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.

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.”

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.

Allowance Over Building Shell: One of three arrangements often 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, 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.

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 an 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 Sts and sewers.

Assignment: A transfer 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.

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.

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".

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 and construction. 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 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 "Workletter".

Buildout: 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.

C.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% capitalization rate ($100,000/10%= $1,000,000). See "Capitalization Rate Inside".

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. Also called "free and clear return". See "Capitalization".

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).

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.

Comparables: Recorded sales of properties similar in size, use, construction quality, age, and often located within the same submaket used as comparisons to determine the fair market value of another particular property.

Condemnation: The process by which private property is taken by a governmental agency for public use without consent of the owner, but only upon payment of just compensation. See also "Eminent Domain".

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 office space.

Conveyance: Most commonly refers to the transfer of title of 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 (restrooms, hallways) that, when added to the net usable square footage equals the net rentable square footage. May be computed for a building or a floor of a building. A "Loss Factor" or "Load Factor" is calculated by dividing the rentable square footage by the usable square footage.

Cost Approach: A method of appraising real property whereby the replacement cost of a structure is calculated using current costs of construction.

Covenant of Quiet Enjoyment: inserted in leases or conveyances whereby landlord or grantor promises that the tenant or grantee shall enjoy possession of the premised in peace and quiet without disturbance.

Deed: Generally, a conveyancing instrument given by the seller to pass fee title to property upon sale.

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.

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.

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.

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 diving the Usable Area by the Gross Building Area in an office building, providing a benchmark measurement for that building's use as an office building.

Eminent Domain: A right of the government to acquire private property for public use by condemnation, in return for just compensation. See, Also "Condemnation".

Equity: The value of one's interest in a property, consisting of its fair market value less any outstanding debt or other encumbrances.

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 cost 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 lease 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 an 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).

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.

Flex Space: A one or two story building 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.

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. tornadoes, floods, etc.) and acts of man (e.g. riots, arson, or strikes, etc.)

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 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".

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.

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.

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.

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.

Lease: An agreement whereby "the owner of real property gives the right of possession to another for a specified period of time and for a specified consideration".

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. Also see "Tenant Improvements" and "Workletter".

Legal Description: A method of geographically identifying a parcel of land that is acceptable in a court of law.

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 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 no liens.

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.

Listing Agreement: An agreement between a real estate broker and the property owner which authorizes the broker to assist in the sale or lease in that property in return for a fee, commission or other form of compensation. See also "Exclusive Listing Agreement".

Market Value: The most probable price 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 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 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 agreements 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.

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. Today the words have no individual meaning of practical significance.

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.

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 judgement 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.

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 the 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.

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.

Quitclaim 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.

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.

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 later. 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, 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.

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 sale, both are agreed to as part of the same transaction.

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.

Site Analysis: The study of a specified parcel of land (and the surrounding area) to determine its suitability for a specific use.

Site Plan: A detailed plan, to scale, depicting development of a parcel of land and containing all information required by the zoning ordinance.

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.

Speculative Space: Any prime space that has not been leased to a tenant prior to commencing construction on a new building.

Survey: The measurement of the boundaries of a parcel of land, its area and sometimes its topography.

Tax Base: Assessed valuation of real property, which is multiplied by the tax rate to determine the amount of tax due.

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"; "Workletter".

"Time is of the Essence": Clause used in contracts used to bind one party to performance at or by a specified time in order to bind the other party to performance.

Title Insurance: Insurance against loss resulting from defects of title to a specifically described parcel of real property. Defects 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 part of the business, not of the real estate.

Triple Net (NNN) Rent: Rent stipulated in a lease in which a 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" (not included in our list).

Turn Key Project: A Project in which a developer is responsible for the total completion of a building (including interior design and construction) or demised premises of the customized requirements of a future owner or tenant.

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 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.

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 space. Computed by multiplying vacant space times 100 and dividing by total inventory.

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.

Warranty: A binding promise made at the time of 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's normal and reasonable use. In many leases the tenant is not responsible for "normal wear and tear".

Workletter: 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 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" (not on our list).

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 of land and construction of improvements in a given area or zone.