Highest and best use. The legally and physically possible use of land that is likely to produce the highest land (or property) value. It considers the balance between site and improvements as well as the intensity and length of uses.

Historical cost. Actual cost of a property at the time it was constructed.

Historical rent. Scheduled (or contract) rent paid in past years.

Holdover tenancy. A tenancy in which the lessee retains possession of the leased premises after the lease has expired and the landlord, by continuing to accept rent from the tenant, thereby agrees to the tenant's continued occupancy.

Homeowners' association. Organization of property owners in a residential condominium or subdivision development, usually authorized by a declaration of restrictions to establish property design and maintenance criteria, collect assessments and manage common areas.

Hoskold sinking fund table. A table that sup- plies a factor by which a property's annual net income may be multiplied to find the present worth of the property over a given period at a given rate of interest.

HUD. Department of Housing and Urban Development.

Improved land. Real property made suitable for building by the addition of utilities and publicly owned structures, such as a curb, sidewalk, street-lighting system and/or sewer.

Improvements. Structures of whatever nature, usually privately rather than publicly owned, erected on a site to enable its utilization, e.g., buildings, fences, driveways and retaining walls.

Income capitalization approach. The process of estimating the value of an income-producing property by capitalization of the annual net operating income expected to be produced by the property during its remaining economic life.

Increasing returns, law of. The situation in which property improvements increase property income or value.

Incurable depreciation. A depreciated item that would be impossible or too expensive to restore or replace.

Independent contractor. A person who con- tracts to do work for another by using his or her own methods and without being under the control of the other person regarding how the work should be done. Unlike an employee, an independent contractor pays all of his or her expenses, personally pays income and social security taxes and receives no employee benefits. Many real estate salespeople are independent contractors.

Index method. An appraisal technique used to estimate reproduction or replacement cost. The appraiser multiplies the original cost of construction by a price index for the geographic area to allow for price changes.

Indirect costs. Costs of erecting a new building not involved with either site preparation or building construction; for example, building per- mit, land survey, overhead expenses such as insurance and payroll taxes, and builder's profit.

Industrial district or park. A controlled development zoned for industrial use and designed to accommodate specific types of industry, providing public utilities, streets, railroad sidings and water and sewage facilities.

Ingress. The way to enter a tract of land. Often used interchangeably with access. (See also ac- cess.)

Installment contract. A contract for the sale of real estate by which the purchase price is paid in installments over an extended period of time by the purchaser, who is in possession, with the title retained by the seller until a certain number of payments are made. The purchaser's payments may be forfeited upon default.

Insurable value. The highest reasonable value that can be placed on property for insurance purposes.

Interest. A percentage of the principal amount of a loan charged by a lender for its use, usually expressed as an annual rate.

Interest rate. Return on an investment; an interest rate is composed of four component rates--safe rate, risk rate, non-liquidity rate and management rate. Management rate. Compensation to the owner for the work involved in managing an investment and reinvesting the funds received from the property. Non-liquidity rate. A penalty charged for the time needed to convert real estate into cash. risk rate. An addition to the safe rate to compensate for the hazards that accompany investments in real estate. safe rate. The interest rate paid by investments of maximum security, highest liquidity and minimum risk.

Interim use. A temporary property use awaiting transition to its highest and best use.

Intestate. Dying without a will or without having made a valid will. Title to property owned by someone who dies intestate will pass to his or her heirs as provided in the law of descent of the state in which the property is located. investment value. The worth of investment property to a specific investor.

Inwood annuity table. A table that supplies a factor to be multiplied by the desired yearly income (based on the interest rate and length of time of the investment) to find the present worth of the investment.

Joint tenancy. Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. On the death of a joint tenant, the decedent's interest passes to the surviving joint tenant(s) by the right of survivor- ship.

Joint venture. The joining of two or more people to conduct a specific business enterprise. A joint venture is similar to a partnership in that it must be created by agreement between the par- ties to share in the losses and profits of the venture. It is unlike a partnership in that the venture is for one specific project only, rather than for a continuing business relationship.

Land. The earth's surface in its natural condition, extending down to the center of the globe, its surface and all things affixed to it, and the air- space above the surface.

Land capitalization rate. The rate of return, including interest, on land only.

Land development method. (See subdivision development method. )

Landlocked parcel. A parcel of land without any access to a public road or way.

Landlord. One who owns property and leases it to a tenant.

Land residual technique. A method of capitalization using the net income remaining to the land after return on and recapture of the building value have been deducted.

Land trust. A trust originated by the owner of real property in which real estate is the only asset. Because the interest of a beneficiary is considered personal property and not real estate, ajudgment against the beneficiary will not create a lien against the real estate. Thus land trusts are popular when there are multiple owners who seek protection against the effects of divorce, judgments or bankruptcies of each other.

Latent defect. Physical deficiencies or construction defects not readily ascertainable from a reasonable inspection of the property, such as a defective septic tank or underground sewage system, or improper plumbing or electrical wiring.

Lease. A written or oral contract for the possession and use of real property for a stipulated period of time, in consideration for the payment of rent. Leases for more than one year generally must be in writing.

Leased fee. The lessor's interest and rights in the real estate being leased.

Leasehold estate. The lessee's right to possess and use real estate during the term of a lease. This is generally considered a personal property interest.

Legal description. A statement identifying land by a system prescribed by law. (See also lot and block system, metes and bounds description and rectangular survey system.)

Lessee. The person to whom property is leased by another; also called a tenant.

Lessee's interest. An interest having value only if the agreed-on rent is less than the market rent.

Lessor. The person who leases property to an- other; also called a landlord.

Lessor's interest. The value of lease rental payments plus the remaining property value at the end of the lease period.

Letter of opinion. Report of property value that states the appraiser's conclusion of value or a range of values and provides only a brief summary of the supporting data and appraiser's analysis.

Letter of transmittal. First page of a narrative appraisal report, in which the report is formally presented to the person for whom the appraisal was made.

Levy. To impose or assess a tax on a person or property; the amount of taxes to be imposed in a given district.

License. (1) The revocable permission for a temporary use of land--a personal right that cannot be sold. (2) Formal permission from a constituted authority (such as a state agency) to engage in a certain activity or business (such as real estate appraisal.)

LID - Land improvement district. special tax or assessment passed on to home buyers to pay for roadwork and improvements. can last up to 17 years or more, can be billed, monthly, quarterly, or annually. Usually becomes lien on property and is passed down to future owners until paid off.

Lien. A right given by law to certain creditors to have their debts paid out of the property of a defaulting debtor, usually by means of a court sale.

Life estate. An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person or persons.

Living trust. An arrangement in which a property owner (truster) transfers assets to a trustee, who assumes specified duties in managing the asset. After the payment of operating expenses and trustee's fees, the income generated by the trust property is paid to or used for the benefit of the designated beneficiary. The living trust is gaining popularity as a way to hold title and avoid probate of trust assets.

Lot and block system. Method of legal description of an individual parcel of land by reference to tract, block and lot numbers and other information by which the parcel is identified in a recorded subdivision map. Also called lot, block and tract system and subdivision system.