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AABATEMENT: A reduction, decrease, or diminution; usually applies to the forgiveness of rent or a decrease of assessed valuation of ad valorem taxes after the assessment and levy.
ABOVE BUILDING STANDARD: Specialized design and engineering services and all construction necessary to personalize tenant space above and beyond the standard tenant finish designed for the particular building.
ABSORBED SPACE: Net change in leased space between two dates.
ABSORPTION: (1) The rate at which land or buildings will be sold or leased in the marketplace during a predetermined period of time, usually a month or a year. (2) The filling of space, such as the rental of units or sale of a tract. The time or rate must be estimated and considered as part of the owner's (usually the builder) costs.
ABSORPTION PERIOD: The number of months required to convert vacant space into leased space assuming there is no new delivered space. Computed by dividing the average monthly absorbed space during a recent period by the current vacant space.
ADD-ON FACTOR: Considered a loss factor, the percentage of gross rentable square footage that is lost due to the tenant's physical occupancy.
AD VALOREM TAX: (According to value) Used in reference to general property tax, which is usually based on the official valuation of property.
ALIENATION CLAUSE: A type of acceleration clause where a debt becomes due in its entirety upon the transfer of ownership of a secured property. See also Due on Sales Clause and Acceleration Clause.
ALLOWANCE OVER BUILDING SHELL: An arrangement used for financing tenant improvements (finishing out office space to accommodate a tenant such as walls, doors, carpeting, etc.), often used in a yet-to-be-built building whereby the landlord's expenditure is capped at a fixed dollar amount over the negotiated price of the base building shell. This arrangement is most successful when both parties agree on a detailed definition of what construction is included and at what price. Tenants may ask for a contingency in the event the actual build-out costs are less than the allow- ance, requiring the landlord to return the savings in the form of rent abatement or other concession.
AM: Accredited Member (designation offered by the American Society of Appraisers).
ANNUAL PERCENTAGE RATE (APR): APR reflects the cost of a loan on a yearly basis. It may be higher than the note rate because it includes interest, loan origination fees, loan discount points, and other credit costs paid to the lender.
ANTICIPATORY BREACH: Occurs when one party to a contract prior to the time of performance informs the other of his or her intent not to perform. For example, when a buyer informs the seller before the closing date of his or her intent not to buy, an anticipatory breach has occurred.
APPRAISAL: (1) The estimation and opinion of value placed upon a piece of land based upon a factual analysis by a qualified professional. (2) The process of estimation and the appraisal report itself.
APPRECIATION: An increase in the value of property caused by an improvement or the elimination of negative factors.
A.S.A: Accredited Senior Appraiser (designation offered by the American Society of Appraisers).
AS IS CONDITION: Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.
ASSESSMENT: (1) An estimate of property value for the purpose of imposing taxes. (2) A fee imposed on property, usually to pay for public improvements such as streets and sewers.
ASSET-BASED LENDER: A lender who loans money based primarily on the values of an asset ? accounts receivable, inventory, a place of equipment, real estate ? rather than on the financial strength of the business which is the primary criterion for banks.
ASSIGNMENT: A transfer of interest between parties of title to any property, real or personal, or of any rights or estates in the property. Common assignments include leases, mortgages, and deeds of trust.
ATTACHMENT: Legal procedure to aid in the collection of a debt. Usually the court issues a writ to seize the property of a debtor and holds it pending the outcome of a lawsuit, keeping the property available for sale to pay any money judgment entered in such lawsuit.
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 rent. See also Letter of Attornment.
BBALLOON PAYMENT: A large payment due on a balloon note. Generally a balloon payment is required when regular monthly or quarterly payments have not covered both the increase due and the principal of the loan.
BANKRUPT: The condition when one is found to be unable to repay one's debts by a court having proper jurisdiction. The bankruptcy may be one of two types: one that is petitioned by the debtor (voluntary) or petitioned by creditors (involuntary).
BANKRUPTCY: Proceedings under federal statutes to relieve a debtor who has been declared bankrupt from insurmountable debt. After
addressing certain priorities and exemptions, the bankrupt's property and other assets are distributed by the court to creditors as full satisfaction for the debt. See also Chapter 11.
BASE RENT: A set amount used as a minimum rent in a lease which also employs a percentage or other allocation for additional rent.
BASE YEAR: The year upon which a direct expense escalation of rent is based. See also Escalation Clause.
BELOW-GRADE: Any facility or part of a facility located underground or below the surface grade.
BREACH OF WARRANTY: The failure of the seller of real property to pass title as either express or implied by law in the conveyancing document.
BUFFER: A strip or parcel of land established as a transition between parcels of land, such as a strip or parcel of land between an industrial and residential area. May contain natural or planted shrubs, walls or fencing, singly or in combination.
Also known as Buffer Zone or Buffer Strip.
BUILDING CLASSIFICATIONS: Class A ? Building has excellent location and access to attract the highest quality tenants. Building
must be of superior construction and finish, relatively new or competitive with new buildings,and providing professional on-site management. Class B ? Building with good location, management, construction land tenancy. Can compete at low end of Class A. Class C ? Generally an older building with growing functional and/or economic obsolescence. Class D ? An older building in
need of extensive renovation as a result of functional obsolescence or deterioration.
BUILDING CODE: A set of laws, usually enacted by city ordinance or other local jurisdiction,
regulating the design, materials, and construction of buildings.
BUILDING STANDARD: A list of construction materials and finishes used in building out office
space for a tenant that the landlord contributes as part of the basic tenant improvements and within
the basic rent structure. Examples of standard building items are: doors, partitions, lights, floor
covering, telephone outlets, etc. May also specify the quantity and quality of the materials to be used
and often carries a dollar value. See also Workletter.
BUILDOUT: The cost of configuring and finishing new or re-let space in accordance with a tenant's specifications.
BUILD TO SUIT: A method of leasing property whereby the landlord builds a new building in accordance with a tenant's specifications and
leases the entire building to the tenant.
BULLET LOAN: Also known as a Construction Loan. Any of a variety of short-term (generally two to five years) financings provided by a lender to a developer to cover the costs of construction and lease-up of 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 the risk involved in construction and lease-up had been overcome resulting in an income-producing property.
CC.A.M.: Common Area Maintenance
CAPITALIZATION: A process of determining the value of real property in which project income is divided by a predetermined annual
rate (capitalization rate). For example, a building with annual project income of $100,000 is worth $1,000,000 at a 10 per cent capitalization rate ($100,000/10% = $1,000,000).
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. See
also Free and Clear Return and Capitalization.
CARRYING CHARGES: (1) Various costs that are incidental to property ownership (e.g. taxes, insurance costs, and maintenance expenses). (2) The costs involved in keeping a property which is intended to produce income (either by sale or
rent) but has not yet done so.
CCIM: Certified Commercial Investment Member
CERTIFICATE OF OCCUPANCY: A certificate issued by a local government building department or agency stating that a building is in a
condition suitable for occupancy. Sometimes also called a C of O or a Non-Residential Use and Occupancy Permit (NON RUP).
CHAPTER 11: A section of the Federal Bankruptcy Code dealing with business reorganizations. A separate section referred to as
Chapter 7 deals with business liquidations.
CLEAR-SPAN FACILITY: An interior area which does not use columns or posts to hold up the roof, thereby creating a large, open area with maximum visibility and use of the floor space ? for example, a clear span parking structure construction utilizing vertical columns on the outside edges of the structure and a clear span between columns, making it unnecessary for vehicles to maneuver between columns.
COMMON AREA: The area owned in common by the owners of condominiums or planned unit development homes in a subdivision. Also, the total area within the shopping center that is not designed for rental to tenants but that is available for common use by all tenants or
groups of tenants, their invitees, and adjacent stores. Parking and its appurtenances, malls, sidewalks, landscaped areas, public toilets, truck
and service facilities, and the like are typically included in the common area.
COMMON AREA MAINTENANCE (C.A.M.) CHARGES: Includes income collected from tenants for operating and maintaining
items pertaining to common areas. Shopping center leases usually contain a clause requiring the tenant to pay its share of operation and
main-tenance for common areas. Such clauses typically define the basis on which charges are made and the type of cost items allocable to
maintenance of the common area. The most common methods by which landlords prorate common area charges among tenants are (1) a prorated charge based on a tenant's leased area as a portion of the total leasable area of the center or the linear
exposure in store frontage, (2) a fixed charge for a stated period, and (3) a variable charge based on a percentage of sales. Some centers include a cost-of-living increase in the common area charges.
COMPARABLES: Recorded sales of properties similar in size, use, construction quality, age, and often located within the same submarket
that are used as comparisons to determine the fair market value of another particular property.
CONCESSIONS: (1) A granting of a right by government or privately, usually for use of land or area in a building to carry on a business. (2) Cash expended by the landlord in the form of rent abatement, build-out allowance, or other payments to induce the tenant to sign a lease.
CONDEMNATION: The process by which private property is taken by a governmental agency for public use without the consent of the
owner but only upon payment of just compensation.See also Eminent Domain.
CONSTRUCTION MANAGEMENT: An arrangement for building construction whereby the owner engages a contractor to oversee the
work of all building trades, each of which enters a separate construction contract with the owner. By contrast, see General Contractor.
CONSUMER PRICE INDEX (CPI): A federal government index that measures the change in the cost of a variety of goods and services.
Used in loans, purchase agreements, and leases as a measure by which to adjust future payments to reflect inflation. See also Cost-of-Living Index.
CONTIGUOUS SPACE: Adjoining office space.
CONTRACT DOCUMENTS: The design plans and specifications for construction of a facility. Working drawings that detail for the
contractor the exact manner in which a project should be built. See also Specifications and Working Drawings.
CONTRACT RENT: Rent paid under a lease. The actual rent as opposed to the market rental value of the property.
CONVEYANCE: Most commonly refers to the transfer of title to land between parties. The term may also include most of the instruments
by which an interest in real estate is created, mortgaged, or assigned.
CORE FACTOR: The percentage of common areas in a building (rest rooms, hallways) that, when added to the net usable square footage,
equals the net rentable square footage. May be computed for a building or floor of a building. A Loss Factor or Load Factor is calculated by
dividing the rentable square footage by the usable square footage. See also Design Efficiency.
COST APPROACH: A method of appraising real property whereby the replacement cost of a structure is calculated using current costs of
construction less depreciation, plus land value.
COVENANT: A private, legal restriction on the use of land recorded in the land records.
COVENANT OF QUIET ENJOYMENT: Usually inserted in leases or conveyances whereby landlord or grantor promises that the tenant
or grantee shall enjoy possession of the premises in peace and quiet without disturbance.
CPM: Certified Property Manager
CRE: Counselor of Real Estate
CUMULATIVE DISCOUNT RATE: A discount factor applied to the rental rate that takes into effect all landlord lease concessions expressed as a percentage of base rent.
DDEDICATE: Transfer of property from private to public ownership.
DEED: Generally, a conveyancing instrument
given by the seller to pass fee title to property
DEED IN LIEU OF FORECLOSURE: A deed
given by an owner/borrower to a lender to prevent
the lender from bringing foreclosure proceedings.
DEED OF TRUST: An instrument securing a
loan that is used in many states in place of a
mortgage. Property is transferred to a trustee by
the borrower (trustor), in favor of the lender
(beneficiary), and reconveyed to the borrower
upon payment in full.
DEFAULT: The omission or failure to perform
a legal or contractual duty or to pay an obligation
when due. Some specific examples are: (1)
Failure to make a payment of principal or interest
or other type of financial obligation when due.
(2) The breach or failure to perform any of the
terms of a note or the covenants of a mortgage
or deed of trust.
DEFICIENCY JUDGMENT: Commonly, the
amount for which the borrower is personally
liable on a note and mortgage if the foreclosure
sale does not bring enough to cover the amount
owed. Actually, the judgment is for the total
amount of the obligation and not for the deficiency.
Any recoveries from a foreclosure sale are
deducted from the judgment. May also apply to
debt due after repossession of personal property
subject to a security interest.
DELIVERED BUILDINGS: Buildings that
have completed construction and are
ready for tenant build-out. May or may not
yet have a Certificate of Occupancy.
DEMISING WALLS: The boundaries that
separate a tenant's space from another
tenant's space and from a public corridor.
DENSITY: Number of dwelling units divided
by the gross acreage being developed. For an
urban project, this term is also used to refer to
the Floor Area Ratio.
DESIGN/BUILD: A system in which a single
entity is responsible for both the design and
construction of a facility, often involving the
fast-track method of construction; also referred
to as Design/Construct.
DEPRECIATION: (1) Decrease in the usefulness,
and therefore value, of real property
improvements or other assets caused by deterioration
or obsolescence. (2) A loss in value as an
accounting procedure to use as a deduction for
income tax purposes. (3) Spreading out the cost
of a capital asset over its useful life.
DISTRAINT: The act of taking (legally or illegally)
personal property and retaining control
until the property owner performs an obligation.
Commonly, a landlord takes possession of personal
property of a tenant in default until the
default is satisfied.
DISTRESS SALE: The sale of property under
less than favorable conditions. Usually, the seller
is experiencing financial difficulties and is under
extreme pressure to sell.
EEARNEST MONEY: A sum of money paid by
a buyer at the time of entering a contract to indicate
the intention and ability of the buyer to
carry out the contract. Normally such earnest
money is applied against the purchase price.
EASEMENT: A right to use the property of
another created by grant, reservation, agreement,
prescription, or necessary implication. It
is either for the benefit of land appurtenant,
such as the right to cross A to get to B, or in
gross, such as a public utility easement.
ECONOMIC FEASIBILITY: A project's feasibility
in terms of costs and revenue with excess
revenue establishing the degree of feasibility.
ECONOMIC RENT: Calculations or analysis
to determine market rental value of a property at
any given time, even though the actual rent may
EFFECTIVE RENT: The rental rate actually
achieved by the landlord after deducting the value
of tenant improvements and other concessions from
the base rental rate paid by a tenant, usually expressed
as an average rate over the term of the lease.
EFFICIENCY FACTOR: The number resulting
from dividing the Usable Area by the Gross Building
Area in an office building, providing a benchmark
measurement for the economic efficiency
of that building's use as an office building.
EMINENT DOMAIN: A right of the government
to acquire private property for a public use
by condemnation, in return for just compensation.
See also Condemnation.
ENCROACHMENT: Generally, a structure
that extends impermissibly over a property line,
easement boundary, or building setback line.
ENCUMBRANCE:Any right to, or interest in, real
property that may exist in one other than the
owner but which will not prevent the transfer of
fee title. A claim, lien, charge, or liability
attached to and binding real property.
ENVIRONMENTAL IMPACT REPORT: A
report generally prepared by an independent
company in accord-ance with federal, state, and
local laws detailing the probable environmental
effect of a development on the surrounding area.
EQUITY: The value of one's interest in a property,
consisting of its fair market value less any
outstanding debt or other encumbrances.
EQUITY KICKER: Also called a participation
loan. Under this kind of loan the lender gets not
only interest payments and principal repaid, but
also the right to share in the net cash flow, profits,
and/or sale proceeds of a building. Equity
participation is generally required for riskier
deals or in return for lower rates.
EQUITY PARTICIPATION: The participation
by a lender in the equity ownership of a project
as one of the conditions for granting a loan.
Used by financial institutions to partially offset
the effects of inflation. Typically occurs when
lending standards are tight or the risk is
unusually high. See also Equity Kicker.
EQUITY OF REDEMPTION: Properly, the right
to pay off the mortgage lien in default by payment
of the principal, interest, and costs due. Not the
same as the redemption period after a foreclosure
sale, which is a right established by statute.
ESCALATION CLAUSE: A clause in a lease
providing for increased rent at a future time.
May be accomplished by several means such as
(1) Fixed increase ? A provision that calls for a
definite, periodic rental increase; (2) Cost of living
? A clause that ties the rent to a government
cost of living index with periodic adjustments as
the index changes; or (3) Direct expense ? Rent
adjustments based on changes in expenses paid
by the landlord such as tax increases, increased
maintenance costs, etc. Typically used in leases
subject to price control regulation to allow the
landlord to collect the maximum amount permitted
ESCROW AGREEMENT: A written agreement
usually made between a buyer, seller, and escrow
agent. The escrow agreement sets forth the basic
obligations of the parties, describes the objects
deposited in escrow, and instructs the escrow agent
concerning the disposition of the objects deposited.
ESTOPPEL CERTIFICATE: A statement
concerning the status of an agreement and the
performance of obligations under the agreement
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
EXCLUSIVE LISTING: A written agreement
between a real estate broker and a building
owner in which the owner promises to pay a fee
or commission to the broker if specified real
property is sold or leased during a stated period.
The broker may or may not be the cause of the
sale or lease.
EXPENSE STOP: Provision in a lease establishing
the maximum level of operating
expense(s) to be paid by the landlord. Expenses
beyond this level are to be reimbursed by the
tenant. May be applied to specific expenses only
(e.g. property taxes or insurance).
FFACE RENTAL RATE: The asking or nominal
rental rate published by the landlord.
FAIR MARKET VALUE: A term usually found
in appraisals that attempts to determine the cash
price that would likely be negotiated between a
willing seller and willing buyer in a reasonable
amount of time. For a sale to be considered a
reflection of Fair Market Value, it must meet all
the conditions of a fair sale whereby: (1) both
buyer and seller act prudently, knowledgeably,
and under no necessity to buy or sell, e.g. other
than in a forced or liquidation sale; (2) the
property must be offered on the open market
for a reasonable amount of time, taking into
consideration the property type and local
market; and (3) payment is made in cash or
terms equivalent to cash. When a sale is unlikely,
e.g. when it is unlikely to be completed within
12 months, the appraiser must discount all cash
flows generated by the property to ascertain the
estimate of Fair Value.
FEASIBILITY STUDY: An analysis of needs,
costs of recommended improvements, and anticipated
revenue and costs; establishes the basis
for the construction of an individual improvement
or a complete system.
FEE SIMPLE: An estate of real property that
the owner has unrestricted powers to dispose of
and which can be left by will or inherited.
Commonly used as a synonym for ownership.
FINANCE CHARGE: The cost of credit as a
dollar amount. It includes any charges payable
by the borrower as a condition of the loan. The
finance charge includes the total amount of
interest, points, loan fees, and other credit charges
paid for the term of the loan. Does not include
amounts charged for insurance premiums,
delinquency charges, attorney's fees, court costs,
collection expenses or official fees. Regulated by
state and federal truth in lending statutes which
require full disclosure of finance charges.
FIRREA: The Financial Institutions Reform
Recovery and Enforcement Act of 1989. The Act
Created the Resolution Trust Corp. (RTC) and
placed new restrictions on savings and loans
regarding real estate investment.
FIRST MORTGAGE: A mortgage creating a
lien against a property which has priority over
all other voluntary liens that exist against the
property. Foreclosure of a first mortgage lien will
generally extinguish or cut off any second
mortgage lien or other subordinate lien.
FIRST REFUSAL RIGHT: A clause occasionally
inserted into a lease that gives a tenant the first
opportunity to buy a property if the owner
decides to sell. The owner must have a legitimate/
good faith offer which the tenant can match or
refuse. Also known as Right of First Refusal.
FIXED COSTS: Costs, such as rent, which do
not fluctuate in proportion to the level of sales
FLEX SPACE: A one- or two-story building
with high ceilings, load-bearing floors, and loading
dock facilities, and little or no common
areas. Usually configured to allow a small
amount of office space in combination with light
assembly or warehouse/distribution uses.
FLOOR/AREA RATIO (FAR): The ratio of the
bulk area of a building to the land on which it is
situated. Calculated by dividing the total square
footage in the building by the square footage of
land area. A term commonly used to indicate the
allowable square footage of a building according
to zoning requirements.
FLOODPLAIN: Land adjoining a river that
would flood if the river overflowed its banks.
FORCE MAJEURE: A force that cannot be controlled
or resisted. Something beyond the control
of the parties involved. Includes acts of God
(e.g. flood, tornadoes, etc.) and acts of man (e.g.
riots, strikes, arson, terrorism, war, etc.).
FORECLOSURE: A proceeding, in or out of
court, designed to extinguish all rights, title, and
interest of the owner(s) of property in order to
sell the property to satisfy a lien against it.
FULL RECOURSE: A borrowing with an
unconditional guaranty. Should the borrower
become delinquent under a full recourse loan,
he or she must accept full responsibility for the loan.
FUTURE PROPOSED SPACE: Commercial
space in proposed development projects that
either have not started construction or set a construction
start date. Future proposed projects
include all those 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 that
have not yet been built.
GGENERAL CONTRACTOR: The party that
contracts for the construction of an entire building
or project rather than a portion of the work.
The general contractor hires subcontractors,
(e.g. plumbing contractors, electrical contractors,
etc.), coordinates all work, and is responsible for
payment to the 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
GRADUATED LEASE: A lease, generally long
term in nature, with varied rental payments and
usually based on periodic appraisal or simply
the passage of time or other contingencies such
as amount of traffic or gross income produced.
GRANT: To transfer an interest in real property such
as the fee or a lesser interest (e.g. an easement).
GRANTEE: One to whom a grant of property
or property rights is made; generally, the buyer.
GRANTOR: One who grants property or property
rights; generally, the seller.
GROSS ABSORPTION: Absorption is a
measure of the amount of office space leased
over a period of time. Gross absorption is a
measure of the total square feet leased over a
period of time with no consideration for office
space vacated in the same area during the same
period. See also Net Absorption.
GROSS BUILDING AREA: The total floor
area in an office building measured in square
feet or square meters that is associated with that
building's use as an office building. The area
extends to the outer surface of exterior walls and
windows and includes office area, retail area,
and other rentable areas such as vending
machine space and storage area but excludes
parking and roof space.
GROSS LEASE: A lease that provides that
the landlord shall pay all expenses of the leased
property, such as taxes, insurance, maintenance,
GROUND LEASE: A lease covering the use
of land only, with the lease sometimes secured
by improvements installed by the tenant. Also
called a land lease.
GROUND RENT: Rent paid for vacant unimproved
property. If the property is improved,
ground rent is that portion of the total earnings
attributable to the land only.
GUARANTOR: One who makes a guaranty.
Person who becomes secondarily liable for
another's debt or performance in contrast to a
strict surety who is primarily liable with the
principal debtor. See also Guaranty.
GUARANTY: Agreement whereby the guarantor
agrees to pay the debt or perform the obligation
of another who fails to do so. Differs from a
surety agreement in that there must be a failure
to pay or perform before the guaranty can be in
effect. Generally, rent is paid for a long-term
lease with lessor retaining title to land. It is commonly
renewable. Office buildings, hotels, and
similar large structures in cities are commonly
built on land under such types of ground leases.
HHIGHEST AND BEST USE: The reasonably
probable and legal use of vacant land or an
improved property, which is physically possible,
appropriately supported, financially feasible, and
that results in the highest value over a given
time. The four criteria the highest and best use must
meet are: legal permissibility, physical possibility,
financial feasibility, and maximum profitability.
HOLD OVER TENANT: A tenant who retains
possession after the expiration of a lease.
HVAC: The acronym for Heating, Ventilating,
and Air-Conditioning. Refers to the equipment
used to heat and cool a building.
IIMPROVED VALUE: An appraisal term that
encompasses the total value of land and
improvements rather than the separate values of
IMPROVEMENTS: Generally, the term refers
to buildings, but may include any permanent
structure or other development, such as a street,
utilities, etc. An addition made to property or an
amelioration in its condition amounting to more
than mere repairs or replacement, costing labor
or capital, and intended to enhance value, beauty, or
utility or to adapt it for new or further purposes.
INDIRECT COSTS: Development costs other
than direct material or direct labor costs, including
administrative and office expenses, title,
legal, survey, financing costs, and property taxes.
INVENTORY: When referring to a market of
office or industrial space, the total amount of
rentable square feet of existing and delivered
space in a given category; for example, prime
office space. Inventory refers to all space within
a certain proscribed market without regard to its
availability or condition and can include both
office and flex and warehouse space.
INVOLUNTARY CONVEYANCE: An involuntary
transfer of real property without the
consent of the owner, such as by a divorce decree,
JJUDGMENT: The decision of a court of law.
Money judgments, when recorded, become a
lien on real property of the defendant.
JUDGMENT LIEN: A lien placed against the
property of a judgment debtor. An involuntary lien.
JUST COMPENSATION: In a condemnation
proceeding, the term refers to the amount paid
by the government agency to the property
owner. The theory is that in order to be just, the
property owner should be no richer or poorer
than before the taking.
LLAND CONTRACT: An installment contract
for the sale of land whereby the seller has legal
title until paid in full. The buyer has equitable
title during the contract term.
LANDLORD'S LIEN: Several types of landlord's
liens are created by contract or by statute.
Some examples are: 1) a contractual landlord's
lien; 2) statutory landlord's lien; and 3) landlord's
remedy of distress (or right of distraint), which
is not truly a lien but has a similar effect.
LANDLORD'S WARRANT: A warrant enabling
a landlord to levy upon a tenant's personal property
(e.g. furniture, etc.) and to sell this property
at a public sale to collect delinquent rent.
LAND, TENEMENTS AND
HEREDITAMENTS: Originally used to
describe freehold estates only. The terms have
come to mean the most technical and all-inclusive
description of real estate.
LEASE: An agreement whereby the owner of
real property (e.g. landlord) gives the right of
possession to another (e.g. tenant) for a specified
period of time (e.g. term) and for a specified
consideration (e.g. rent).
LEASE COMMENCEMENT DATE: The
date on which beneficial occupancy commences
and the legal terms of the lease go into effect
LEASEHOLD IMPROVEMENTS: Improvements made to leased premises by a
tenant. The term is used in condemnation
proceedings to determine the portion of the
award to which the lessee is entitled. See also
Tenant Improvements and Workletter.
LEGAL DESCRIPTION: A method of geographically
identifying a parcel of land that is
acceptable in a court of law.
LEGAL OWNER: The term is used to distinguish
the legal owner from the equitable owner
and not as opposed to an illegal owner. The legal
owner has title to the property, although the title
may actually carry no rights to the property
other than to act as a lien.
LEGAL TITLE: Usually title without ownership
rights, such as the title placed in a trustee
under a deed of trust, or the title in a vendor
under a land contract.
LETTER OF CREDIT: An engagement,
pledge, or commitment by a bank or person,
made at the request of a customer, stating that
the issuer will honor drafts or other demands
for payment upon full compliance with the conditions
specified in the letter of credit.
LETTER OF ATTORNMENT: A letter from a
grantor to a tenant stating that a property has
been sold and directing rent to be paid to the
grantee (e.g. the new owner). See also Attorn.
LETTER OF INTENT: A formal method
through which a prospective developer, buyer,
or tenant expresses his/her interest in property.
Depending on the language, a legal obligation
may be created.
LIEN: An encumbrance against property for money,
either voluntary or involuntary. All liens are
encumbrances but all encumbrances are not liens.
LIENHOLDER: A mortgagee or other creditor
who has a lien against the property of another.
LIEN WAIVER (WAIVER OF LIENS): Generally, a waiver of mechanic's lien rights signed
by a general contractor and his subcontractors.
LIKE-KIND PROPERTY: A tax term used in
certain real property exchanges. Property must
be exchanged for like-kind property and the tax
consequences postponed pursuant to Section 1031
of the Internal Revenue Code. The term does not
refer to the physical similarity of the properties
but the purpose and intent of the taxpayer.
LIMITED PARTNERSHIP: A partnership created
under state law which consists of one or more
general partners who conduct the business and
are responsible for any losses, and one or more
special or limited partners who contribute capital
and are liable only up to the amount contributed.
LISTING AGREEMENT: An agreement
between a real estate broker and the property
owner which authorizes the broker to assist in
the sale or lease of that property in return for a
fee, commission or other form of compensation.
See also Exclusive Listing Agreement.
LONG TERM LEASE: A lease whose term
exceeds ten years, or in some regions five years,
from initial signing until the date of expiration or
LOT: A parcel of land. A part of a series of
parcels which make up a subdivision, the
boundaries of which are created by and shown
on a plat.
LUMP-SUM CONTRACT: A construction
contract requiring the contractor to complete a
building for a specified amount, usually established
by competitive bidding. The contractor
absorbs any loss or retains any profit.
MMAI: Member of Appraisal Institute
MAKER: One who executes (e.g. signs) a note
in the capacity of the maker (e.g. borrower).
MARKET INDICATORS: Statistical measures
of construction and real estate activity, including
issued permits, indices of building costs, deeds
recorded, and homes for sale.
MARKET PRICE: The price a property brings
in a given market. Commonly used interchangeably
with market value, although not truly the
same. See also Market Value.
MARKET RENT: The rental income that a
property would most probably command on the
open market based on current rents paid for on
the open market for comparable space. See also
MARKET STUDY: A forecast of future demand
for a type of project along with recommendations
as to quantity to be sold or leased and prices to
be charged. Also known as Marketability Study.
MARKETABLE TITLE: Title to real property
that can be readily marketed (e.g. sold) to a
reasonably prudent purchaser aware of the
facts and their legal meaning concerning liens
MARKET VALUE: The most probable price
which a property should bring in a competitive
and open market under all conditions requisite
to a fair sale, with the buyer and seller each acting
prudently and knowledgeably, and assuming
the price is not affected by undue stimulus.
Implicit in this definition is the consummation
of a sale as of a specified date and the passing of
title from seller to buyer under conditions
whereby: (1) buyer and seller are equally motivated;
(2) both parties are well informed or well
advised and acting in what they consider their
own best interests; (3) a reasonable time is
allowed for exposure in the open market; (4)
payment is made in cash or in financial arrangements
comparable thereto; and (5) the price
represents the normal consideration for the
property sold unaffected by special or creative
financial or sales concessions granted by anyone
associated with the sale.
MASTER LEASE: A primary lease that controls
subsequent leases and which may cover
more property than subsequent leases.
MASTER PLAN: (1) A zoning plan for an
entire governmental subdivision (e.g. a city). A
comprehensive plan to allow a city to grow in an
orderly manner, both economically and ecologically.
(2) A developer's plan for a multi-phase
office park or mixed-use development that takes
into account all proposed or projected uses,
improvements, and amenities.
MECHANIC'S LIEN: A claim 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
or improvements to land and which attaches to
the land as well as to the improvements.
METES AND BOUNDS: The boundary
lines of land described in accordance with
their terminal points and angles. Originally,
metes referred to distance and bounds referred
to direction. Today the words have no individual
meaning of practical significance.
MIXED-USE: Space within a building or project
provided for more than one use (e.g. an apartment
building with office space, a hotel with office
space, or a retail establishment with apartments).
MORTGAGE: The instrument that evidences
an interest in real estate and created to provide a
pledge as security for the performance or repayment
of a loan. The borrower (e.g. mortgager)
retains possession and use of the property.
MORTGAGEE: The party that lends the
money and receives the mortgage.
MORTGAGOR: The party that borrows the
money and gives the mortgage on the property.
NNET ABSORPTION: Net absorption is a
measure of the total square feet leased over a
period of time taking into consideration office
space vacated in the same area during the same
period. See also Gross Absorption. Absorption is
a measure of the amount of office space leased
over a period of time.
NET LEASE: A lease in which the tenant pays,
in addition to rent, certain costs associated with
a leased property, including property taxes,
insurance premiums, repairs, utilities, and maintenance.
There are also net-net (double net) and
net-net-net (triple net) leases, depending upon
the degree to which the tenant is responsible for
operating costs. See also Gross Lease.
NET RENTABLE AREA: Floor area of a building
less any vertical penetrations of the floors. No
deductions are made for necessary columns and
projections of the building (BOMA Standard).
NON-COMPETITIVE SPACE: Space in
office buildings that contain or are intended to
contain one office occupant so that the space is
rarely if ever available for lease or sublease.
NON-RECOURSE LOAN: A loan that does
not allow for a deficiency judgment against a
borrower in the event of default. The borrower
cannot be held personally liable. The lender's only
available recourse in the event of default is the
collateral or property.
NONJUDICIAL FORECLOSURE SALE: A
property sale by a trustee under a deed of trust,
or a mortgage under a power of sale of a mortgage.
OOPEN SPACE: The total area of land and/or
water not improved by a building, structure,
street, road, or parking area, or containing only
such improvements as are complementary,
necessary, or appropriate to the use and enjoyment
of the open area.
OPERATING EXPENSES: The actual cost of
operating income-producing property, including
management, utilities, and similar day-to-day
expenses, taxes, insurance, and reserves for the
replacement of items that wear out.
OPERATING COST ESCALATION: Refers
to the clause in a lease agreement used to adjust
rents over the term of a lease to account for
increased operating costs.
OWNERSHIP: Rights to the use, enjoyment, and
alienation of property to the exclusion of others.
PPARKING INDEX / PARKING RATIO: Figure representing the number of parking spaces
available per 1,000 square feet of gross building area
PARTIAL TAKING: The taking of part of an
owner's property under the laws of eminent
domain. Compensation must be based on damages
or benefits to the remaining property as
well as the portion taken.
PASS THROUGHS: (1) A method of escalation
found in modern leases whereby the tenant
directly pays increases in operating expenses of
the property. (2) A method of paying interest
directly to certificate holders of a mortgage pool.
(3) Building and operating expenses that are
paid by the tenant under the terms of a lease.
PE: Professional Engineer
PERCENTAGE LEASE: A lease, generally on
a retail business property, in which the rent is
calculated as a percentage of gross or net sales.
There is usually a minimum or base rent in the
event of poor sales.
PERFORMANCE BOND: A bond posted by
a contractor guaranteeing the owner that the
bonding company will complete construction if
the contractor defaults.
PHANTOM SPACE: Generally refers to
space that is under lease to a tenant but not
presently occupied. Usually created when a tenant
consolidates or reduces operations in space it
leases prior to the end of its lease term. The
vacant but leased space may or may not be formally
marketed on a sublet basis or counted
among a market's vacancy.
PITI (PRINCIPAL, INTEREST, TAXES,
AND INSURANCE): Acronym used to
indicate what is typically included in a monthly
mortgage payment on real property. Principal,
interest, taxes, and insurance are the four major
portions of a typical monthly payment.
PLAT (PLAT MAP): A map dividing a parcel
of land into lots, as in a subdivision.
POWER OF SALE: Clause in a mortgage or
deed of trust giving the mortgagee or trustee the
power to sell the property in the event of default.
PRECAST CONCRETE: Concrete building
components fabricated at a plant site and
shipped to the site of construction.
PRELEASE: A signed lease for space in an
office building or other project that has not yet
received a Certificate of Occupancy.
PRIME SPACE: First generation (new) space
that is currently available for lease but has never
before been occupied by a tenant.
PRIME TENANT: The major tenant in a
building, shopping center, etc.
PROFFER: (1) A development plan and/or
written condition that, when offered by an
owner and accepted by the county, becomes a
legally binding part of the property in question.
(2) To offer or tender, as in the production of a
document and offer of the same in evidence.
PUNCH LIST: An itemized list noting incomplete
or unsatisfactory construction. Usually
prepared by the tenant architect after the contractor
has notified the owner that the tenant space is
QQUITCLAIM DEED: A deed operating as a
release and, as such, intended to pass to the grantee
any title, interest, or claim that the grantor may
have in the property but not containing any
warranty of valid interest or title in the grantor.
RRAW LAND: Land in its natural state. Land
that has not been subdivided into lots, does not
have water, sewers, streets, utilities, or other
improvements necessary before a structure can
REO (REAL ESTATE OWNED): All real
estate directly owned by a lender, including real
estate taken to satisfy a debt. Includes real estate
acquired by lenders through foreclosure; or in
settlement of any other obligation to the lender.
REAL PROPERTY / REAL ESTATE: Land
and anything permanently affixed to the land,
such as buildings, fences, and those things
attached to the buildings, such as light fixtures,
plumbing and heating fixtures, or other items
which would be personal property if not
attached. May refer to rights in real property as
well as the property itself.
RECAPTURE: That portion of the gain from
the sale of real estate that is taxed at ordinary
income tax rates. Calculated as the difference
between the accelerated depreciation taken and
the straight-line depreciation that would have
RECOURSE: The right of a lender or holder of
a note secured by a mortgage or deed to look to
the personal assets of the borrower or endorser
for payment, not just to the property.
REHAB / REHABILITATION: A building
undergoing extensive renovation in order to
cure obsolescence. Some rehab projects are so
extensive that tenants may not be in the building
during the work period. Synonymous with
reconditioning, except when used in connection
with urban renewal, at which time it encompasses
all types of changes, including structural
and even street changes.
RENEWAL OPTION: The right of a tenant to
renew (e.g. extend the term of) a lease for a stated
period of time and rent at an amount that can
RENT: Consideration paid for the occupancy
and use of real property. A general term covering
any consideration (not only money).
RENT COMMENCEMENT DATE: The
date on which a tenant begins paying rent.
Depending upon the nature of the marketplace,
it may coincide with the lease commencement
date or it may be several months after. It will
never begin before the lease commencement date.
RENTABLE SQUARE FEET / RENTABLE
AREA: Usable square feet plus a percentage
(the core factor) of the common areas on the
floor, including hallways, bathrooms, and telephone
closets (and sometimes main lobbies).
Rentable square footage is the number of square
feet on which a tenant's rent is based.
RENTABLE/USABLE RATIO: The number
resulting from dividing the Total Rentable Area
in a building by the Usable Area. The inverse of
this ratio describes the proportion of space that
an occupant can expect to utilize.
RENTAL CONCESSION: See Abatement.
RENT-UP PERIOD: The period of time following
construction of a new building when
tenants are actively sought and the project is
approaching stabilized occupancy.
RIGHT OF FIRST REFUSAL: See First
RUNNING WITH THE LAND: This term is
generally synonymous with and usually used in
reference to easements and covenants. It also
means passing with the transfer of the land.
SSALE-LEASEBACK: A sale and subsequent
lease from the buyer back to the seller. Often, a
financing arrangement in which a property
owner sells all or part of the property to an
investor and then leases it back. Although the
lease actually follows the sale, both are agreed to
as part of the same transaction.
SECOND MORTGAGE: A mortgage that
ranks after 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 priority determines the designation
first, second, third, etc.
SECONDARY SPACE: Space that has been
previously occupied and becomes available for
lease. Includes both re-let and sublet space.
SECURITY DEPOSIT: Generally, a deposit
of money by a tenant with a landlord to secure
performance of a lease.
SEISEN (SEIZEN): The term originally
referred to the completion of feudal investiture
by which a tenant was admitted into the field to
render services to the lord or proprietor. Today it
has come to mean possession under a legal right
(usually a fee interest).
SETBACK: A distance from a curb, property
line, or structure, within which building is
prohibited. Setback requirements are normally
provided for by ordinances or building codes.
Provision in zoning ordinance regulating the
distance from the lot line to the point where
improvements may be constructed.
SETBACK ORDINANCE: Part of a zoning
ordinance that regulates the distance from the lot
line to the point where improvements may be
SIOR: Society of Industrial and Office Realtors
SITE ANALYSIS: The study of a specified
parcel of land (and the surrounding area) to
determine its suitability for a specific use.
SITE DEVELOPMENT: All improvements
made to a site before a building may be constructed,
such as grading, utility installation, etc.
SITE PLAN: A detailed plan, to scale, depicting
development of a parcel of land and containing
all information required by the zoning ordinance.
See also Master Plan.
SLAB: (1) A concrete floor used as a foundation
in homes without a basement. (2) Any concrete
floor, even if an upper story.
SPACE PLAN: A graphic representation of a
tenant's office space requirements, showing wall
and door locations, room sizes, and some
furniture layouts. Also called the Preliminary Plan.
SPECIAL ASSESSMENT: Any special charge
levied against real property for public improvements
(e.g. sidewalks, sewers, streetlights, etc.)
that directly benefit the assessed property.
SPECIFIC PERFORMANCE:A lawsuit in which
the court compels one of the parties to perform
or carry out the provisions of a contract into
which he has entered. Typically used when money
damages for breach would not be satisfactory.
SPECULATIVE SPACE: Any space that has
not been leased to a tenant prior to commencing
construction on a new building.
STEP-UP LEASE (GRADED LEASE): A
lease calling for set increases in rent at set intervals.
STRAIGHT LEASE (FLAT LEASE): A
lease calling for the same amount of rent to be
paid periodically (usually monthly) for the entire
term of the lease.
STRIP CENTER: Any shopping area, generally
with common parking, comprised of a row of stores.
SUBCONTRACTOR: One who works under
a general contractor; often a specialist, such as an
electrical contractor, cement contractor, etc.
SUBDIVISION PLAT / SUBDIVISION MAP: A detailed drawing, to scale, depicting division of
a parcel of land into two or more lots and containing
engineering considerations and other information
required. A map is typically submitted by a subdivider
to the proper governmental body for
approval in order to establish a subdivision. When
the map is approved and recorded, it becomes
the basis for the legal description of the subdivision.
SUBORDINATION AGREEMENT: An
agreement by which the priority of a mortgage
lender is relinquished in favor of that of a lender
who would otherwise be junior in status.
SURETY: One who voluntarily binds himself
to be obligated for the debt or obligation of
another. A common example is the co-maker of
a note. Surety differs from guarantor or insurance
carrier, although the terms are commonly (and
mistakenly) used interchangeably.
SURFACE RIGHTS: The rights (e.g. easements)
to use the surface of land, including the
right to drill or mine through the surface when
subsurface rights are involved.
SURVEY: The measurement of the boundaries of
a parcel of land, its area, and sometimes its topography.
TTAKING: A common synonym for
Condemnation or Eminent Domain.
TAX BASE: Assessed valuation of real property,
which is multiplied by the tax rate to determine
the amount of tax due.
TAX LIEN: (1) A lien for nonpayment of property
taxes. Attaches only to the property upon
which the taxes are unpaid. (2) A federal income
tax lien. May attach to all property of the person
owing the taxes.
TAX ROLL: A list containing the descriptions
of all parcels in the county, the names of the
owners (or those receiving the tax bill), assessed
values and tax amounts.
TENANT: (1) A holder of property under a
lease or other rental agreement. (2) Originally,
one who had the right to possession, irrespective
of the title interest.
TENANT AT WILL: One who holds possession
of premises by permission of the owner or landlord
but without agreement for a fixed term of possession.
TENANT IMPROVEMENTS: Improvements
to land or buildings to meet the needs of tenants.
May be new improvements or remodeling and
may be paid for by the landlord, the tenant, or shared.
See also Leasehold Improvements and Workletter.
TIME IS OF THE ESSENCE: Clause used in
contracts to bind one party to performance at or
by a specified time in order to bind the other
party to performance.
TITLE: The means whereby one has just and
full possession of real property.
TITLE INSURANCE: Insurance against loss
resulting from defects of title to a specifically
described parcel of real property. Defects may run
to the fee (e.g. chain of title) or to encumbrances.
TITLE SEARCH: A review of all recorded
documents affecting a specific piece of property
to determine the present condition of title.
TOTAL INVENTORY: Total square footage of
rentable office or industrial space, vacant and
occupied, ready for tenant finish. Includes
TRADE FIXTURES: Personal property used in a
business and attached the property, but removable
upon sale because it is deemed to be part of
the business, not of the real estate.
TRIPLE NET (NNN) RENT: Rent stipulated
in a lease in which the tenant agrees to pay a
share of the landlord's operating expenses
including insurance, maintenance, or real estate
taxes for the building proportionate to the
amount of space it occupies. See also Full
TURN KEY PROJECT: A project in which the
developer is responsible for the total completion
of a building (including interior design and
construction) or demised premises to the customized
requirements of a future owner or tenant.
UUNDER CONSTRUCTION: Planned buildings
for which construction has started but have
not yet been granted a Certificate of Occupancy.
Planned buildings are not included.
UNDER CONTRACT: A property for which a
purchase offer has been accepted by the seller is
said to be under contract. Generally, the
prospective buyer is given a certain period of
time in which to perform feasibility studies and
finalize financing arrangements. During the time,
the seller cannot entertain offers from other buyers
unless the purchase contract is allowed to
expire without going to closing.
UNENCUMBERED: Describes title to property
that is free of liens and any other encumbrances.
Free and clear.
UNIMPROVED LAND: Most commonly
refers to land without buildings; it can also mean
land in its natural state. See also Raw Land.
USE: Specific purpose for which a parcel of
land or a building, or a portion thereof, is designed,
arranged, intended, occupied or maintained.
VVACANCY FACTOR: The amount of gross
revenue lost because of vacant space; an allowance
item on pro forma income statements
usually calculated as a percentage of gross revenue.
VACANCY RATE: A measurement expressed
as a percentage of the total amount of available
space compared to the total inventory of space.
Computed by multiplying vacant space times
100 and divided by total inventory. May be based on
past records of the property or a professional
guess if a new project. Surrounding area buildings,
if similar, may be used for comparison.
VACANT SPACE: Existing space which is
currently being marketed for sale or lease,
excluding sublet space.
VARIANCE: A permit that grants a property
owner relief from certain provisions of a zoning
ordinance when, because of the particular physical
surroundings, shape, or topographical condition
of the property, compliance would result in a
particular hardship or practical difficulty which
would deprive the owner of the reasonable use
of the land or building involved.
VENDEE: Purchaser or buyer, generally used
in real property context.
VENDOR: The person who transfers property
by sale. A synonym for seller. Commonly used
in land contract sales.
WWARRANTY: A legal binding promise made
at the time of a sale whereby the seller gives the
buyer certain assurances as to the condition of
the property being sold.
WEAR AND TEAR: The deterioration or loss
in value caused by the tenant's normal and reasonable
use of the property. In many leases the tenant
is not responsible for normal wear and tear.
WEIGHTED AVERAGE RENTAL RATES: Rental rates averaged to the amount of space
available in each building per market area.
WORKLETTER: The standard building items
that the landlord contributes as part of the tenant
improvements, as traditionally listed in an
addendum or workletter attached to the lease.
Examples of standard building items are: doors,
partitions, lights, floor covering, telephone outlets,
etc. The Workletter may specify the quantity
and quality of the materials to be used and often
carries a dollar value.
WORKING DRAWINGS: The set of plans for
a project that, in combination with a set of specifications,
comprise the contract documents
indicating the exact manner in which a project
should be built. See also Contract Documents.
WORKOUT: The process by which a borrower
attempts to negotiate with a lender to restructure
the borrower's non-performing and overdue debt
rather than go through foreclosure proceedings.
ZZONING: A method of regulating use of real
estate by dividing a city or other area into zones
and designating which uses may be permitted
for land in each zone.
ZONING ORDINANCE: The set of laws and regulations,
generally at the city or county level, that
control the use of land and construction of
improvements in a given area or zone.