Title
Insurance and Settlement Glossary of Terms
We are
pleased to provide this extensive list of terms however Finest Abstract
LLC is not responsible for errors, omissions or misinterpretations on
this page. The definitions below are not comprehensive and should not
be relied upon. They are posted only to provide a general idea of each
term.
You
should consult your attorney or professional advisor for a full
explanation of these terms.
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A
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A summary of money judgment obtained in court. (When this summary
or abstract is recorded in the county recorder's office, in some states
the judgment becomes a lien on the debtor's property, both presently
owned or after-acquired.)
A summary prepared by a licensed abstractor of all documents
recorded in the public records of the political subdivision where the
land is located. An abstract in some states or areas is reviewed by an
attorney or other experienced title examiner to determine the status of
title. Virtually every abstractor today provides actual copies of the
records rather than an abstract of each document.
A reduction or decrease. Usually applies to a decrease of assessed
valuation of ad valorem taxes after the assessment, and levy.
Clause in a deed of trust or mortgage, which accelerates, or hastens,
the time when the indebtedness becomes due. For example, some deeds of
trust contain a provision (an acceleration clause) stating that the note
shall become due immediately upon the sale of the land or upon failure
to pay interest or an installment of principal and interest.
Recording of instruments with the county recorder by a title company
merely as a convenience to a customer and without assumption of
responsibility for correctness or validity.
A formal declaration before a duly authorized officer (such as a notary
public) by a person who has executed an instrument that such execution
is his own act and deed. An acknowledgment is necessary to entitle an
instrument (with certain specific exceptions) to be recorded, to impart
constructive notice of its contents and to entitle the instrument to be
used as evidence without further proof. The certificate of
acknowledgment is attached to the instrument or incorporated therein.
Mortgage loans under which the interest rate is periodically adjusted to
more closely coincide with current rates. The amounts and times of
adjustment are agreed to at the inception of the loan. Also called:
Adjustable Rate Loans, Adjustable Rate Mortgages (ARM'S), Flexible Rate
Loans, Variable Rate Loans. (See also: Indexing, Rate Index).
A person appointed by the probate court to carry out the administration
of a decedent's estate when the decedent has left no will. If a woman is
appointed, she is called an administratrix.
A process of acquiring title to real property by possession for a
certain (statutory) period of time, in addition to fulfilling other
conditions.
A written statement or declaration, sworn to before an officer who has
authority to administer an oath.
One who has authorization, either expressed or implied, to act for or
represent another party, usually in business matters, such as issuing
title insurance policies on behalf of a title insurer for a portion of
the premium.
A written contract entered into between the seller (vendor) and buyer
(vendee) for sale of real property (land) on an installment or deferred
payment plan. It is also known as an agreement to convey, a long form
Security Agreement or a real estate installment contract.
Rate which includes charges for title insurance, searching or abstract
fees and examination fees.
(American Land Title Association) Organization composed of title
insurance firms which sets standards for the industry, including title
insurance policy forms used on a national basis.
Changes to alter, adds to, or correct part of an agreement without
changing the principal idea or essence.
A loan that is paid off, both interest and principal, by regular
payments that are equal or nearly equal.
The yearly interest percentage of a loan, as expressed by the actual
rate of interest paid. For example: 6% add-on interest would be much
more than 6% simple interest, even though both would say 6%. The A.P.R.
is disclosed as a requirement of federal truth in lending statutes.
An estimate of value of property resulting from analysis of facts about
the property; an opinion of value.
An attorney whose opinion is acceptable to a title company as the basis
for issuance of a title insurance policy by the insurer. The insurer,
rather than the attorney, executes the policy.
The act of conveying real property; taking title to a property with the
Buyer assuming liability for paying an existing note secured by a deed
of trust against the property.
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B
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See Starter.
A special proceeding under federal, or in some instances state, laws by
which the property of a debtor is protected by the court and may be
divided among the debtor's creditors and the debtor.
See Deed of Trust.
A mortgage or trust deed that covers more than one lot or parcel of real
property, and often an entire subdivision. As individual lots are sold,
a partial reconveyance from the blanket mortgage is ordinarily obtained.
One who buys property in good faith, for fair value, and without notice
of any adverse claim or right of third parties.
A subordinate or division office of ABC Company, as opposed to an
affiliate, agent, subsidiary or underwritten firm associated with the
Company.
Failure to perform a contract, in whole or part, without legal excuse.
An agreement between an owner or lessee and a building contractor,
setting forth terms relative to the construction of a proposed
structure.
A payment to the lender from the seller, buyer, third party, or some
combination of these, causing the lender to reduce the interest rate
during the early years of a loan. The buydown is usually for the first
one to five years of the loan. (See also: Certificate Backed Mortgage)
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C
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The percentage (acceptable to an average buyer) used to determine the
value of income property through capitalization.
In areas where attorneys examine abstracts or chains of title, a written
opinion, executed by the examining attorney, stating that title is
vested as stated in the abstract.
The date the documents are recorded and title passes from Seller to
Buyer. On this date, the Buyer becomes the legal owner, and title
insurance becomes effective.
The final procedure in the real estate sales process, where the sale and
pertinent loan are completed by the execution of documents for
recording. In some areas, this procedure is known as the closing of
escrow.
Also known as Closing Protection Letter. A letter of authorization from
a Title Company, for an individual or agency conducting a settlement on
behalf of the Title Company and Lender which includes the execution of
all documents and disbursements of funds.
An irregularity, possible claim, or encumbrance which, if valid, would
adversely affect or impair the title.
Ordinary coinsurance is defined as a transaction under which each of two
or more insurers assumes a designated portion of the liability for the
total risk and is liable for only such portion of any loss beginning at
the first dollar of loss. (See Reinsurance.)
By or at the side, additional or auxiliary. Mistakenly used to mean
collateral security.
Most commonly used to mean some security in addition to the personal
obligation of the borrower.
A binding contract with a title company to issue a specific title
policy, showing only those exceptions contained in the commitment and
any intervening matters after the date of the commitment and prior to
the effective date of the policy. The commitment contains all
information included in the preliminary title report, plus a list of the
title company's requirements to insure the transaction. It also includes
the standard exceptions from coverage that will appear in the policy.
A driveway which is jointly owned, used and maintained by two or more
persons. Usually, a portion of each owner's property is burdened by the
driveway.
Property acquired by husband, wife or both during marriage which gives
each spouse an interest in the property whether each appears in title or
not.
Sales that have similar characteristics as the subject property, used
for analysis in the appraisal. Commonly called "comps".
The taking of private property by the government for public use - as for
a street or a storm drain - upon making just compensation to the owner.
This right or power of government to take property for a necessary
public use is called eminent domain.
A person appointed by the court to care for the person and/or property
of an incompetent adult or an adult unable to care for their person or
property because of health.
Notice imparted by the public records of the county when documents
entitled to recording are recorded.
An instrument in writing, such as a deed or trust deed, used to transfer
(convey) title to property from one person to another.
An entity authorized by law and established by a group of people, the
stockholders, which is endowed with certain rights, privileges and
duties similar to an individual.
(1) A formal agreement or contract between two parties in which one
party gives the other certain promises and assurances, such as the
covenant of warranty in a warranty deed. (2) Agreements or promises
contained in deeds and other instruments for performance or
nonperformance of certain acts, or use or nonuse of property in a
certain manner.
Commonly called CC & R's the term usually refers to a written recorded
declaration which sets forth certain covenants, conditions,
restrictions, rules or regulations established by a sub divider or other
landowner to create uniformity of buildings and use within tracts of
land or groups of lots. The restrictions also can be established by
deed. CC & R's are sometimes referred to as private zoning.
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D
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Money owing from one person to another.
One who owes a debt.
A probate court decree which determines how the estate of a decedent
shall be distributed.
Written document by which an estate or interest in real property is
transferred from one person to another. The person who transfers the
interest is called the "grantor." The one who acquires the interest is
called the "grantee." Examples of deeds are grant deeds, administrator's
deeds, executor's deeds, quitclaim deeds, etc. The deed to use depends
on the language of the deed, the legal capacity of the grantor and other
circumstances.
A written document by which the title to land is conveyed as security
for the repayment of a loan or other obligation. It is a form of
mortgage. The landowner or debtor is called the "trustor." The party to
whom the legal title is conveyed (and who may be called on to conduct a
sale thereof if the loan is not paid) is the "trustee." The lender is
the "beneficiary." When the loan is paid off, the trustee is asked by
the beneficiary to issue a "recon" or reconveyance. This reconveyance
corresponds to the release that the holder of a mortgage executes when
the mortgage is paid off.
Limitations in the deed to a property that dictate certain uses that may
or not be made of the property.
A blemish, imperfection or deficiency. A defective title is one that is
irregular and faulty.
(1) Title to a negotiable instrument obtained by fraud.(2) Title to real
property which lacks some of the elements necessary to transfer good
title.
A note having no date for repayment, but due on demand of the lender.
(1) Money given by the buyer with an offer to purchase. Shows good
faith. Also called earnest money. (2) A natural accumulation of
resources (oil, gold, etc.) which may be commercially recovered and
marketed.
The exact location of a piece of real property stated in terms of lot,
block, tract, part lot, metes and bounds, recorded instruments, or U.S.
Government survey (sectionalized). This is also referred to as legal
description of property.
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E
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Down payment made by a purchaser of real estate as evidence of good
faith; a deposit or partial payment.
A right or interest in the use of the land of another which entitles the
holder to some use, privilege or benefit, such as to place pole lines,
pipe lines or roads thereon.
A qualifying term meaning the ability to pay as well as desire to buy.
The right of a government to take privately owned property for public
purposes under condemnation proceedings upon payment of its reasonable
value. See Condemnation.
The presence of an improvement such as a building, a wall, a fence or
other fixture which overlaps onto the property of an adjoining owner.
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F
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An estate under which the owner is entitled to unrestricted powers to
dispose of the property, and which can be left by will or inherited.
Commonly, a synonym for ownership.
In most states, title insurers file rate schedules, title insurance
policies and endorsement forms with the State Insurance Department or
other state agency and then may use such items or rates starting within
a specified period of time after filing. Rates so filed usually are
mandatory.
A mortgage having a rate of interest which remains the same for the life
of the mortgage.
The sale of property used as security for a debt after default in
payment.
A common penalty for the violation of conditions or restrictions imposed
by the seller upon the buyer in a deed or other proper document. For
example, a deed may be granted upon the condition that if liquor is sold
on the land, the title to the land will be forfeited (that is, lost) by
the buyer (or some later owner) and will revert to the seller.
In real estate, revealing all the known facts which may affect the
decision of a buyer or tenant. A broker must disclose known defects in
the property for sale or lease.
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G
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A clause in CC & R's which provides that " a violation thereof shall not
defeat or render invalid the lien of any mortgage or deed of trust made
in good faith and for value."
A person who buys or lends in good faith, that is, without notice of any
existing problem, where value is paid or lent.
A transfer of real estate, between individuals, by deed. A transfer of
real estate from a sovereign is accomplished by patent or royal decree.
See Deed.
See Deed.
One of the many types of deeds used to transfer real property. Contains
warranties against prior conveyances or encumbrances. When title
insurance is purchased, warranties in a deed are of little practical
significance.
A person appointed by a court to manage the person and/or property of
one who is legally incompetent to handle his/her own affairs.
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H
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Real estate insurance protecting against fire, some natural causes,
vandalism, etc., depending upon the policy. Buyer often adds liability
insurance and extended coverage for personal property.
A statutory protection from execution or the establishment of title by
occupation of real property in accordance with the laws of various
states or the Federal Government.
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I
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A trust type of account established by lenders for the accumulation of
borrower's funds to meet periodic payments of taxes, mortgage insurance
premiums, and/or future insurance policy premiums, required to protect
their security.
Insurance against possible loss or damage. A title insurance policy is a
contract of indemnity.
Without leaving a will, or leaving an invalid will so that the property
of the estate passes by the laws of succession rather than by the
direction of the deceased.
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J
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A lien against the property of a judgment debtor. An involuntary lien.
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K
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L
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An installment contract for the sale of land whereby the seller (vendor)
holds legal title and the buyer (vendee) has equitable title until the
sales price is paid in full.
An agreement by which an owner of real property (lessor) gives the right
of possession to another (lessee), for a specified period of time (term)
and for a specified consideration (rent).
A description of land recognized by law, based on government surveys,
spelling out the exact boundaries of the entire piece of land. It should
so thoroughly identify a parcel of land that it cannot be confused with
any other.
Any person or entity advancing funds which are to be repaid. A general
term encompassing all mortgagees, and beneficiaries under deeds of
trust.
An encumbrance against property for money, either voluntary or
involuntary. All liens are encumbrances but all encumbrances are not
liens.
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M
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A lien created by statute for the purpose of securing priority of
payment for the price or value of work performed and materials furnished
in construction or repair of improvements to land, and which attaches to
the land as well as the improvements.
(1) To hypothecate as security, real property for the payment of a debt.
The borrower (mortgagor) retains possession and use of the property. (2)
The instrument by which real estate is hypothecated as security for the
repayment of a loan.
The party lending the money and receiving the mortgage (Lender).
The party who borrows the money and gives the mortgage (Borrower).
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N
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A unilateral agreement containing an express and absolute promise of the
signer to pay to a named person, or order, or bearer, a definite sum of
money at a specified date or on demand. Usually provides for interest
and, concerning real property, is secured by a mortgage or trust deed.
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O
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One to whom an obligation (promise) is owned.
One who legally binds (obligates) oneself, such as the maker of a
promissory note.
The purchase price of property, paid by the present owner. The present
owner may or may not be the first owner.
A policy of title insurance usually insuring an owner of real estate
against loss occasioned by defects in, liens against or unmarketability
of the owner's title.
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P
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Any area of land contained within a single description.
An association of two or more persons who have contracted to join in
business and share the profits.
A wall generally erected on a property boundary or between two lots for
the common benefit and use of the property owners on either side.
A conveyance of title to land by the Federal or State Government.
Any property that is not designated by law as real property (i.e.,
money, goods, evidences of debt, rights of action, furniture,
automobiles).
A title term referring to Property In Question .
A payment that combines Principal, Interest, Taxes, and Insurance
.
A plan, map or chart of a tract or town site dividing a parcel of land
into lots.
A document by which one person (called the "principal") authorizes
another person (called the "attorney-in-fact") to act for him/her in a
specific manner in designated transactions.
A written report issued by a title company, preliminary to issuing title
insurance, which shows the recorded condition of title of the property
in question. See Commitment.
The order of preference, rank or position of the various liens and
encumbrances affecting the title to a particular parcel of land.
Usually, the date and time of recording determine the relative priority
between documents.
A title term referring to the type of inspection made in connection with
insuring a new construction loan. In making the inspection of the
property, the Title Company must be assured that the work of improvement
had not yet begun when the lender's deed of trust was recorded.
Land owned by the government and belonging to the community at large.
The transcriptions in a recorder's office of instruments which have been
recorded, including the indexes pertaining to them.
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Q
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A deed operating as a release; intended to pass any title, interest, or
claim which the grantor may have in the property, but not containing any
warranty of a valid interest or title in the grantor.
To free the title to a piece of land from the claims of other persons by
means of a court action called a "quiet title" action. The court decree
obtained is a "quiet title" decree.
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R
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Land, from the center of the earth and extending above the surface
indefinitely, including all inherent natural attributes and any man-made
improvements of a permanent nature place thereon. For example: minerals,
trees, buildings, appurtenant rights.
An instrument used to transfer title from a trustee to the equitable
owner of real estate, when title is held as collateral security for a
debt. Most commonly used upon payment in full of a trust deed. Also
called a deed of reconveyance or release.
Filing documents affecting real property as a matter of public record,
giving notice to future purchasers, creditors, or other interested
parties. Recording is controlled by statute and usually requires the
witnessing and notarizing of an instrument to be recorded.
A contract which one insurer makes with another to protect the first
insurer, wholly or partially, against loss or liability by reason of a
risk under a separate and distinct contract as insurer of a third party.
Reinsurance differs from coinsurance in that, in the case of
reinsurance, only one insurer has a direct contractual relationship with
the insured, and that insurer (commonly referred to as the "lead
insurer") purchases reinsurance in order to lessen or spread the risk.
The "lead insurer" will assume a risk up to a limit (the amount of which
is referred to as the "retention") and any loss which exceeds this limit
would be borne by the reinsurers. In the case of coinsurance, each
coinsurer has a direct contractual relationship with the insured, and
the risk is shared in agreed-upon proportions from the first dollar of
loss.
Often called restrictive covenants . Provisions in a deed or
other instrument whereby an owner of land prohibits or restricts certain
use, occupation or improvement of the land.
(1) The right to pass over property owned by another, usually based upon
an easement. (2) A path or thoroughfare over which passage is made. (3)
A strip of land over which facilities such as highways, railroads or
power lines are built.
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S
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A situation in which the grantor in a deed to a parcel of property sells
it and retains possession by simultaneously leasing it from the grantee.
In title industry parlance, a careful exploration and examination of the
public records in an effort to find all recorded instruments relating to
a particular chain of title.
Real property owned by one spouse exclusive of any interest of the other
spouse.
One who settles upon unoccupied land without legal claim or authority.
See Adverse Possession.
A copy of the last policy or report issued by a title insurer which
described the title to land upon which a new search is to be made. In
some states, this is called a back title letter or back title
certificate .
Interest-bearing bonds issued, usually by a city or county, to secure
the payment of assessments levied against land to pay for street
improvements. The property owner may pay off the particular assessment
against the property, or may allow the assessment to "go to bond" and
pay installments of principal and interest over a period of years,
usually at the city or county treasurer's office. The holder of a bond
received payments from these offices.
An area of land laid out and divided into lots, blocks, and building
sites, and in which public facilities are laid out, such as streets,
alleys, parks, and easements for public utilities.
An agreement by which one encumbrance (for example, a mortgage) is made
subject to another encumbrance (for example, a mortgage) is made subject
to another encumbrance (perhaps a lease). To "subordinate" is to "make
subject to," or to make of lower priority.
Rights to enter upon and use the surface of a parcel of land, usually in
connection with an oil and gas lease or other mineral lease. They may be
"implied" by the language of the lease (no explicit reservation or
exception of the surface rights) or "explicitly" set forth.
The measurement by a surveyor of real property which delineates the
boundaries of a parcel of land. An ALTA survey additionally delineates
the exact location of all improvements, encroachments, easements and
other matters affecting the title to the property in question. A title
insurance company may require a survey whenever the company is requested
to issue an ALTA Extended Coverage Policy.
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T
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A deed executed by the tax collector to the state, county or city when
no redemption is made from a tax sale.
Property on which current county taxes have not been paid is "sold to
the state." No actual sale takes place - the title is transferred to the
state and the owner may redeem it by paying taxes, penalties and costs.
If it has not been redeemed within five years, the property (referred to
as "tax sold property") is actually deeded to the state. (Similar
"sales" to cities take place for unpaid city taxes.)
Leaving a legally valid will at death. See
Intestate.
(1) A combination of all the elements that constitute a legal right to
own, possess, use, control, enjoy and dispose of real estate or a right
or interest therein. (2) The rights of ownership recognized and
protected by the law.
Insured statement of the condition of title or ownership of real
property. For a one-time-only premium, the named insured and their heirs
are protected against title defects, liens and encumbrances existing as
of the date of the policy and not specifically excluded from it. In the
event of a claim, the Title Company provides legal defense from the
policyholder and pays any covered losses incurred as a result of such
claim.
See Preliminary Report.
A review of all recorded documents affecting a specific parcel of land
to determine the present condition of title. An experienced title
officer or attorney reviews and analyzes all material relating to the
search, then determines the sufficiency and status of title for
insurance of a title insurance policy.
See Deed of Trust.
See Deed of Trust.
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U
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An insurance company that insures title. An underwriting company may
have independent agencies who issue insurance policies in their behalf
or may be the primary issuing agent themselves.
A title firm (agency) which conducts title searches but is not qualified
to insure, and therefore issues policies of a qualified title insurer
(underwriter) in return for a portion of the premium.
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V
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An interest rate that fluctuates with the current cost of money; subject
to adjustment if the prevailing rate moves up or down.
See Agreement of Sale.
See Agreement of Sale.
An implied lien given by law to a vendor for the remaining unpaid and
unsecured part of a purchase price .
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W
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To legally assure that the title conveyed is good and possession will be
undisturbed.
A deed used in many states to convey fee title to real property.
A written expression of the desire of a person as to the disposition of
that person's property after death. Must follow certain procedures to be
valid.
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X
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Y
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Z
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The division of a city or a county by legislative regulations into areas
(zones), specifying the uses allowable for the real property in these
areas.
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