The Navigator Glossary is the perfect resource to learn real estate terms, so you can make informed decisions.
Base Year: The year upon which a direct expense escalation of rent is based. See also "Escalation Clause."
Block Layout: A preliminary method of roughly laying out a tenant's internal office requirements. Gives an initial feel of the space prior to preparing a more detailed layout.
BOMA Standard: A nationally published standard of measuring office space. Standards are published by other organizations and can affect how the size of space is calculated. Are "vertical" penetrations such as elevator shafts and stairwells excluded? Are balconies included?
Building Classifications:
Class "A"
- Building has excellent location and access to attract the highest quality tenants.
- Building must be of superior construction and finish, relatively new or competitive with new buildings, and providing professional on-site management.
Class "B"
- Building with good location, management, construction and tenancy.
- Can compete at low end of Class A.
Class "C"
- Generally an older building with growing functional and/or economic obsolescence.
Class "D"
- An older building in need of extensive renovation as a result of functional obsolescence or deterioration.
Building Code: A set of laws, usually enacted by city ordinance or other local jurisdiction, regulating the design, materials and construction of buildings.
Building Standard: A list of construction materials and finishes used in building out office space for a tenant that the landlord contributes as part of the tenant improvements. Examples of standard building items are: doors, partitions, lights, floor covering, telephone outlets, etc. May also specify the quantity and quality of the materials to be used and often carries a dollar value. See also "Workletter."
Build-out: The cost of configuring and finishing new or re-let space in accordance with a tenant's specifications.
Build to Suit: A method of leasing property whereby the landlord builds a new building in accordance with a tenant's specifications.
Carrying Charges: Various costs that are incidental to property ownership (e.g., taxes, insurance costs and maintenance expenses).
Ceiling Plenum: The totally enclosed area above the ceiling used for the distribution of the air conditioning system (as opposed to fully-ducting the supply and return air system.
Certificate of Occupancy: A certificate issued by a local government building department or agency stating that a building is in a condition suitable for occupancy. Sometimes also called a "C of O" or a Non-Residential Use and Occupancy Permit (NON RUP).
Common Area: The total area within an office building that is not designed for rental to tenants but that is available for common use or enjoyed by all tenants or groups of tenants, their invitees, and adjacent stores. Malls, sidewalks, landscaped area, public toilets, truck and service facilities, and the like, are included in the common area.
Concessions: Cash expended by the landlord in the form of rent abatement, build-out allowance, or other payments to induce the tenant to sign a lease.
Consumer Price Index: A federal government index that measures the change in the cost of a variety of goods and services. Used in loans, purchase agreements and leases as a measure by which to adjust future payments to reflect inflation. Also called "Cost-of-Living Index".
Contract Documents: The design plans and specifications for construction of a facility. Working drawings that detail for the contractor the exact manner in which a project should be built. See also "Specifications;" "Working Drawings".
Core Factor: The percentage of common areas in a building (rest rooms, hallways) that, when added to the net usable square footage equals the net rentable square footage. May be computed for a building or floor of a building. A "Loss Factor" or "Load Factor" is calculated by dividing the rentable square footage by the usable square footage.
Default: The failure to meet an obligation, including lease clauses (i.e. timely rent payment, tenant use of premises, etc) and mortgages (i.e., timely mortgage payment, timely payoff upon due date).
Demising Walls: The boundaries that separate a tenant's space from another tenant's space and from a public corridor.
Economic Feasibility: A project's feasibility in terms of costs and revenue, with excess revenue establishing the degree of feasibility.
Efficiency Factor: The number resulting from dividing the Usable Area by the Gross Building Area in an office building, providing a benchmark measurement for that building's use as an office building.
EMS: Energy Management System. Computerized system to minimize the cost of operation while maintaining specified temperature and comfort parameters. May include integration of HVAC, electrical, and lighting systems.
Environmental Impact Report: A report generally prepared by an independent company detailing the probable environmental effect of a development on the surrounding area. (see Phase I, II, & III).
Equity: The value of one's interest in a property, consisting of its fair market value less any outstanding debt or other encumbrances.
Escalation Clause: A clause in a lease providing for increased rent at a future time. May be accomplished by several means such as (1) Fixed increase- A provision that calls for a definite, periodic rental increase; (2) Cost of living - A clause that ties the rent to a government cost of living index, with periodic adjustments as the index changes; or (3) Direct expense - Rent adjustments based on changes in expenses paid by the landlord, such as tax increases, increased maintenance costs, etc.
Fee Simple: An estate of real property that the owner has unrestricted powers to dispose of and which can be left by will or inherited. Commonly used as a synonym for ownership.
First Mortgage: A mortgage creating a lien against a property that has priority over all other voluntary liens that exist against the property. Foreclosure of a first mortgage lien will generally extinguish or cut off any second mortgage lien or other subordinate lien.
First Refusal Right: A clause occasionally inserted in a lease that gives a tenant the first opportunity to buy a property or lease additional space if the owner decides to sell or offer other space. The owner must have a legitimate offer, which the tenant can match or refuse.
Floor/Area Ratio (FAR): The ratio of the bulk area of a building to the land on which it is situated. Calculated by dividing the total square footage in the building by the square footage of land area.
Full Service Rent: A rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increases in operating expenses over the base year amount. See also: "Pass Throughs".
Gross Building Area: The total floor area in an office building measured in square feet or square meters that is associated with that building's use as an office building. The area extends to the outer surface of exterior walls and windows and includes office area, retail area, and other rentable areas such as vending machine space and storage area, but excludes parking and roof space.
Gross Lease: A lease that provides that the landlord shall pay all expenses of the leased property, such as taxes, insurance, maintenance, utilities, etc.
Guaranty: Agreement whereby the guarantor agrees to pay the debt or perform the obligation of another who fails to do so. Differs from a surety agreement in that there must be a failure to pay or perform before the guaranty can be in effect.
Hot Desk: Data, electrical, and phone connected, ready to plug in.
HVAC: The acronym for Heating Ventilating and Air-Conditioning. Refers to the equipment used to heat and cool a building.
ISDN: Integrated Services Digital Network. A high-speed data and media communication system, as much as ten or more times faster than conventional phone lines.
Lease: An agreement whereby the owner of real property (i.e., landlord) gives the right of possession to another (i.e., tenant) for a specified period of time (i.e., term) and for a specified consideration (i.e., rent).
Lease Commencement Date: The date on which beneficial occupancy commences and the legal terms of the lease go into effect.
Leasehold Improvements: Improvements made to leased premises by a tenant. See also "Tenant Improvements," "Workletter".
Letter of Intent: A formal method through which a prospective developer, buyer or tenant expresses his/her interest in a property. Depending on the language, a legal obligation may be created.
Lien: An encumbrance against property for money, either voluntary or involuntary. All liens are encumbrances but all encumbrances are not liens.
Live Load: The variable weight per square foot to which a building is subjected. Typical suburban live loads may be in the 50-70 lbs. per square foot range, while class A high-rises may offer 75-120 lbs. per square foot. This measurement may be critical for heavy file or equipment areas.
Loss Factor: The common area calculation used to convert usable square foot measurements (usually, the physical space actually occupied by the tenant) to rentable square foot calculations. Usually includes a pro-rata share of restrooms, lobby, common hallways, mechanical equipment rooms, etc.
Lump-Sum Contract: A construction contract requiring the contractor to complete a building for a specified amount, usually established by competitive bidding. The contractor absorbs any loss or retains any profit.
Master Plan: (1) A zoning plan for an entire governmental subdivision, (e.g., a city). A comprehensive plan to allow a city to grow in an orderly manner, both economically and ecologically. (2) A developer's plan for a multi-phase office park or mixed-use development that takes into account all proposed or projected uses, improvements and amenities.
Mortgage: The instrument that evidences an interest in real estate and created to provide a pledge as security for the performance or repayment of a loan. The borrower (i.e., mortgagor) retains possession and use of the property.
Mortgagee: The party that lends the money and receives the mortgage.
Mortgagor: The party that borrows the money and gives the mortgage on the property.
Net lease: A lease in which the tenant pays, in addition to rent, certain costs associated with a leased property, including property taxes, insurance premiums, repairs, utilities, and maintenance. There are also "net-net" )double net) and "net-net-net" (triple net) leases, depending upon the degree to which the tenant is responsible for operating costs. See also "Gross Lease".
Net Rentable Area: Floor area of a building less any vertical penetrations of the floors. No deductions are made for necessary columns and projections of the building. (BOMA Standard).
Operating Expenses: The actual cost of operating income-producing property, including utilities and similar day-to-day expenses, taxes, insurance and reserves for the replacement of items that wear out.
Operating Cost escalation: Refers to the clause in a lease agreement used to adjust rents over the term of a lease.
Parking Ratio: Figure representing the number of parking spaces available per 1,000 square feet of gross leasable area.
Pass Throughs: Building and operating expenses that are paid by the tenant under the terms of a lease.
Phase 1: Preliminary investigation, usually by environmental engineer or consultant, of site's current and past tenancies, adjacent uses, and initial assessment prior to extensive analysis of the possibility or likelihood of site contamination in any manner.
Phase 2: More detailed site analysis, including, but not limited to, soil borings, samplings, testing of materials found in or around site.
Phase 3: Site remediation of contamination or hazardous or suspected hazardous materials.
Punch List: An itemized list noting incomplete or unsatisfactory construction. Usually prepared by the tenant architect after the contractor has notified the owner that the tenant space is substantially complete.
Renewal Option: The right of a tenant to renew (i.e., extend the term of) a lease for a stated period of time and rent at an amount that can be determined.
Rent: Consideration paid for the occupancy and use of real property. A general term covering any consideration (not only money).
Rent Commencement Date: The date on which a tenant begins paying rent. Depending upon the nature of the marketplace, it may coincide with the lease commencement date or it may be several months after. It will never begin before the lease commencement date.
Rentable Square Feet: Usually the space measurement which incorporates both the "usable square foot" measurement as well as the common area. The proportional difference between usable and rentable is generally referred to as the "Loss Factor".
Rentable/Usable Ratio: The number resulting from dividing the Total Rentable Area in a building by the Usable Area. The inverse of this ratio describes the proportion of space that an occupant can expect to utilize.
Right of First Refusal: See "First Refusal Right".
Sale-Leaseback: A financing arrangement in which a property owner sells all or part of the property to an investor and then leases it back. Although the lease actually follows the sale, both are agreed to as part of the same transaction.
Security Deposit: Generally, a deposit of money by a tenant with a landlord to secure performance of a lease.
Setback: The distance from a lot line or other reference point, within which no structure may be located.
Site Plan: A detailed plan, to scale, depicting development of a parcel of land and containing all information required by the zoning ordinance. See also "Master Plan".
Sonet: Synchronized Optical Network Transmission. High-speed data and multimedia transmission system to office buildings.
Space Plan: Sometimes called the preliminary plan. A graphic representation of a tenant's office space requirements, showing wall and door locations, room sizes, and some furniture layouts.
Speculative Space: Any prime space that has not been leased to a tenant prior to commencing construction on a new building.
Stacking Plan: Schematic illustrating tenancies on a floor-by-floor basis. Useful in forecasting how to accommodate growth tenants and identifying larger blocks of space.
Tax Base: Assessed valuation of real property, which is multiplied by the tax rate to determine the amount of tax due.
Tenant Improvements: Improvements to land or buildings to meet the needs of tenants. May be new improvements or remodeling, and may be paid for by the landlord, the tenant, or shared. See also "Leasehold Improvements;" "Workletter".
"Time Is Of The Essence" Clause: used in contracts to bind one party to performance at or by a specified time in order to bind the other party to performance.
Title: The means whereby one has just and full possession of real property.
Title Insurance: Insurance against loss resulting from defects of title to a specifically described parcel of real property. Defects may runt to the fee (i.e., chain of title) or to encumbrances.
Title Search: A review of all recorded documents affecting a specific piece of property to determine the present condition of title.
Trade Fixtures: Personal property used in a business and attached to a structure, but removable upon sale because it is deemed to be part of the business, not of the real estate.
Triple Net (NNN) Rent: Rent stipulated in a lease in which the tenant agrees to pay a share of the landlord's operating expenses or real estate taxes for the building proportionate to the amount of space it occupies. See also "Full Service Rent".
Turn Key Project: A project in which the developer is responsible for the total completion of a building (including interior design and construction) or demised premises to the customized requirements of a future owner or tenant.
UPS: Uninterruptible Power Supply. A special power source which takes over in the event of a failure in the main power system.
Usable Square Feet: That space measurement actually contained within the demised premises. If the entire building is occupied by a single user, the rentable and usable square foot calculations may be the same.
Use: Specific purpose for which a parcel of land or a building is designed, arranged, intended, occupied or maintained.
Vacancy Rate: A measurement expressed as a percentage of the total amount of available space compared to the total inventory of space. Computed by multiplying vacant space times 100 and divided by total inventory.
Variance: A permit that grants a property owner relief from certain provisions of a zoning ordinance when, because of the particular physical surroundings, shape or topographical condition of the property, compliance would result in a particular hardship or practical difficulty which would deprive the owner of the reasonable use of the land or building involved.
Warranty: A binding promise made at the time of a sale whereby the seller gives the buyer certain assurances as to the condition of the property.
Wet Columns: Columns where the pipes are accessible for wet-bars, kitchens, and drinking fountains.
Workletter: The standard building items that the landlord contributes as part of the tenant improvements. Examples of standard building items are: doors, partitions, lights, floor covering, telephone outlets, etc. The Workletter may specify the quantity and quality of the materials to be used and often carries a dollar value.
Working Drawings: The set of plans for a project that, in combination with a set of specifications, comprise the contract documents indicating the exact manner in which a project should be built. See also "Contract Documents".
Zoning Ordinance: The set of laws and regulations, generally at the city or county level, that control the use of land and construction of improvements in a given area or zone.