Real Estate Glossary
Often and commonly referred to as free rent or early occupancy and may occur outside or in addition to the primary term of the lease.
The rate, expressed as a percentage, at which available space in the marketplace is leased during a predetermined period of time.
ABSTRACT OF TITLE
A condensed version of the history of title to a piece of land that lists any transfers in ownership, as well as any liabilities attached to it, such as mortgages.
The joining, reaching or touching of adjoining land. Abutting pieces of property have a common boundary
A provision in a written mortgage, note, bond or conditional sales contract that, in the event of default, the whole amount of principal and interest may be declared to be due and payable at once.
A measure of land equal to 43,560 square feet.
According to value.
ADJUSTABLE RATE MORTGAGE (ARM)
A mortgage loan whose interest rate fluctuates according to the movements of an assigned index or designated market indicator--such as the weekly average of one-year US Treasury Bills--over the life of the loan. To avoid constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary.
The date on which the interest rate changes for an adjustable rate mortgage.
A clause in a mortgage, which gives the lender the right to call the entire loan balance due if the property is sold, also known as a due-on-sale clause.
Calculation to determine a regular-interval payment plan over time, with interest, to pay a set sum.
The major or prime tenant in a shopping center, building, etc.
ANNUAL PERCENTAGE RATE (APR)
The actual cost of borrowing money, expressed in the form of an annual interest rate.
A determination of the value of something by a qualified, disinterested expert.
An increase in value or worth of property.
ASKING (LIST) PRICE
The price placed on a property for sale.
A person to whom a property right is transferred.
An existing mortgage that can be taken over by the buyer on the same terms given to the original borrower.
ASSUMPTION OF MORTGAGE
The transfer of title to property to a grantee wherein he assumes liability for payment of an existing note secured by a mortgage against the property.
To turn over or transfer to another money or goods. To agree to recognize a new owner of a property and to pay him/her rent. In a lease, when the tenant agrees to attorn to the purchaser, the landlord is given the power to subordinate tenant's interest to any first mortgage or deed of trust lien subsequently placed on the leased premises.
A set amount used as a minimum rent in a lease with provisions for increasing the rent over the term of the lease.
The year of a lease term which is used to compare subsequent years; usually when calculating operating expense pass throughs.
Building Owners and Managers Association
A nationally published standard of measuring office space. Standards are published by other organizations and can affect how the size of space is calculated.
For a commission or fee, bringing together parties interested in buying, selling, exchanging or leasing real property.
Building classifications in most markets refer to Class "A", "B", "C" and sometimes "D" properties. While the rating assigned to a particular building is very subjective, Class "A" properties are typically newer buildings with superior construction and finish in excellent locations with easy access, attractive credit to tenants and which offer multitude of amenities to tenants. The class of a building may vary depending on the location of the property. What is a class B in one market might be a class C in a different market. Also, as the class of the building decreases (moves from A to B etc) the rents tend to decrease.
The section of the building where the restrooms, ventilation shafts, electrical distribution, elevator shafts and stairwells are located.
The project specifications set out by the owner, usually in conjunction with the project architect. Details the type, quality and color selection available with respect to carpet, paint, light fixtures, wall coverings and other project finishes.
The space improvements put in place per the tenant's specifications.
An approach taken to lease space by a property owner where a new building is designed and constructed to the tenant's specifications.
A licensee who has declared to represent only the buyer in a transaction, regardless of whether compensation is paid by the buyer or the listing broker through a commission split.
A year using the actual number of days in each month for a total of 365 days in a year (366 days in a leap year).
The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage.
This type of expense is most often defined by reference to generally accepted accounting principles (GAAP), but GAAP does not provide definitive guidance on all possible expenditures. Accountants will often disagree on whether or not to include certain items.
Costs incidental to property ownership, other than interest (i.e. taxes, insurance costs & maintenance expenses) that must be absorbed by the landlord during the initial lease up of a building and thereafter during periods of vacancy.
The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.
CERTIFICATE OF OCCUPANCY
A document presented by a local government agency or building department certifying that a building and/or the leased premises (tenant's space) has been satisfactorily inspected and is/are in a condition suitable for occupancy.
A title that doesn't have any liens (including a mortgage) against it.
The conclusion of a sales transaction when the seller transfers title to the buyer in exchange for consideration.
Costs the buyer must pay at the time of closing, in addition to the down payment which may include points, title charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, appraisals, prepayments for property taxes, deed recording fee and property insurance. Closing costs can vary considerably from one financial institution to another.
A detailed written summary of the financial settlement of a real estate transaction showing all charges and credits made, and all cash received and paid out.
The compensation paid to a licensed real estate broker or by the broker to the salesperson for services rendered. Usually a percentage of the selling price of the property or the total value of the lease.
There are two components of the term common area. If referred to with the Load Factor calculation, the common areas are those areas within a building that are available for common use by all tenants of groups of tenants and their invitees. On the other hand, the cost of maintaining parking facilities, malls, sidewalks, public toilets, service facilities and the like are included in the term "common area" when calculating the tenants pro-rata share of building operating expenses.
COMMON AREA MAINTENANCE (CAM)
This is the amount of additional rent charged to the tenant in addition to the base rent to maintain the common areas of the property shared by the tenants and from which all tenants derive some benefit. Most often, this does not include capital improvements (see capital expenses) that are made to the property.
Properties which are similar to a particular property and are use to compare and establish a value for that property.
Cash or cash equivalents expended by the landlord in the form of rental abatement, additional tenant finish allowance, moving expenses, cabling expenses or other monies expended to influence or persuade the tenant to sign a lease.
The process of taking private property, without the consent of the owner, by a governmental agency for public use through the power of eminent domain.
A form of real estate, usually a dwelling with individual ownership of separate portions of the building plus shared ownership of the common areas. Also found in industrial parks, where individual units are separately owned, but the common areas (such as guard gates, common landscaping, etc) are shared.
1. Multiple suites/spaces within the same building and on the same floor which can be combined and rented as a single unit. 2. A block of space located on multiple adjoining floors in a building.
A provision in a contract stating that some of all of the terms of the contract will be altered or voided by the occurrence of a specific event.
Most commonly refers to the transfer of title to property between parties by deed. The term may also include most of the instruments by which an interest in real estate is created, mortgaged or assigned.
Two or more leases that end at the same time.
The rejection of an offer to buy or sell that simultaneously makes a different offer, changing the terms in some way.
Consumer Price Index. Sometimes used to index rental rate escalations.
Certified Property Manager. Professional designation conferred by Institute of Real Estate Management; requires extensive specialized education and experience.
The total amount of debt which you must pay.
A written instrument by which title to land is conveyed.
The failure to meet an obligation, including lease clauses (i.e. timely rent payment, tenant use of premises, etc) and mortgages (i.e. timely mortgage payments, timely payoff upon due date).
The partition wall that separates one tenant's space from another or from the building's common area such as a public corridor.
A loss in value.
The making known of a fact that had previously been hidden.
An amount of money the buyer pays which is the difference between the purchase price and the mortgage amount.
A deposit made by the buyer as evidence of good faith in offering to purchase real estate and to secure performance of the contract. Earnest money is typically held by a title company, in an escrow account during the period between acceptance of the contract and the closing.
A right to use another person's real estate for a specific purpose. The most common type of easement is the right to travel over another person's land, knows as a right of way. In addition, property owners commonly grant easements for the placement of utility poles, utility trenches, water lines or sewer lines. The owner of property that is subject to easement is said to be "burdened" with the easement because he or she is not allowed to interfere with its use.
The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by the tenant, usually expressed as an average rate over the term of the lease.
The right of the government to take private property for public use, through court action known as condemnation. The Fifth Amendment to the United States Constitution provides that the government may take private property only if the owner is given "just compensation" (usually fair market value) for his or her loss.
The intrusion of a structure which extends, without permission, over a property line, easement boundary or building setback line.
A cloud against clear free title to the property which does not prevent conveyance such as unpaid taxes, easements, deed restrictions, mortgage loans etc.
ENVIRONMENTAL IMPACT STUDY
Documents which are required by federal and state laws to accompany proposals for major projects and programs that will likely have an impact on the surrounding area.
A clause in a lease which provides for the rent to be increased to reflect changes in expenses paid by the landlord such as real estate taxes, operating costs, etc.
A trust arrangement by which one or more parties deposit things of value with an authorized escrow agent in accordance with the terms of a real estate agreement.
1. A third party account which holds money safely while a sale is in progress.
2. An account used to save monies required for payment of an eventual debt.
A signed statement certifying that certain statements of fact are correct as of the date of the statement and can be relied upon by a third party, including a prospective lender or purchaser.
Accounting statements that provide specific information about a company's financial position The include the Profit and Loss Statement, also known as the Income Statement, the Balance Sheet, and the Statement of Cash Flows. Financial statements can generally be audited by an outside CPA firm or unedited and, thus, prepared by the company.
FIRST GENERATION SPACE
Generally refers to new space that is currently available for lease and has never before been occupied by a tenant.
Personal property which has been attached to real estate so as to become a part of the real property. The article must meet one of three conditions: 1) attached in a permanent manner 2) specially adapted to the property or 3) intentionally made part of the real property.
A building providing its occupants the flexibility of utilizing the space. Usually provides a configuration allowing a flexible amount of office or showroom space in combination with manufacturing, laboratory, warehouse etc.
A force that cannot be controlled by the parties to a contract and prevents said parties from complying with the provisions of the contract, for example a hurricane.
A procedure by which the mortgagee (lender) either takes title to or forces the sale of the mortgagor's (borrower's) property in satisfaction of a debt.
FULL SERVICE RENT
An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount.
survey method A system of land description which uses meridians (north and south lines) and base lines (east and west lines). Areas include quadrangles (24 miles on each side), townships (6 miles on each side) and sections (1 mile on each side).
A lease in which the tenant pays a flat sum for rent out of which the landlord must pay all expenses.
GROSS SQUARE FOOT
Usually the total building square footage, including elevator shafts, vertical penetrations, equipment areas, ductwork shafts and stairwells.
Rent paid to the owner for use of land, normally on which to build a building.
In a contract, a promise by one party not to hold the other party responsible if the other party carries out the contract in a way that causes damage to the first party.
HOLD OVER TENANT
A tenant retaining possession of the leased premises after the expiration of a lease.
Heating Ventilation and Air Conditioning
Integrated Services Digital Network A high-speed data and media communication system, as much as ten or more times faster than conventional phone lines.
The fixed term of the lease.
Improvements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvement to be made in the leased premises by the landlord.
A description of a specific parcel of real estate which is acceptable to the courts in that state, and which allows an independent surveyor to locate and identify it. Usually it uses one of the following methods: government survey, metes and bounds or recorded plat (lot and block number).
The user of the leased property under the lease.
Depending on the type of the lease, either the owner of the leased property or the owner of the security interest in the leased property.
LETTER OF CREDIT
A specific arrangement between a lessee and one of its banks. The bank agrees in the event of a defined event, the lessor can look to the bank to make payment instead of the lessee. This is similar to a security deposit in that it is one way for a lessor to insure that it will be paid under the lease.
LETTER OF INTENT
A preliminary agreement stating the proposed terms for a final contract. They can be binding or non-binding.
A monetary claim against a property. These should be settled before the sale is finalized.
The legal agreement between the listing agent/broker and the vendor, setting out the services to be rendered, describing the property for sale, and stating the terms of payment.
The common area calculation used to convert usable square foot measurements (usually, the physical space actually occupied by the tenant) to rentable square foot calculations. Usually includes a pro rata share of restrooms, lobby and common hallways.
The rental income that a property would command on the open market with a landlord and a tenant ready and willing to consummate a lease in the ordinary course of business; indicated by the rents that landlords are willing to accept and tenants are willing to pay in recent lease transactions for comparable space.
A legal claim placed on real estate by someone who is owed money for labor, services or supplies contributed to the property for the purpose of improving it.
METES AND BOUNDS
A system of land description using distance (metes) and angles/compass directions (bounds) beginning and ending at the same point.
Space within a building or project providing for more than one use (i.e. a loft or apartment project with retail, an apartment building with office space).
A rental agreement that provides for a one month tenancy that is automatically renewed each month unless either tenant or landlord gives the other the proper amount of notice (usually 30 days) to terminate the agreement.
A contract providing security for repayment of a loan, registered against property with stated rights and remedies in the event of default.
National Association of Industrial and Office Parks
Type of lease whereby the Tenant pays for part or all of the operating expenses which may include utilities, janitorial, property insurance, property management, sewer, water & garbage.
NET NET NET (NNN)
Lease Type of lease where Tenant generally pays for all operating expenses. May even include responsibility for roof and structural repair or replacement.
A clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and that no other tenant operating the same or similar type of business can occupy space in the building.
PARKING RATIO OR INDEX
The number of parking spaces available expressed in relationship to the rentable square footage. Expressed as X spaces per 1000 square feet, a building that offered 2 spaces for every 1000 square feet would show a parking ration of 2:1000.
Lease in which all or part of the rental is a specified percentage of gross income from total sales made upon the premises.
The guarantee of someone to be individually responsible for the obligations of the lease. Generally for Subchapter S closely held companies and small businesses, a lessor may ask for a personal guaranty as a way to insure that the lease payments will be made.
A record or recorded subdivisions of land
Refers to space in a proposed building that has been leased before the start of construction or in advance of the issuance of a Certificate of Occupancy.
The interest or discount rate charged by a commercial bank to its largest and strongest customers.
Taxes that are paid yearly on real property. Property taxes are ad valorem, based on the assessed value of the real property.
Proportionately; according to measure, interest or liability.
To divide or distribute proportionally. At closing, various expenses such as taxes insurance, interest, rents etc are prorated between the seller and the buyer.
An itemized list, typically prepared by the architect or construction manager documenting incomplete or unsatisfactory items after the contractor has notified the owner that the tenant space is substantially complete.
Option to purchase leased property either at the end of the lease term or if some other specific criteria are met by the lessee.
Land, and generally whatever is erected or affixed to the land, such as buildings, fences and including light fixtures, plumbing and heating fixtures or other items which would be personal property if not attached.
A real estate broker or associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors®.
Court-appointed custodian who holds property for the court, pending final disposition of the matter before the court.
A subdivision map filed with the county recorder's office that shows the location and boundaries (lot and block number) of individual parcels of land.
A clause giving a tenant the right to extend the term of a lease, usually for a stated period of time and at a rent amount provided for in the option language.
RENTABLE SQUARE FEET
Usually the space measurement which incorporates both the "usable square foot" measurement as well as the common area. The difference between usable and rentable is generally between 10% - 15%.
RIGHT OF FIRST REFUSAL
1. A lease clause giving a tenant the first opportunity to buy a property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept. 2. A lease clause giving a tenant the first opportunity to lease additional space that may become available in a property at the same price and under the same terms and conditions as those contained in a third party offer that the owner has expressed willingness to accept.
SECOND GENERATION SPACE
Refers to previously occupied space that becomes available for lease, either directly from the landlord or as sublease space.
A payment required by a landlord to ensure that a tenant pays rent on time and keeps the rental unit in good condition. If the tenant damages the property or leaves owing rent, the landlord can use the security deposit to cover what the tenant owes.
The distance a building must be set back from the property lines in accordance with local zoning ordinances or deed restrictions.
The "unofficial" vacancy portion of the office market caused by available sublease space and/or excess space leased but not occupied by office users.
SOCIETY OF INDUSTRIAL AND OFFICE REALTOR (SIOR)
One of the oldest professional commercial designations in the United States. Approximately 1,500 members worldwide. Emphasis on corporate office and industrial real estate.
The installation of all necessary improvements (installment of utilities, grading etc) made to a site before a building or project can be constructed on such a site.
A detailed plan which depicts the location of improvements on a parcel of land which also contains all the information required by zoning ordinances.
The exposed wearing surface laid over the structural support beams of a building to form one of the floor(s) of the building or laid slab on grade in the case of non-structural ground level concrete slab.
A graphic representation of a tenant's space requirements, showing all wall and door locations, room sizes, and sometimes furniture layout.
Any special charge levied against real property for public improvements that benefit the assessed property.
Carrying out the precise terms agreed upon in a contract.
Schematic illustrating tenancies on a floor-by-floor basis. Useful in forecasting how to accommodate growth tenants and identifying larger blocks of space.
A rental agreement or lease between a tenant and a new tenant (called a sublessee) who will either share the rental or take over from the first tenant. The sublessee pays rent directly to the tenant. The tenant is still completely responsible to the landlord for the rent and for any damages, including those caused by the sublessee. Most landlords prohibit subleases unless they have given prior written consent.
As used in a lease, the tenant generally accepts the leased premises subject to any recorded mortgage or deed of trust lien and all existing recorded restrictions and the landlord is often given the power to subordinate the tenant's interest to any first mortgage or deed of trust lien subsequently placed on the leased premises.
The process by which a parcel of land is measured and its boundaries and contents are ascertained.
TENANT IMPROVEMENT (TI)
allowance or work letter Defines the fixed amount of money contributed by the landlord towards tenant improvements.
Improvements made to the leased premises by or for a tenant.
TIME IS OF THE ESSENCE
A clause, which if included in a contract, makes failure to perform by a specific date a material breach or violation of the contract.
A policy issued by a title company after searching the title and which insures against loss resulting from defects of title to a specifically described parcel of real property or from the enforcement of liens existing against it at the time the policy is issued.
One who as agent for others handles money or holds title to their land.
Landlord-provided tenant improvements, usually including everything (walls, doors, floor and window coverings, electrical) except telecommunications wiring and tenant furniture.
A property for which the seller has accepted a buyer's offer to purchase is said to be under contract. During the period of time the property is under contract, the seller is precluded from entertaining offers from other buyers.
Most commonly refers to land without improvements or buildings but can also mean land in its natural state.
Uninterruptible Power Supply. A special power source which takes over in the event of a failure in the main power system.
USABLE SQUARE FEET
That space measurement actually contained within the demised premises. If the entire building is occupied by a single user, the rentable and usable square foot calculations may be the same.
Any method used to provide internet users with a graphical presentation of a property or properties.
Having no legal force or effect.
1. Buyer's on-site inspection of the property being purchased just prior to closing 2. A detailed inspection of a new construction, in which a punch list and cosmetic items are addressed prior to final acceptance.
A list of the building standard items that the landlord will contribute as a part of the tenant improvements.
Exercise of police powers of city in regulating and controlling the character or use of property. Zoning laws divide cities into different areas according to use, from single-family residences to industrial plants.
A set of laws which control the size, location and use of buildings within these different areas.