Glossary of Terms

ABOVE BUILDING STANDARD- Services and finishes provided by a landlord that exceeded those provided under the base rent. The tenant reimburses above standard services to the landlord.

ACCEPTANCE - Voluntary agreement to an offer.

ACCESSIBILITY - The location of a site in terms of how easily it may be reached by customers, employees, carriers, and others necessary to the intended use of the property.

ACKNOWLEDGEMENT - A written declaration by a person executing an instrument, given before and officer authorized to give an oath (usually a notary public), stating that the execution is of his own volition.

ACRE - A measure, usually of land, equal to 160 sq. rods (43,560 sq. ft.) in any shape.

ADDENDUM – Something added. A list or other material added to a document, letter, contractual agreement, escrow instructions, etc.

ADDITIONAL RENT- (1) Results from lease provisions that allow increases of fixed expenses, such as taxes and insurance, to be passed on to the lease on a prorated or other agreed- upon basis. (2) A lease term that obligates a tenant to pay certain expenses in addition to the tenant’s periodic rent. Additional rent often includes late payment fees, costs of collection, and other miscellaneous expenses and may include operating expenses in excess of an expense stop.

ADVERSE LAND USE – A use, which causes surrounding property to lose value, such as an industrial development in a residential area.

APPRAISIAL REPORT – A written report by an appraiser containing an opinion as to the value of a property and the reasoning leading to this opinion. The factual data supporting the opinion, such as comparables, appraisal formulas, and qualifications of the appraiser, will also be set forth.

AREA AMENITIES- Those amenities within the neighborhood or the geographic area surrounding a building and comparable buildings.  

AS-IS OR AS-BUILT CONDITION- The existing condition of a tenant space, including all improvements.

ASSESSED VALUE – Value placed upon property for property tax purposes by the tax assessor.

ASSESSOR – One who estimates value of property for tax purposes.  

ATTRIBUTABLE COSTS- Costs that can be directly associated with a particular project, program, or cost center. These costs are often called pass-through costs.

AVERAGE DAILY TRAFFIC – The number of vehicles passing a given point in one day. Usually obtained by finding the number for several days and averaging.

BASE YEAR- (1) A term used to calculate a base of operating expenses over which a tenant is expected to pay his or her proportionate share; usually, the base year is the calendar year in which the lease is signed. (2) A term used to calculate a base of operating expenses over which a tenant is expected to pay its proportionate share; usually, the “base year” is the calendar year in which the lease is signed.

BREECH OF CONTRACT – Failure to perform a contract, in whole or part, without legal excuse.

BROKERAGE - The act of bringing together principles (buyer-seller; landlord-tenant; etc.) for a fee or commission, rather that acting as a principle.

BROKER’S PRICE OPINION (BPO)- The broker’s written opinion of the value of real property. It justifies the value on the basis of the condition of the property and compares it with similar ones on the market.

BUILDING OPERATIONS AND MAINTENANCE- Includes management of building systems, such as HVAC (heating, ventilation, and air conditioning), electrical, plumbing, security, and in some cases, data and telecommunications cabling; maintenance of building structures and interiors, furniture, and equipment; and maintence of grounds, landscaping, and site improvements.

BUILD TO SUIT- -A method of leasing property whereby the lessor builds to suit the tenant (according to the tenant’s specifications) The cost of construction is figured into the rental amount of the lease, which is usually for a long term.

CAPITAL EXPENDITURES – Money spent on improvements such as land, buildings, machinery, and similar major expenditures, which are, not inventory.

CASH FLOW – In investment property, the actual cash investor will receive after deduction of operation expenses and debt service (loan payment) from his gross income.

CERTIFICATE OF INSURANCE- Written verification of types, terms, and amounts of insurance carried by the named insured, which are sent to those who require proof of such coverage.

CERTIFICATE OF OCCUPANCY – A certificate issued by a local building department to a builder or renovator, stating that the building is in proper condition to be occupied.

CHARGEBACK- A cost for facilities department services, materials, or products levied on an end user of space.

CLOSING STATEMENT – The statement, which lists the financial settlement between buyer and seller, and also the costs each must pay. A separate statement for buyer and seller is sometimes prepared.

CONDITIONAL USE PERMIT – Approval by the government body that controls zoning of a use not permitted by the zoning. The procedure is less complicated than applying for a change of zoning.

CONTIGUOUS SPACE- Space that is directly adjacent to another space or spaces, or space that is directly above or below a specific space.

CORE FACTOR- The number of square feet in a multi-tenant building devoted to the lobby and hallways and for which each tenant is assessed a certain percentage.

DEED RESTRICTIONS – Limitations on the use of property placed in the conveyancing deed by the grantor, which bind all future owners.

DOUBLE-NET LEASE- A lease where rent payments cover triple net plus building insurance premiums. The tenant pays for everything except taxes.

EASMENT – A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another.

EFFECTIVE RENTAL RATES- Rental rates that include landlord concessions to a tenant to induce the signing of a lease. These concessions include free rent, paid moving expenses, and similar costs paid by the landlord.

ENVIRONMENTAL SITE ASSESSMENT – A physical inspection of a site (land or improvement) to determine if environmental problems exist.

ESCROW – Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event. Modernly, in some states, all instruments necessary to the sale (including funds) are delivered to a third (neutral) party, with instructions as to their use.

ESTOPPEL- A legal principle that prevents one party from claiming to have a certain right when that party has previously acted in a manner implying lack of any interest in that right. (2) A legal principal that bars a person from denying the truth of a matter that has been either conclusively determined in a prior law suit, or previously claimed, asserted, or otherwise represented by such a person as being true.

EVIDENCE OF TITLE – A document establishing ownership to property. Most commonly, a deed.

EXCLUSIONS- This area of an insurance policy describes the limitations of coverage under the policy and states specifically what the policy does not cover.

EXCULPATORY CLAUSE- A clause in a contract or agreement that holds a party harmless in the event of a default. (2) Lease term that limits the liability of landlords and tenants.

EXPENSE PASS-THROUGHS- Lease clauses that require a tenant to reimburse the landlord for expenses such as insurance and taxes beyond a fixed amount; common in single-net and double-net leases.

EXPENSE STOP- A measure of operating expenses paid by the landlord.

FAIR MARKET VALUE – Price that probably would be negotiated between willing seller and willing buyer in a reasonable time. Usually arrived at by comparable sales in the area.

FIDUCIARY – One acting in a relationship of trust, regarding financial transactions.

FIXED EXPENSES- Expenses over which a business has little control; determined mostly by outside agents, whose actions a company cannot influence, and include ad valorem (value-based) taxes (such a property taxes), property insurance premiums, and utility demand charges.

FOOTPRINT- The actual size and shape of a workstation as a portion of floor space; also refers to the size and shape of a building as it sits on a piece of land.

FORCE MAJEURE CLAUSE- A contract term that excuses the performance of one of the parties to the contract when certain listed circumstances occur.

FULL SERVICE LEASE- A lease in which the landlord provides some tenant services (i.e., janitorial, snow removal) and in which some operating expenses are passed through to the tenant.

GROSS LEASE- A lease that vests all responsibility for operating costs with the lessor, who assumes the full risk of any increases in these costs. The tenant’s payments cover all expenses except those specifically excluded or named as above-standard services.

HIGHEST AND BEST USE – The use of land, which results in its highest value. In appraisal this cannot be merely theoretical but must be realistic in that the use must be legal (proper zoning, etc.) physically achievable and financially feasible.

HOLD-HARMLESS AGREEMENT- An agreement in which one party consents to protecting the other from loss and to paying for the other party’s losses.

IMPROVED LAND – Land having either on-site improvements, off-site improvements, or both.

IMPROVED VALUE – An appraisal term encompassing the total value of land and improvements (buildings) rather than the separate values of each.

IMPROVEMENTS - Generally, buildings, but may include any permanent structure or other development, such as a street, utilities, etc.

LAND USE PLANNING – The development of long range plans for the use of land in a given area, such as through zoning plans.

LEASE BUYOUT- A process usually initiated by a tenant that wants to vacate leased space before the lease term ends.

LEASEHOLD INTEREST INSURANCE- Coverage for the tenant’s or the landlord’s insurable interest in protection from a financial exposure to loss that is related to the terms of their lease.

LETTER OF INTENT – A formal method of stating that a prospective developer, buyer, or lessee is interested in property. Not an offer and created no obligation. However, a builder who wants to build an office building, for example, may influence a lender by showing letters of intent from major prospective tenants.

LIGHT INDUSTRY – Encompassing most light manufacturing as opposed to factories, which tend to produce heavy pollution (air, water, noise, etc.). A zoning designation.

LISTING – An agreement between an owner of real property and a real estate agent, whereby the agent agrees to secure a buyer or tenant for specific property at a certain price and terms in return for a fee or commission.

LOCATION RENT- That portion of tent that is attributable to the economic advantage provided by one location over another because of a particular location’s ability to provide lower costs and greater convenience.

MASTER PLAN – A zoning plan for an entire subdivision. A comprehensive plan to allow a development to grow in an orderly and sound manner, both economically and ecologically.

MODIFIED GROSS LEASE- Contrasted with a full service lease, a modified gross lease has the tenant paying directly some of the expenses. Typically, it is where the electric and water are separately metered and the tenant pays directly to utility.

NET LEASE – A lease requiring the tenant to pay, in addition to a fixed rental, the expenses of the property leased, such as taxes, insurance, maintenance, etc. In some states the term triple net is used

NET NET NET (NNN) - Lease type in which Tenant generally pays for all operating expenses. May even include responsibility for roof and structural repair or replacement.

OFFER OF ACCEPTANCE – Necessary elements of a contract to sell real estate.

ORDINANCE – A law of statute. The term used to designate the enactment of the legislative body of a municipal corporation or a county.

PERCENTAGE RENT- Rent that is usually based upon a percentage of the gross sales or revenue of the tenant. The percentage rent may be paid monthly, quarterly, or annually.

PLAT – A map dividing a parcel of land into lots, as in a subdivision.

PUNCH LIST- A list of deficiencies in construction compiled by the project manager or architect near the end of a job. The list should record all incomplete, missing, or substandard items and the action to be taken by the contractor to correct each problem.

QUADRANT – A quarter section of a circle, one of the quarters created by two intersecting roads or streets.

RENT ROLL- (1) A condensed statement of the actual lease agreement that lists the fundamentals of each lease, such as square footage, rent, expiration date, rental adjustment dates, and expansion/contraction/cancellation rights. (2) A list of all leases of property that also specifies the amount of rent and certain other information about each lease.

SINGLE-NET LEASE- A lease in which the lessor is exposed to greater financial risk if operating costs increase during the lease term. The tenant pays for all items included in a double-net lease except taxes.

SURVEY – The measurement of the boundaries of a parcel of land, its area, and sometimes its topography.

TENANT BUILD-OUT- Construction and/or alteration of tenant space as defined in a lease.

TENANT/OCCUPANT IMPROVEMENTS- Leasing, design, and construction, either new or alterations, plus furnishings, required to make a space habitable and serviceable for its occupants.

TITLE – The evidence one has of right to possession of land.

TITLE SEARCH – A review of all recorded documents affecting a specific piece of property to determine the present condition of title.

TOPOGRAPHICAL MAP – Map showing the differences in grade of a parcel of land. Grades are measured in relation to sea level.

TRIPLE-NET LEASE- A lease in which the tenant pays for property taxes, insurance, repairs (sometimes even major ones), site maintenance, building upgrades, (possibly even to meet local codes) routine maintenance, and all operating expenses; usually done only for unique single-tenant buildings and long term occupancies. See also Double-Net Lease and Single-Net Lease.

TURN KEY – Referring to an owner making a property ready for a tenant to begin business by having the tenant furnish only furniture, phone, and inventory, if any. Ready to “turn the key” in the front door and begin business.

UNIMPROVED LAND – Most commonly land without buildings, it can also mean land in its natural state.

VARIANCE – Change of a portion of zoning requirements without changing zoning.

ZONING – The division of a city or county by legislative regulations into areas (zones), specifying the uses allowable for the real property in these areas.

ZONING ORDINANCE – A law (generally at the city or county level) controlling the use of land and construction of improvements in a given area (zone).