Real Estate Definitions and Glossary*
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H | I | J | L | M | N | O |
P | Q | R | S | T | U | V |
W | Z
A
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Absorption: The rate, expressed
as a percentage, at which available space in the marketplace is leased during a
predetermined period of time.Anchor Tenant: 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. It may be higher than the note rate because it represents full
disclosure of the interest rate, loan origination fees, loan discount points,
and other credit costs paid to the lender.Appraisal: An
estimate of opinion and value based upon a factual analysis of a property by a
qualified professional.Appreciation: The increased value of
an asset."As-Is" Condition: The acceptance by the tenant of
the existing condition of the premises at the time the lease is consummated.
This would include any physical defects.Assignment: A
transfer by lessee of lessee’s entire estate in the property. Distinguishable
from a sublease where the sublessee acquires something less than the lessee’s
entire interest.Attorn: 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 upon the leased premises.
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Balloon Payment: A large
principal payment that typically becomes due at the conclusion of the loan term.
Generally, it reflects a loan amortized over a longer period than that of the
term of the loan itself (i.e. payments based on a 25 year amortization with the
principal balance due at the end of 5 years). See "Bullet Loan".Base
Rent: A set amount used as a minimum rent in a lease with provisions
for increasing the rent over the term of the lease.
Below-grade: Any structure or a portion of a structure
located underground or below the surface grade of the surrounding
land.Building Classifications: 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 to credit tenants, and which
offer a multitude of amenities such as on-site management or covered parking.
These buildings, of course, command the highest rental rates in their
sub-market. As the "Class" of the building decreases (i.e. Class "B", "C" or
"D") one component or another such as age, location or construction of the
building becomes less desirable. Note that a Class "A" building in one
sub-market might rank lower if it were located in a distinctly different
sub-market just a few miles away containing a higher end
product.Build-out: The space improvements put in place per
the tenant's specifications. Takes into consideration the amount of Tenant
Finish Allowance provided for in the lease agreement.
Build-To-Suit: An approach taken to lease space by a
property owner where a new building is designed and constructed per the tenant’s
specifications.Bullet Loan: Any short-term, generally five
to seven years, financing option that requires a balloon payment at the end of
the term and anticipates that the loan will be refinanced in order to meet the
balloon payment obligation. Essentially, should the refinancing not be
available, often due to the property not performing as anticipated, the borrower
is "shot" and the property is subject to foreclosure. An example of this is when
a developer borrows to cover the costs of construction and carry-costs for a new
building with the expectation that it would be replaced by long-term (or
"permanent") financing provided by an institutional investor once most of risk
involved in construction and lease-up had been overcome resulting in an
income-producing property.
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Capital Expenses: 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.Capitalization: A method of determining value
of real property by considering net operating income divided by a predetermined
annual rate of return. See "Capitalization Rate".Capitalization
Rate: The rate that is considered a reasonable return on investment (on
the basis of both the investor's alternative investment possibilities and the
risk of the investment). Used to determine and value real property through the
capitalization process. Also called "free and clear return". See
"Capitalization".Carrying Charges: Costs incidental to
property ownership, other than interest (i.e. taxes, insurance costs and
maintenance expenses), that must be absorbed by the landlord during the initial
lease-up of a building and thereafter during periods of
vacancy.Comparables: Lease rates and terms of properties
similar in size, construction quality, age, use, and typically located within
the same sub-market and used as comparison properties to determine the fair
market lease rate for another property with similar
characteristics.Concessions: 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.Construction
Management: The actual construction process is overseen by a qualified
construction manager who ensures that the various stages of the construction
process are completed in a timely and seamless fashion, from getting the
construction permit to completion of the construction to the final walk-through
of the completed leased premises with the tenant.Consumer Price
Index ("CPI"): Measures inflation in relation to the change in the
price of a fixed market basket of goods and services purchased by a specified
population during a "base" period of time. It is not a true "cost of living"
factor and bears little direct relation to actual costs of building operation or
the value of real estate. The CPI is commonly used to increase the base rental
periodically as a means of protecting the landlord's rental stream against
inflation or to provide a cushion for operating expense increases for a landlord
unwilling to undertake the record keeping necessary for operating expense
escalations.Contract Documents: The complete set of design
plans and specifications for the construction of a building or of a building’s
interior improvements. Working Drawings specify for the contractor the precise
manner in which a project is to be constructed. See also "Specifications" and
"Working Drawings".Conveyance: 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.Cost Approach: A method of appraising
real property whereby the replacement cost of a structure is calculated using
current costs of construction.Covenant: A written agreement
inserted into deeds or other legal instruments stipulating performance or
non-performance of certain acts or, uses or non-use of a property and/or
land.Covenant of Quiet Enjoyment: The old "quiet enjoyment"
paragraph, now more commonly referred to as "Warranty of Possession", had
nothing to do with noise in and around the leased premises. It provides a
warranty by Landlord that it has the legal ability to convey the possession of
the premises to Tenant; the Landlord does not warrant that he owns the land.
This is the essence of the landlord's agreement and the tenant's obligation to
pay rent. This means that if the landlord breaches this warranty, it constitutes
an actual or constructive eviction.Cumulative Discount
Rate: The interest rate used in finding present values that when
applied to the rental rate takes into account all landlord lease concessions and
then expressed as a percentage of base rent.
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Dedicate: To appropriate private property to
public ownership for a public use.Deed: A legal instrument transferring
title to real property from the seller to the buyer upon the sale of such
property.Deed Of Trust: An instrument used in many states in place of a
mortgage by which real property is transferred to a trustee by the borrower
(trustor), in favor of the lender (beneficiary), to secure repayment of a
debt.Depreciation: Spreading out the cost of a capital asset over its
estimated useful life or a decrease in the usefulness, and therefore value, of
real property improvements or other assets caused by deterioration or
obsolescence.Distraint: The act of seizing (legally or illegally) personal
property based on the right and interest which a landlord has in the property of
a tenant in default.Dollar Stop: An agreed dollar amount of taxes and
operating expense (expressed for the building as a whole or on a square foot
basis) over which the tenant will pay its prorated share of increases. May be
applied to specific expenses (e.g., property taxes or insurance).
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Earnest Money: The monetary advance by a buyer of
part of the purchase price to indicate the intention and ability of the buyer to
carry out the contract.Easement: A right of use over the property of another
created by grant, reservation, agreement, prescription or necessary implication.
It is either for the benefit of adjoining land (“appurtenant”), such as the
right to cross A to get to B., or for the benefit of a specific individual (“in
gross”), such as a public utility easement.Economic Feasibility: A building
or project’s feasibility in terms of costs and revenue, with excess revenue
establishing the degree of viability.Economic Rent: The market rental value
of a property at a given point in time, even though the actual rent may be
different.Effective Rent: The actual rental rate to be achieved by the
landlord after deducting the value of concessions from the base rental rate paid
by a tenant, usually expressed as an average rate over the term of the
lease.Encroachment: The intrusion of a structure which extends, without
permission, over a property line, easement boundary or building setback
line.Encumbrance: Any right to, or interest in, real property held by
someone other than the owner, but which will not prevent the transfer of fee
title (i.e. a claim, lien, charge or liability attached to and binding real
property)..Environmental Impact Statement: 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 environment.Equity: The
fair market value of an asset less any outstanding indebtedness or other
encumbrances.Escalation Clause: 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. This may be accomplished by several
means such as fixed periodic increases, increases tied to the Consumer Price
Index or adjustments based on changes in expenses paid by the landlord in
relation to a dollar stop or base year reference.Estoppel Certificate: 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. In the context of a lease, a statement by a
tenant identifying that the lease is in effect and certifying that no rent has
been prepaid and that there are no known outstanding defaults by the landlord
(except those specified).Escrow Agreement: A written agreement made between
the parties to a contract and an escrow agent. The escrow agreement sets forth
the basic obligations of the parties, describes the monies (or other things of
value) to be deposited in escrow, and instructs the escrow agent concerning the
disposition of the monies deposited.Exclusive Agency Listing: A written
agreement between a real estate broker and a property owner in which the owner
promises to pay a fee or commission to the broker if specified real property is
leased during the listing period. The broker need not be the procuring cause of
the lease.Expense Stop: An agreed dollar amount of taxes and operating
expense (expressed for the building as a whole or on a square foot basis) over
which the tenant will pay its prorated share of increases. May be applied to
specific expenses (e.g., property taxes or insurance).
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Face Rental Rate: The “asking” rental rate
published by the landlord.Fair Market Value: The sale price at which a
property would change hands between a willing buyer and willing seller, neither
being under any compulsion to buy or sell and both having reasonable knowledge
of the relevant facts. Also known as FMV.Finance Charge: The amount paid for
the privilege deferring payment of goods or services purchased, including any
charges payable by the purchaser as a condition of the loan.First Mortgage:
The senior mortgage which, by reason of its position, has priority over all
junior encumbrances. The holder of the first or senior mortgage has a priority
right to payment in the event of default.First Refusal Right or Right Of
First Refusal (Purchase): 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.First Refusal Right or Right Of First Refusal
(Adjacent Space): A lease clause giving a tenant the first opportunity to lease
additional space that might become available in 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. This right is often restricted
to specific areas of the building such as adjacent suites or other suites on the
same floor.Fixed Costs: Costs, such as rent, which do not fluctuate in
proportion to the level of sales or production.Force Majeure: A force that
cannot be controlled by the parties to a contract and prevents said parties from
complying with the provisions of the contract. This includes acts of God such as
a flood or a hurricane or, acts of man such as a strike, fire or war.Full
Recourse: A loan on which an endorser or guarantor is liable in the event of
default by the borrower.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. See also "Pass Throughs".Future Proposed Space: Space in a
proposed commercial development which is not yet under construction or where no
construction start date has been set. Future Proposed projects include all those
projects waiting for a lead tenant, financing, zoning, approvals or any other
event necessary to begin construction. Also may refer to the future phases of a
multi-phase project not yet built.

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General Contractor: The prime contractor who contracts for
the construction of an entire building or project, rather than just a portion of
the work. The general contractor hires subcontractors, (e.g., plumbing,
electrical, etc.), coordinates all work, and is responsible for payment to
subcontractors.General Partner: A member of a partnership who has authority
to bind the partnership. A general partner also shares in the profits and losses
of the partnership. See also “Limited Partnership”.Graduated Lease: A lease,
generally long term in nature, which provides that the rent will vary depending
upon future contingencies, such as a periodic appraisal, the tenant’s gross
income or simply the passage of time.Grant: To bestow or transfer an
interest in real property by deed or other instrument; either the fee or a
lesser interest, such as an easement.Grantee: One to whom a grant is
made.Grantor: The person making the grant.Gross Building Area: The total
floor area of the building measuring from the outer surface of exterior walls
and windows and including all vertical penetrations (e.g. elevator shafts, etc.)
and basement space.Gross Lease: A lease in which the tenant pays a flat sum
for rent out of which the landlord must pay all expenses such as taxes,
insurance, maintenance, utilities, etc.Ground Rent: Rent paid to the owner
for use of land, normally on which to build a building. Generally, the
arrangement is that of a long-term lease (e.g. 99 years) with the lessor
retaining title to the land.Guarantor: One who makes a guaranty. See also
“Guaranty”.Guaranty: Agreement whereby the guarantor undertakes collaterally
to assure satisfaction of the debt of another or perform the obligation of
another if and when the debtor fails to do so. Differs from a surety agreement
in that there is a separate and distinct contract rather than a joint
undertaking with the principal. See also "Guarantor.
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Hard Cost: The cost of actually constructing the
improvements (i.e. construction costs). See also “Soft Cost”.Highest and
Best Use: The use of land or buildings which will bring the greatest economic
return over a given time which is physically possible, appropriately supported,
financially feasible.High Rise: In the Central Business District, this could
mean a building higher than 25 stories above ground level but in suburban
sub-markets, it generally refers to buildings higher than 7 or 8
stories.Hold Over Tenant: A tenant retaining possession of the leased
premises after the expiration of a lease.HVAC: The acronym for “Heating,
Ventilating and Air-Conditioning”.
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Improvements: In the context of leasing, the term typically
refers to the improvements made to or inside a building but may include any
permanent structure or other development, such as a street, sidewalks,
utilities, etc. See also “Leasehold Improvements”. Indirect Costs:
Development costs, other than material and labor costs which are directly
related to the construction of improvements, including administrative and office
expenses, commissions, architectural, engineering and financing
costs.Inventory: The total amount of rentable square feet of existing and
any forthcoming space (whether it be a tenant vacating space or new buildings
coming on the market), in a given category, for example, all warehouse space in
a specified submarket. Inventory refers to all space within a certain proscribed
market without regard to its availability or condition, and categories can
include all types of leased space such as office, flex, retail and warehouse
space.
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Judgment: The final decision of a court resolving a dispute
and determining the rights and obligations of the parties. Money judgments, when
recorded, become a lien on real property of the defendant.Judgment Lien: An
encumbrance that arises by law when a judgment for the recovery of money
attaches to the debtor’s real estate. See also "Lien".Just Compensation:
Compensation which is fair to both the owner and the public when property is
taken for public use through condemnation (eminent domain). The theory is that
in order to be “just”, the property owner should be no richer or poorer than
before the taking.
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Lease: An agreement whereby the owner of real property
(i.e., landlord/lessor) gives the right of possession to another (i.e.,
tenant/lessee) for a specified period of time (i.e., term) and for a specified
consideration (i.e., rent).Lease Agreement: The formal legal document
entered into between a Landlord and a Tenant to reflect the terms of the
negotiations between them; that is, the lease terms have been negotiated and
agreed upon, and the agreement has been reduced to writing. It constitutes the
entire agreement between the parties and sets forth their basic legal
rights.Lease Commencement Date: The date usually constitutes the
commencement of the term of the Lease for all purposes, whether or not the
tenant has actually taken possession so long as beneficial occupancy is
possible. In reality, there could be other agreements, such as an Early
Occupancy Agreement, which have an impact on this strict
definition.Leasehold Improvements: 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 improvements to be made in the leased premises
by Landlord. See also “Tenant Improvements”.Legal Description: A
geographical description identifying a parcel of land by government survey,
metes and bounds, or lot numbers of a recorded plat including a description of
any portion thereof that is subject to an easement or reservation.Legal
Owner: The term is in technical contrast to equitable owner. The legal owner has
title to the property, although the title may actually carry no rights to the
property other than as a lien. See also “Lien”.Letter Of Attornment: A
letter from the grantor to a tenant, stating that a property has been sold, and
directing rent to be paid to the grantee (buyer). See also “Attorn”.Letter
Of Credit: A commitment by a bank or other person, made at the request of a
customer, that the issuer will honor drafts or other demands for payment upon
full compliance with the conditions specified in the letter of credit. Letters
of credit are often used in place of cash deposited with the landlord in
satisfying the security deposit provisions of a lease.Letter Of Intent: A
preliminary agreement stating the proposed terms for a final contract. They can
be "binding" or "non-binding". This is the threshold issue in most litigation
concerning letters of intent. The parties should always consult their respective
legal counsel before signing any Letter of Intent.Lien: A claim or
encumbrance against property used to secure a debt, charge or the performance of
some act. Includes liens acquired by contract or by operation of law. Note that
all liens are encumbrances but all encumbrances are not liens.Lien Waiver
(Waiver of Liens): A waiver of mechanic’s lien rights, signed by a general
contractor and his subcontractors, that is often required before the general
contractor can receive a draw under the payment provisions of a construction
contract. May also be required before the owner can receive a draw on a
construction loan.Like-Kind Property: A term used in an exchange of property
held for productive use in a trade or business or for investment. Unless cash is
received, the tax consequences of the exchange are postponed pursuant to Section
1031 of the Internal Revenue Code.Limited Partnership: A type of
partnership, created under state law, comprised of one or more general partners
who manage the business and who are personally liable for partnership debts, and
one or more special or limited partners who contribute capital and share in
profits but who take no part in running the business and incur no liability over
and above the amount contributed. See also "General Partner".Listing
Agreement: An agreement between the owner of a property and a real estate broker
giving the broker the authorization to attempt to sell or lease the property at
a certain price and terms in return for a commission, set fee or other form of
compensation. See also “Exclusive Listing Agreement”.Long Term Lease: In
most markets, this refers to a lease whose term is at least three years from
initial signing until the date of expiration or renewal option.Lot:
Generally, one of several contiguous parcels of land making up a fractional part
or subdivision of a block, the boundaries of which are shown on recorded maps
and “plats”.Low Rise: A building with fewer than 4 stories above ground
level.Lump-Sum Contract: A type of construction contract requiring the
general contractor to complete a building or project for a fixed cost normally
established by competitive bidding. The contractor absorbs any loss or retains
any profit.
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Maker: One who creates or executes a promissory note and
promises to pay the note when it becomes due..Market Rent: 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 were willing to accept and tenants were
willing to pay in recent lease transactions for comparable space.Market
Study: A forecast of future demand for a certain type of real estate project
that includes an estimate of the square footage that can be absorbed and the
rents that can be charged. Also called “Marketability Study”.Marketable
Title: A title which is free from encumbrances and could be readily marketed
(i.e., sold) to a reasonably intelligent purchaser who is well informed of the
facts and willing to accept such title while exercising ordinary business
prudence. Market Value: The highest price a property would command in a
competitive and open market under all conditions requisite to a fair sale with
the buyer and seller each acting prudently and knowledgeably in the ordinary
course of trade.Master Lease: A primary lease that controls subsequent
leases and which may cover more property than subsequent leases. An Executive
Suite operation is a good example in that a primary lease is signed with the
landlord and then individual offices within the leased premises are leased to
other individuals or companies.Mechanic’s Lien: A claim created by state
statutes for the purpose of securing priority of payment of the price and value
of work performed and materials furnished in constructing, repairing or
improving a building or other structure, and which attaches to the land as well
as to the buildings and improvements thereon.Metes and Bounds: The boundary
lines of land, with their terminal points and angles, described by listing the
compass directions and distances of the boundaries. Originally, metes referred
to distance and bounds referred to direction.Mid-Rise: A building with
between four and eight stories above ground level although in a Central Business
District, this might extend to buildings up to twenty-five
stories.Mixed-Use: 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, an office building with retail space).Mortgage:
A written instrument creating an interest in real estate and that provides
security for the performance of a duty or the payment of a debt. The borrower
(i.e., mortgagor) retains possession and use of the property.
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Net Lease: A lease in which there is a provision for the
tenant to pay, in addition to rent, certain costs associated with the operation
of the property. These costs may include property taxes, insurance, repairs,
utilities, and maintenance. There are also “NN” (double net) and “NNN” (triple
net) leases. The difference between the three is the degree to which the tenant
is responsible for operating costs. See also “Gross Lease”.Net Rentable
Area: The floor area of a building that remains after the square footage
represented by vertical penetrations, such as elevator shafts, etc., has been
deducted. Common areas and mechanical rooms are included and there are no
deductions made for necessary columns and projections of the building. (This is
by the Building Owner and Manager Association - BOMA, Standard).Net Square
Footage (S.F.): The space required for a function or staff position. Also see
"Circulation Factor and "Usable Square Footage".Non-Compete Clause: 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. This clause benefits
service-oriented businesses desiring exclusive access to the building’s
population (i.e. travel agent, deli, etc.).Non-Recourse Loan: A loan which
bars a lender from seeking a deficiency judgment against a borrower in the event
of default. The borrower is not personally liable if the value of the collateral
for the loan falls below the amount required to repay the loan.Normal Wear
and Tear: The deterioration or loss in value caused by the tenant’s normal and
reasonable use. In many leases the tenant is not responsible for “normal wear
and tear”.
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Open Space: An unimproved area of land or water, or
containing only such improvements as are appropriate to the use and enjoyment of
the open area, and dedicated for public or private use or enjoyment or for the
use and enjoyment of owners and occupants of land adjoining or neighboring such
open spaces.Operating Cost Escalation: Although there are many variations of
escalation clauses, all are intended to adjust rents by reference to external
standards such as published indexes, negotiated wage levels, or expenses related
to the ownership and operation of buildings. During the past thirty years,
Landlords have developed the custom of separating the base rent for the
occupancy of the leased premises from escalation rent. This technique enables
the landlord to better ensure that the “net” rent to be received under the lease
will not be reduced by the normal costs of operating and maintaining the
property. The landlord’s definition of Operating Expenses is likely to be broad,
covering most costs of operation of the building. Most landlords pass through
proper and customary charges, but in the hands of an overly aggressive landlord,
these clauses can operate to impose obligations which the tenant would not
willingly or knowingly accept.Operating Expenses: The actual costs
associated with operating a property including maintenance, repairs, management,
utilities, taxes and insurance. A landlord’s definition of operating expenses is
likely to be quite broad, covering most aspects of operating the
building.Operating Expense Escalation: Although there are many variations of
operating expense escalation clauses, all are intended to adjust rents by
reference to external standards such as published indexes, negotiated wage
levels, or expenses related to the ownership and operation of buildings.
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Parking Ratio or Index: The intent of this ratio is to
provide a uniform method of expressing the amount of parking that is available
at a given building. Dividing the total rentable square footage of a building by
the building’s total number of parking spaces provides the amount of rentable
square feet per each individual parking space (expressed as 1/xxx or 1 per xxx).
Dividing 1000 by the previous result provides the ratio of parking spaces
available per each 1000 rentable square feet (expressed as x per
1000).Partial Taking: The taking of part (a portion) of an owner’s property
under the laws of eminent domain.Pass Throughs: Refers to the tenant's pro
rata share of operating expenses (i.e. taxes, utilities, repairs) paid in
addition to the base rent.Percentage Lease: Refers to a provision of the
lease calling for the landlord to be paid a percentage of the tenant's gross
sales as a component of rent. There is usually a base rent amount to which
"percentage" rent is then added. This type of clause is most often found in
retail leases.Performance Bond: A surety bond posted by a contractor
guaranteeing full performance of a contract with the proceeds to be used to
complete the contract or compensate for the owner’s loss in the event of
nonperformance.Plat (Plat Map): Map of a specific area, such as a
subdivision, which shows the boundaries of individual parcels of land (e.g.
lots) together with streets and easements.Power Of Sale: Clause inserted in
a mortgage or deed of trust giving the mortgagee (or trustee) the right and
power, on default in the payment of the debt secured, to advertise and sell the
property at public auction. Preleased: 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.Prime Space: This typically
refers to first generation (new) space that is currently available for lease and
which has never before been occupied by a tenant.Prime Tenant: The major
tenant in a building or, the major or anchor tenant in a shopping center serving
to attract other, smaller tenants into adjacent space because of the customer
traffic generated.Pro rata: Proportionately; according to measure, interest,
or liability. In the case of a tenant, the proportionate share of expenses for
the maintainenance and operation of the property. Punch List: 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.
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Quitclaim Deed: A deed operating as a release that is
intended to pass any title, interest, or claim that the grantor may have in the
property, but not containing any warranty or professing that such title is
valid.
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Raw Land: Unimproved land that remains in its natural
state.Raw Space: Unimproved "shell space" in a building.REO (Real Estate
Owned): Real estate that has come to be owned by a lender, including real estate
taken to satisfy a debt. Includes real estate acquired by lenders through
foreclosure or, in settlement of some other obligation. Real Property: 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.Recapture: (1) When
the IRS recovers the tax benefit of a deduction or a credit previously taken by
a taxpayer, which is often a factor in foreclosure since there is a forgiveness
of debt. (2) As used in leases, a clause giving the lessor a percentage of
profits above a fixed amount of rent; or in a percentage lease, a clause
granting the landlord a right to terminate the lease if the tenant fails to
realize minimum sales.Recourse: The right of a lender, in the event of a
default by the borrower, to recover against the personal assets of a party who
is secondarily liable for the debt (e.g. endorser or guarantor).Rehab: An
extensive renovation of a building or project which is intended to cure
obsolescence of such building or project. Renewal Option: 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 as provided for in the option language. Rent:
Compensation or fee paid, usually periodically (i.e. monthly rent payments, for
the occupancy and use of any rental property, land, buildings, equipment,
etc.Rent Commencement Date: The date on which a tenant begins paying rent.
The dynamics of a marketplace will dictate whether this date coincides with the
lease commencement date or if it commences months later (i.e., in a weak market,
the tenant may be granted several months free rent). It will never begin before
the lease commencement date.Rentable Square Footage: Rentable Square Footage
equals the Usable Square Footage plus the tenant’s pro rata share of the
Building Common Areas, such as lobbies, public corridors and restrooms. The
pro-rata share, often referred to as the Rentable/Usable (R/U) Factor, will
typically fall in a range of 1.10 to 1.16, depending on the particular building.
Typically, a full floor occupancy will have an R/U Factor of 1.10 while a
partial floor occupancy will have an R/U Factor of 1.12 to 1.16 times the Usable
Area.Rentable/Usable Ratio: That number obtained when the Total Rentable
Area in a building is divided by the Usable Area in the building. The inverse of
this ratio describes the proportion of space that an occupant can expect to
actually utilize/physically occupy.Rental Concession: Concessions a landlord
may offer a tenant in order to secure their tenancy. While rental abatement is
one form of a concession, there are many others such as: increased tenant
improvement allowance, signage, lower than market rental rates and moving
allowances are only a few of the many. See also "Abatement".Rent-Up Period:
That period of time, following construction of a new building, when tenants are
actively being sought and the project is approaching its stabilized
occupancy.Representation Agreement: An agreement between the owner of a
property and a real estate broker giving the broker the authorization to attempt
to sell or lease the property at a certain price and terms in return for a
commission, set fee or other form of compensation. See also “Exclusive Listing
Agreement”.Request for Proposal (“RFP”): The formalized Request for Proposal
represents a compilation of the many considerations that a tenant might have and
should be customized to reflect their specific needs. Just as the building’s
standard form lease document represents the landlord’s “wish list”, the RFP
serves in that same capacity for the tenant.Right Of First Refusal: See
“First Refusal Right”.
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Sale-Leaseback: An arrangement by which the owner occupant
of a property agrees to sell all or part of the property to an investor and then
lease it back and continue to occupy space as a tenant. Although the lease
technically follows the sale, both will have been agreed to as part of the same
transaction.Second Mortgage: A mortgage on property that ranks below a first
mortgage in priority. Properties may have two, three, or more mortgages, deeds
of trust, or land contracts as liens at the same time. Legal sequence priority,
indicated by the date of recording, determines the designation first, second,
third, etc.Security Deposit: A deposit of money by a tenant to a landlord to
secure performance of a lease. This deposit can also take the form of a Letter
of Credit or other financial instrument.Seisen (Seizen): Possession of real
property under claim of freehold estate. This term originally referred to the
completion of feudal investiture by which a tenant was admitted into the feud
and performed the rights of homage and fealty. Presently it has come to mean
possession under a legal right (usually a fee interest). As the old doctrine of
corporeal investiture is no longer in force, the delivery of a deed gives seisin
in law.Setback: The distance from a curb, property line or other reference
point, within which building is prohibited.Setback Ordinance: Setback
requirements are normally provided for by ordinances or building codes.
Provisions of a zoning ordinance regulate the distance from the lot line to the
point where improvements may be constructed.Shell Space: The interior
condition of the tenant's usable square footage when it is without improvements
or finishes. While existing improvements and finishes can be removed, thus
returning space in an older building to its "shell" condition, the term most
commonly refers to the condition of the usable square footage after completion
of the building's "shell" construction but prior to the build out of the
tenant's space. Shell construction typically denotes the floor, windows, walls
and roof of an enclosed premises and may include some HVAC, electrical or
plumbing improvements but not demising walls or interior space partitioning. In
a new multi-tenant building, the common area improvements, such as lobbies,
restrooms and exit corridors may also be included in the shell construction.
With a newly constructed office building, there will often be a distinction
between improvements above and below the ceiling grid. In a retail project, all
or a portion of the floor slab is often installed along with the tenant
improvements so as to better accommodate tenant specific under-floor plumbing
requirements.Site Analysis: The study of a specific parcel of land which
takes into account the surrounding area and is meant to determine its
suitability for a specific use or purpose.Site Development: The installation
of all necessary improvements, (i.e. installment of utilities, grading, etc.),
made to a site before a building or project can be constructed upon such
site.Site Plan: A detailed plan which depicts the location of improvements
on a parcel of land which also contains all the information required by the
zoning ordinance.Slab: The exposed wearing surface laid over the structural
support beams of a building to form the floor(s) of the building or laid
slab-on-grade in the case of a non-structural, ground level concrete
slab.Soft Cost: That portion of an equity investment other than the actual
cost of the improvements themselves (i.e. architectural and engineering fees,
commissions, etc.) and which may be tax-deductible in the first year. See also
“Hard Cost”.Space Plan: A graphic representation of a tenant’s space
requirements, showing wall and door locations, room sizes, and sometimes
includes furniture layouts. A preliminary space plan will be prepared for a
prospective tenant at any number of different properties and this serves as a
“test-fit” to help the tenant determine which property will best meet its
requirements. When the tenant has selected a building of choice, a final space
plan is prepared which speaks to all of the landlord and tenant objectives and
then approved by both parties. It must be sufficiently detailed to allow an
accurate estimate of the construction costs. This final space plan will often
become an exhibit to any lease negotiated between the parties.Special
Assessment: Any special charge levied against real property for public
improvements (e.g., sidewalks, streets, water and sewer, etc.) that benefit the
assessed property.Specific Performance: A requirement compelling one of the
parties to perform or carry out the provisions of a contract into which he has
entered.Speculative Space: Any tenant space that has not been leased before
the start of construction on a new building. See also "First Generation
Space".Step-Up Lease (Graded Lease): A lease specifying set increases in
rent at set intervals during the term of the lease.Straight Lease (Flat
Lease): A lease specifying the same, a fixed amount, of rent that is to be paid
periodically during the entire term of the lease. This is typically paid out in
monthly installments.Strip Center: Any shopping area, generally with common
parking, comprised of a row of stores but smaller than the neighborhood center
anchored by a grocery store.Subcontractor: A contractor working under and
being paid by the general contractor. Often a specialist in nature, such as an
electrical contractor, cement contractor, etc.Subdivision Plat: A detailed
drawing which depicts the manner in which a parcel of land has been divided into
two or more lots. It contains engineering considerations and other information
required by the local authority.Subordination Agreement: 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 upon the leased
premises.Surety: One who at the request of another, and for the purpose of
securing to him a benefit, voluntarily binds himself to be obligated for the
debt or obligation of another. Although the term includes guarantor and the
terms are commonly, though mistakenly, used interchangeably, surety differs from
guarantor in a variety of respects.Surface Rights: A right or easement
granted with mineral rights, enabling the possessor of the mineral rights to
drill or mine through the surface.Survey: The process by which a parcel of
land is measured and its boundaries and contents ascertained.

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Taking: A common synonym for condemnation or any actual or
material interference with private property rights but it is not essential that
there be physical seizure or appropriation.Tax Lien: A statutory lien,
existing in favor of the state or municipality, for nonpayment of property taxes
which attaches only to the property upon which the taxes are unpaid.Tax
roll: A list or record containing the descriptions of all land parcels located
within the county, the names of the owners or those receiving the tax bill,
assessed values and tax amounts.Tenant (Lessee): One who rents real estate
from another and holds an estate by virtue of a lease.Tenant At Will: One
who holds possession of premises by permission of the owner or landlord, the
characteristics of which are an uncertain duration (i.e. without a fixed term)
and the right of either party to terminate on proper notice.Tenant
Improvements: 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 improvements to be made in the leased premises by the landlord.
See also “Leasehold Improvements”, “Workletter”.Tenant Improvement (“TI”)
Allowance or Work Letter: Defines the fixed amount of money contributed by the
landlord toward tenant improvements. The tenant pays any of the costs that
exceed this amount. Also commonly referred to as "Tenant Finish
Allowance.“Time Is Of The Essence”: Means that performance by one party
within the period specified in the contract is essential to require performance
by the other party.Title: The means whereby the owner of lands has the just
and full possession of real property.Title Insurance: 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 title policy
is issued.Title Search: A review of all recorded documents affecting a
specific piece of property to determine the present condition of title.Total
Inventory: The total amount of square footage of a type of property (i.e.
office, industrial, retail, etc.) within a geographical area, whether vacant or
occupied. This normally includes owner-occupied space.Trade Fixtures:
Personal property that is attached to a structure (i.e. the walls of the leased
premises) that are used in the business. Since this property is part of the
business and not deemed to be part of the real estate, it is typically removable
upon lease termination.Triple Net (NNN) Rent: A lease in which the tenant
pays, in addition to rent, certain costs associated with a leased property,
which may include property taxes, insurance premiums, repairs, utilities, and
maintenances. There are also “Net Leases" and “NN” (double net) leases,
depending upon the degree to which the tenant is responsible for operating
costs. See also “Gross Lease”.Turn Key Project: The construction of a
project in which a third party, usually a developer or general contractor, is
responsible for the total completion of a building (including construction and
interior design) or, the construction of tenant improvements to the customized
requirements and specifications of a future owner or tenant.

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Under Construction: When construction has started but the
Certificate of Occupancy has not yet been issued.Under Contract: A property
for which the seller has accepted the buyer’s offer to purchase is referred to
as being “under contract”. Generally, the prospective buyer is given a certain
period of time in which to perform its due diligence and finalize financing
arrangements. During the period of time the property is under contract, the
seller is precluded from entertaining offers from other buyers.Unencumbered:
Describes title to property that is free of liens and any other encumbrances.
Free and clear. See also "Encumbrances.Unimproved Land: Most commonly refers
to land without improvements or buildings but can also mean land in its natural
state. See also, “Raw Land”.Use: The specific purpose for which a parcel of
land or a building is intended to be used or for which it has been designed or
arranged.Usable Square Footage: Usable Square Footage is the area contained
within the demising walls of the tenant space. Total Usable Square Footage
equals the Net Square Footage x the Circulation Factor. Also see: Circulation
Factor and Net Square Footage.

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Vacancy Factor: The amount of gross revenue that pro forma
income statements anticipate will be lost because of vacancies, often expressed
as a percentage of the total rentable square footage available in a building or
project.Vacancy Rate: The total amount of available space compared to the
total inventory of space and expressed as a percentage. This is calculated by
multiplying the vacant space times 100 and then dividing it by the total
inventory.Vacant Space: Refers to existing tenant space currently being
marketed for lease. This excludes space available for sublease.Variance:
Refers to permission that allows a property owner to depart from the literal
requirements of a zoning ordinance that, because of special circumstances, cause
a unique hardship. Included would be such things as the particular physical
surroundings, shape or topographical condition of the property and when
compliance would result in a practical difficulty and would deprive the owner of
the reasonable use of the property.

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Warranty of Possession: This is the old "quiet enjoyment"
paragraph, which of course had nothing to do with noise in and around the leased
premises. It provides a warranty by Landlord that it has the legal ability to
convey the possession of the premises to Tenant; the Landlord does not warrant
that he owns the land. This is the essence of the landlord’s agreement and the
tenant’s obligation to pay rent. This means that if the landlord breaches this
warranty, it constitutes an actual or constructive eviction.Workletter: A
list of the building standard items that the landlord will contribute as part of
the tenant improvements. Examples of the building standard items typically
identified include: style and type of doors, lineal feet of partitions, type and
quantity of lights, quality of floor coverings, number of telephone and
electrical outlets, etc. The Workletter often carries a dollar value but is
contrasted with a fixed dollar tenant improvement allowance that can be used at
the tenant’s discretion. See also Leasehold Improvements and "Tenant
Improvements.Working Drawings: The set of plans for a building or project
that comprise the contract documents that indicate the precise manner in which a
project is to be built. This set of plans includes a set of specifications for
the building or project.

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Zoning: The division of a city or town into zones and the
application of regulations having to do with the structural, architectural
design and intended use of buildings within such designated zone (i.e. a tenant
needing manufacturing space would look for a building located within an area
zoned for manufacturing).Zoning Ordinance: Refers to the set of laws and
regulations, generally, at the city or county level, controlling the use of land
and construction of improvements in a given area or zone.