.
LAND TITLES OFFICE. The government office in which certificates of title are held and at which
instruments creating an interest in real property or giving notice thereof may be filed or
deposited.
LAND TITLES SYSTEM. In Alberta, that system of land holding and registration that enacts the
Torrens system. See “TORRENS SYSTEM”.
LEASE. A contract between lessor and lessee for the occupation or use of the lessor’s real or
personal property by the lessee for a specified time and for a specified consideration (rent). With
respect to real property, the lessor is the landlord and the lessee is the tenant. A caveat or the lease
may be registered agains title to the real property at the Land Titles Office. A financing statement
in respect of an interest arising under a lease of personal property of a term of more than one year
must be registered in the Personal Property Registry to perfect the security interest.
LEASEHOLD MORTGAGE. A mortgage given by a lessee on the security of its leasehold interest
in land.
LEGAL INTEREST. The rate of interest prescribed by law as the highest that may be lawfully
contracted for or exacted (60% per annum under the Criminal Code). Legal interest is also a term
distinguished from the term “equitable interest”, which is an interest in land recognized only by
equity. See “EQUITY”.
16 Glossary of Common Financial and Legal Terms
LEGAL MORTGAGE. A mortgage that passes legal title to the mortgagee (as is the effect of
mortgages in some jurisdictions other than Alberta), as contrasted with an equitable mortgage,
which does not pass legal title. See “EQUITABLE MORTGAGE”.
LEGAL TITLE. Full and absolute title or apparent right of ownership enforceable in a Court of law,
with beneficial or equitable title held by another.
LESSEE. The party renting real or personal property for monetary or other consideration. The
lessee of real property is also called the tenant.
LESSOR. The party owning real or personal property that is rented out to another (the lessee).
The lessor of real property is also known as the landlord.
LETTER OF CREDIT. An authority, generally given by a financial institution, to a person named in
the letter of credit to advance money on the faith of that letter or to draw cheques, drafts or other
bills of exchange upon such institution, with an undertaking by such institution to honour the
cheques, drafts or other bills upon presentation.
LETTER OF GUARANTEE. See “LETTER OF CREDIT”.
LEVERAGE RATIO. See “DEBT COVERAGE RATIO”.
LIEN. The right to hold or encumber the property of another as security for the performance of
an obligation.
LIEN HOLDBACK. Under the Alberta Builders’ Lien Act, the ten percent (10%) of the contract
price that an owner is obligated to hold for a specified period of days beyond completion of the
contract.
LIFE ESTATE. An interest in land, the duration of which is limited to the life of the party holding
it or some other person.
LIMITATION DATE. The date by which certain actions or steps must be taken or the right to do so
is lost. Various statutes establish such limitations of actions.
LIMITATION OF ACTIONS. The general limitation period for commencing a civil action in Alberta
is two years. See “LIMITATION DATE”.
LIMITED PARTNERSHIP. An incorporated association under the Partnership Act formed by two
or more persons whereby the general partner is liable for the obligations of and management of
the partnership, with the limited partners having no liability beyond the amounts contributed or
agreed to be contributed by them as capital, and no management responsibilities.
LINE OF CREDIT. A limited credit extended by a financial institution to its customer, to the full
extent of which the customer may avail itself in its dealings with the financial institution, but
which the customer may not exceed.
LIQUIDATED DAMAGES. A specific sum which a party agrees to pay upon breaking some promise
and which, having been arrived at by good faith effort to estimate actual damage that will probably
ensue from the breach, may be recoverable as agreed damages if breach occurs. An unreasonably
large liquidated damages amount may be held by the Courts to be a penalty and therefore
unenforceable.
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LIQUIDATOR. A person appointed to carry out the winding up of a corporation.
LIS PENDENS. See “CERTIFICATE OF LIS PENDENS”.
LOAN. Delivery by one party to, and receipt by another party of, a sum of money upon agreement,
express or implied, to repay it with or without interest.
LOAN AGREEMENT. An agreement that sets forth the terms and conditions relating to a loan
or loans.
LOCAL IMPROVEMENT LEVY. A charge placed upon lands within a given district to pay the
benefits that the respective parcels of land derive from an improvement.
LOCK IN CLAUSE. A clause that restricts repayment of a loan during a specified period or the
whole term of the mortgage.
M
MASTER. A person appointed by the Alberta Government to sit as judicial officer of the Court
of Queen’s Bench of Alberta to carrying out certain administrative and judicial duties. Masters sit
most business days, and preside over most builders’ liens, collectons, foreclosure and interlocutory
matters in lawsuits.
MATERIAL ADVERSE CHANGE CLAUSE. A provision in a loan document, pursuant to which default
shall occur if the business, prospects, assets or financial position of a party to a loan transaction
change(s) in a materially adverse way.
MATURITY DATE. The date at which an obligation, such as the principal of a mortgage, becomes
due.
MECHANIC’S LIEN. See “BUILDER’S LIEN”.
MINUTE BOOK. A formal permanent record of all decisions made and business conducted at
meetings of the shareholders or directors of a corporation. Also usually contains the constating
documents of the corporation.
MORTGAGE. An interest in land created by a written instrument providing security for the
performance of a duty or the payment of a debt. Under the Alberta land titles system, a mortgage
is a charge or lien over the land of another, whereas, under the common law, a mortgage involves
the conveyance of title to the mortgagee subject to the mortgagor’s right of redemption.
MORTGAGE BOND. A bond issued by a corporation and secured by a mortgage on its property.
MORTGAGE DEBENTURE. A debenture issued by a corporation and secured by a mortgage on its
property.
MORTGAGE LOAN. An arrangement whereby a sum of money is borrowed and a promise to repay
is given and under which, as security, the borrower gives to the lender a conveyance or charge on
property owned by the borrower.
MORTGAGE NOTE. A promissory note executed in favour of the lender giving the lender an
encumbrance or lien on the borrower’s property.
MORTGAGEE. The person to whom property is mortgaged, usually the lender.
18 Glossary of Common Financial and Legal Terms
MORTGAGEE IN POSSESSION. A mortgagee (creditor) who has entered into actual occupation
of, or has obtained receipt of the rents of, the mortgaged premises, or has done some other act of
like legal effect, with the result that the mortgagee (creditor) may become liable for obligations
relating to the mortgaged premises.
MORTGAGOR. A person who mortgages his or her property as security for the mortgage, usually
the borrower.
N
NATIONAL HOUSING ACT MORTGAGE. A mortgage made pursuant to the National Housing Act,
and approved and insured by the Canada Mortgage and Housing Corporation.
NEGATIVE COVENANT. A promise not to do something, such as operate a certain type of business
in a leasehold or build a certain type of building on a parcel of land.
NEGOTIABLE. The legal capability of being transferred by endorsement or delivery.
NOMINAL INTEREST RATE. The rate of interest stated on the face of a loan document, which may
be higher or lower than the effective rate of interest, depending on whether the loan amount is
discounted or sold at a premium or on some other factor.
NON-ARM’S LENGTH TRANSACTION. See “ARM’S LENGTH TRANSACTION”.
NON-RECOURSE LOAN. A loan that contains a clause that bars the lender from holding the
borrower personally liable for any deficiency between the debt and the value of the security
given.
NOTARY PUBLIC. One who may affirm under notarial seal the execution of certain legal writings
or the authenticity of a copy of a document or writing.
NOTE. See “PROMISSORY NOTE”.
NOTICE OF INTENTION. A notice that a chartered bank intends to take security under section 427
of the Bank Act, which notice must be registered at the Bank of Canada not more than three (3)
years prior to the security being given.
NOTICE OF MOTION. A notice in writing, served upon all parties to an action, stating that on a
certain date designated, a motion will be made to the Court for the purpose or object stated. See
“ORIGINATING NOTICE OF MOTION”.
O
OATH. An affirmation of truth of a statement, which renders one willfully asserting untrue
statements punishable for perjury.
OFFER. To hold out; to make a proposal to.
OFFER TO PURCHASE. An offer signed by a party seeking to purchase the real property of
another.
OPEN END MORTGAGE. A mortgage under which the lender has the option of advancing more
funds where, for example, the value of the property is anticipated to increase.
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OPEN MORTGAGE. A mortgage permitting the mortgagor to repay all or part of the principal
amount at any time without notice or bonus.
OPTION. In the context of real estate, a right which acts as a continuing offer, given for
consideration, to purchase or lease property at an agreed price and on agreed terms, within a
specified time.
ORDER. A direction of a Court or judge made or entered in writing.
ORDER ACCEPTING TENDER AND VESTING TITLE. An order sought by a mortgagee (creditor) in a
foreclosure action, confirming sale to a successful tenderer and ordering that title be transferred to
that tenderer (in Edmonton, more commonly referred to as an order confirming sale and vesting
order).
ORDER FOR FORECLOSURE. An order granted where no satisfactory tenders are received, vesting
title in the name of the mortgagee (creditor) and foreclosing the mortgagor (debtor) from claiming
an equity of redemption in the property.
ORDER NISI. A provisional or conditional order allowing a certain time in which to do some
required act, on failure of which the order will be made absolute.
ORDER NISI/ORDER FOR SALE. An order declaring that a mortgagor (debtor) is in default under
the mortgage, granting the mortgagor (debtor) a redemption period after which the mortgaged
property will be offered for sale, failing which title will be transferred to the mortgagee
(creditor).
ORIGINATING NOTICE OF MOTION. A notice issued to commence legal proceedings in the Courts
in a matter.
P
PARTIAL DISCHARGE. A discharge of a definite portion of the mortgaged property, usually given
after the mortgagor (debtor) has repaid a specific portion of the mortgage debt.
PARTICIPATION LOAN. A loan issued to one borrower by two or more lenders whereby each
lender reduces its individual risk.
PARTICIPATION MORTGAGE. A type of mortgage whereby the lender participates in profits of
the venture beyond or in addition to interest.
PARTITION. The act of dividing real property in certain proportions among persons who
previously owned the property as joint tenants or tenants in common.
PARTNERSHIP. The voluntary, unincorporated relationship that exists between two or more
persons carrying on a business in common with a view to making profits.
PARTY-PARTY COSTS. An award of costs based on a tariff set out in the Alberta Rules of Court,
which usually provides only partial indemnity of a party’s actual legal costs and disbursements.
PAYEE. The party named in a bill of exchange as the party entitled to payment.
PAYMENT INTO COURT. The deposit of money with the Clerk of the Court pending the outcome
of litigation that will determine who is entitled to the funds. Payment into Court is often made
so that the party holding the funds can be relieved of any responsibility with regard to their
distribution.
20 Glossary of Common Financial and Legal Terms
PERFECTION. In respect of a security interest in personal property, perfection is said to occur
when a security interest has met the requirements provided by the Personal Property Security
Act. In order to be enforceable, a security interest must be perfected. See “ATTACHMENT”.
PERJURY. The result of making a statement before a person who is authorized by law to permit
it to be made before him under oath or solemn affirmation, by affidavit, solemn declaration or
deposition or orally, that is false and made with the intent to mislead.
PERSONAL COVENANT. A promise by a borrower to repay a loan. In Alberta, a creditor is
statutorily barred in most cases from suing an individual mortgagor (debtor) on his or her personal
covenant, being restricted to recovery against the land.
PERSONAL LIABILITY. The kind of responsibility for the payment or performance of an obligation
that exposes the personal assets of the responsible person to payment of the obligation.
PERSONAL PROPERTY. Generally, everything which is subject to ownership and is not land or
an interest in land; includes goods, chattels, money, notes, bonds, stocks and choses in action
generally, including intangible property.
PERSONAL PROPERTY SECURITY. Security given over personal property.
PERSONAL PROPERTY SECURITY ACT. Legislation in force in the western provinces and Ontario
that governs personal property security. The Alberta Personal Property Security Act came into
force on October 1, 1990.
PETITION. A formal written request to an official body, or a formal written application to a Court,
requesting judication on a certain matter.
PIT PAYMENT. The monthly payment by a mortgagor (debtor) of principal, interest and taxes.
PLAINTIFF. The party who commences an action against another party (the defendant) in a
lawsuit.
PLAN. A design covering the area of real property into lots.
PLEADINGS. Statements delivered alternately by the parties to any action, including a statement
of claim and a statement of defence.
PLEDGE. The delivery of possession (but not ownership) or deposit of property as security, by
one party (the pledgor) to another (the pledgee), for the payment of a debt or the performance of
an obligation (for example, a pledge of a duplicate certificate of title). The property may be sold by
the pledgee upon default by the pledgor.
POSSESSION. Physical detention coupled with the intention to hold the thing detained as one’s
own. A person who, although not in actual physical possession, knowingly has both the power
and the intention at a given time to exercise dominion or control over a thing, is said to have
constructive possession of it.
POSTPONEMENT. An instrument by which the holder of a prior registered instrument gives
priority to a subsequently registered instrument.
POWER OF ATTORNEY. A legal instrument by which one person (the donor) empowers another
(the donee) to represent him, or act in his stead, for general or specific purposes. See “ENDURING
POWER OF ATTORNEY”.
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POWER OF SALE. A clause commonly inserted in a mortgage giving the mortgagee (creditor) the
right and power, on default in the payment of the debt secured, to advertise and sell the mortgaged
property at a public auction to satisfy the debt, without resorting to a Court for authority. Such
clauses are not enforceable in Alberta.
PRAECIPE. An order of a judge directed to the Clerk of the Court.
PRECEDENT. A judgment or decision of a Court of law cited as authority for deciding upon later
cases involving similar facts or issues. Also refers to a copy of an instrument or document used as
a guide in preparation of a similar instrument or document.
PREFERENCE. See “FRAUDULENT PREFERENCE”.
PREFERRED CREDITORS. Under the Bankruptcy and Insolvency Act, those creditors whose debt
is unsecured, but who take in priority to common unsecured creditors by virtue of statutory
provision. Generally, a creditor whom the common law or legislation gives some advantage over
other claimants.
PREPAID INTEREST. Interest paid before due.
PREPAYMENT. Payment of all or part of the debt prior to its maturity date.
PREPAYMENT CLAUSE. A clause typically found in a mortgage instrument allowing prepayment
according to agreed terms and conditions, with or without a prepayment penalty. A similar clause
is often found in other debt instruments.
PRIME RATE OR PRIME LENDING RATE. The lowest rate of interest from time to time charged by a
lender to its most creditworthy borrowers. This rate often dictates other interest rates for various
personal and commercial loans.
PRINCIPAL. The amount of money that is being borrowed and upon which interest is calculated.
PRIOR CHARGE OR ENCUMBRANCE. A charge or encumbrance ranking in priority to the
encumbrance in question, either because it was executed first or because it was registered first,
depending on the type of instruments being considered.
PRIVITY OF CONTRACT. The relation that exists between the immediate parties to a contract
which is generally necessary for one party to sue another or be sued on that contract.
PRIVITY OF ESTATE. Most commonly refers to the relation that exists between a lessor (landlord)
and his lessee (tenant) or that lessee’s assignee (but not his subtenant). Certain of the rights and
obligations (which flow to parties where privity of contract exists) may not flow where only
privity of estate exists; and, in turn, certain of the rights and obligations (which flow where privity
of estate exists) may not flow where neither type of privity exists.
PROBATE. A process granted by the Court to the effect that the last will and testament of a certain
person has been proven and registered in the Court and that administration of such person’s
effects has been granted to the executor proving the will.
PROMISSORY NOTE. An unconditional promise in writing, made by one person (the promissor)
to another (the promissee or payee) signed by the maker, engaging to pay on demand, or at a fixed
or determinable future time, a sum certain in money to, or to the order of, a specified person or
the person bearing the note.
22 Glossary of Common Financial and Legal Terms
PROPOSAL. Under the Bankruptcy and Insolvency Act, the proposal made by a debtor to his
creditors for the orderly payment of debts, without the debtor going into bankruptcy.
PROPRIETORSHIP. An unincorporated business owned and controlled exclusively by one person,
and frequently called a sole proprietorship.
PROVINCIAL COURT (CIVIL DIVISION). The small claims Court of Alberta, with a monetary
jurisdiction for claims of $25,000 (excluding interest and costs) and under.
PURCHASE. Transfer of any interest in property from one to another by voluntary act and
agreement, founded on valuable consideration.
PURCHASE MONEY SECURITY INTEREST. A security interest taken by a seller in goods sold, to
secure the purchaser’s obligation in whole or in part. May also refer to a security interest taken by
a lender where money or other value is given in order to enable the borrower to acquire rights in
the collateral. A PMSI includes an interest of a lessor under a lease for a term of more than one year
and the interest of consignors under commercial consignments.
Q
R
QUIT CLAIM DEED. A transaction whereby the borrower transfers to the lender all his or her
rights and interests in the subject property, and the lender accepts it in full or part satisfaction of
the loan indebtedness.
REAL PROPERTY. Land, and generally whatever is erected or growing upon or affixed to the land.
REALTY. See “REAL PROPERTY”.
RECEIVER. A person appointed by the Court or pursuant to a debt instrument, to take charge
of the assets of an insolvent person or business and preserve them for sale and distribution to
creditors. A receiver may also be appointed to take charge of property while that property is the
subject of ongoing litigation.
RECEIVERSHIP. The state or condition of a corporation, partnership or individual over whom a
receiver has been appointed for protection of assets for the benefit of creditors.
RECIPROCAL ENFORCEMENT OF JUDGMENTS. A process by which a judgment from another
province or territory in Canada, or certain other foreign jurisdictions, will be enforced by the
Courts in Alberta.
REDEMPTION. With respect to mortgages, the re acquisition of property after commencement
of foreclosure proceedings by payment of the debt.
REDEMPTION PERIOD. A period of time allowed by law during which a mortgagor or debtor may
recover his or her property by paying off the entire debt in arrears.
REGISTRAR. The chief administrative officer at a registry, for example, the Registrar of Land
Titles. May also refer to a Registrar in Bankruptcy, which hears bankruptcy matters in the Court
of Queen’s Bench of Alberta (all Masters are also Registrars in Bankruptcy).
REGISTRATION. The act of filing notice of an interest in real or personal property at the appropriate
registry office.
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RELEASE. The giving up, discharge or renunciation of a right or claim against another either
gratuitously or for consideration. Also refers to the legal instrument or clause therein by which
the rights or interests are relinquished.
REMEDY. The means by which a right is enforced or the violation of a right is prevented, redressed
or compensated.
REPUDIATION. Words or actions by a contracting party indicating that he or she is not going
to perform contractual duties and obligations in the future and which may treated by the other
parties to the contract as an anticipatory breach actionable in damages.
RESCIND. To abrogate, annul, avoid or cancel a contract and treat it as if it were never made.
RESCISSION. See “RESCIND”.
RESERVATIONS. The clause in a deed or other instrument of conveyance by which the grantor
creates and reserves, some right, interest, or profit in the estate granted, such as rent or an
easement.
RESPONDENT. A party holding a different or opposing position to that of the party making an
application to the Courts; the party against whom an appeal is brought in an action; the party
against whom a divorce action is commenced.
RESTS. The periodic balancing of an account, for the purpose of ascertaining and charging
interest and converting it into principal.
RETAINER. Refers to both the engagement of a lawyer to act on behalf of or advise the client
and to the sum of money received by the lawyer from the client prior to the performance of legal
services.
REVERSION. Where land is granted by the owner for a lesser estate or interest than he or she
has, the undisposed interest is termed the reversion, because the land will revert to the owner
upon conclusion of the particular estate granted. The owner is then said to have a reversionary
interest.
RICE ORDER. An alternative remedy to foreclosure whereby a mortgagee (creditor) is allowed to
purchase the mortgaged property, crediting the purchase price towards the amount owing on the
mortgage and thus establishing the balance still outstanding.
RIGHT. A claim or entitlement enforceable by law.
RIGHT OF FIRST REFUSAL. Right to have first opportunity to purchase property when such
becomes available, or right to meet any offer.
RIGHT OF SURVIVORSHIP. The right of a survivor of joint tenants, to the property held in joint
tenancy.
RIGHT OF WAY. The right of passing over the land of another. A public right of way is called a
highway. A private right of way is normally an easement or a customary right.
S
SALE AND LEASEBACK. A method of financing whereby property is sold to a purchaser (the
lender) who simultaneously enters into a long term lease of the property with the vendor (or
borrower) who retains possession for the term of the lease and pays rent to the purchaser/lessor.
24 Glossary of Common Financial and Legal Terms
SEAL. A solemn mode of expressing consent to and the authenticity of a written instrument,
commonly by either affixing a wafer or making a mechanical impression on the instrument beside
the signatures thereon. In some cases, the purpose of sealing may be to avoid the consequences of
lack of consideration.
SEARCH. In commercial law, the examination of the various registries for the purpose of
ascertaining the state of title to property or the status of an individual or a corporation or other
entity.
SECOND MORTGAGE. A mortgage of property that ranks below a first mortgage in priority. Time
and date of registration determines priority between all real property mortgages
SECTION 426 (BANK ACT) SECURITY. An interest in hydrocarbons or minerals assigned to a
chartered bank as security for a loan to the owner thereof or for a loan guaranteed by the owner
thereof.
SECTION 427 (BANK ACT) SECURITY. An interest in inventory, property or equipment (such as
that used in manufacturing, farming, forestry, mining, fishing, wholesale or retail) assigned to a
bank as security for a loan to the owner thereof.
SECURED CREDITORS. A creditor who has the right, on the debtor’s default, to proceed against
collateral and apply it to the payment of the debt.
SECURITY. Collateral given or pledged to guarantee the fulfillment of an obligation; especially
the assurance that a creditor will be repaid (usually with interest) any money or credit extended
to a debtor.
SECURITY AGREEMENT. An agreement whereby a debtor grants a security interest to a creditor,
who then becomes secured creditor.
SECURITY FOR COSTS. Payment into Court by a plaintiff or an appellant to secure the payment of
costs of the defendant or respondent if the plaintiff or appellant does not prevail in Court.
SELF HELP REMEDY. The taking of action in person or by representative with legal consequences,
but without sanction of the Court.
SEIZE OR SUE PROVISION. Under the Alberta Law of Property Act, a creditor may choose to seize
property under a security agreement, or sue on the debt, but not both. This provision only applies
to purchase-money security interests in consumer goods.
SERIAL NUMBER GOODS. Personal property defined as “serial number goods” by the regulations
made pursuant to the Alberta Personal Property Security Act and includes motor vehicles, trailers,
mobile homes, aircraft, boats, or outboard motors for boats, tractors, combines, self propelled
equipment used in the construction or maintenance of roads, together with self propelled, mobile
devices designed for use on a road or a natural terrain.
SERVICE. With respect to litigation, the delivery of a copy of a legal document to the opposing
party in an action or to a person who is not a party but who has an interest in the proceedings.
SET OFF. A claim by the defendant in an action to reduce the amount of the claim by the plaintiff
by an amount owed by the plaintiff to the defendant.
SETTLEMENT. With respect to litigation, an agreement by which parties having disputed matters
between them ascertain what is due from one to the other.
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SEVERAL LIABILITY. Liability separate and distinct from liability of another, with the result that
an independent action may be brought without joining any others as defendants.
SHORT FORM MORTGAGE. A mortgage document that uses precise shortened wording which,
according to the Alberta Land Titles Act, has the identical legal effect of the long form wording set
out therein.
SINE DIE. Until further notice, for an indefinite period of time. For example, a Court application
may be adjourned sine die until counsel give notice that the matter is being put back on the list for
a Court hearing.
SMALL CLAIMS COURT. See “PROVINCIAL COURT, CIVIL DIVISION”.
SOLE PROPRIETORSHIP. See “PROPRIETORSHIP”.
SOLICITOR-CLIENT COSTS. An amount of money to indemnify a party for their actual legal costs
and disbursements.
SPECIFIC ASSIGNMENT. An assignment whereby the assignor grants to the assignee all of its
rights under a particular contract, such as entitlement to receive rent and other rights under a
lease. The assignee must notify the other contract party of the assignment before the assignee can
claim against that other party the benefits of the contract assigned. Under the Personal Property
Security Act, a financing statement must be registered in the Personal Property Registry for the
assignment to be perfected.
SPECIFIC PERFORMANCE. A remedy available when damages would be inadequate compensation;
by this remedy, a party to a contract will be compelled by Court order to perform specifically what
that party agreed to do.
SPLIT FINANCING. See “COMPONENT FINANCING”.
STANDBY COMMITMENT. A commitment from a lender to make a loan in a specified period of
time on specified terms, but without specific intent as to whether funds will be drawn down, or,
if down, the time or times at which drawdown is to occur.
STANDBY FEE. A sum of money (normally non refundable) given by the borrower to the lender
to keep a loan commitment effective for a specified period of time.
STATEMENT OF CLAIM. A written or printed statement by the plaintiff in an action, filed in the
Court of Queen’s Bench and served upon the defendant, showing the facts on which the plaintiff
relies to support his or her claim against the defendant, and the relief claimed. A statement of
claim is one of three ways to commence an action, the other two being by originating notice and
by petition.
STATEMENT OF DEFENCE. A written or printed statement by the defendant, filed in the Court of
Queen’s Bench and served upon the plaintiff, answering the allegations in the statement of claim
by admission or denial. Failure by the defendant to file a statement of defence within a certain
period after being served the statement of claim entitles the plaintiff to obtain default judgment.
STATUTE OF LIMITATIONS. A statute that prescribes the periods within which most but not all
proceedings to enforce a right must be taken, after which the right of action will be barred. Various
other acts set out limitation periods as well. See “LIMITATION DATE”.
STATUTE LAW. The written law as set out in the acts of the federal parliament or the provincial or
territorial legislature, or some comparable body outside Canada.
26 Glossary of Common Financial and Legal Terms
STATUTORY DECLARATION. A written statement of facts whereby the person making it (the
declarant) signs and solemnly declares to be true before a Commissioner for Oaths or Notary
Public. Such statement, by law, has the same effect as if made under oath.
STYLE OF CAUSE. The heading on a Court document that sets out the names of the parties in the
action or describes the nature of the matter before the Courts.
SUBCONTRACT. A contract subordinate to another contract, made between the original
contracting parties and a third party.
SUBLEASE. A grant to a third party (the subtenant or sublessee) by a lessee (tenant) of rights the
same as those held by the lessee (tenant), except that the term is shorter.
SUBORDINATION. The act or process by which a person’s rights are ranked below the rights of
others.
SUBROGATION. The substitution of one party for another whose debt the party pays, entitling
the paying party to rights, remedies, or securities that would otherwise belong to the debtor. The
principle under which an insurer that has paid a loss under an insurance policy is entitled to all the
rights and remedies belonging to the insured against a third party with respect to any loss covered
by the policy.
SUPPLEMENTAL DEBENTURE. A document that amends a previously executed debenture, as to
its terms, conditions etc.
SURETY. A person bound with another (the principal debtor) for the payment of a sum of
money or for the performance of some duty or promise and who is entitled to be indemnified by
the principal if payment or performance is enforced against the surety. Although often called a
guarantor, the terms are technically different in that a guarantor usually signs a separate contract
with the creditor whereas a surety is usually party to the contract between the creditor and the
principal debtor.
SURVEY CERTIFICATE. A certificate issued by a surveyor indicating the accurate mathematical
measurements of the land and positioning of the buildings thereon.
SURVIVORSHIP. See “RIGHT OF SURVIVORSHIP”.
T
TARIFF. A schedule set out in the Alberta Rules of Court or in statutory regulations indicating the
fees in a Court action for performance of specified legal services.
TAXATION OF COSTS. The process before a Court official of examining, and, if necessary,
reducing, the bill of costs of a lawyer.
TAX LIEN. A lien imposed by a taxing authority on real estate for failure to pay taxes within the
time required by law.
TENANT. See “LESSEE”.
TENANTS IN COMMON. Two or more persons holding title to real property in a manner by which
each is entitled to occupy the entire property but each may also dispose of his or her interest
independently of the other by agreement or will. The right of survivorship that applies to joint
tenancy does not apply to tenancy in common.
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TENDER. The act by which one party offers money, property or documentation to another
pursuant to, or in satisfaction of, the latter’s claim or right.
TENURE. The mode of holding or occupying land or an office.
TERM. The generic reference to the provisions in a contract, including both conditions and
warranties. Also refers to the period of time for which a lease, loan, or other contract is to extend,
after which a renewal agreement must be effected if the contractual relationship is to continue.
TESTATE. Having made a will.
TESTATOR/TESTATRIX. A male/female person, living or dead, who has made a will. Legal writers
now generally use testator to refer to someone of either sex.
THIRD PARTY. One not a party to an action, agreement or transaction, but who may have rights
or obligations therein or thereunder.
THIRD PARTY NOTICE. Where a defendant claims to be entitled to a contribution from a party
not a party to an action, such party may be served with a third party notice and thereby be made
party to the action.
TITLE. The right to ownership of property.
TITLE SEARCH. Under the Torrens systems such as exists in Alberta an examination of the
certificate of title held at the Land Titles Office to determine ownership of the subject property
and existence of any registrations or defects in title. Under a registry system such as that which
applies to parts of Ontario, a title search involves an examination of a series of titles to establish
the chain of ownership.
TORRENS SYSTEM. The system of land ownership and registration developed in Australia upon
which the system adopted in Alberta under the Land Titles Act is based. Simply stated, in a Torrens
system, the current title to land may be relied upon as reflecting the current state of title (including
ownership and any registrations effecting title), as contrasted with registry systems, in which it
is necessary to conduct a historical search forward from a root of title in order to determine the
state of title.
TORT. A private or civil wrong or injury, other than a breach of contract, for which the Court will
provide a remedy usually in the form of damages. A tort arises when there is a breach of a duty
imposed by operation of the general law as opposed to a duty imposed by agreement.
TRANSFER. An act of the parties, or of the law, by which, a title to or an interest in property
is conveyed from one person (the transferor) to another (the transferee) - for example, sales,
mortgages or gifts.
TRANSMISSION. The passing of an inheritance to an heir.
TRUST. Any arrangement whereby property is transferred to a person (the trustee), to be
administered faithfully by the trustee for the benefit of another (the beneficiary or cestui que
trust).
TRUST ACCOUNT. The bank account of a law firm or other trustee, in which monies received in
trust for others are deposited.
28 Glossary of Common Financial and Legal Terms
TRUST DEED. An instrument whereby real or personal property is transferred or mortgaged to a
party (the trustee) in trust for the benefit of another or others. See “DEED OF TRUST”.
TRUSTEE. A person, firm or corporation who or which holds property in trust for (i.e., for the
benefit of) another (the beneficiary or cestui que trust). A trustee is a fiduciary and therefore has
the duty to act honestly and use as much diligence as a prudent person of business would exercise
in dealing with that person’s own affairs.
U
UNDERTAKING. A promise to take some action or provide some information at a later date.
UNDIVIDED INTEREST. An interest in land owned by one or two or more tenants in common or
joint tenants before partition.
UNDUE INFLUENCE. The equitable doctrine that where a person enters into an agreement or makes
a disposition of property under such circumstances as to show or give rise to the presumption that
such person has not been allowed to exercise a free and deliberate judgment on the matter, the
Court will set the agreement aside.
UNSECURED CREDITOR. A creditor who does not hold security from the debtor.
USURY. Exacting an illegal or excessive rate of interest (under the Criminal Code, in excess of
sixty percent (60%).
V
VARIABLE INTEREST MORTGAGE. A mortgage in which the interest rate may vary during the
term of the mortgage, usually in response to a change in the prime lending rate of the lender.
VENDOR. One who sells real or personal property.
VENDOR TAKE BACK MORTGAGE. A mortgage taken back by the vendor of property in lieu of
purchase money in order to help finance the purchase.
VEST. To confer ownership (of property) upon a person.
VOID. Of no legal effect. A contract which is void is treated as if it never existed.
VOIDABLE. An agreement or other act which one of the parties to it is entitled to rescind, and
which, until that happens, has full legal effect - for example, where an act of fraud has been
performed in connection with a contract.
W
WAIVE. To renounce or give up a benefit or right. A waiver may be expressed or implied.
WARRANTY. A clause in a contract, the breach of which entitles the party to damages, but not
rescission. See “CONDITION”. Also refers generally to a promise that certain facts are as they are
represented to be, and will remain so.
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WINDING-UP. Settlement of the accounts and liquidation of the assets of a partnership or
corporation, for the purpose of making distribution and dissolving the business.
WITHOUT PREJUDICE. A term used in correspondence dealing with legal proceedings or
negotiations to indicate that a statement in such correspondence cannot be used as evidence in
the proceedings, or cannot be deemed an admission of liability.
WRAP-AROUND MORTGAGE. A mortgage of land, already subject to a mortgage or mortgages,
the principal amount of which includes the amount(s) of the prior mortgage(s), and under
which the mortgagee controls the making of payments on the prior mortgage(s) and, in certain
events, has the right to fully repay the prior mortgage(s) so as to become first mortgagee. A wraparound mortgage may be used, for example, where a loan is made on first mortgage terms but the
mortgagee agrees to permit a prior mortgage or prior mortgages to remain outstanding because
the rate(s) of interest payable thereunder is or are lower than prevailing rates.
WRIT. An order issued by the Court of Queen’s Bench requiring the performance of a specified
act, or giving authority to have it done.
WRIT OF ENFORCEMENT. A writ issued by the Court of Queen’s Bench, filed in the Personal
Property Registry, and acted upon by a civil enforcement agency or bailiff in order to enforce
payment on a money judgment.
WRIT OF POSSESSION. A writ of execution employed to enforce a judgment for recovery of
possession of land, by commanding a bailiff to enter the land and give possession of it to the
person entitled under the judgment.
WRIT PROCEEDINGS. An action, step or measure under the Civil Enforcement Act to enforce a
money judgment.
Z
ZONING BY-LAW. A public by-law regulating the character and intensity of use of real property
by establishing districts, each with uniform restrictions relating to use, height, area, bulk or
density of population imposed upon private land.
30 Glossary of Common Financial and Legal Terms
NOTES
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NOTES
32 Glossary of Common Financial and Legal Terms