Commercial Real Estate Glossary
Here is a glossary to assist you in understanding the Commercial Real Estate terms you may encounter when purchasing, buying, or leasing property.
Abatement of Rent
A specified time period during which the landlord does not require the tenant to pay base rent.
An individual/entity who is licensed by the Department of Real Estate to act on behalf of principal when conducting a real estate transaction.
Individual to whom a contract is assigned.
The manner by which a contract is transferred from one individual to another individual.
An individual who transfers a contract to another individual.
The minimum rent due as specified in the lease agreement.
The base operating expense account is the floor over which any increases in operating expenses will be passed on to the tenants of the building. In general, a base year is calculated on a calendar year basis or the first 12 months of the tenant’s occupancy.
The construction or improvements of the interior of a space, including flooring, walls, finished plumbing, electrical work, etc.
Written government permission to make changes to existing building improvements.
A provision in a contract (e.g., lease) that allows for one to be relieved of their obligation.
Any major physical development or redevelopment to a property that extends the life of the property. Examples include upgrading the elevators, replacement of the roof, and renovations of the lobby.
Certificate of Occupancy (CO)
The government issues this official form, which states that the building is legally ready to be occupied.
The date the lease begins and the terms are implemented.
All areas and facilities outside the premises and within the exterior boundary line of the project.
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, etc. Most often, this does not include any capital improvements that are made to the property.
Touching at some point or along a boundary.
A requirement in a contract that must occur before that contract can be finalized.
A legal agreement between entities that requires each to conduct (or refrain from conducting) certain activities. This document provides each party with a right that is enforceable under our judicial system.
Failure to fulfill an obligation or perform an act as promised.
Transfer from one entity to another.
The right to take possession of the premises prior to the commencement date.
The government’s right to condemn and acquire property for public use. The government must provide the owner fair compensation.
Signing one’s name on the back of a check.
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.
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 (e.g., base rent, lease commencement and expiration) existing lease between the landlord and tenant.
Physical removal of a tenant either by law or force.
An agreement in which one broker has exclusive rights to represent the owner or tenant.
Personal property so attached the land or building (e.g., improvements) it is considered part of the real property.
Additional time allowed to complete an action (e.g., make a payment) before a default or violation occurs.
A general term used to define most types of commercial leases that are not triple net leases. A gross lease typically does not pass through property taxes, insurance or common area maintenance fees to the tenant. Some Landlords do pass these expenses through in a gross lease based on a “base year” established in the lease document.
One who gives a pledge or promise to perform.
A tenant who remains in possession of leased property after the lease term expiration.
A written legal document created to secure the rights of the parties participating in the agreement.
Incapable of being altered, changed, or recalled.
Ownership of real property by two or more individuals, each of whom has an undivided interest with the right of survivorship.
A formal decision issued by a court in response to a suit.
The individual or entity from which a tenant leases real property.
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).
The estate or interest a tenant has as stated in the tenant’s lease.
An individual (i.e., tenant) to whom property is rented under a lease.
An individual (i.e. landlord) who rents property to a tenant via a lease.
Letter of Intent
An informal, usually non-binding, document used during negotiations, designed to reach agreement on the basic deal terms prior to drafting a binding agreement.
An employment contract between principal and agent that authorizes the agent (such as a broker) to perform services for the principal and his property.
The actual selling or leasing price of a property.
The expected price that a property should bring if listed in the open market for a reasonable period of time.
Meeting of the Minds
When all individuals to a contract agree to the substance and terms of that contract.
Lessee is responsible for reimbursing the Landlord for one of the three items that comprises a triple net lease (property taxes, property insurance, or common area maintenance).
Net Net Lease
Lessee is responsible for reimbursing the Landlord for two of the three items that comprises a triple net lease ( property taxes, property insurance, or common area maintenance).
The tenant signs this to prevent himself from being evicted if the property owner does not pay its mortgage to the bank.
The actual costs associated with operating a project including maintenance, repairs, utilities, taxes, insurance etc…
A right given at a specified time in the future to lease or purchase additional property.
The number of parking spaces available at the project per 1,000 square feet of either rentable or usable space.
A type of lease typically used for a retail tenant where in addition to base rent, the landlord is compensated by receiving a percentage of the tenant’s gross sales. These types of leases are used when the landlord’s real estate is considered the primary driving factor for a tenant’s revenue. Examples include a tenant leasing space in a shopping mall or directly adjacent to a stadium.
The guarantor of the lease shall be personally liable for the lease obligation should the business become unable to fulfill the rental obligation.
Any property which is not real property.
The person or entity which is engaging in the real estate transaction or hiring the broker to act on their behalf.
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.
Land and any capital improvements (e.g., buildings) erected on the property.
Compensation from tenant to landlord for the use of real estate.
Rentable Square Footage
Usable square footage plus the tenant’s pro rata share of the buildings common area or core factor.
Requires the tenant to restore the leased premises to its original condition prior to vacating.
A limitation placed on the property.
An act of rescinding power previously authorized.
The leasing of space from one tenant to another tenant.
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.
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.
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.
The one time right to terminate the existing lease and be releaved of its obligations at a specific point in time in the future. Usually a predetermined penalty that will be assessed if the right is exercised.
Triple Net Lease
A lease requiring tenants to pay all utilities, insurance, taxes, and maintenance costs.
Property in a city or a high-density area.
Usable Square Footage
The actual square footage contained within the walls of the premises used exclusively by the tenant.
The type of activity that will be conducted by the tenant in the premises.
A binding situation that is authorized and enforceable by law.
Estimated price, value, or worth. Also, the act of identifying a property’s worth via an appraisal.
Government authorization to use or develop a property in a manner which is not permitted by the applicable zoning regulations.
Act, condition, or deed that violates the permissible use of property.
Something that is unenforceable.
A situation which is capable of being unenforceable but is not so unless direct action is taken.
The intentional relinquishment or abandonment of a specific claim, privilege, or right.
An amount of money that a landlord agrees to spend on the construction of the interior of a space per the lease, usually negotiated.
An area, delineated by a governmental authority, which is authorized for and limited to specific uses.
A law by a local governmental authority (e.g., city or county) that sets the parameters for which the property may be put to use.