LPB Commercial Real Estate Glossary

Commercial Real Estate Terms

• Assignee - Individual to whom a contract is assigned.
• Assignor - An individual who transfers a contract to another individual.
• Base Year Lease – Represents base year expenses. In these leases tenants pay a prorate share of increase in expenses over base year.  Landlord’s expenses stay at base year lease rates.
• Cap Rate - Net Income/Purchase Price * 100
• Capital Improvement - Any major physical development or redevelopment to a property that extends the life of the property.
• Char Service – Janitorial service expenses.
• Chattel - Household goods, including personal property such as lamps, desks, and chairs.
• Common Area Maintenance (CAM) - This is the amount of additional rent charged to the tenant, in addition to the base rent, to maintain the common areas of the property shared by the tenants and from which all tenants benefit. Examples include: snow removal, outdoor lighting, parking lot sweeping, insurance, property taxes, doorman, concierges, security, alarm, utilities associated with common areas, etc. Most often, this does not include any capital improvements that are made to the property.
• Covenants - Wording found in deeds that limit or restrict the use to which a property may be put.
• Deed Restriction - An imposed restriction in a deed that limits the use of the property. For example, a restriction could prohibit the sale of alcoholic beverages.
• Ejectment - Action to regain possession or real property. This is a last-ditch effort that is used when there is no relationship between landlord and tenant.
• Eminent Domain - The government's right to condemn and acquire property for public use. The government must provide the owner fair compensation.
• Escrow - A written agreement among parties, requiring that certain property/funds be placed with a third party. The object in escrow is released to a designated entity upon completion of some specific occurrence.
• Estoppel Certificate - A legal instrument executed by the one taking out the mortgage (i.e., mortgagor). The owner of a property may require an individual leasing a property to sign an estoppel certificate, which verifies the major points (i.e., base rent, lease commencement and expiration) existing lease between the landlord and tenant.
• Eviction (Actual) - Physical removal of a tenant either by law or force.
• Eviction (Constructive) - The landlord or his agents disturb the tenant, rendering the leased space unfit for the tenant's previous use.
• Exclusive Agency - An agreement in which one broker has exclusive rights to represent the owner or tenant. If another broker is used, both the original and actual broker are entitled to leasing commissions.
• Fiduciary - A person who represents another on financial/property matters.
• Fixtures -Personal property so attached the land or building (i.e., improvements) it is considered part of the real property.
• Flex Space – Building is flexible and can be office, warehouse, and other industrial uses.
• Gross Lease - A lease of property whereby the landlord (i.e., lessor) pays for all property charges usually included in ownership. These charges can include utilities, taxes, and maintenance, among others.
• Joint Tenancy - Ownership of real property by two or more individuals, each of whom has an undivided interest with the right of survivorship.
• Lease - A contract whereby the landlord grants the tenant the right to occupy defined space for a set period at a specific price (i.e., rent).
• Leasehold - The estate or interest a tenant has as stated in the tenant's lease.
• Lessee - An individual (i.e., tenant) to whom property is rented under a lease.
• Lessor - An individual (i.e. landlord) who rents property to a tenant via a lease.
• Letter of Intent - An informal, usually non-binding, agreement among parties indicating their serious desire to move forward with negotiations.
• Listing - An employment contract between principal and agent that authorizes the agent (such as a broker) to perform services for the principal and his property.
• Loss Factor - What percentage of the gross area of a space is lost due to walls, elevator, etc. Rule of thumb in Manhattan is approximately 15%.
• Market Price - The actual selling or leasing price of a property.
• Market Value - The expected price that a property should bring if exposed for lease in the open market for a reasonable period of time and with market savvy landlords and tenants.
• Multiple Listing - An arrangement among Real Estate Board of Exchange Members, whereby each broker presents the broker's listings to the attention of the other members so that if a lease results, the commission is divided between the broker bringing the listing and the broker making the lease.
• Negative Absorption - the sum of both space vacated and empty new square footage coming on line.
• Net Lease - Also called triple net lease. The lessee pays not only a fixed rental charge but also expenses on the rented property, including maintenance.
• Non-Disturbance Agreement - The tenant signs this to prevent himself from being evicted if the property owner does not pay its mortgage to the bank.
• Notary Public - A public officer who is authorized to witness and verify certain documents (i.e., contracts, deeds, mortgages). Also, an affidavit may be sworn before this public officer.
• Obligee - The person who will receive the outcome of an obligation.
• Obligor - An individual who has engaged to perform an obligation to another person (i.e., obligee).
• Open Listing - A listing given to any broker without liability to compensate any broker except the one who first secures a buyer who is ready, willing, and able to meet the terms of the listing, or secures the acceptance by the landlord of a satisfactory offer; the lease of the property automatically terminates the listing.
• Option - A right given to purchase or lease a property upon specified terms within a specified time. If the right is not exercised, the option holder is not subject to liability for damages. If the holder of the option exercises it, the grantor of option must perform the option's requirements.
• Percentage Lease - A lease of property in which the rent is based upon the percentage of the sales volume made on the specific premises. There is usually a clause for a minimum rent as well.
• Personal Property - Any property which is not real property. Examples include furniture, clothing, and artwork.
• Power of Attorney - A written instrument duly signed and executed by an individual which authorizes an agent to act on his behalf to the extent indicated in the document.
• Principal - The employer (i.e., landlord) of an agent or broker. This is the agent's or broker's client.
• Quiet Enjoyment - The right of an landlord or tenant to use the property without disturbances.
• Real Estate Syndicate - When partners (either with or without unlimited liability) form a partnership to participate in a real estate venture.
• Real Property - Land and any capital improvements (i.e., buildings) erected on the property.
• Reserves for Replacement – Are funds put aside by the landlord from proceeds from the tenant for replacement (typically for roof and redoing parking lot).
• Residential Hotels with Residential Designation - Residential meaning can be rented by the week or month but not nightly.  During tourist season May thru Oct 25% of rooms can be rented nightly.
• Restriction - A restriction, often specified in the deed, on the use of property.
• Situs - The location of a property.
• Specific Performance - When a court requires a defendant to carry out the terms of an agreement or contract.
• Square Feet - The usual method by which rental space is defined. It is the area of that space, calculated by taking length times width. For example, a room 30 feet by 60 feet has an area of 1,800 square feet.
• Subagent - An agent of an individual already acting as an agent of a principal.
• Subletting - The leasing of space from one tenant to another tenant.
• Surrender - The cancellation of a lease by mutual consent of the tenant and the landlord.
• Tenancy at Will - A license to occupy or use lands and buildings at the will of the landlord.
• Tenancy by the Entirety - An estate which exists only between husband and wife. Each has equal right of enjoyment and possession during their joint lives, and each has the right of survivorship.
• Tenant Improvements - Work done on the interior of a space, can be paid for by landlord, tenant, or some combination of both, depending on the terms of the lease.
• Tenant Improvement Allowance (TI) - Landlord agrees to provide property to Tenant in a certain condition and a Tenant Improvement Allowance for the tenant to develop the property.
• Tenancy in Common - Ownership of property by two or more individuals, each of whom has an undivided interest, without the right of survivorship.
• Tenants at Sufferance - An individual who comes to possess land via lawful title and keeps it in perpetuity without any title.
• Tie-in Arrangement - A contract where one transaction depends upon another transaction.
• Triple Net Lease - A lease requiring tenants to pay all utilities, insurance, taxes, and maintenance costs.
• Valuation - Estimated price, value, or worth. Also, the act of identifying a property's worth via an appraisal.
• Variance - Government authorization to use or develop a property in a manner which is not permitted by the applicable zoning regulations.
• Violation - Act, condition, or deed that violates the permissible use of property.
• Void - Something that is unenforceable.
• Voidable - A situation which is capable of being unenforceable but is not so unless direct action is taken.
• Waiver - The intentional relinquishment or abandonment of a specific claim, privilege, or right.
• Work Letter - An amount of money that a landlord agrees to spend on the construction of the interior of a space per the lease, usually negotiated.
• Zone - An area, delineated by a governmental authority, which is authorized for and limited to specific uses.
• Zoning Ordinance - A law by a local governmental authority (i.e., city or county) that sets the parameters for which the property may be put to use.