Commercial Glossary | Columbus Realtors

Abatement

In real estate, a reduction of rent, interest, or an amount due and may occur outside or in addition to the primary term of the lease. Also an environmental term meaning partial or complete reduction of the intensity or concentration of a contaminant (e.g., removal of asbestos).

Absorption Rate

The net change in space available for lease between two dates, typically expressed as a percentage of the total square footage.

Act of God

An event that is caused by the forces of nature and is clearly outside the control of a party under contract obligation; one that humans could have not have prevented by reasonable effort. e.g., an earthquake, windstorm.

Americans with Disabilities Act (ADA)

Federal legislation that extends civil rights protection to people with disabilities. It includes various requirements and standards relating to accessibility of buildings to the handicapped (Title III, Public Accommodations). This law can have far-reaching and expensive implications for commercial properties, particularly when they are being renovated.

Add-On Factor

Often referred to as the Loss Factor or Rentable/Usable (R/U) Factor, it represents the tenant’s pro-rata share of the Building Common Areas, such as lobbies, public corridors and restrooms. It is usually expressed as a percentage which can then be applied to the usable square footage to determine the rentable square footage upon which the tenant will pay rent. (See also Common Area Factor)

Additional Rent

An amount beyond minimum rent, including reimbursements.

Addendum

A legal document that adds to or amends the terms of a contract. (See Lease Rider)

Adjusted Basis

Additions for capital improvements and subtractions for depreciation and partial sales.

Administration Fee

The cost of administering the common area of a commercial property.

Adverse Possession

The actual, exclusive, open, notorious, hostile, and continuous possession and occupation of real property under an evident claim of right or title. The time required to obtain title legally by adverse possession is 21 years in the state of Ohio.

Agent

The licensed real estate salesperson or broker who represents buyers/tenants or sellers/landlords.

Air Rights

The right to use the space above the physical surface of the land, generally allowing the surface to be used for some other purpose.

Anchor Tenant

The major or prime tenant in a shopping center, building, etc.

Annual Percentage Rate (APR) The total costs (interest rate, closing costs, fees, and so on) that are part of a borrower’s loan, expressed as a percentage rate of interest. The total costs are amortized over the term of the loan.

Appraisal

An opinion and value based upon a factual analysis of a property by a qualified professional. (See Cost Approach, Income Approach, Market Approach)

Appreciation

The increased value of an asset.

As-Is Condition

Adjective description of a condition in a sales contract or lease in which the buyer or tenant agrees to take the property (e.g. building, chattels) without the right to complain if it is faulty. However, the buyer must have had the right to reasonable inspection, so that he/she has a chance to find any obvious deficiency. Intentionally hiding a known defect will make a seller liable for fraud and serves to cancel the "as is" provision.

Assemblage

The acquisition of two or more contiguous properties into one large property.

Assessment

A fee imposed on property; e.g. to pay for public improvements such as water, sewers, streets, improvement districts, etc.

Assignee

Person to whom a contract is assigned.

Assignment

The transfer, in writing, of one person’s interest or right in a property (e.g., a bond, lease, mortgage, or other instrument) to another. Also the document by which such an interest or right is transferred.

Assignor

Person who transfers a contract to another individual.

Assisted Living Facility

Provide supervision or assistance with activities of daily living (ADLs); coordination of services by outside health care providers; and monitoring of resident activities to help to ensure their health, safety, and well-being.

Attornment

To agree to recognize a new owner of a property and to pay him/her rent.

Atrium

The central area of a building, equipped with a ceiling of translucent material that allows natural light to fall on the interior.

Balloon Payment

A large principal payment that typically becomes due at the conclusion of the loan term. Generally, it reflects a loan amortized over a longer period than that of the term of the loan itself (i.e. payments based on a 25 year amortization with the principal balance due at the end of 5 years).

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor's assets are measured and evaluated, whereupon the assets are used to repay a portion of outstanding debt. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy.

Bargain Sale

A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution.

Base Rent

A set amount used as a minimum rent in a lease.

Base Year

Actual taxes and operating expenses for a specified base year, most often the year in which the lease commences.

Basis

The book value of an investment. The original basis for tax purposes is the purchase price plus any other costs of acquisition that are capitalized.

Bay Depth

Represents the distance from the front wall of the leased premises to the rear wall of the lease premises

Bearing Wall

A supporting wall that sustains its own weight as well as other weight. A wall that supports a portion of a building above it, usually a floor or roof.

Below-grade

Any structure or a portion of a structure located underground or below the surface grade of the surrounding land.

Big Box

A single-use store, typically 50,000 square feet or more.

Building Owners and Managers Association (BOMA International)

Founded in 1907, is a professional organization for commercial real estate professionals and is the oldest and largest in its field. Its membership includes building owners, managers, developers, leasing professionals, corporate facility managers, asset managers, and the providers of the products and services needed to operate commercial properties.

Borrowed Light

A partition, containing glass or plastic panels, between an interior dark space and a space illuminated by daylight or high-intensity artificial light.

Buildable Area

That portion of a parcel that is usable for a building. It will typically exclude wetlands, storm-water retention areas, tree preserves, or other easement areas, and the like.

Building Code

The various laws set forth by the applicable government authority as to the end use of a certain piece of property and that dictate the criteria for design, materials and type of improvements allowed.

Building Permit

Written government permission to develop, renovate, or repair a building.

Building Standard

The landlord's minimum standards with respect to tenant finish improvements within the building.

Build-out

The space improvements put in place per the tenant's specifications.

Build-To-Suit

A customized design and build approach to a tenant's space usually resulting in a single occupant building which is then leased or sold to the tenant

Buyout

Funds provided to enable an operating management to acquire a lease.

Bylaws

Regulations that provide specific procedures for handling routine matters in an organization (e.g., a homeowners’ association or a merchants’ association). Secondary laws of a condominium association that govern its internal affairs and deal with routine operational and administrative matters; also called code of regulations.

Cancellation Clause

A provision in a contract (e.g., lease) that confers the ability of one in the lease to terminate the party's obligations. The grounds and ability to cancel are usually specified in the lease. (see termination option)

Capital Expenses

Capital expenditures (CAPEX or capex) are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year.

Capital Improvements

A structural addition or betterment to real property that increases its useful life or productivity or extends the life of a building or its equipment. The improvement must have a life in excess of one year in order for the cost to be recovered (depreciated) for income tax purposes. See also cost recovery; depreciation. The use of capital for a betterment that did not exist before.

Capitalization Rate

A rate of return used to estimate a property’s value based on that property’s net operating income (NOI). This rate is based on the rates of return prevalent in the marketplace for similar properties and intended to reflect the investment risk associated with a particular property. It is derived from market data on similar, recent, sales (NOI divided by property value/sales price = capitalization rate) or from calculations based on expected returns to debt and equity. Also called cap rate or overall capitalization rate (OAR).

Carrying Costs

Expenses incurred on idle property or property under construction, e.g., taxes, insurance premiums, standby water and sewer rents, security or protective service.

Cash Flow

Sometimes referred to as funds from operations. (See funds from operations) The amount of spendable income available after all payments have been made for operating expenses and mortgage principal and interest; it is a way of recognizing the timing of receipts and payments.

CCIM

A Certified Commercial Investment Member (CCIM) is a recognized expert in the disciplines of commercial and investment real estate. The designation is awarded by CCIM Institute.

Central Business District

The central shopping or business area in an urban environment, usually the place where real estate values are highest; also called downtown. (In Central Ohio, see COCIE’s CBD map)

Certificate of Occupancy

A document issued by a local government agency or building department certifying a building's compliance with applicable building codes and other laws, and indicating it to be in a condition suitable for occupancy

Certified Property Manager® (CPM®)

The professional designation conferred by the Institute of Real Estate Management (IREM) on individuals who distinguish themselves in the areas of education, experience, and ethics in property management.

Change of Use

The process of changing the function of a structure without changing its exterior dimensions.

Chapter 7 (see bankruptcy)

Chapter 11 (see bankruptcy)

Chattel

In law, any property other than a freehold or fee estate in land; treated as personal property, although divisible into chattels real and chattels personal.

CIE (Commercial Information Exchange)

A CIE is an Internet-based commercial property listing service that is operated by a local association to serve the local market.

Clearance (Ceiling Clearance)

The distance between the floor and ceiling, or joist, that allows unrestricted height for equipment or to stacked items.

Clear-Span Facility

A building, most often a warehouse or parking garage, with vertical columns on the outside edges of the structure and a clear span between columns.

CMBS

Commercial Mortgage Backed Securities. Securities collateralized by loans on commercial real estate. Yield on the mortgages is passed through to the investors, less a service charge by the issuing organization.

Coinsurance

An insurance option under which the insured (e.g., the property owner) is obligated to maintain insurance coverage at a stipulated level (e.g., 80 percent of the property’s value) in order to receive the full value up to the limits of the policy in case of a loss, in exchange for a lowered premium rate. (Coverage is based on actual cash value of the improvements, which reflects a deduction for depreciation.) Failure to maintain that level of insurance coverage will reduce the amount reimbursed (in proportion to the property value). In the event of a loss, the insurance shares in losses in proportion to the amount that the insurance coverage was less than the required percentage.

Common Area

The total area within a property that is not designed for sale or rental but is available for common use by all owners, tenants, or their invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped areas, recreation areas, public toilets, truck and service facilities.

Common Area Factor

Represents the percentage of Net Rentable Square Feet devoted to the building's common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Loss Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the common area by the total square footage.

Common Area Maintenance (CAM)

The expense of operating and maintaining common areas; may or may not include management charges and usually does not include capital expenditures on tenant improvements or other improvements to the property.

Commission

A fee paid to an agent or employee for transacting a piece of business or performing a service. In real estate, the fee paid to the party or parties responsible for generating the business (e.g., the fee paid to an agent or broker for negotiating a sale or rental). The fee may be a percentage of the transaction amount, an agreed-to fixed amount, or a rate per square foot.

Community Center

A community center typically offers a wider range of apparel and other soft goods than the neighborhood center. Among the more common anchors are supermarkets, super drugstores, and discount department stores. Community center tenants often include value-oriented big-box category-dominant retailers selling such items as apparel, home improvement/furnishings, toys, electronics or sporting goods. The center is usually configured in a straight line as a strip, or L, or U shape. Community centers typically have 100,000-500,000 square feet of gross leasable area (GLA).

Comparables

Sale prices, lease rates and terms of properties similar in size, construction quality, age, use, and typically located within the same sub-market and used as comparison properties to determine the fair market value for another property with similar characteristics.

Concessions

Cash or cash equivalents expended by the landlord in the form of rental abatement, additional tenant finish allowance, moving expenses, cabling expenses or other monies expended to influence or persuade the tenant to sign a lease.

Condemnation

The process of taking private property, without the consent of the owner, by a governmental agency for public use through the power of eminent domain. See also "Eminent Domain".

Condition Precedent

A contract where one transaction depends upon another transaction.

Condominium

A multiunit structure or property in which persons hold fee simple title to individual units and an undivided interest in common areas.

Condominium Association

A private, automatic, usually not-for-profit corporation comprised of the unit owners of a condominium that is responsible for the operation of the condominium community; a homeowners’ association (HOA). The operation of a condominium association is governed by legal documents known as the declaration (also called Covenants, Conditions, and Restrictions or CC&Rs), bylaws, articles of incorporation. See also declarations.

Condominium Unit

That part of a condominium development – a defined three-dimensional space located within the walls, floor, and ceiling of a condominium structure – that is privately owned and independently and exclusively used by a unit owner; also called condominium apartment.

Conduit

The conveyance of income from one entity to another so that the final recipient incurs tax liability.

Conduit Financing

The financial intermediary that sponsors the conduit between the lender(s) originating loans and the ultimate investor. The conduit makes or purchases loans from third-party correspondents under standardized terms, underwriting, and documents and the, when sufficient volume has been obtained, pools the loans for sale to investors in the commercial mortgage-backed securities (CMBS) market.

Construction Management

The actual construction process is overseen by a qualified construction manager who ensures that the various stages of the construction process are completed in a timely and seamless fashion, from getting the construction permit to completion of the construction to the final walk-through of the completed leased premises with the tenant.

Consideration

Something of value exchanged for a promise or for performance of a service that makes an exchange legally binding, such as paying rent in exchange for use of a property.

Consumer Price Index (CPI)

A figure published by the U.S. Bureau of Labor Statistics measuring consumer purchasing power; compares current costs of goods and services to those of a selected base year. The CPI is commonly used to increase the base rental periodically as a means of protecting the landlord’s rental stream against inflation or to provide a cushion for operating expense increases for a landlord unwilling to undertake the record keeping necessary for operating expense escalations.

Contiguous Space

(1) Multiple suites/spaces within the same building and on the same floor, which can be combined and rented to a single tenant. (2) A b lock of space located on multiple adjoining floors in a building (i.e., a tenant leases floors 6 through 12 in a building).

Continuous Operation

The requirement that a tenant remain open during prescribed business hours and for a term consistent with the lease or reciprocal easement agreement provision.

Contingencies

A provision in a contract requiring certain acts to be completed before the contract is binding.

Contract

An agreement between two or more persons that represents their promise to do or not to do a particular thing; where real property is concerned, a dated, written, signed statement between two or more competent parties who agree to perform or not to perform a legal act, for legal consideration, within a specified time.

Co-Tenancy (Leasing)

A term that refers to a clause inserted into a tenant’s lease stipulating that a reduced rent or no rent be paid until an agreed-upon percentage of the center or a named tenant is occupied.

Convenience Center

Also known as neighborhood center. A small center whose tenants provide a narrow mix of goods and personal services to a very limited trade area. These centers range between 30,000 and 100,000 square feet of gross leasable area and the primary trade area is 3 miles.

Conveyance

Most commonly refers to the transfer of title to property between parties by deed. The term may also include most of the instruments, by which an interest in real estate is created, mortgaged or assigned.

Cooperative

Ownership of a share or shares of stock in a corporation that holds the title to a multiple-unit residential structure. A shareholder does not own a specific unit outright but has the right to occupy it as a co-owner of the cooperative association under a proprietary lease.

Core Factor

Represents the percentage of Net Rentable Square Feet devoted to the building’s common areas (lobbies, rest rooms, corridors, landlord rooms, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Loss Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage. (see common area factor)

Cost Approach

A method of appraising real property whereby the replacement cost of a structure is calculated using current costs of construction; discounted by physical depreciation.

Cost-of-Living Adjustment

Adjustment reflected on the wholesale price index or the cost-of-living index, which can be national, regional or confined to a metropolitan area. (See Consumer Price Index)

Cost Recovery

A tax deduction allowed by the Internal Revenue Service to recover the cost of a depreciable asset. The value of the improvements only, since land cannot be depreciated

Covenant

A written agreement inserted into deeds or other legal instruments stipulating performance or non-performance of certain acts or, uses or non-use of a property and/or land.

Critical Mass

Refers to the high number of retailers and square footage needed in one center or in one market to create enough excitement to attract a high volume of shoppers.

Cross-Collateralization

A grouping of mortgages or properties that serves to jointly secure one debt obligation.

Curable Obsolescence

Reversible deterioration of a building that is a result of deferred maintenance.

Curb Appeal

General cleanliness, neatness, and attractiveness of a building as exemplified by the appearance of the exterior and grounds and the general level of housekeeping. The aesthetic image and appearance projected by a property.

Current Liabilities

A short-term debt, regardless of its source, including any liability accrued and deferred, and unearned revenue that is to be paid out of current assets or is to be transferred to income within a relatively short period, usually one year or less.

Debt Coverage Ratio

The relationship between projected net operating income and expected debt service, expressed as NOI divided by debt service.

Declaration (Condominium)

A legal document that, when filed, commits land to condominium use, creates a condominium association and serves as its constitutional law, physically describes a condominium, defines the method of determining each unit owner’s share of the common areas, and includes restrictions and covenants.

Dedicate

To appropriate private property to public ownership for a public use.

Deed

A document that transfers title in real estate. In the sale of a piece of property, the seller is the “grantor” and the buyer is the “grantee”. There are 6 statutory forms for deeds in Ohio.

· General Warranty Deed

· Limited Warranty Deed

· Quit Claim Deed

· Survivorship Tenancy

· Transfer on Death Deed

· Executor or Trustee Deed

General Warranty Deed

Is used when the grantor will provide to the buyer warrantee promises that the grantor lawfully owns the property to be transferred, that the property is free from all encumbrances; that the grantor has good right to sell and convey the property, and that the grantor does warrant and will defend these statements of ownership forever, against the lawful claims and demands of any person.

Limited Warranty Deed

A type of deed that does the same thing as a general warranty deed except the grantor only warrants against his or her own encumbrances, and not all encumbrances. A grantor transferring with a limited warranty deed only promises to defend against claims that challenge that grantor’s prior ownership of property.

Quit Claim Deed

A type of deed that transfers property with no promises about the ownership of the property and no promises to defend against claims made on the ownership of the property.

Survivorship Tenancy

Relates to the usual joint and survivor type of ownership that a husband and wife might have. But, this is not a deed which only married couples can use. Any 2 or more people can own property jointly, with rights of survivorship. Thus, 2 sisters might own a house with a survivorship tenancy deed and when the first sister dies, the property is automatically (or rather, still) the property of the surviving sister. Similarly, 2 friends might jointly own property and if one dies, the other becomes the sole owner. And, this deed can be used by more than 2 people. A group of people might own a house and they each have joint ownership with the others. If any die, then the ownership of the deceased person goes to all the remaining owners in proportion to their ownership of the property.

Transfer on Death Deed

Allows an owner to transfer property to another person (the beneficiary) directly, upon the death of the owner. The beneficiary has no rights to the property at all, until the death of the owner.

Executor or Trustee Deed

Used by a person who is the executor of a person’s estate, or the trustee of a trust (amount other fiduciary actions).

Deed In Lieu Of Foreclosure

A deed given by an owner/borrower to a lender to satisfy a mortgage debt and avoid foreclosure.

Deed Of Trust
An instrument used in many states in place of a mortgage by which real property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), to secure repayment of a debt. (In many states – not in Ohio.)

Deed Restriction

An imposed restriction in a deed that limits the current and future use of the property.

Deed Restrictions

Clauses in a deed limiting the future uses of the property. Deed restrictions may take many forms: They may limit the density of buildings, dictate the types of structures that can be erected, or prevent buildings from being used for specific purposes or from being used at all. Deed restrictions may impose a myriad of limitations and condition.

Default

The general failure to perform a legal or contractual duty or to discharge an obligation when due.

Defective Title

A claim or other imperfection that adversely affects the customary use and marketability of a property.

Deferred Maintenance

Ordinary maintenance of a building that, because it has not been performed, negatively affects the use, occupancy, and value of the property.

Deficiency Judgment

Imposition of personal liability on a borrower for the unpaid balance of mortgage debt after a foreclosure has failed to yield the full amount of the debt.

Delivery

Transfer something from one entity to another.

Delivery Date

A date, specified in the lease, separate from the building construction completion date so that a commercial tenant may perform its own work in time to meet an occupancy or opening date.

Delinquent

In real estate, delinquency is commonly used in reference to past due rent or other payments not paid as agreed under a lease or a loan.

Demographics

Vital statistics of the marketing area. Demographic statistics include age, sex, income, education, and occupation.

Demised Premises

That portion of a property conveyed by a lease agreement, usually defined by the walls and other structures that separate one tenant’s space from that of another and further identified by a unit or space (suite) number.

Demising Walls

The partition wall that separates one tenant’s s pace from another or from the building’s common area such as a public corridor.

Density

In housing, the number of dwelling units constructed in a defined area.

Depreciation

Spreading out the cost of a capital asset over its estimated useful life

Design/Build

A system in which a single entity is responsible for both the design and construction of a project.

Destination Tenants

Used in referring to ancillary or shop tenants in a shopping center because the merchandise or services they offer are specifically sought out by consumers.

Directors’ and Officers’ Liability Insurance

Protection against financial loss arising out of alleged errors in judgment, breaches of duty, and wrongful acts of a board of directors and/or officers in carrying out their prescribed duties.

Discount Anchored Shopping Center

A retail development in which a discount store is the major tenant in the development, with additional retail space usually consisting of smaller retail tenants.

Discount Cash Flow

Financial analysis using the time value of money to determine how much an investment held for several years into the future would be worth in present dollars.

Distraint

The act of seizing (legally or illegally) personal property based on the right and interest which a landlord has in the property of a tenant in default.

Distressed Property

Developed real property that is neglected for a period of twelve consecutive months.

Dock-high Building

A building in which the main floor is elevated to a height sufficient so that materials, equipment, products, etc., can be moved directly out loading doors onto trucks parked on the ground level outside the building.

Downzoning

A zoning policy in which the prevailing zoning ordinances are allowed for less intensive use. Downzoning may involve reducing the allowable density for development or changing the allowable character from high use to low use.

Dual Agency

A situation in which a single agent, with disclosure to each party, represents both parties to a transaction (e.g., buyer and seller in real estate sales). As a dual agent, a real estate agent and brokerage represent two clients whose interests are, or at times could be, different or adverse. For this reason, the dual agent(s) may not be able to advocate on behalf of the client to the same extent the agent may have if the agent represented only one client.

Due Diligence

Proper examination of necessary information, to satisfy oneself as to its accuracy. Activities carried out by a prospective purchaser or mortgagee of real property to confirm that the property is as represented by the seller and is not subject to environmental or other problems. Due diligence is a reasonable investigation by the parties involved to confirm that all statements within the document are true and that no material facts are omitted.

Easement

An interest in or right to land that is owned by another person. A legal right to use land owned by another person or business for a specific purpose. An easement may be granted by a deed or created as a result of actual use that was not prohibited.

Earnest Money Deposit

The money given to the seller at the time the offer is made as a sign of the buyer’s good faith.

Economic Obsolescence

Impairment of desirability or useful life of property, or its loss in use and value, arising from economic forces outside of the building or property, such as changes in optimum land use, legislative enactments that restrict or impair property rights, and changes in market conditions.

Economic Rent

The market rental value of a property at a given point in time, even though the actual rent may be different.

Effective Date

The latest date appearing on the signature page of the transaction and the date upon which the lease contract goes into effect.

Effective Gross Income

The total amount of income actually collected during a reporting period; the gross receipts of a property. Gross potential rental income less vacancy and collection losses plus miscellaneous or unscheduled income.

Effective Rent

The actual rental rate to be 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

(See common area factor)

Elderly Housing

Housing with design features and facilities intended for use by the elderly. A specialized type of residential property that includes services and amenities as an adjunct to independent living (e.g., congregate housing) and may be owned and operated by nonprofit entities.

Electric Service

The amount of electricity supplied to a building’s electrical panel measured in amperage (amps). This can be 100 amps to over 1000 amps.

Electric Supply

The amount of electricity supplied to a building’s electrical panel measured in amperage (amps). This can be 100 amps to over 1000 amps.

Single Phase Electricity

The type of electrical power available to a building measured in voltage (volts) of 120 or 220 volts. Single phase is used for lighting, smaller HVAC systems and general office equipment.

Three Phase Electricity

The type of electrical power measured in voltage (volts) of 208, 240, 440 or 477 volts. Three phase power is used for larger HVAC systems and heavy equipment.

Eminent Domain

A power of the state, municipalities, and private persons or corporations authorized to exercise functions of public character to acquire private property for public use by condemnation, in return for just compensation.

Encapsulation

In regard to environmental hazards, a method of containment.

Enclosed Mall

An enclosed mall has a walkway or mall that is enclosed, heated and cooled, insulated, and lighted. The mall corridor is flanked on one or both sides by storefronts and entrances. The configuration of the center may vary, but on-site parking is usually provided around the perimeter of the center.

Encroachment

The intrusion of a structure, which extends, without permission, over a property line, easement boundary or building setback line.

Encumbrance

Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).

End Cap

The end storefront of a strip center.

Environmental Impact Statement

Documents which are required by federal and state laws to accompany proposals for major projects and programs that will likely have an impact on the surrounding environment.

Environmental Site Assessment (ESA)

The process of determining whether contamination is present on a parcel of real property. A procedure commonly conducted at commercial and industrial sites to identify potential environmental problems prior to the transfer of the property. ESAs are performed in phases:

A phase I audit focuses on evidence of potential contamination; also called preliminary assessment.

A phase II audit confirms the presence of contamination; also called site inspection.

A phase III audit describes the extent of contamination and possible remediation alternatives as well as the cost to remediate.

Equity

The owner’s interest in a company after all obligations are met; analogous to the difference between the value of your home and the balance of your mortgage.

Escalation Clause

A clause in a contract, lease, or mortgage providing for increases in wages, rent, or interest based on fluctuations in certain economic indexes, costs, or taxes. Also called rent escalator clause.

Escrow Agreement

A written agreement made between the parties to a contract and an escrow agent. The escrow agreement sets forth the basic obligations of the parties, describes the monies (or other things of value) to be deposited in escrow, and instructs the escrow agent concerning the disposition of the monies deposited.

Estoppel Certificate

A document by which the tenant states the terms of the lease and the full amount of rent to be paid for the entire term of the lease, commonly requested by the landlord in conjunction with a transfer of ownership or in relation to financing or refinancing.

Eviction

A legal proceeding by the landlord to physically remove a tenant either by law or force .

Exclusive Agency Listing

A written agreement between a real estate broker and a property owner in which the owner promises to pay a fee or commission to the broker if specified real property is leased during the listing period.

Exclusivity Clause

A lease clause that limits the number of stores or types of goods or services of other tenants that can open in the shopping center competing with the lessee.

Executor ( or Trustee) Deed (see Deed)

Exhibit

An attachment to a contract that elaborates on points agreed to in the lease.

Expense Recovery

Total receipts from tenants to recover operating expenses for maintenance and repair, utilities, security, insurance, taxes, and other expenses.

Expense Stop

An agreed dollar amount of taxes and operating expense (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its prorated share of increases.

Factory Outlet

A store offering merchandise direct from the manufacturer at prices lower than standard retail. These stores are often contained in centers that specialize in factory outlets.

Fair Housing Laws

Laws promulgated at all levels that prohibit discrimination in the sale and rental of housing. There are federal, state, and local fair housing laws. Specifically, Title VIII of the U. S. Civil Rights Act of 1968 prohibits discrimination in the sale or rental of housing based on race, color, religion, or national origin. The act was amended in 1974 to include sex as a protected class. The Fair Housing Amendments Act of 1988 further prohibits discrimination on the basis of familial status (children) or mental or physical disability.

Fair Market Value (FMV)

The sale price at which a property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. Also known as FMV.

Fashion Special Center

A center composed mainly of upscale apparel shops, boutiques and craft shops carrying selected fashion or unique merchandise of high quality and price. These centers need not be anchored, although sometimes restaurants or entertainment can provide the draw of anchors.

Feasibility Study

Analysis done to discover the practicality, possibility, and reasonableness of a proposed undertaking especially regarding proposed costs and revenues.

Fee Simple

The most complete type of private ownership of real estate which gives the titleholder the right to possess, control, use, and dispose of the property without time limitation, including the unlimited right to divide the property among one’s heirs. Sometimes called fee or fee simple absolute.

Fiduciary

A person to whom property or power is entrusted for the benefit of another.

Finance Charge

The amount paid for the privilege of deferring payment of goods or services purchased, including any charges payable by the purchaser as a condition of the loan.

Finish Allowance

An amount allowed by the landlord for constructing tenant improvements to leased commercial space.

Fire Sprinkler System

An automatic fire-protection system, designed to cover any area so protected with water when the temperature exceeds a predetermined level.

Fire Wall

A wall constructed of fireproof material installed to check the spread of fire into other areas of a building or to adjacent properties typically for one, two or four hours.

First Generation Space

Generally refers to new space that is currently available for lease and has never before been occupied by a tenant.

See also "Lien".

Junior Anchor

Smaller versions of anchor tenants, but with multiple usage. Typical junior anchors are less than 40,000 square feet. (see anchor tenant)

Jurisdiction

The district over which the power of the court extends. The geographic area of authority for a specific government entity.

Just Compensation

Compensation which is fair to both the owner and the public when property is taken for public use through condemnation (eminent domain).

Kiosk

A booth or stall set up in a shopping center, to sell goods or services.

Land Contract (Land Installment Contract)

A contract for the purchase of real estate on an installment basis. Upon payment of the last installment, the deed is delivered to the purchaser. (See installment contract.)

Land Lease

A lease under which a tenant pays rent to use the land for a period of time.

Landlord

One who owns real property that is leased to a tenant; see also lessor.

Landlord’s Lien

A type of lien that can be created by contract or by operation of law. Some examples are: (1) a contractual landlord’s lien as might be found in a lease agreement; (2) a 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. See also "Lien".

Landlord’s Warrant

A warrant from a landlord to levy upon a tenant’s personal property (e.g., furniture, etc.) and to sell this property at a public sale to compel payment of the rent or the observance of some other stipulation in the lease.

Latent Defect

Physical deficiencies or construction defects not readily ascertainable from a reasonable inspection of the property, such as a defective septic tank or underground sewerage system, or improper plumbing or electrical liner.

Lease

An agreement whereby the owner of real property (i.e., landlord/lessor) gives the right of possession to another (i.e., tenant/lessee) for a specified period of time (i.e., term) and for a specified consideration (i.e., rent).

Lease Types

RETAIL

	Base	Utilities	Janitorial	Property Taxes & Assessments	Property Insurance	CAM (Common Area Maintenance)
Modified Gross	T	T	T	L*	L*	L
Gross	T	T	T	L	L	L
N (Single Net Lease)	T	T	T	T	L	L
NN (Double Net Lease)	T	T	T	T	T	L
NNN (Triple Net Lease)	T	T	T	T	T	T

L= Landlord/Lessor

T= Tenant/Lessee

*=Base Year Only, all increase through on a pro rata basis

OFFICE

	Base	Utilities	Janitorial	Property Taxes & Assessments	Property Insurance	Building Operations & Administrative
Full Service Gross	T	L	L	L	L	L
Modified Gross	T	T	T	L*	L*	L*
Gross	T	T	T	L	L	L
N (Single Net Lease)	T	T	T	T	L	L
NN (Double Net Lease)	T	T	T	T	T	L
NNN (Triple Net Lease)	T	T	T	T	T	T

L= Landlord/Lessor

T= Tenant/Lessee

*=Base Year Only, all increase through on a pro rata basis

INDUSTRIAL

	Base	Utilities	Janitorial	Property Taxes & Assessments	Property Insurance	Building Operations & Administrative
Modified Gross	T	T	T	L*	L*	L
Gross	T	T	T	L	L	L
N (Single Net Lease)	T	T	T	T	L	L
NN (Double Net Lease)	T	T	T	T	T	L
NNN (Triple Net Lease)	T	T	T	T	T	T

L= Landlord/Lessor

T= Tenant/Lessee

*= Base Year Only, all increases are passed through on a pro rata basis

Absolute Net Lease (Bond)

The tenant assumes nearly all of the obligations of ownership of the property, therefore making the lease payments net of any offsets or deductions and net to the lessor or owner.

Double Net Lease (NN)

A lease in which the lessee pays rent to the lessor, as well as all taxes and insurance expenses that arise from the use of the property. The lessor pays maintenance expenses.

Full Service Gross

The landlord is responsible for paying all expenses on a lease.

Gross Lease

A lease in which the tenant pays a flat sum for rent out of which the landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc.

Ground Lease

A lease that grants the right to use and occupy land. Improvements made by the ground lessee typically revert to the ground lessor.

Modified Gross Lease

The most common types of modified gross leases excludes maintenance, janitorial and electrical. This type of lease is commonly utilized in commercial buildings. Generally in a modified gross lease the Landlord has the right to expense pass-throughs utilizing a “base year.”

Net Lease

Generally a lease in which the tenant pays for utilities, janitorial services, and either property taxes or insurance, and the landlord pays for maintenance, repairs, and the property taxes or insurance not paid by the tenant. Also called single net lease, modified gross lease, and semi-gross lease, sometimes used synonymously with single net lease but better stated as a partial net lease to eliminate confusion.

Triple Net Lease (NNN)

Lease under which the tenants pay the agreed-upon rent plus all costs of maintenance and repair.

Lease Abstract

An abbreviated version of a lease, containing the most important terms of the lease.

Lease Agreement

Lease Commencement Date

The date usually constitutes the commencement of the term of the Lease for all purposes, whether or not the tenant has actually taken possession so long as beneficial occupancy is possible.

Lease Outline Drawing

A sketch showing the demised space and its relation to adjacent spaces.

Leasehold

The estate or interest a tenant has as stated in the tenant's lease

Leasehold Improvements

Improvements or additions to leased property that have been made by the lessee.

Lease Rate/SF

The amount of money asked for per square foot on a listing of a property.

Lease Rider

A legal document that adds to or amends the terms of a standard lease form. See also addendum.

Leasing Fee

A fee charged to the owner when a property is leased.

Legal Description

A legal description (also referred to as land description, property description, or land boundary description) is “a written statement recognized by law as to the definite location of a tract of land by reference to a survey, recorded map or adjoining property.”

Legal Owner

The term is in technical contrast to equitable owner. The legal owner has title to the property, although the title may actually carry no rights to the property other than as a lien. See also “Lien”.

Lessee

An individual or entity to whom property is rented under a lease.

Lessor

An individual or entity who rents property to a tenant via a lease.

Letter Of Attornment

A letter from the grantor (seller) to a tenant, stating that a property has been sold, and directing rent to be paid to the grantee (buyer).

Letter Of Credit

A commitment by a bank or other person, made at the request of a another, 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 preliminary agreement stating the proposed terms for a final contract. They can be "binding" or "non-binding" on the parties. Basic issues would include rent, pass-through expenses and other major points of negotiation.

Leverage

The use of borrowed funds to complete an investment transaction. The higher the proportion of borrowed funds used to make the investment, the higher the leverage and the lower the proportion of equity funds.

LIBOR

London Interbank Offered Rate. The interest rate offered on Eurodollar deposits traded between banks. There is a different LIBOR rate for each deposit maturity.

Lifestyle Center

Most often located near affluent residential neighborhoods, this center type caters to the retail needs and “lifestyle” pursuits of consumers in its trading area. It has an open-air configuration and typically includes at least 50,000 square feet of retail space occupied by upscale national chain specialty stores. Other elements help make the lifestyle center serve as a multipurpose leisure-time destination, including restaurants, entertainment, and design ambience and amenities such as fountains and backyard furniture that are conducive to casual browsing. These centers may or may not be anchored by one or more conventional or fashion specialty department stores. These centers range between 150,000 and 500,000 square feet of gross leasable area encompassing 10 to 40 acres and the primary trade area is 8 to 12 miles.

Lien

A claim or encumbrance against property used to secure a debt, charge or the performance of some act. Includes liens acquired by contract or by operation of law.

Lien Waiver (Waiver of Liens)

A waiver signed by a lien holder.

Life Support System

A building’s security and protection services, e.g., television surveillance, communications systems, fire protection.

Like-Kind Property

A term used in an exchange of property held for productive use in a trade or business or for investment. Unless cash or other personal property is received, the tax consequences of the exchange are postponed pursuant to Section 1031 of the Internal Revenue Code.

Limited Common Areas

In a condominium, property that physically is part of the common areas but is reserved for the exclusive use of a particular unit owner or group of unit owners (e.g., entry doors, balconies windows, roofs).

Limited Liability Company (LLC)

Created by state statute, a business ownership form that functions like a corporation (its members are protected from liability) but for income tax purposes is classified as a partnership. Income and expenses flow through to the individual members.

Limited Partnership

A type of partnership, created under state law, comprised of one or more general partners who manage the business and who are personally liable for partnership debts, and one or more special or limited partners who contribute capital and share in profits but who take no part in running the business and incur no liability over and above the amount contributed. See also "General Partner".

Limited Warranty Deed (see Deed)

Listing

An employment contract between principal and agent that authorizes the agent (such as a broker) to perform services for the principal and his property.

Listing Agreement

An agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms that are suitable for the seller in return for a commission, set fee or other form of compensation.

Listing Type

Indicates whether the listing is Sublease or Direct.

Load Bearing Wall

A load-bearing wall (or bearing wall) is a wall that bears a load resting upon it by conducting its weight to a foundation structure.

Load Factor (Common Area Factor)

The percentage of space in a building that is added to its usable area to account for lobbies, corridors, and other common areas.

Loading Dock

A platform or area where material, equipment, supplies, etc., are moved in or out of an industrial facility to trucks or railcars. This platform being the same height as the truck or railcar.

Loft Building

A structure of two or more stories designed for industrial use. In urban areas, many such buildings that are no longer used for their original purpose may be candidates for adaptive use as offices, condominium dwellings, or rental apartments.

Loss Factor

Percentage of the gross area of a space that is lost due to walls, elevator, etc.

Loss of Income Insurance

A policy that protects the insured against loss of earnings as a result of a direct loss from an insured peril.

Lot

Generally, one of several contiguous parcels of land making up a fractional part or subdivision of a block, the boundaries of which are shown on recorded maps and “plats”.

Low Incoming Housing

Housing units that, by reason of rental levels or amount of other charges, are available to households or individuals whose incomes do not exceed the maximum income limits established for continued occupancy in federally assisted low-rent public housing.

Low Rise

A building with 3 stories or less above ground level.

Maintenance (Operations)

The upkeep of the various physical assets/or and common areas. of a shopping center. Maintenance involves the preservation of what is already there. For example, patching the parking lot and relamping the lights; painting wall surfaces and replacing deteriorated caulking; rodding the sewer line; and in general doing those things that prolong the economic life of the property in its present forms.

Maintenance Contract

An agreement between a management company and a property owner/investor in which the company assumes complete or partial responsibility for management of the property.

Maintenance and Repair Expenses

Expenses related to the maintenance and repair of a building and grounds. They usually do not include major capital improvements or maintenance and repair services that are for the sole benefit of individual tenants.

Maker

One who creates or executes a promissory note and promises to pay the note when it becomes due.

Mall

The shopping center of any type, such as “strip mall,” used colloquially to describe an open-air center.

Man Hours

A unit of one-hour’s work per person used as a measurement to estimate labor costs and productivity.

Management Fee

The fee charged by the manager or the owner to cover rental collection, administration, common area, maintenance, and tenant relations activities.

Mandatory

A requirement that must be conformed to as specified in any written document.

Margin of Safety

The extent to which the fair market value of the property exceeds the outstanding loan amount. In real estate and its management, the difference between net operating income (NOI) and annual debt service.

Market Approach

A method of valuation used in appraisal based on a comparison of data from recent sales of similar properties in the market.

Market Price

The actual selling price of a property between a willing buyer and seller under no undue stress.

Market Rent

The rental income that a property would command on the open market with a landlord and a tenant ready and willing to consummate a lease in the ordinary course of business; indicated by the rents that landlords were willing to accept and tenants were willing to pay in recent lease transactions for comparable space.

Market Study

A forecast of future demand for a certain type of real estate project that includes an estimate of the square footage that can be absorbed and the rents that can be charged.

Market Value

The highest price a property would command in a competitive and open market under all conditions requisite to a fair sale with the buyer and seller each acting prudently and knowledgeably in the ordinary course of trade.

Marketable Title

A title which is free from encumbrances and could be readily sold

Marketing Fund

An account that is specifically for funding shopping center promotions and advertising.

Market Saturation

In economics, “market saturation” is a term used to describe a situation in which a project has become diffused (distributed) within a market; the actual level of saturation can depend on consumer purchasing power; as well as competition, prices and technology.

Master Deed

A legal document filed by a condominium developer or converter to record all of the individual condominium units owned within a condominium development. It may also include restrictions and covenants.

Master Lease

A primary lease that controls subsequent leases and which may cover more property than subsequent leases.

Material Safety Data Sheet (MSDS) Issued by the EPA

A compilation of information regarding the hazardous properties of chemicals. Usual information includes composition, physical and chemical properties, and known hazards (e.g., toxicity, flammability, explosion potential); recommended cautions for handling (e.g., protective clothing and devices), storage, and disposal; clean-up procedures, and first aid treatment in the event of exposure. An MSDS is provided when chemicals (e.g., solvents, cleaning compounds) are shipped in bulk in pails or drums and when the information cannot be fitted on the labels of small containers. These documents must be retained for reference by maintenance and other on-site personnel.

Mechanic’s Lien

A lien granted by law on a building or other improvement on land, and on the land itself, as security for payment for labor done and/or materials furnished for improvement.

Media Saturation

A media pattern of wide coverage and high frequency during a concentrated time period, designed to achieve maximum impact, coverage, or both.

Meeting of the Minds

When all individuals to a contract agree to the substance and terms of that contract.

Megamall

An enclosed mall three of four times the size of an ordinary regional shopping center (usually in excess of two million square feet of gross leasable area) and including retail space, hotels, restaurants, entertainment facilities, and amusement park-type amenities.

Memorandum of Lease

A document with only essential lease terms, not details about the rent; an alternative to the recording of the entire lease.

Merchants’ Association

An organization formed in shopping centers and controlled by the tenants to plan promotions and advertisements for the good of the center as a whole and usually established as a not-for-profit corporation. All tenants are required to participate, and both tenants and landlord pay dues. Compare marketing fund.

Metes and Bounds

The boundary lines of land, with their terminal points and angles, described by listing the compass directions and distances of the boundaries. Originally, metes referred to distance and bounds referred to direction.

Metropolitan Statistical Area (MSA)

A geographic unit composed of one or more counties consisting of a population of at least 50,000. Each county must have specific metropolitan characteristics.

Mezzanine

An intermediate floor placed between the floor and ceiling of a single story.

Mezzanine Debt

Debt that incorporates equity-based options, such as warrants, with a lower-priority debt. Mezzanine debt is actually closer to equity than debt.

Mid-Rise

A building with between four to ten stories above ground level.

Midstream Analysis

The part of the cash flow analysis that is prepared during the later lifecycle of the property. Thus allowing new figures to be added and revised to evaluate the alternatives.

Millage Rates

The rate of real estate taxes levied by a taxing authority based on a mill (1/10 of one cent), or one dollar per one thousand dollars of assessed taxable value.

Minimum Rent

The basic rent that a tenant will pay the landlord each year, in twelve equal, consecutive installments, computed based on an amount of rent per square foot; also called base rent.

Miniperm Loan

An interest-only mortgage on income property put in place because a longer-term permanent loan cannot yet be supported by the property’s cash flow, usually made in conjunction with a construction loan and for a term of three to five years. Also called minipermanent loan.

Miniwarehouse

A facility that typically provides 1200 to 2000 square feet of office warehouse space designed for the conduct of business.

Minor

A person under a legal age, usually under 18 years old.

Mixed-Use

Space within a building or project providing for more than one use (i.e., a loft or apartment project with retail, an apartment building with office space, an office building with retail space). See Planned Unit Development

Mobile Home Park

A community designed to receive manufactured, mobile, and/or modular housing. The resident typically owns the dwelling unit and leases the lot on which the home is placed. The lot includes the pad plus utility connection, lawn, parking space, etc.

Modified Accelerated Cost Recovery System (MACRS)

The schedule put in place by Internal Revenue Service tax codes for depreciating property and equipment.

Modified Internal Rate of Return (MIRR)

In financial analysis, an indicator that uses investor-selected rates of return in calculating positive cash flow as a basis for decision-making.

Modular Home

A factory-built year-round dwelling unit that is built to the specifications of the local or state building code applicable to modular housing built on a permanent foundation.

Month-to-Month Tenancy

An agreement to rent or lease for consecutive and continuing monthly periods until terminated by proper prior notice by either the landlord or the tenant. Notice of termination must precede the commencement date of the final month of occupancy. State law usually establishes the time period of prior notice.

Monument Sign

Typically a ground-mounted sign identifying the occupants of a building.

Mortgage

The instrument in which the owner of a property pledges it as security toward the repayment of a loan.

Mortgage Bonds

Securities issued to finance real estate.

Mortgage Insurance

The practice of the government insuring privately borrowed loans. If the borrower defaults, the government guarantees to pay off the balance or purchase the property. Compare private mortgage insurance.

Mortgagee

The lender in a mortgage loan transaction.

Mortgagor

The borrower in a mortgage loan transaction. The owner of the real estate who conveys his/her interest in the property as security for a loan.

Multiple Listing Service

An arrangement among real estate firms whereby each broker presents the broker's listings to the attention of the other members so that if a transaction results, the commission is divided between the broker bringing the listing and the broker making the sale/lease.

NAIOP (National Association of Industrial and Office Properties)

Membership organization of owners and developers of industrial, office, and related properties and others involved in the commercial real estate industry. Formerly the National Association of Industrial and Office Parks and, subsequently, NAIOP – The Association for Commercial Real Estate.

NAR (National Association of REALTORS®)

National non-profit professional organization of licensed real estate practitioners who are members of subscribing local real estate boards throughout the United States and its possessions.

Natural Break

In percentage rent, the point at which rent due from a specific percentage of sales equals the minimum rent.

Negative Cash Flow

A deficit or loss. When operating expenses and debt service exceed revenues collected.

Negligence

Failure to use the level of care a reasonable and prudent person would use under the same circumstances, characterized by inattention, inadvertence, and thoughtlessness that results in harm. Failure to exercise reasonable care which, though not accompanied by harmful intent, directly results in an injury to an innocent party.

Neighborhood Center

This center is designed to provide convenience shopping for the day-to-day needs of consumers in the immediate neighborhood. These centers are often anchored by a supermarket and/or a drug store anchor.

Net Absorption

The square feet leased in a specific geographic area over a fixed period-of-time after deducting space vacated in the same area during the same period.

Net Operating Income (NOI)

Difference between the total effective income and total operating expenses.

Net Rentable Area

The floor area of a building that remains after the square footage represented by vertical penetrations, such as elevator shafts, etc., has been deducted. Common areas and mechanical rooms are included and there are no deductions made for necessary columns and projections of the building. (This is by the Building Owner and Manager Association - BOMA, Standard).

New/Existing

Indicates whether the space available is new construction or second generation.

NOI – Net Operating Income

Total collections (gross receipts) less operating expenses; may be calculated on an annual or a monthly basis.

Non-Compete Clause

A clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and that no other tenant operating the same or similar type of business can occupy space in the building. This clause benefits service-oriented businesses desiring exclusive access to the building’s population.

Non-Conforming Loan

A loan that fails to meet typical bank criteria for funding. Reasons include the loan amount is higher than the conforming loan limit (for mortgage loans), lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it. In many cases, non-conforming loans can be funded by hard money lenders, or private institutions/money. A large portion of real estate loans are qualified as non-conforming because either the borrower’s financial status or the property type does not meet bank guidelines. Non-conforming loans can be either A-paper or subprime loans.

Non-Disturbance Agreement

Agreement between a tenant (or lessee) and the landlord’s (or Lessor’s) lender to ensure the tenant will remain in possession of the leased property, despite any foreclosure action against the landlord.

Non-Recourse Loan

A loan that bars a lender from seeking a deficiency judgment against a borrower in the event of default. The borrower is not personally liable if the value of the collateral for the loan falls below the amount required to repay the loan.

Normal 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”.

Notary Public

A public officer who is authorized to witness and verify certain documents.

Notice to Vacate

Legal notification requiring a tenant to remove him/herself and all removable possessions from the premises, within a stated period of time or upon a specified day and date, and to deliver the premises to the owner or agent or to a designated successor.

Obsolescence

A loss of value brought about by an aging or change in design, technology, taste, or demand. Physical obsolescence (deterioration) is a result of aging (wear and tear) or deferred maintenance. Functional obsolescence is an internal condition of a property related to its design or use. Economic obsolescence is an inability to generate enough income to offset operating expenses, usually due to conditions external to the property (changes in populations and/or land uses, legislation, etc.)

Occupancy Cost

The sum of a tenant’s rent, utilities, and add-ons. Also called total rent.

Occupancy Rate

The ratio of the space rented to the total amount of space available for rent.

Off Price Centers

A type of specialty shopping center comprised of tenants offering name-brand merchandise at large discounts (20% - 60%) off normal retail prices because special bulk purchases allow cost savings to be passed on to the customer. Compare outlet center.

Off Site Costs

In the land-development process, costs related to expenditures for construction items and the like not directly on the parcel of land being developed; for example, the cost of bringing sanitary sewers to a project from a distant point and road widening.

Office Building

A single- or multistory structure designed for the conduct of business, generally divided into individual offices and offering space for rent or lease.

Office Building Classification

For the purposes of comparison, office space is grouped into three classes. These classes represent a subjective quality rating of buildings, which indicates the competitive ability of each building to attract similar types of tenants. Combinations of factors such as rent, building finishes, system standards and efficiency, building amenities, location/accessibility, and market perception are used as relative measures. (Note that national cost estimating services may classify office buildings differently than local markets.)

Class A office buildings are the most prestigious office buildings competing for the premier office users, with rents above average for the area. Buildings have high-quality standard finishes, state-of-the-art systems, exceptional accessibility, and a definite market presence.

Class B office buildings compete for a wide range of users, with rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate, but the buildings do not compete with Class A buildings at the same price.

Class C office buildings compete for tenants requiring functional space at rents below the average for the area.

Office Park

A controlled park-like development composed of office buildings that includes access roads and a unique identification. Often these developments are located outside the central business district (CBD) of major urban centers and buildings are single-story or low-rise structures.

Open Air Centers - ICSC

An attached row of stores or service outlets managed as a unit, with on-site parking usually with common areas that are not enclosed. Open canopies may connect the storefronts, but an open-air center does not have enclosed walkways linking the stores.

Open Listing

A listing given to any broker without liability to compensate any broker except the one who first secures a buyer/tenant who is ready, willing, and able to meet the terms of the listing, or secures the acceptance by the landlord/seller of a satisfactory offer; the sale/lease of the property automatically terminates the listing.

Open Space

An unimproved area of land or water, or containing only such improvements as are appropriate to the use and enjoyment of the open area, and dedicated for public or private use or enjoyment or for the use and enjoyment of owners and occupants of land adjoining or neighboring such open spaces.

Operating Expenses

The actual costs associated with operating a property including maintenance, repairs, management, utilities, taxes and insurance.

Operating Expense Escalation

A clause in an agreement intended to adjust rents by reference to external standards such as published indexes, negotiated wage levels, or expenses related to the ownership and operation of buildings.

Operating Covenant

The promise of the tenant to open and operate its business in the leased premises for a specified period of time and consistent with the required hours of operation.

Operating Expense Stop

In a lease, a clause obligating the property owner to pay operating costs up to a certain amount per square foot per year; tenants pay their pro rata share of any costs in excess of that amount.

Operating Reserves

Funds set aside for the payment of an annual expense.

Operating Statement

The primary record of money received and paid out relative to a property produced by the accounting function. It details expenditures and the percentage of income that can be expressed as profit. A financial statement showing income and expenses by specific category and for a specific time frame.

Operating Year

Operating costs lists for a fixed 12-month period.

Opportunity Cost

The cost of not selling and reinvesting the proceeds of an investment, calculated by an investor at a certain time as a measure of performance. The return that could have been earned if the money were available for investment immediately. The monetary or other advantage that is foregone today in order to obtain something that will have value in the future.

Option

The right to purchase or lease something at a future date for a specified price and terms. The right may or may not be exercised at the option holder’s (optionee’s) discretion. Options may be received, negotiated, or purchased.

Organization Chart

A graphic representation of the levels of employee responsibility and authority. The chain of command within a business.

OSHA

Occupational Safety and Health Act; Occupational Safety and Health Administration

Outdoor Advertising

Advertising used outside (e.g., billboards, electric spectaculars, painted displays, and ads on buses, commuter trains, and transit cars and platforms).

Outlet Center

Usually located in rural or occasionally in tourist locations, outlet centers consist mostly of manufacturers’ outlet stores selling their own brands at a discount. These centers are typically not anchored. These centers range between 50,000 and 400,000 square feet of gross leasable area encompassing 10 to 75 miles with an abundance of customers coming from the outside trade area.

Outlot

Unused portions of a shopping center’s site that constitute the perimeter areas, not including the center facility or parking lot, and that may be used or developed for similar or nonsimilar purposes.

Overage Rent

An amount of percentage rent beyond the minimum rent that is derived as a percentage of the tenant’s sales that exceed an agreed-upon breakpoint.

Overall Capitalization Rate (OCR)

IREM: The rate used to capitalize net operating income by relating it to value is called either the overall rate of return or the overall capitalization rate over the life of the investment. Higher cap rates result in lower values, and lower cap rates give higher values.

Ownership Interest (Condominium)

The legal share (undivided interest) each unit owner of a condominium has in the common areas of the property, expressed as a percentage.

Pad Site (Development)

This normally refers to the land area available for (or occupied by) a freestanding building within the parking area of a shopping center or enclosed mall. Parking for a pad site use is generally provided through cross-easement access and parking arrangements with the shopping center owner.

Parking Area

The space on a site devoted to parking, including aisles, walks, islands, minor landscaping, and other features incidental to parking.

Parking Area Ratio

The relationship between the size of the parking area and the size of the building it is intended to serve. This relationship can be expressed in the number of car spaces per 1,000 square feet of rentable area.

Parliamentary Procedure

Established rules of parliamentary law and unwritten rules of courtesy used to facilitate the transaction of business in deliberative assemblies, such as condominium or homeowners’ association board meetings.

Partial Taking

The taking of part (a portion) of an owner’s property under the laws of eminent domain.

Pass Through Expenses

A tenant’s portion of expenses composed of common area maintenance, taxes, insurance and any other expenses determined by the landlord to be paid by the tenant.

Passive Activity Losses

Generally, a passive activity is any rental activity OR any business in which the taxpayer does not materially participate. Non-passive activities are businesses in which the taxpayer works on a regular, continuous, and substantial basis. In addition, passive income does not include salaries, portfolio, or investment income.

Per Capita

A means of expressing total municipal expenditures or income by dividing them by the total user or resident population.

Percentage Rent

A percentage of the tenant’s total annual sales paid in addition to fixed rent. This additional rent is normally paid after a pre-determined sales level has been achieved. The percentage factor is then applied to all sales over the present level (breakpoint).

Per diem

Allowance, payment, charge, or rent established on a daily basis.

Performance Bond

A surety bond posted by a contractor guaranteeing full performance of a contract with the proceeds to be used to complete the contract or compensate for the owner’s loss in the event of nonperformance.

Permanent Loan

A long-term loan that finances the purchase of an existing building or replaces a construction loan for a new development.

Permitted Use (Legal/Leasing)

What tenant is permitted to sell or do, to ensure control of the tenant mix of the property.

Personal Guarantee

A lease or financing provision that obligates personal assets of an officer of the tenant company or a related party as a secondary means to meet financial obligations to the landlord/lender under the lease or financing instrument.

Personal Property

Any property which is not real property. Examples include furniture, clothing, and artwork.

Pet Agreement

A lease addendum that authorizes a tenant to keep a specific pet on the premises as long as certain conditions are met.

Physical Life

The length of time for which a building structure is sound.

Physical Obsolescence

A condition of aging (deterioration) or deferred maintenance of a property.

Pilaster

A short, vertical thickened section of a masonry wall, some what like a pillar built into the wall, which projects from the wall either on one side or both sides; The purpose of the pilaster is to strengthen the wall at points of concentrated loads, or to stiffen the wall against buckling or overturning.

Planned Unit Development (PUD)

A type of development that usually includes a mixture of open space, single-family homes, townhouses, condominiums or cooperatives, rental units, and recreational and commercial facilities within a defined area under a specific zoning arrangement. Also, a zoning classification that allows flexibility in the design of a subdivision, usually setting an overall density limit which allows clustering of units to provide for common open space.

Plat (Plat Map)

Map of a specific area, such as a subdivision, which shows the boundaries of individual parcels of land (e.g. lots) together with streets and easements.

Plot Plan (Development/General)

The blueprint of a site showing the location and square footage of all tenants, as well as surface facilities.

Plumbing Chase

A duct space or enclosure inside partition walls to house plumbing lines and vent stacks.

Points

An upfront percentage fee paid for a loan that increases the overall yield to the lender. One point equals one percent of the original amount of the loan.

Possession

Occupancy or control of property. The right to use the premises.

Power Center

A center dominated by several large anchors, including discount department stores, off-price stores, warehouse clubs, or “category killers,” i.e., stores that offer a vast selection in related merchandise categories at very competitive retail prices. The center typically consists of several anchors, some of which may be freestanding (unconnected) and only a minimum amount of small specialty tenants. These centers range between 250,000 and 600,000 square feet in gross leasable area encompassing 10 to 50 acres and the primary trade area is between 5 and 10 miles.

Power of Attorney

A legal instrument in which a person authorizes another to act as his or her attorney or agent.

Power Of Sale

Clause inserted in a mortgage or deed of trust giving the mortgagee (or trustee) the right and power, on default in the payment of the debt secured, to advertise and sell the property at public auction.

Precast Concrete

Concrete components (i.e. walls) of a building which a prefabricated at a plant site and then shipped to the site of construction.

Preleasing

The leasing of space in a project before and during construction.

Prepayment Clause

A provision in a mortgage or other loan instrument that gives the borrower the right to pay off the indebtedness before it becomes due. See also prepayment penalty.

Prepayment Penalty

An extra stipulated charge for paying off all or part of a loan on real property in advance. A cash penalty for paying off a mortgage loan before its date of maturity.

Present Value (PV)

The amount one would have to invest today at a given rate for the period to yield the future sum.

Preventive Maintenance

A program of regularly scheduled inspection and care that allows potential problems to be prevented or at least detected and solved before major repairs are needed.

Primary Market (Research)

A geographic term used to define the trading area of a shopping center.

Prime Rate

The lowest interest rate available from commercial banks for short-term loans to their most creditworthy customers.

Principal (real estate)

One who owns property

Principal (finance)

The amount of money that is borrowed in a loan as distinct from the interest on such loan; the original amount or remaining balance of a loan. Also, the original amount of capital invested. one who owns property

Private Mortgage Insurance (PMI)

Insurance that protects lenders making risky loans in financing real estate purchases.

Profit & Loss Statement – P & L

A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time – usually a fiscal quarter or year.

Pro forma

A financial projection for a proposed project based on certain specified assumptions and reflecting acquisition/construction costs, financing, leasing rates and velocity, and operating costs.

Pro rata

Proportionately; according to measure, interest, or liability.

Professional Liability Insurance

Insurance against a monetary loss caused by failure to meet a professional standard or resulting from negligent actions; also called errors and omissions (E&O) insurance.

Project Management (Construction)

The organized, systematic approach toward planning, organizing, and managing the process of design and construction. A project manager operates as an agent on behalf of the owner.

Promissory Note

A written promise to pay a specified sum of money to a specific person or firm under specified terms (a stated interest rate, a schedule of payments, and a due date).

Property Insurance (Insurance)

First-party insurance covering the insured for damage to his or her personal or real property or the loss of its use.

Property Management

A professional activity in which someone other than the owner supervises the operation of a property according to the owner’s objectives; also referred to as real estate management. The operation of income-producing real estate as a business, including leasing, rent collection, maintenance of the property, and general administration. Usually, this is performed by someone who acts as the owner’s agent (i.e., a professional property manager).

Protected Class

It is illegal, pursuant to the Ohio Fair Housing Law, Division (H) of Section 4112.02 of the Revised Code, and the Federal Fair Housing law, 42 U.S.C.A. 3601, to refuse to sell, transfer, assign, rent, lease, sublease, or finance housing accommodations; refuse to negotiate for sale or rental of housing accommodations; or otherwise deny or make unavailable housing accommodations because of race, color religion, sex, familial status as defined in Section 4112.01 of the Revised Code, ancestry, military status as defined in that section, disability as defined in that section, or national origin or to so discriminate in advertising the sale or rental of housing, in the financing of housing, or in the provision of real estate brokerage services.

It is also illegal, for profit, to induce or attempt to induce a person to sell or rent a dwelling by representations regarding the entry into the neighborhood of a person or persons belonging to one of the protected classes.

Protected Covenants (Deed Restrictions)

Clauses in a deed limiting the future uses of the property.

Public Limited Partnership

A type of limited partnership with an unlimited number of participants that is required to register with the Securities and Exchange Commission (SEC) when the number of partners and the value of their assets reach certain levels.

Punch List

An itemized list, typically prepared by the architect or construction manager, documenting incomplete or

unsatisfactory items after the contractor has notified the owner that the tenant space is substantially complete.

Pylon Sign (Development/General)

Typically, a sign mounted on a pole and used to identify the occupants of a building.

Quiet Enjoyment

In the covenant of quiet enjoyment, the landlord promises that during the term of the tenancy no one, including the landlord will disturb the tenant in the tenant's use and enjoyment of the premises. Quiet enjoyment includes the right to exclude others from the premises, the right to peace and quiet, the right to clean premises, and the right to basic services such as heat and hot water service.

Quitclaim Deed (see Deed)

Radius Restriction Clause (Leasing/Legal)

A clause inserted into a shopping center retail lease establishing the distance from the center that the retailer may operate another, similar store.

Radon

A naturally occurring radioactive gas, chemical symbol Rn, formed by the disintegration (radioactive decay) of radium. Radon migrates through soil and enters buildings through porous foundation materials and along water and gas lines. It is considered a potential hazard to human health, most particularly in residential buildings, especially those that have been tightly sealed to prevent heat loss because they are usually less well ventilated than commercial buildings.

Raw Land

Unimproved land that remains in its natural state.

Real Estate Board

An organization whose members consist primarily of real estate professionals such as brokers.

Real Estate Investment Trust (REIT)

An entity that sells shares of beneficial interest to investors and uses the funds to invest in real estate or real estate mortgages. Real estate investment trusts must meet certain requirements in a certified REIT. No corporate taxes need to be paid as long as a series of complex Internal Revenue Service qualifications are met.

Real Estate Syndicate

When partners (either with or without unlimited liability) form a partnership to participate in a real estate venture.

Real Estate Taxes (Property Taxes)

Charges imposed on all owners of real estate in the area of the taxing authority, usually based on the assessed value of the property.

Real Property

Land, and generally whatever is erected or affixed to the land, such as buildings, fences, and including light fixtures, plumbing and heating fixtures, or other items which would be personal property if not attached.

REALTOR®

A registered trademark of the National Association of REALTORS that can be used only by its members.

Recapture

When the IRS recovers the tax benefit of a deduction or a credit previously taken by a taxpayer upon the sale of the property.

Receiver

An individual appointed by a court to manage a property that is the subject of a pending bankruptcy or foreclosure. A receiver’s role is to preserve property that has been abandoned or for which there have been allegations of fraud or mismanagement by the owner.

Receivership

Court-ordered turnover of a property to an impartial third party (receiver) so that it may be preserved for the benefit of the affected parties. A special trust set up to hold and administer property under litigation.

Reciprocal Easement Agreement (Development)

Reciprocal easement agreements between shopping center and various anchors or owners of adjacent land regarding how a given property is to be developed and maintained.

Reconciliation Billing

Billing to tenants to reconcile the difference between estimated pass-through charges paid by the tenant and actual operating expenses of the property owed by the tenant. The difference is billed or credited (or refunded) to the tenant as appropriate.

Recourse

A type of loan that obliges the borrower to use personal assets as a secondary means to repay a loan.

Redevelopment (Development)

Usually a comprehensive action that may include extensive leasing activity, renovation, expansion, and/or reconfiguration, but that typically substantially changes the leasing and marketing direction of an existing property.

Referral Fee

A fee paid by one real estate broker to another for the referral of a prospective tenant or client.

Referral Program

In apartment leasing, a marketing vehicle that offers residents incentives to refer others to a property.

Refinancing

Obtaining a new loan to pay off an existing loan, using the same property as collateral.

Regional Center (General)

This center type provides general merchandise (a large percentage of which is apparel) and services in full depth and variety. Its main attractions are its anchors; traditional, mass merchant or discount department stores, or fashion specialty stores. A typical regional center is usually enclosed, with an inward orientation of the stores connected by a common walkway, and parking surrounds the outside perimeter.

Rehab

An extensive renovation of a building or project which is intended to cure obsolescence of such building or project.

REIT see Real Estate Investment Trust

Rendering

A perspective drawing finished with ink or color to bring out the effect of a design.

Renewal Clause

A lease provision giving a tenant the right to renew the lease for an additional period upon the expiration of the original lease term; also called renewal option.

Rent

A fee paid, usually monthly, for the occupancy and use of any rental property, land, buildings, equipment, etc.

Rentable Area

In a multi-tenant building, the area on which rent is based and which generally includes the space available for tenants’ exclusive use plus identified common areas less any major vertical penetrations (air shafts, stairways, elevators) in the building.

Rent Acceleration (Leasing/Accounting)

The right of the landlord to collect rent for the balance of the term of the lease in one lump sum in case of default.

Rent Commencement Date

The date on which a tenant begins paying rent.

Rent Relief (Abatement)

An abatement of some or all rent for set period of time.

Rent Roll

A summary schedule listing of all spaces in a property; vacant as well as occupied. Information listed here includes tenant names, size of each store, rent, the term of each lease (including commencement and expiration date), as well as other information.

Rentable/Usable Ratio

That number obtained when the Total Rentable Area in a building is divided by the Usable Area in the building. The inverse of this ratio describes the proportion of space that an occupant can expect to actually utilize/physically occupy.

Rental Area (Leasing)

The square footage of a building that can actually be rented.

Rental Concession

Concessions a landlord may offer a tenant in order to secure their tenancy. These can include: rent abatement, increased tenant improvement allowance, signage, lower than market rental rates and moving allowances.

Rent-Up Period

That period of time, following construction of a new building, when tenants are actively being sought and the project is approaching its stabilized occupancy.

REO (Real Estate Owned Property)

Real estate that has come to be owned by a lender, including real estate taken to satisfy a debt. Includes real estate acquired by lenders through foreclosure or, in settlement of some other obligation.

Replacement Allowance

An allowance that provides for the periodic replacement of building components that wear out quicker than the building itself.

Replacement Cost

The today’s estimated cost to replace or restore a building to its pre-existing condition and appearance (and in compliance with applicable current building codes); without considering depreciation. In appraisal, the cost at current prices to replace an existing building with one of equal utility.

Replacement Reserves

Funds set aside for future repair and replacement of major building components (e.g., roof, HVAC system).

Replacement Value (Insurance)

The basis for loss payment can, by endorsement (specifying changes in or additions to the policy) and additional premium, be changed from actual cash value (replacement cost less depreciation) to replacement value, which is the full cost of replacement as of that date. This change adds to the annual expense of insurance.

Representation Agreement

An agreement between the owner of a property and a real estate broker giving the broker the authorization to

sell or lease the property at a certain price and terms in return for a commission, set fee or other form of

compensation.

Request for Proposal (“RFP”)

The formalized Request for Proposal represents a compilation of the many considerations made to a landlord or vendor to reflect their specific needs for contract or lease being considered for a project or tenant.

Resident Manager - IREM

An employee residing in a building for the purpose of overseeing and administering the day-to-day building affairs in accordance with directions from the property manager or owner.

Residential Lead Based Paint Hazard Reduction Act

Federal law enacted in 1992 that requires all owners of residential properties built before 1978 to notify new renters and potential buyers about the presence of lead-based paint. New rules regarding particulars of disclosure came into effect in December 1996. Rental applicants and residents who renew leases must be given a government pamphlet on lead paint hazards, a disclosure form detailing lead paint hazards at the property, and any reports that describe lead paint hazards at the property.

Restoration

The process of restoring something damaged or deteriorated to a prior good condition.

Restriction

A restriction, often specified in the deed, on the use of property.

Retainer

The act of employing an advisor; the nature of the services to be provided are spelled out in a retainer agreement to be able to make a claim upon that person’s services in case of need.

Retaliatory Eviction

Requirement by a landlord that a tenant vacate leased premises in response to a complaint from the tenant concerning the condition of the building or efforts to form a tenants’ union. Landlord-tenant laws in many states forbid such evictions.

Retrofit

The replacement of fixtures or facilities in a building with new equipment that is more efficient, usually in terms of energy consumption, fire protection codes, or accommodations for new technology.

Return on Investment (ROI)

The ratio of net operating income to the total investment amount, for a given time period, which provides a measure of the financial performance of the investment. A measure of profitability expressed as a percentage and calculated by comparing period income to the owner’s equity in the property (income ÷ equity = % ROI). A measure of cash flow against investment, it can be calculated either before or after deduction of income tax. ROI measures overall effectiveness of management in generating profits from available assets; however, it does not consider the time value of money.

Return on Investment (ROI) Analysis (Finance)

A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of investment; the result is expressed as a percentage or a ratio.

Revenue Growth

A ratio determined by dividing the difference between this year’s net sales and last year’s net sales by the amount of last year’s net sales.

Revocation

An act of rescinding power previously authorized.

Rezoning

A change in prevailing zoning ordinances; rezoning changes the permitted uses for the affected parcel or parcels of land.

Right of First Offer (Leasing/Legal)

A provision requiring the landlord or seller to offer vacant space or property to the offeree before offering it for sale or lease to anyone else.

Right Of First Refusal

A provision requiring the landlord to give the tenant the option of leasing a space on terms negotiated with another prospective tenant.

Rule of Thumb

A common or ubiquitous benchmark.

Rules and Regulations

Guidelines for tenants who lease space in a building, outlining requirements such as, tenant maintenance responsibilities, hours of operation, etc.; also known as house rules and regulations. Specifics are usually incorporated in the lease, either as a specific provision or as a rider, and they vary by property type.

Run with the Land (Legal/Development)

This term refers to the rights or restrictions that affect all owners, both present and future, in the chain of title to a parcel of land.

Sale-Leaseback

An arrangement by which the owner occupant of a property agrees to sell all or part of the property to an investor and then lease it back and continue to occupy space as a tenant. Although the lease technically follows the sale, both will have been agreed to as part of the same transaction.

Sales (Retail)

The amounts received by or accrued to the store in exchange for merchandise sold to customers during an accounting period.

Sales Area (Retail)

Rentable area minus storage space. The proportion of rentable store area devoted to sales varies among store types and among stores of the same type, so that calculations of sales or rent are more uniform if made on the basis of total store area.

Schedule of Commissions

A document that outlines the terms of a commission agreement stating how and when the fee is to be paid.

Scheduled Gross Income

The total amount of revenue generated by a property if all space were leased at a quoted rates.

Second Generation or Secondary Space

Refers to previously occupied space that becomes available for lease, either directly from the landlord or as sublease space. See also "First Generation Space.

Second Mortgage

A mortgage on property that ranks below 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 sequence priority, indicated by the date of recording, determines the designation first, second, third, etc.

Secondary Market (Finance)

The resale by the original lender for the mortgage loan of an investor.

Secondary Market (Research)

A geographic term used to designate areas outside the primary market, the fringes of the market and beyond.

Section 8 Housing

Privately owned residential rental units that participate in the low-income rental assistance program created by the 1974 amendments to Section 8 of the 1937 Housing Act. Under this program the U. S. Department of Housing and Urban Development (HUD) pays a rent subsidy to the landlord on behalf of qualified low-income residents so they pay a limited portion of their incomes for rent (voucher program). Alternatively, residents may receive rent subsidies for the entire rent and not pay any portion of the rent themselves (certificate program).

Security Deposit

A deposit of money by a tenant to a landlord to secure performance of a lease. This deposit can also take the form of a Letter of Credit or other financial instrument.

Security Expenses (Accounting/Security)

This major category includes costs associated with security at the property. These include payroll and employee benefits of center-employed security personnel, the costs of contracted security services, equipment, uniforms and supplies attributable to the security function.

Self-Service Storage Facility

A rental property comprising individual units of space, with individual doors and locks, used for storage of personal property. Spaces may be leased by individuals or by businesses. Also known as ministorage and self-storage.

Setback

The distance from a curb, property line or other reference point, within which building is prohibited.

Setback Ordinance

Provisions of a building or zoning ordinance that regulate the distance from the lot line to the point where improvements may be constructed.

Shares of Beneficial Interest

Shares sold by real estate investment trusts (REITs); they are traded on the stock markets similar to corporate common stock. See also real estate investment trust (REIT).

Shell Space

The interior condition of the tenant's usable square footage when it is without improvements or finishes. While existing improvements and finishes can be removed, thus returning space in an older building to its "shell" condition, the term most commonly refers to the condition of the usable square footage after completion of the building's "shell" construction but prior to the build out of the tenant's space. Shell construction typically denotes the floor, windows, walls and roof of an enclosed premises and may include some HVAC, electrical or plumbing improvements but not demising walls or interior space partitioning. Different property types have different standards for their definition of shell space.

Gray Shell

Used in referring to the condition of the interior of a retail shell space that has been partially improved by the landlord (i.e., stubbed plumbing has been installed and concrete floors may or may not have been poured, but there is no finish on demising walls.

Vanilla Box/White box

A space partially completed by the landlord based on negotiations between tenant and landlord. Vanilla box normally means HVAC (heating, ventilation, and air-conditioning), walls, floors, stockroom wall, basic electrical work, basic plumbing work, rear door, and storefront.

Shopping Center (General)

A group of retail restaurants and other commercial establishments that is planned, developed, owned and managed as a single property. On-site parking is usually provided. The center’s size and orientation are generally determined by the market characteristics of the trade area served by the center.

Shopping Patterns (Research)

Various types of behavior a consumer exhibits in a shopping center which are measured with consumer data tools. Shopping patterns might include the following: shopper origin, next destination, mode of transportation, primary purpose of center visit, shopping frequency, amount spent, time spent shopping, stores visited/purchased in, and buyer conversion.

Short Term Debt (Accounting/Finance)

Any debt that is due within five years in accordance with IRS applicable federal rate which is less than 36 months.

Shrinkage (Retail)

The difference between merchandise on hand shown by a physical inventory and that shown as “book value.” It may be due to theft, internal or external fraud, record distortion, waste, sabotage, general laxity, or careless operation.

Sick Building Syndrome (SBS)

Acute symptoms exhibited by building occupants that are apparently linked to time they spend in the building but dissipate when they leave it and for which no specific cause or illness can be identified.

Signage

A lettered board or other device placed on or in front of a building to identify the location or to advertise the business transacted there. Also, a conspicuously placed board or placard containing direction, warning, or other type of information.

Single Phase Power

The type of electrical power available to a building measured in voltage (volts) of 100 or 220 volts. Single phase is used for lighting, smaller HVAC systems and general office equipment.

SIOR (Society of Industrial and Office, REALTORS®)

Membership organization of real estate brokers specializing in industrial and office properties and other individuals and businesses with interests in these types of real estate; an affiliate of the National Association of REALTORS® (NAR).

Site Analysis

The study of a specific parcel of land which takes into account the surrounding area and is meant to determine its suitability for a specific use or purpose.

Site Development

The installation of all necessary improvements, (i.e. installment of utilities, grading, etc.), made to a site before a building or project can be constructed upon such site.

Site Plan

A detailed plan which depicts the location of improvements on a parcel of land which also contains all the information required by the zoning ordinance.

Situs

The location of a property.

Slab

A flat, reinforced-concrete structural member, relatively sizable in length and width, but shallow in depth; used for floors, roofs, and bridge decks.

Slippage (Accounting)

Also known as leakage. The amount the landlord pays for additional costs such as the triple net charges and/or tenant repairs, due to favorable leases that have provided relief to tenants under certain conditions. The impact of slippage erodes net operating income (NOI), which reduces the value of the property.

Socioeconomic Groups (Research)

Classification of social status, usually based on the occupation of the head of household.

Soft Cost

Cost items in addition to the direct construction cost. Soft costs generally include architectural and engineering, legal, permits and fees, financing fees, construction interest and operating expenses, leasing and real estate commissions, advertising and promotion.

Space Plan

A graphic representation of a tenant’s space requirements, showing wall and door locations, room sizes, and sometimes includes furniture layouts. A preliminary space plan will be prepared for a prospective tenant at any number of different properties and this serves as a “test-fit” to help the tenant determine which property will best meet its requirements. When the tenant has selected a building of choice, a final space plan is prepared which speaks to all of the landlord and tenant objectives and then approved by both parties. It must be sufficiently detailed to allow an accurate estimate of the construction costs. This final space plan will often become an exhibit to any lease negotiated between the parties.

Special Assessment

Any special charge levied against real property for improvements levied by either government or public authority that benefit the assessed property.

Special Warranty Deed (see Deeds)

Specialty Center

A type of shopping center often dominated by food and gift tenants and having 50,000 – 300,000 square feet of gross leasable area (GLA). There may be no conventional anchor tenant. Many such centers have been created by conversion of an existing old building (adaptive use) in a tourist-oriented area, usually perpetuating an architectural theme suggested by the site; also known as theme or festival shopping centers.

Specific Performance

A requirement compelling one of the parties to perform or carry out the provisions of a contract into which he has entered.

Speculative Building

Development of a single (usually commercial) building without preleasing commitments from one or more major office, retail, or industrial tenants.

Speculative Space

Any tenant space that has not been leased before the start of construction on a new building.

Square Feet

The usual method by which rental space is defined. It is the area of that space, calculated by taking length times width. For example, a room 30 feet by 60 feet has an area of 1,800 square feet.

Stabilization

A component of the real estate cycle. A period when demand begins to increase and absorb the oversupply, but there is little new construction, and rental increases are asked to keep pace with inflation.

Stabilized Operating Expenses (Accounting

Projected expenses that are subject to change but have been adjusted to reflect equivalent, stable property operations.

Standard Form Lease

Ownership’s lease form into which clauses or provisions may be written.

Statute

A law established by an act of a legislature.

Statute of Frauds

State law (founded on ancient English law) which requires that contracts must be reduced to written form if it is to be

enforced by law.

Statute of Limitations

A law barring all right of redress after a certain period of time from the moment when a cause of action first arises.

Steering

An illegal discriminatory practice that conceals vacancies from a rental prospect, shows prospects only a portion of a site or area, or encourages a prospective tenant to look at another site for housing. Under fair housing law, the illegal assignment of any person to a particular complex, building, section, floor, or unit of a building based on their membership in a protected class.

Step-Up Lease

A lease specifying set increases in rent at set intervals during the term of the lease.

Straight Lease (Flat Lease)

A lease specifying the same, a fixed amount, of rent that is to be paid periodically during the entire term of the lease.

This is typically paid out in monthly installments.

Straight-Line Depreciation

Part of the Internal Revenue Service income tax code that allows the value of an investment to be recovered by deducting a certain amount each year over a set span of years.

Strip Center

Any shopping area, generally with common parking, comprised of a row of stores but smaller than the neighborhood center anchored by a grocery store.

Subagent

An agent of an individual already acting as an agent of a principal.

Subcontractor

A contractor working under and being paid by the general contractor. Often a specialist in nature, such as an electrical contractor, cement contractor, etc.

Subdivision Plat

A detailed drawing which depicts the manner in which a parcel of land has been divided into two or more lots. It contains engineering considerations and other information required by the local authority.

Sublease

A lease executed by the lessee of an estate to a third person conveying the same estate for a shorter term, or a portion of the estate for the same, or a shorter, term is a sublease. The original tenant remains liable for the lease while a new tenant assumes occupancy.

Subletting

The leasing of space from one tenant to another tenant.

Subordination

When a lien holder, a lessee or one having an interest in or claim against personal or real property, places their interest behind that of another.

Subordination Agreement

As used in a lease, the tenant generally accepts the leased premises subject to any recorded mortgage or deed of trust lien and all existing recorded restrictions, and the landlord is often given the power to subordinate the tenant's interest to any first mortgage or deed of trust lien subsequently placed upon the leased premises.

Subordination Clause

A lease covenant in which the tenant agrees to take any action required to subordinate his/her claims against the property to the rights of the lender under a first mortgage or deed of trust, so long as it does not affect his/her right to possession.

Subordination, Non-Disturbance, and Attornment Agreement (SNDA) (Legal)

Protection for a tenant against a lender using foreclosure to substitute another tenant in that space.

Subrogation

The substitution of one creditor for another such that the substituted person succeeds to the legal rights and claims of the original claimant. In insurance, the right of an insurer to attempt to recover amounts from an at-fault third party for claims paid to the insured party.

Subsidized Housing

Usually privately owned rental property for which a portion of the return on the owner’s investment may result from additional tax advantages granted for development, for leasing part of the property to residents who are eligible for housing subsidies, or for leasing to a local housing authority. The National Housing Act, which has been amended substantially over time, includes provisions for subsidies to landlords via low mortgage rate loans and for payment of rent on behalf of qualified individuals. Compare government-assisted housing; public housing.

Suburban Center (General)

A center located in a less-dense city or town that surrounds either the central city of a U. S. metropolitan statistical area.

Suburban Office Building

A usually low-rise office building set in a landscaped area located in an outlying suburb rather than in or near a city’s central business district (CBD).

Supercenter (Retail)

A very large discount department store that also sells a complete line of grocery merchandise.

Superregional Center (General)

Similar to a regional center, but because of its larger size, a superregional center has more anchors, a deeper selection of merchandise, and draws from a larger population base. As with regional centers, the typical configuration is as an enclosed mall, frequently with multi-levels.

Surety

One who at the request of another, and for the purpose of securing to him a benefit, voluntarily binds himself to be obligated for the debt or obligation of another. Although the term includes guarantor and the terms are commonly, though mistakenly, used interchangeably, surety differs from guarantor in a variety of respects.

Surface Rights

A right or easement granted with mineral rights, enabling the possessor of the mineral rights to drill or mine through the surface.

Surrender

The cancellation of a lease by mutual consent of the tenant and the landlord.

Survey

The process by which a parcel of land is measured and its boundaries and contents ascertained, and described.

Survivorship

A distinguishing characteristic of a joint tenancy relationship between two (or more) people that, when one of the joint tenants dies, the property rights of the deceased automatically transfer to the surviving joint tenant (and not to the deceased party’s heirs). See also joint tenancy.

Survivorship Tenancy (see Deed)

Syndication

A form of partnership that permits investment in projects by spreading risk among a larger number of investors. A form of real estate ownership in which a syndicator sells equity interests to investors.

Taking

A common synonym for condemnation or any actual or material interference with private property rights but it is not essential that there be physical seizure or appropriation.

Tax Base

The assessed valuation of all the real property that lies within the jurisdiction of a taxing authority, which is then multiplied by the tax rate or mill levy to determine the amount of tax due.

Tax Exempt

Certain kinds of income which are not subject to federal income tax.

Tax Lien (Real Estate)

A statutory lien, existing in favor of the state or municipality, for nonpayment of property taxes which attaches only to the property upon which the taxes are unpaid.

Tax roll

A list or record containing the descriptions of all land parcels located within the county, the names of the owners or those receiving the tax bill, assessed values and tax amounts.

Taxes/SF

Amount of money spent on taxes by either the landlord or tenant.

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.

Tenancy in Common

A form of co-ownership in which there is individual ownership by the distinct owners. Each co-owner may deal with his or her share as they please. There is no right to survivorship.

Tenant (Lessee)

A party who leases real property from the landlord of the property (or of a leasehold interest in the property) for value considerations.

Tenant Allowance

See Tenant Improvement Allowance

Tenant At Will

One who holds possession of premises by permission of the owner or landlord, the characteristics of which are an uncertain duration (i.e. without a fixed term) and the right of either party to terminate on proper notice.

Tenant Improvement Allowances (Leasing)

Provisions in a lease in which the landlord agrees to pay for certain changes to enhance a tenant’s space.

Tenant Improvements (TI)

Improvements made to the leased premises by a landlord or tenant.

Tenant Mix

The tenant types within a multi-tenant complex.

Tenant Representative or Tenant Rep (Leasing)

Broker retained by a prospective tenant to represent him in a real estate lease transaction.

Tenant Roster

See Rent Roll

Tenant Trade Name (Leasing/Retail)

The name under which a tenant is doing business as (DBA).

Termination Option (Leasing/Legal)

The right of a landlord or tenant to terminate a lease based on certain preset conditions.

Time-and-Material Method (T&M)

Time and material is a project billing type whereby the customer is charged for all of the hours of work performed, any direct expenses incurred, and material purchased during project delivery. For example, if you hired a technology consultant to install a network in your office, the consultant might opt to charge you for time (the number of hours worked to install the network) and materials (the raw cost of the direct materials used in your installation).

Time Is Of The Essence

Means that performance by one party within the period specified in the contract is essential to require performance by the other party.

Time Value of Money (Finance)

The concept underlying compound interest; that a dollar received today is worth more than a dollar in the future, due to opportunity cost, inflation, and certainty of payment.

Timeshare

A form of divided ownership of real estate, usually at resort properties, whereby ownership is segregated over a stated period of time.

Title

Title is a collective term that makes up your legal rights to own, possess, use, control and dispose of land. Title takes into account all previous ownership, uses and transfers. In order to legally transfer real estate property, a title search must be performed, and in most cases the title must be determined as clear or free of defects or encumbrances.

Title Insurance

Title insurance is an insurance policy that protects against future loss should the title condition be any different than when the policy was written.

Title Report (Legal/Development)

A report that indicates the current status of the title, describing easements, restrictions, liens, covenants, incumbrances, or any defects in the title.

Title Search

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

Topography

Surface features of land, such as elevation, ridges, slope; contour, etc.

Tort

A wrongful act or violation of a legal right for which a civil action will lie.

Total Building Inventory

The total amount of square footage of a type of property (i.e. office, industrial, retail, etc.) within a geographical area, whether vacant or occupied.

Townhouse Condominium

A multistory/multifamily dwelling under condominium ownership that utilizes an arrangement of units attached side by side, often as rowhouses with individual entrances; also called zero lot line housing.

Trade Area

The geographic area from which the sustaining patronage for steady support of a shopping center is obtained. The extent of the trade area is governed in each instance by a number of factors, including the matter of the center itself, its accessibility, the extent of physical barriers, the location of competing facilities, and limitations of driving time and distance.

Trade Fixtures

Personal property that is attached to a structure (i.e. the walls of the leased premises) that are used in the business.

Since this property is part of the business and not deemed to be part of the real estate, it is typically removable upon lease termination.

Trade Name (General/Retail)

See Tenant Trade Name

Traditional Mall (General)

This center type provides general merchandise (a large percentage of which is apparel) and services in full depth and variety. Its main attractions are its anchors; traditional, mass merchant, or discount department stores or fashion specialty stores. This center is usually enclosed, with an inward orientation of stores connected by a common walkway, and parking surrounds the outside perimeter.

Traffic Count

The number of automobiles passing an intersection or point along a street within a given period of time. Also used in referring to the number of pedestrians entering a shopping center or mall within a defined period.

Transfer on Death Deed (see Deed)

Truck Well

A dug out and paved area that allows a truck to back down to the edge of a loading dock at the ground-floor level to facilitate the loading and unloading of material, equipment, products,, etc. (for a contrast, see Dock-high Building).

Truss

A steel (or wood) frame that carries the load of a roof.

Trust – (Legal)

A right or interest in real estate or other property separate and distinct from ownership of that property. An interest in property held by one person for the benefit of another person.

Trust Account

A fiduciary account established by one entity to hold funds that belong to another entity. A separate bank account, segregated from an agent’s own funds, in which the agent is required to deposit monies collected for the client; in some states called an escrow account.

Trustee

The person or entity to whom property is transferred in order to hold it for the benefit of another person or entity (the beneficiary), to whom the trustee owes a fiduciary duty.

Trustee (or Executor) Deed (see Deed)

Trustor

One who creates a trust by transferring legal title to real or personal property to a trustee under an agreement that the trustee will administer the item in trust for the benefit of another (the beneficiary of the trust).

Turnkey Operation

A concession whereby the landlord agrees to provide an agreed upon finished level for a commercial tenant.

Turnover Rate

The number of units vacated during a specific period of time, typically expressed as the ratio between the number of move-outs (or the number of new tenancies) and the total number of units in a property.

U.S. Department of Housing and Urban Development (HUD)

A federal department created to supervise the Federal Housing Administration (FHA) and other government agencies charged with administering various housing programs.

Under Construction

When construction has started but the Certificate of Occupancy has not yet been issued.

Under Contract

A property for which a sale contract has been executed and is valid.

Underground Storage Tanks (USTs)

A large container located partially or completely underground that is designed to hold petroleum products, chemical solutions, etc. A leaking underground storage tank (LUST) can be an environmental hazard.

Underwriter

In real estate, a party who evaluates the risk involved in making a mortgage and approves or denies the mortgage.

Unencumbered

Describes title to property that is free of liens and any other encumbrances. Free and clear.

Uniform Commercial Code (UCC)

A collection of laws established to standardize the state laws that apply to commercial transactions. Few such laws apply to real estate; specifically, the UCC applies to chattel mortgages, securities, commercial paper, and the like.

Unimproved Land

Most commonly refers to land without improvements or buildings but can also mean land in its natural state.

Uninterruptible Power Supply (UPS)

A special power source (battery backup or auxiliary generator) used to reduce the risk of sudden power outage. In the event of an outage, the electrical load is transferred to the UPS.

Unsecured Loan

A loan that is not backed by specific collateral, one that is not secured by a mortgage on a particular property; unsecured debt.

Urban Centers (General)

Contributors to the revitalization of downtown areas, urban centers are usually part of a city’s urban-renewal program.

Urban Land Institute (ULI)

An independent nonprofit research and educational organization dedicated to improving the quality and standards of land use and development.

Urban Property

Property in a city or a high-density area.

Usable Area (see Rentable Area)

Use

The specific purpose for which a parcel of land or a building is intended to be used or for which it has been designed or arranged.

Use Clause (Leasing/Legal)

The permitted use a tenant has in his space as stated in the lease.

Useful Life

The period of time during which a building is expected to yield a competitive return. For purposes of cost recovery under U.S. tax code, useful life is based on property type (e.g., residential or commercial building) and does not necessarily coincide with the building’s actual physical or economic life.

Utility

A public service such as gas, water, or electricity. telephone and data service are often considered a utility as well.

Utilities Expense

The cost of all utilities used in a building contracted by the landlord. It includes expenses for electricity, gas, oil and water. It does not include utilities contracted directly by individual tenants.

Vacancy & Collection Loss

An allowance for reductions in gross potential income attributable to projected vacancy (physical or economic) and potential collection loss considerations.

Vacancy Factor

The amount of gross revenue that pro forma income statements anticipate will be lost because of vacancies, often expressed as a percentage of the total rentable square footage available in a building or project.

Vacancy Rate

The total amount of available space compared to the total inventory of space and expressed as a percentage. This is calculated by multiplying the vacant space times 100 and then dividing it by the total inventory.

Vacant Space

Refers to existing tenant space currently being marketed for lease. This excludes space available for sublease.

Valid

A binding situation that is authorized and enforceable by law.

Valuation

Estimated price, value, or worth. Also, the act of identifying a property's worth via an appraisal.

Value Enhancement

To increase the worth and the potential selling price of a property.

Vanilla Box/White Box (see Shell Space)

Variance

Refers to permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship.

Violation

Act, condition, or deed that violates the permissible use of property.

Void

Something that is unenforceable.

Waiver

The intentional relinquishment or abandonment of a specific claim, privilege, or right.

Waiver of Subrogation

In a lease, a clause whereby tenant and owner both agree not to file insurance claims against each other for any damage to the property.

Warranty Deed (See Deeds)

Wet Column

Columns through which plumbing pipes can be taken in order to install drinking fountains, sinks, etc. in tenant space.

Working Drawings

The set of plans for a building or project that comprise the contract documents that indicate the precise manner in which a project is to be built. This set of plans includes a set of specifications for the building or project.

Workletter

A list of the building standard items that the landlord will contribute as part of the tenant improvements. Examples of the building standard items typically identified include: style and type of doors, lineal feet of partitions, type and quantity of lights, quality of floor coverings, number of telephone and electrical outlets, etc. The Workletter often carries a dollar value but is contrasted with a fixed dollar tenant improvement allowance that can be used at the tenant’s discretion. See also Leasehold Improvements and "Tenant Improvements.”

Year-End Reconciliation (Leasing)

Adjustments made at year-end addressing the reality of the prior year’s operations rather than the estimates. Any adjustments are abased on a review of both the general ledger and charges to the common area budgets.

Yield (Finance)

The effective return on an investment, as paid in dividends or interest. Expressed as a percentage, yield is computed by dividing the market price for a stock or bond into the dividend or interest paid in the preceding period.

Yield Maintenance

A lender requirement under which requires a borrower, in the event of prepayment, to supply securities in an equivalent yield to prevent a loss of return to the lender through maturity of the loan.

Zero Lot Line (Development)

The construction of a building on the boundary of a lot.

Zone

An area, delineated by a governmental authority, which is authorized for and limited to specific uses.

Zoning

The division of a municipality or governmental authority into zones and the application of regulations having to do with the structural, architectural design and intended use of buildings within such designated zone.

Zoning Class

Refers to the general type of zoning, such as Industrial, Office or MUH.

Zoning Code

Refers to the specific zoning for a property, such as M or C-4.

Zoning Ordinance

Refers to the set of laws and regulations, generally, at the city or county level, controlling the use of land and

construction of improvements in a given area or zone.

Zoning Variance

An exception made to a prevailing zoning ordinance that does not constitute a change in the legally applicable zoning.