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Abatement:
A reduction or decrease; 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.
Absorbed
Space:
Net change in leased space between two dates.
Absorption:
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. Also called 'Market Absorption."
Absorption
Period: The
number of months required to convert vacant space into leased space
assuming no new delivered space. Computed by dividing the space
absorbed monthly, on average, during a recent period into the current
vacant space.
Ad
Valorem:
(According to value) Used in reference to general property tax, which
is usually based on the official valuation of property.
Add
On Factor:
Considered a loss factor, the percentage of gross rentable square
footage, which is lost to the tenant’s physical occupancy.
Adequate
Rate Covenant:
An agreement often required in revenue bond projects; guarantee's
the operator will charge adequate rates to produce revenue necessary
to cover principal and interest payments.
Alienation
Clause:
A
type of acceleration clause where a debt becomes due in its entirety
upon the transfer of ownership of a secured property.
Allowance
Over Building Shell:
One
of three arrangements often used for financing tenant improvements
(finishing out space to accommodate a tenant with improvements such as
walls, doors, carpeting etc.) Often used in a new construction, this
arrangement caps the landlord's expenditure 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
allowance, requiring the landlord to return the savings in the form of
rent abatement or other concession.
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 time of performance, informs
the other of his or her intent not to perform. Example: The buyer
informs the seller before the closing date of his or her intent not to
buy.
Appraisal:
The estimation and opinion of value placed upon a piece of land based
upon a factual analysis by a qualified professional; the process of
estimation and the report itself.
Appreciation:
An increase in the value of property caused by all improvement or the
elimination of negative factors.
"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 and/or real
estate rather than on the financial strength of the business, which is
the primary criterion for banks.
Assignment:
A
transfer between parties of title to any property, real or personal,
of all 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 all other money or goods. To agree to
recognize a new owner of a property and to pay him rent. See also
''Letter of Attornment."
Balloon
Payment:
A
large payment due on a loan. 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
1)), 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
expressed or implied by law in the conveyance document.
Buffer: A
strip of land established as a transition between distinct land uses.
May contain natural or planted shrubs, walls or fencing singly or in
combination.
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 and tenancy. Can compete
at low end of Class A.
Class
"C" Generally
an older building with growing functional land/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
tenant improvements. 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 'Work letter."
Building
Standard Plus Allowance:
One
of three arrangements often used for financing tenant improvements
(finishing out office space to accommodate a tenant such as walls,
doors, carpeting etc.) Under this arrangement the landlord lists in
detail all materials and costs to make the premises suitable for
occupancy and provides a negotiated allowance for the tenant to
customize or upgrade materials. See Also: 'Work letter,"
Build
out:
The
cost of configuring and finishing new or relet 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.
Bullet
Loan:
Also
known as a Construction Loan, any of a variety of short term
(generally five to seven 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 risk involved in construction and lease up had been
overcome resulting in an income producing property.
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). See "Capitalization Rate."
Capitalization
Rate:
The
rate that is considered a reasonable return on and of 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:
Various costs that are incidental to property ownership (e.g. costs
and maintenance, taxes, insurance expenses).
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 0" or a Non-Residential Use
and Occupancy Permit.
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:
A structure with 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
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 included in the common
area.
Common
Area Charges:
Include
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
maintenance on common areas and defining the basis on which charges
are made and the type of cost items allocable to maintenance of the
common area. Of the ways to prorate the charges among tenants, the
most common 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.
See attached article-
Comparables:
Recorded
sales of properties similar in size, use, construction quality, age,
and often located within the same sub market used as comparisons to
determine the fair market value of another particular property.
Competitive
Space:
Space
in office buildings, which contain or are intended to contain more
than one occupant. In addition to the multiple tenant criterion,
typical characteristics of Competitive Space include: tenants
generally have short-term leases (10 years or less) and the interior
of the building is not designed with one organization in mind but
rather to accommodate the widest variety of tenants.
Concessions:
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:
Construction
supervision by a qualified manager.
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. Also called "Cost of Living Index,"
Contiguous
Space:
Adjoining
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;”‘
Working Drawings."
Contract
Rent:
Rent
paid under a lease. The actual rent paid 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.
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.
Cumulative
Discount Rate:
A
discount factor applied to the rental rate that takes into effect all
landlords lease concessions expressed as a percentage of base rent.
Dedicate:
Transfer of property from private to public ownership.
Deed:
Generally, a conveyance instrument given by the seller to pass fee
title to property upon sale.
Deed
In Lieu Of Foreclosure:
A deed given by an owner/borrower to a tender 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
general failure to perform a promised task 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.
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.
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.
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.
Earnest
Money:
The monetary advance by a purchaser of part of the purchase price as
evidence of good faith. The earnest money is used to bind the parties
to the contract of sale. See also 'Deposit."
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 be
different.
Effective
Rent:
The rental rate actually 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.
Efficiency
Factor:
The number resulting from dividing the Usable Area by the Gross
Building Area in all office building, providing a benchmark
measurement for that building's use as all office building.
Eminent
Domain:
A
right of' the government to acquire private properly for public use by
condemnation, in return for just compensation. See also
"Condemnation."
Encroachment:
Generally,
a structure which 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 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, often used by
non-bank lenders with start up businesses, the lender gets not only
interest payments and principal repaid, but the right to buy equity
(part ownership in the company) as well. Equity participation is
generally required for riskier deals or in return for lower rates.
Equity
Participation:
'File
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. Also called "Equity
Kicker."
Equity
of Redemption:
Not
the same as the redemption period after a foreclosure sale, which is a
right established by statute; properly, the right to pay off the
mortgage lien in default by payment of the principal, interest and
costs due.
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.
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 ease 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 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.
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).
Face
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,
i.e., 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, i.e., 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.
FIRREA:
The Financial Institutions Reform Recovery and Enforcement Act of
1989. 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, which 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 in 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 offer that the tenant can match or
refuse.
Fixed
Costs:
Costs, such as rent, which do not fluctuate in proportion to the level
of sales or production.
Flex
Space:
A one- or two-story buildings with little or no common areas, high
ceilings, load-bearing floors and loading dock facilities. 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.
Floodplain:
Land adjoining a river that would flood if the river overflowed its
banks.
Force
Majeure:
A force that cannot be controlled or resisted. In other words,
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, 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.
Full
Service Rent:
A rental rate that includes operating expenses and real estate taxes
for the first year. The tenant is generally still responsible for any
increases in operating expenses over the base year amount. See also:
"Pass Through."
Functional
Design:
Design of a structure or facility that increases its overall
efficiency and provides maximum user acceptance; a parking concept
plan showing traffic flow, stall geometry, and other features that
determine the interior design of parking facilities.
Future
Proposed Space:
Commercial space in proposed development projects, which 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 multiphase
project that have not yet been built.
General
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 Partnership;" 'Partnership''
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.
Grant:
To transfer an interest in real property, either the fee or a lesser
interest, such as 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 buildings use as 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, utilities,
etc.
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. 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 la surety
agreement in that there must be a failure to pay or perform before the
guaranty can be in effect.
Hard
Dollars:
The
actual cash proceeds from a loan that is given to the seller. See also
"Soft Dollars."
Highest
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. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility and maximum profitability.
High
Rise:
A building higher than 25 stories above ground level.
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.
Improved
Value:
An
appraisal term that encompasses the total value of land and
improvements rather than the separate values of each improvement.
Generally, the term refers to buildings, but may include any permanent
structure or other development, such as a street, utilities, etc. See
also "On Site Improvements "
Indirect
Costs:
Development costs other than direct material or direct labor costs,
including administrative and office expenses, 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:
A
transfer of real property without the consent of the owner, such as by
a divorce decree, condemnation, etc.
Judgment:
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.
Judgment
Mortgage:
A
mortgage creating a lien, which is inferior or subordinate to a
prior lien. Foreclosure of a junior mortgage will not extinguish any
lien, which is superior to it. See also "First Mortgage;"
"Second Mortgage."
Just
Compensation:
In a condemnation proceeding, the term refers to the amount paid 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.
Land
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.
Lease:
An agreement whereby the owner of real property (i.e., landlord) gives
the right of possession to another (i.e., tenant) for a specified
period of time (i.e., term) and for a specified consideration (i.e.,
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 lease premises by a tenant. See also "Tenant Improvements
"Work letter."
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 from 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 (i.e., 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.
Lien
holder:
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.
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:
A written 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 from initial signing until the
date of expiration or renewal option.
Lot: A
parcel of land, generally part of a series of parcels which make up a
subdivision, the boundaries of which are created by and shown on a
"plat."
Low
Rise:
A building with fewer than seven stories above ground level.
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.
Maker:
One
who executes (i.e., signs) a note in the capacity of the maker (i.e.,
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:
Rent
generally encountered in any given market. See "Economic
Rent."
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 called "Marketability Study."
Marketable
Title:
Title
to real property that can be readily marketed (i.e., sold) to a
reasonably prudent purchaser aware of the facts and their legal
meaning concerning liens and encumbrances.
Market
Rent:
The
rental income that a property would most probably command on the open
market-, indicated by current rents paid and asked for comparable
space as of the date of the appraisal.
Market
Value:
The
most probably price which a property should bring a competitive and
open market under all conditions requisite to a fair sale, the buyer
and seller, each acting prudently and knowledgeably, and assuming the
price is not affected by undue stimulus. Implicit is 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 typically 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 terms of cash in U.S. dollars or in
terms of 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).
(2) A comprehensive plan to allow a city to grow in an orderly manner,
both economically and ecologically. (3) A developer's plan for a
multiphase office park or mixed-use developments that takes into
account all proposed or projected uses, improvements and amenities.
Mechanic's
Lien:
A
claim created by state statutes for the purpose of securing priority
of payment for the price or value of work performed and materials
furnished in construction or repair of improvements to land, and which
attaches to the land as well as 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.
Mid-Rise:
A
building with between 7 and 25 stories above ground level.
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 (i.e., mortgagor) 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.
Net
Absorption:
Absorption
is a measure of the amount of office space leased over a period of
time. 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."
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-Recourse
Loan:
A
loan, which 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.
Open Listing: A type of listing
agreement in which more than one real estate agent may be employed
to sell the property. The owner pays a commission only to the agent
who finds the buyer. This listing is also known as a simple listing
or a general listing and the owner is not obligated to pay anyone a
commission if the owner personally sells the property. Such a
listing is often used by builders and developers who agree to pay a
sales commission to any agent who sells a house or lot in their
subdivision.
Open
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
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.
Ownership:
Rights
to the use, enjoyment, and alienation of property to the exclusion of
others.
Parking
Index:
Figure representing the number of parking spaces available per 1,000
square feet of gross leasable 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
Through:
Building
and operating expenses that are paid by the tenant under the terms of
a lease.
Percentage
Lease:
A lease, generally on a retail business property, in which the rent is
calculated as a percentage of 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 included in a monthly mortgage payment on
real property. Principal, interest, taxes and insurance are the four
major portions of a typical monthly payment.
Planned
Delivery Space:
Office space that is currently under construction or renovation and
will be completed (delivered to the market) within two years. Does not
include Proposed or Future Proposed Space.
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.
Pre
lease:
A signed lease for space in a multi-tenant office building, which 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:
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.
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 substantially complete.
Quit
Claim 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.
Raw
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 be constructed.
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:
(1) 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. (2) 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 been allowed.
Recourse:
The right of a lender or holder of a note secured by a mortgage to
look to the personal assets of the borrower or endorser for payment
should, not just to the property.
Rehab: 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.
Renewal
Option:
The right of a tenant to renew (i.e., extend the term of) a lease for
a stated period of time and rent at an amount that can be determined.
Rent:
Consideration paid for the occupancy and use of real property. A
general term covering all 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:
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 of 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 ail occupant can expect to utilize.
Rental
Concession:
Rent forgiven by Landlord. 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:
Right
to purchase or lease based on specific terms negotiated by two or more
parties. See "First Refusal Right."
Running
With The Land:
This
term is generally synonymous with and usually used in reference with
easements and covenants. It also means passing with the transfer of
the land.
Sale
Leaseback:
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 safe, 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 t lie
designation first, second, third, etc.
Secondary
Space:
Space which -has been previously occupied and becomes available for
lease. Includes both relet and sublet space.
Security
Deposit:
Generally, a deposit of money by a tenant with a landlord to secure
performance of a lease.
Setback:
The distance from a lot line or other reference point, within which no
structure may be located.
Setback
Ordinance:
Part of a zoning ordinance that regulates the distance from the lot
line to the point where improvements may be constructed.
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:
The exposed wearing surface laid over the Structural support beams of
a building.
Soft
Dollars:
That portion of equity investment that may be tax-deductible in the
first year. See also "Hard Dollars.
Space
Plan:
Sometimes called the preliminary plan. A graphic representation of a
tenant's office space requirements, showing wall and door locations,
room sizes, and some furniture layouts.
Special
Assessment:
Any special charge levied against real property for public
improvements (e.g., sidewalks, sewers, etc.) that 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.
Speculative
Space:
Any prime 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:
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.
Subordination
Agreement:
An
agreement by which the priority of a mortgage lender is relinquished
in favor of that of a lender that 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, although the terms are commonly (and
mistakenly) used interchangeably.
Surface
Rights:
The rights (i.e., 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.
Taking:
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. (2) Originally, one who had
the right to possession, irrespective of the title interests.
Tenant
At Will:
One
who holds possession of premises by permission of the owner or
landlord, but without agreement for a fixed term.
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;"
"Work letter."
Tenent Occupancy Costs (TOC): The costs, generally in a shopping
center, associated with the operating costs charged to the tenant,
usually at a fixed amount. See attached
article.
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 (i.e.,
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 owner occupied space.
Trade
Fixtures:
Personal
property used in a business and attached to a structure, 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 or real estate taxes for the building
proportionate to the amount of space it occupies. See also Full
Service Rent."
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.
Under
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 the seller has accepted a purchase offer 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 is
designed, arranged, intended, occupied or maintained.
Vacancy
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.
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. Another word for
"seller." Commonly used in land contract sales.
Warranty:
A
binding promise made at the time of a sale whereby the seller gives
the buyer certain assurances as to the condition of the property.
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." See also "Normal Wear and
Tear."
Weighted
Average Rental Rates: Rental
rates averaged to the amount of space available in each building per
market area.
Work
Letter:
The standard building items that the landlord contributes as part of
the tenant improvements. Examples of standard building items are:
doors, partitions, lights, floor covering, telephone outlets, etc. The
Work Letter 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 t e 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 debt rather than go through foreclosure
proceedings.
Zoning:
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 01 kind
and construction of improvements in a given area or zone.
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