Glossary of Real Estate Terms

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Glossary of Real Estate Terms

    Glossary of Real Estate Terms

    BLACK‟S GUIDE ? 1999

    This information is used with permission from Black's Guide Inc., 444 N. Frederick Avenue, #420, Gaithersburg,

    MD 20877-2432.

Black‟s Guide‟s Glossary of Real Estate Terms provides a complete reference dictionary of terms and phrases

    used in the commercial real estate industry. These definitions have been endorsed by numerous industry organizations as the Market Standard for their respective regions.

    actual build-out costs are less Abatement: A reduction or Add-On Factor: Considered a than the allowance. requiring the decrease; usually applies to the loss factor, the percentage of landlord to return the savings in forgiveness of rent or a decrease gross rentable square footage the form of rent abatement or of assessed valuation of ad which is lost to the tenant's other concession. valorem taxes after the physical occupancy.

    assessment and levy. AM: Accredited Member Adequate Rate Covenant: An (designation offered by the agreement often required in American Society of Appraisers). Above Building Standard: revenue bond-financed projects; Specialized design and guarantees the operator will Annual Percentage Rate (APR): engineering services and all charge adequate rates to produce construction necessary to APR reflects the cost of a loan on revenue necessary to cover personalize tenant space. a yearly basis. It may be higher principal and interest payments. than the note rate because it

    includes Interest, loan origination Absorbed Space: Net change in Alienation Clause: A type of fees, loan discount points and leased space between two dates. acceleration clause where a debt other credit costs paid to the becomes due in its entirety upon lender. Absorption: The rate at which the transfer of ownership of a land or buildings will be sold or secured property. See also "Due Anticipatory Breach: Occurs leased in the marketplace during on Sales Clause” and when one party to a contract, prior a predetermined period of time, "Acceleration Clause.” to time of performance, informs usually a month or a year. Also

    the other of his or her intent not to called "Market Absorption.” Allowance Over Building Shell: perform. Example: The buyer One of three arrangements often informs the seller before the Absorption Period: The number used for financing tenant closing date of his or her intent of months required to convert improvements (finishing out office not to buy. vacant space into leased space space to accommodate a tenant assuming no new delivered space. such as walls, doors, carpeting Appraisal: The estimation and Computed by dividing the etc.). Often used in a opinion of value placed upon a average monthly absorbed space yet-to-be-built building, this piece of land based upon a during a recent period into the arrangement caps the landlord‟s factual analysis by a qualified current vacant space. expenditure at a fixed dollar professional; the process of amount over the negotiated price estimation and the report itself. Ad Valorem: (According to value) of the base building shell. This Used in reference to general arrangement is most successful Appreciation: An increase in the property tax, which is usually when both parties agree on a value of property caused by an based on the official valuation of detailed definition of what improvement or the elimination of property. construction is included and at negative factors. what price. Tenants may ask for a

    contingency in the event the

    Glossary: Page 1 of 13

    ASA: Accredited Senior Bankrupt: The condition when Class “C” -- Generally an older

    Appraiser (designation offered by one is found to be unable to repay building with growing functional

    the American Society of one‟s debts by a court having and/or economic obsolescence.

    Appraisers). proper jurisdiction. The Class “D” -- An older building in bankruptcy may be one of two need of extensive renovation as a types: one that is petitioned by the result of functional obsolescence “As Is” Condition: Premises

    debtor (voluntary) or petitioned by or deterioration. accepted by a buyer or tenant in

    creditors (involuntary). the condition existing at the time

    Building Codes: Rules set by of the sale or lease, including all

    Bankruptcy: Proceedings under physical defects. local, state or municipal federal statutes to relieve a debtor governments to regulate building who has been declared bankrupt and construction standards. In Assessment: (1) An estimate of

    from insurmountable debt. After many areas these codes are property value for the purpose of

    addressing certain priorities and based on national standards. imposing taxes, (2) A fee imposed

    exemptions. The bankrupt's Building codes are designed to on property, usually to pay for

    property and other assets are provide minimum standards to public improvements such as

    distributed by the court to safeguard the health, safety and streets and sewers,

    creditors as full satisfaction for the welfare of the public by regulating

    debt. See also: "Chapter 11.” and controlling the design, Asset-Based Lender: A lender

    construction, quality, use and who loans money based primarily

    occupancy, location and Base Rent: A set amount used as on the values of an

    maintenance of all buildings and a minimum rent in a lease which asset--accounts receivable,

    structures. The establishment of also employs a percentage or inventory, a piece of equipment,

    building codes is a valid exercise other allocation for traditional real estate--rather than on the

    of the state's police power and rent. financial strength of the business,

    thus they are valid restrictions on which is the primacy criterion for

    an owner's use of his or her Base Year: The year upon which banks.

    property. Some codes are a direct expense escalation of

    divided into specialized areas, rent is based. See also Assignment: A transfer between

    such as plumbing, electrical and "Escalation Clause." parties of title to any property, real

    fire codes. Codes are enforced or personal, or of any rights or by the issuing of building permits Below-grade: Any facility or part estates in the property. Common and certificates of occupancy and assignments include leases, of a facility located underground by inspections. Fines are mortgages and deeds of trust. or below the surface grade. imposed on violators.

    Attachment: Legal procedure to Breach of Warranty: The failure

    Building Standard: A list of aid in the collection of a debt, of the seller of real property to

    construction materials and Usually the court issues a writ to pass title as either expressed or

    finishes used in building out office seize the property of a debtor and implied by law in the

    space for a tenant that the holds it pending the outcome of a conveyancing document.

    landlord contributes as part of the lawsuit, keeping the property

    tenant improvements. Examples available for sale to pay any Buffer: A strip of land established of standard building items are: money judgment entered in such as a transition between distinct doors, partitions, lights, floor lawsuit. land uses. May contain natural or covering, telephone outlets, etc. planted shrubs, or fencing, singly May also specify the quantity and Attorn: To turn over or transfer to or in combination. quality of the materials to be used another money or goods. To and often carries a dollar value. agree to recognize a new owner Building Classifications: Class See also "Workletter.” of a property and to pay him rent. “A” -- Building has excellent

    See also "Letter of Attornment." location and access to attract the Building Standard Plus highest quality tenants. Building Allowance: One of three Balloon Payment: A large must be of superior construction arrangements often used for payment due on a loan. Generally and finish, relatively new or financing tenant improvements a balloon payment is required competitive with new buildings (finishing out office space to when regular monthly or quarterly and providing professional on-site accommodate a tenant such as payments have not covered both management. Class “B” --Building walls, doors, carpeting etc.). the increase due and the principal with good location, management, Under this arrangement the of the loan. construction and tenancy. Can landlord lists in detail all materials compete at low end of Class A.

    Glossary: Page 2 of 13

and costs to make the premises through the capitalization process. and defining the basis on which

    suitable for occupancy and Also called “free and clear return. charges are made and the type of

    provides a negotiated allowance See “Capitalization.” cost items allocable to for the tenant to customize or maintenance of the common area.

    upgrade materials. See Also. Of the ways to prorate the Carrying Charges: Various costs

    “Workletter." charges among tenants, the most that are incidental to ownership

    common are (1) a prorated (e.g., taxes insurance costs and

    charge based on a tenant's Buildout: The cost of configuring maintenance expenses).

    leased areas as a portion of the and finishing new or relet space in

    total leasable area of the center or accordance with a tenant‟s CCIM: Certified Commercial

    the linear exposure to store specifications. Investment Member.

    frontage, (2) a fixed charge for a

    stated period, and (3) a variable Build To Suit: A method of Certificate of Occupancy: A

    charge based on a percentage of leasing property whereby the certificate issued by a local

    sales. Some centers include a landlord builds a new building in government building department

    cost-of-living increase in the accordance with a tenant's or agency stating that a building is

    common area charges. specifications. in a condition suitable for

    occupancy. Sometimes also

    Comparables: Recorded sales of Bullet Loan: Also known as a called a “C of O" or a

    properties similar in size, use, Construction Loan, any of a Non-Residential Use and

    construction quality, age, and variety of short-term (generally Occupancy Permit (NON RUP).

    often located within the same five to seven years) financings

    submarket used as comparisons provided by a lender to a Chapter 11: A section of the

    to determine the fair market value developer to cover the costs of Federal Bankruptcy Code dealing

    of another particular property. construction and lease-up of a with business reorganizations. A new building with the expectation separate section, referred to as

    Competitive Space: Space in that it would be replaced by Chapter 7, deals with business

    office buildings which contain or long-term (or “permanent”) liquidations.

    are intended to contain more than financing provided by an

    one occupant. In addition to the institutional investor once most of Clear-Span Facility: A parking

    multiple tenant criterion, typical risk involved in construction and structure with vertical columns on

    characteristics of Competitive lease-up had been overcome the outside edges of the structure Space include: tenants generally resulting in an income-producing amid a clear span between have short-term leases (10 years property. columns making it unnecessary or less) and the interior of the for vehicles to maneuver between building is not designed with one CAM: Certified Asset Manager. columns.

    organization in mind but rather to

    accommodate the widest variety C.A.M.: Common Area Common Area: The total area of tenants. Maintenance. within the shopping center that is

    not designed for rental to tenants Concessions: Cash expended Capitalization: A process of but that is available for common

    by the landlord in the form of rent determining the value of real use by all tenants or groups of

    abatement, build-out allowance or property in which project income tenants, their invitees, and

    other payments to induce the is divided by a predetermined adjacent stores. Parking and its

    tenant to sign a lease. annual rate (capitalization rate). appurtenances, malls, sidewalks For example, a building with landscaped areas, public toilets,

    Condemnation: The process by annual project income $100,000 truck and service facilities, and

    which private property is taken by is worth $1,000,000 at a 10 per the like are included in the

    a governmental agency for public cent capitalization rate common area.

    use without the consent of the ($100,000/10% = $1,000,000).

    owner, but only upon payment of See "Capitalization Rate.' Common Area Charges:

    just compensation. See also lncludes income collected from

    “Eminent Domain.” Capitalization Rate: The rate tenants for operating and that is considered a reasonable maintaining items pertaining to

    Construction Management: return on investment (on the basis common areas. Shopping center

    Construction supervision by a of both the investor's alternative leases usually contain a clause

    qualified manager. investment possibilities and the requiring the tenant to pay its risk of the investment). Used to share of operation and

    determine and value real property maintenance on common areas

    Glossary: Page 3 of 13

    Consumer Price Index (CPI): A Covenant of Quiet Enjoyment: enough to cover the amount owed. federal government index that Usually inserted in leases or Actually, the judgment is for the measures the charge in the cost conveyances whereby landlord or total amount of the obligation and of a variety of goods and services. grant or promises that the tenant not for the deficiency. Any Used in loans, purchase or grantee shall enjoy possession recoveries from a foreclosure sale agreements and leases as a of the premises in peace and are deducted from the judgment. measure by which to adjust future quiet without disturbance.

    payments to reflect inflation. Also Delivered Buildings: Buildings called “Cost-of-Living Index.” CPM: Certified Property Manager that have completed construction

    and are ready for tenant build-out. Contiguous Space: Adjoining May or may not yet have a CRE: Counselor of Real Estate

    office space. Certificate of Occupancy.

    Cumulative Discount Rate: A

    Contract Documents: The Demising Walls: The boundaries discount factor applied to the

    design plans and specifications that separate a tenant‟s space rental rate that takes into effect all for construction of a facility. from another tenant‟s space and landlord lease concessions

    Working drawings that detail for from a public corridor. expressed as a percentage of

    the contractor the exact manner base rent.

    in which a project should be built. Density: Number of dwelling See also specifications “Working units divided by the gross Dedicate: Transfer of property

    Drawings.” acreage being developed. from private to public ownership.

    Contract Rent: Rent paid under Design/Build: A system in which Deed: Generally a conveyancing

    a lease. The actual rent as a single entity is responsible for instrument given by the seller to

    opposed to the market rental both the design and construction pass fee title to property upon

    value of the property. of a facility, often involving the sale.

    fast-track method of construction; Conveyance: Most commonly also referred to as Deed In Lieu Of Foreclosure: A

    refers to the transfer of title to land “design/construct.” deed given by an owner/borrower

    between parties. The term may to a lender to prevent the lender

    also include most of the Depreciation: Decrease in the from bringing foreclosure

    instruments by which an interest usefulness, and therefore value, proceedings.

    in real estate is created, of real property improvements or mortgaged or assigned. other assets caused by Deed Of Trust: An instrument

    deterioration or obsolescence. (2) securing a loan that is used in

    Core Factor: The percentage of A loss in value as an accounting many states in place of a

    common areas in a building (rest procedure to use as a deduction mortgage. Property is transferred

    rooms, hallways) that, when for income tax purposes. to a trustee by the borrower

    added to the net usable square (trustor), in favor of the lender

    footage equals the net rentable Distraint: The act of taking (beneficiary), and reconveyed to

    square footage. May be (legally or illegally) personal the borrower upon payment in full.

    computed for a building or floor of property and retaining control a building. A "Loss Factor” or until the property owner performs Default: The general failure to

    “Load Factor” is calculated by an obligation. Commonly, a perform a promised task or to pay

    dividing the rentable square landlord takes possession of an obligation when due. Some

    footage by the usable square personal property of a tenant in specific examples are: (1) Failure

    footage. See also “Design default until the default is to make a payment of principal or Efficiency.” satisfied. interest or other type of financial

    obligation when due; (2) The

    Cost Approach: A method of Distress Sale: The sale of breach or failure to perform any of appraising real property, whereby property under less than the terms of a note or the

    the replacement cost of a struc-favorable conditions. Usually. the covenants of a mortgage or deed

    ture is calculated using current seller is experiencing financial of trust.

    costs of construction. difficulties area is under extreme

    pressure to sell. Deficiency Judgment:

    Covenant: A private legal Commonly, the amount for which

    restriction on the use of land, Earnest Money: The monetary the borrower is personally liable

    recorded in the land records. advance by a purchaser of part of on a note and mortgage if the

    the purchase price as evidence of foreclosure sale does not bring

    Glossary: Page 4 of 13

    good faith. The earnest money is but which will not prevent the Direct expense -- Rent used to bind the parties to the transfer of fee title. A claim, lien, adjustments based on changes in contract of sale. See also charge or liability attached to and expenses paid by the landlord, “Deposit.” binding real property. such as tax increases, increased

    maintenance costs, etc. Easement: A right to use the Environmental Impact Report:

    Estoppel Certificate: A property of another created by A report generally prepared by an grant, reservation, agreement, independent company detailing statement concerning the status prescription or necessary the probable environmental effect of an agreement and the implication. It is either for the of a development on the performance of obligations under benefit of land "appurtenant,” surrounding area. the agreement relied upon by a such as the right to cross A to get third party, including a to B, or "in gross,” such as a prospective lender or purchaser. Equity: The value of one‟s

    public utility easement.” In the context of a lease, a interest in a property consisting of

    statement by a tenant identifying its fair market value less any

    that the lease is in effect and Economic Feasibility: A outstanding debt or other

    certifying that no rent has been project‟s feasibility in terms of encumbrances.

    prepaid and that there are no costs and revenue with excess

    known outstanding defaults by revenue establishing the degree Equity Kicker: Also called a

    the landlord (except those of feasibility. participation loan. Under this kind

    specified). of loan -- often used by non-bank Economic Rent: Calculations or lenders with start-up businesses

    Escrow Agreement: A written analysis to determine market -- the lender gets not only interest

    agreement usually made between rental value of a property at any payments and principal repaid,

    a buyer, seller and escrow agent. given time, even though the but the right to buy equity (part

    The escrow agreement sets forth actual rent may be different. ownership in the company) as

    the basic obligations of the parties, well. Equity participation is

    describes the objects deposited in generally required for riskier deals Effective Rent: The rental rate

    escrow, and instructs the escrow or in return for lower rates. actually achieved by the landlord

    agent concerning the disposition after deducting the value of

    of the objects deposited. Equity Participation: The concessions from the base rental

    rate paid by a tenant, usually participation by a lender in the

    Exclusive Listing: A written expressed as an average rate equity ownership of a project as

    agreement between a real estate over the term of the lease. one of the conditions for granting

    broker and a building owner in a loan. Used by financial

    which the owner promises to pay institutions no partially offset the Efficiency Factor: The number

    a fee or commission to the broker effects of inflation, also called resulting from dividing the Usable

    if specified real property is sold or “„Equity Kicker." Area by the Gross Building Area

    leased during a stated period. in an office building, providing a

    The broker may or may not be the Equity of Redemption: Not the benchmark measurement for that

    cause of the sale or lease. building‟s use as an office same as the redemption period building. after a foreclosure sale, which is a Expense Stop: Provision in a right established by statute. lease establishing the maximum Properly, the right to pay off the Eminent Domain: A right of the level of operating expense(s) to mortgage lien in default by government to acquire private be paid by the landlord. Expenses payment of the principal, interest property for public use by beyond this level are to be and costs due. condemnation in return for just reimbursed by the tenant. May be compensation. See also applied to specific expenses only Escalation Clause: A clause in a “Condemnation.” (e.g., property taxes or lease providing for increased rent insurance). at a future time. May be Encroachment: Generally a accomplished by several means structure which extends Face Rental Rate: The “asking‟” such as (1) Fixed increase -- A impermissibly over a property line, or nominal rental rate published provision that calls for a definite, easement boundary or building by the landlord. periodic rental increase; (2) Cost setback line. Fair Market Value: A term of living -- A clause that ties the

    usually found in appraisals that rent to a government cost of living Encumbrance: Any, right to or attempts to determine the cash index, with periodic adjustments interest in, real property that may price that would likely be as the index changes; or (3) exist in one other than the owner,

    Glossary: Page 5 of 13

    negotiated between a willing which has priority over all other delinquent under a full recourse seller and willing buyer in a voluntary liens which exist against loan, he or she must accept full reasonable amount of time. For a the property. Foreclosure of a first responsibility for the loan. sale to be considered a reflection mortgage lien will generally

    of “Fair Market Value," it must extinguish or cut off any second Full Service Rent: A rental rate meet all the conditions of a fair mortgage lien or other that includes operating expenses sale whereby: (1) both buyer and subordinate lien. and real estate taxes for the first seller act prudently, year. The tenant is generally still knowledgeably and under no First Refusal Right: A clause responsible for any increases in necessity to buy or sell, i.e., other occasionally inserted in a lease, operating expenses over the base than in a forced or liquidation sale; that gives a tenant the first year amount. See also: “Pass (2) the property must be offered opportunity to buy a property if the Throughs.”

    on the open market for a owner decides to sell. The owner

    reasonable amount of time, taking must have a legitimate offer which Functional Design: Design of a into consideration the property the tenant can match or refuse. structure or facility that increases type and local market; and (3) its overall efficiency and provides payment is made in cash or terms Fixed Costs: Costs, such as rent, maximum user acceptance; a equivalent to cash. When a sale is which do not fluctuate in parking concept plan showing unlikely, i.e., when it is unlikely to proportion to the level of sales or traffic flow, stall geometry, and be completed within 12 months, production. other features that determine the the appraiser must discount all interior design of parking facilities. cash flows generated by the Flex Space: A one- or two-story

    property to ascertain the estimate Future Proposed Space: building with little or no common

    of Fair Value. areas, high ceilings, load-bearing Commercial space in proposed

    floors and loading dock facilities. development projects which Feasibility Study: An analysis of Usually con-figured to allow a either have not started needs, costs of recommended small amount of office space in construction or set a construction improvements, and anticipated combination with light assembly start date. Future Proposed revenue and costs; establishes or warehouse/distribution uses. projects include all those waiting the basis for the construction of for a lead tenant, financing, an individual improvement or a zoning, approvals or any other Floor/Area Ratio (FAR): The

    complete system. event necessary to begin ratio of the bulk area of a building

    construction. Also may refer to to the land on which it is situated.

    Fee Simple: An estate of real the future phases of a multi-phase Calculated by dividing the total

    property that the owner has project that have not yet been square footage in the building by

    unrestricted powers to dispose of built. the square footage of land area.

    and which can be left by will or

    inherited. Commonly used as a General Contractor: The party Floodplain: Land adjoining a

    synonym for ownership. that contracts for the construction river than would flood if the river

    of an entire building or project, overflowed its banks.

    Finance Charge: The cost of rather than a portion of the work. credit as a dollar amount. It The general contractor hires Force Majeure: A force that

    includes any charges payable by subcontractors, (e.g., plumbing cannot be controlled or resisted.

    the borrower as a condition of the contractors, electrical contractors, In other words something beyond

    loan. The finance charge includes etc.) coordinates all work, and is the control of the parties involved. the total amount of interest, points, responsible for payment to the Includes acts of God (e.g., flood, loan fees and other credit charges subcontractors. tornadoes, etc.) and acts of man paid for the term of the loan. (e.g., riots, strikes, arson, etc.).

    General Partner: A member of a FIRREA: The Financial partnership who has authority to Foreclosure: A proceeding, in or

    Institutions Reform Recovery and bind the partnership. A general out of court, designed to

    Enforcement Act of 1989. partner also shares in the profits extinguish all rights, title, and

    Created the Resolution Trust and losses of the partnership. interest of the owner(s) of

    Corp. (RTC) and placed new See also “Limited Partnership;” property in order to sell the

    restrictions on savings and loans “Partnership.” property to satisfy a lien against it. regarding real estate investment.

    Graduated Lease: A lease, Full Recourse: A borrowing with

    First Mortgage: A mortgage generally long term in nature, with an unconditional guaranty.

    creating a lien against a property varied rental payments and Should the borrower become

    Glossary: Page 6 of 13

    Indirect Costs: Development usually based on periodic earnings attributable to the land appraisal or simply the passage only. costs other than direct material or

    of time. direct labor costs including

    administrative and office Guarantor: One who makes a

    expenses, financing costs and Grant: To transfer an interest in guaranty. See also “Guaranty.”

    property taxes. real property either the fee, or a

    lesser interest such as an Guaranty: Agreement whereby

    Inventory: When referring to a easement. the guarantor agrees to pay the

    market of office or industrial debt or perform the obligation of

    space, the total amount of Grantee: One to whom a grant of another who fails to do so. Differs

    rentable square feet of existing property or property rights is from a surety agreement in that

    and delivered space in a given made, generally, the buyer. there must be a failure to pay or

    category, for example, prime perform before the guaranty can

    office space. Inventory refers to be in effect. Grantor: One who grants

    all space within a certain property or property rights;

    proscribed market without regard Hard Dollars: The actual cash generally, the seller.

    to its availability or condition, and proceeds from a loan that is given

    can include both office and flex to the seller. See also “Soft Gross Absorption: Absorption is

    and warehouse space. Dollars.” a measure of the amount of office

    space leased over a period of

    Involuntary Conveyance: An Highest and Best Use: The time. Gross absorption is a

    involuntary transfer of real measure of the total square feet reasonably probable and legal

    property without the consent of leased over a period of time with use of vacant land on an

    the owner, such as by a divorce no consideration for office space improved property, which is

    decree, condemnation, etc. vacated in the same area during physically possible, appropriately the same period. See also "Net supported, financially feasible

    Judgment: The decision of a Absorption.” and that results in the highest

    court of law. Money judgments, value. The four criteria the highest

    when recorded, become a lien on and best use must meet are legal Gross Building Area: The total

    real property of the defendant. permissibility, physical possibility, floor area in an office building

    financial feasibility and maximum measured in square feet or

    Judgment Lien: A lien placed profitability. square meters that is associated

    against the property of a with that building‟s use as office

    judgment debtor. An involuntary High Rise: A building higher than building. The area extends to the

    lien. outer surface of exterior walls and 25 stories above ground level. windows and includes office area,

    Judgment Mortgage: A retail area, and other rentable Hold Over Tenant: A tenant who

    areas such as vending machine mortgage creating a lien which is retains possession after the space and storage area, but inferior or subordinate to a prior expiration of a lease.

    excludes parking and roof space. lien. Foreclosure of a junior

    mortgage will not extinguish any HVAC: The acronym for Heating

    lien which is superior no it. See Gross Lease: A lease that Ventilating and Air-Conditioning.

    also “First Mortgage;” “Second provides that the landlord shall Refers to the equipment used to

    Mortgage.” pay all expenses of the leased heat and cool a building. property, such as taxes,

    Just Compensation: In a insurance, maintenance, utilities, Improved Value: An appraisal

    etc. condemnation proceeding, the term that encompasses the total

    term refers to the amount paid to value of land and improvements

    the property owner. The theory is Ground Lease: A lease covering rather than the separate values of

    that in order to be "just," the the use of land only, with the each.

    property owner should be no lease sometimes secured by

    richer or poorer than before the improvements installed by the Improvements: Generally, the

    taking. tenant. Also called a “Land term refers to buildings, but may Lease.” include any permanent structure Land Contract: An installment or other development, such as a contract for the sale of land Ground Rent: Rent paid for street, utilities, etc. See also whereby the seller has legal title vacant unimproved property. If “On-Site Improvements.” until paid in full. The buyer has the property is improved, ground equitable title during the contract rent is that portion of the total term.

    Glossary: Page 7 of 13

     business and are responsible for Landlord’s Lien: Several types Legal Title: Usually title without any losses, and one or more of landlord‟s liens are created by ownership rights, such as the title special or limited partners who contract or by statute. Some placed in a trustee under a deed contribute capital and are liable examples are: 1) a contractual of trust, or the title in a vendor only up to the amount contributed. landlord‟s lien; 2) statutory under a land contract.

    Listing Agreement: An landlord‟s lien; and 3) landlord‟s

    Letter of Credit: An engagement, remedy of distress (or right of agreement between a real estate distraint), which is not truly a lien pledge or commitment by a bank broker and the property owner but has a similar effect. or person, made at the request of which authorizes the broker to

     a customer, stating that the issuer assist in the sale or lease of that Landlord’s Warrant: A warrant will honor drafts or other demands property in return for a fee, enabling a landlord to levy upon a for payment upon full compliance commission or other form of tenant‟s personal property (e.g., with the conditions specified in compensation. See also: furniture, etc.) and to sell this the letter of credit. “Exclusive Listing Agreement.”

    property at a public sale to collect

    Letter of Attornment: A letter Long Term Lease: A lease delinquent rent.

     from a grantor to a tenant, stating whose term exceeds ten years Land, Tenements and that a property has been sold, and from initial signing until the date of Hereditaments: Originally used directing rent to be paid to the expiration or renewal option. to describe freehold estates only. grantee (i.e., the new owner). See

    Lot: A parcel of land, generally The terms have come to mean also “Attorn.”

    the most technical and part of a series of parcels which

    Letter of Intent: A formal method all-inclusive description of real make up a subdivision, the estate. through which a prospective boundaries of which are created

     developer, buyer or tenant by and shown on a plat. Lease: An agreement whereby expresses his/her interest in

    Low Rise: A building with fewer the owner of real property (i.e., property. Depending on the

    landlord) gives the right of language, a legal obligation may than seven stories above ground possession to another (i.e., tenant) be created. level.

    for a specified period of time (i.e.,

    Lien: An encumbrance against Lump-Sum Contract: A term) and for a specified

    consideration (i.e., rent). property for money, either construction contract requiring

     voluntary or involuntary. All liens the contractor to complete a Lease Commencement Date: are encumbrances but all building for a specified amount, The date on which beneficial encumbrances are not liens. usually established by occupancy commences and the competitive bidding. The

    Lienholder: A mortgagee or legal terms of the lease go into contractor absorbs any loss or effect. other creditor who has a lien retains any profit.

     against the property of another.

    Leasehold Improvements: MAI: Member of Appraisal

    Lien Waiver (Waiver of Liens): Improvements made to leased Institute.

    premises by a tenant. See also Generally, a waiver of mechanic's

    Maker: One who executes (i.e., “Tenant Improvements;” lien rights signed by a general

    “Workletter.” contractor and his signs) a note in the capacity of the

     subcontractors. maker (i.e., borrower). Legal Description: A method of

    Like-Kind Property: A tax term Market Indicators: Statistical geographically identifying a

    parcel of land that is acceptable in used in certain real property measures of construction and real a court of law. exchanges. Property must be estate activity, including issued

     exchanged for like-kind property permits, indices of building costs, Legal Owner: The term is used to and the tax consequences deeds recorded and homes for distinguish the legal owner from postponed pursuant to Section sale.

    the equitable owner and not as 1031 of the Internal Revenue

    Market Price: The price a opposed to an illegal owner. The Code.

    legal owner has title to the property brings in a given market.

    Limited Partnership: A property, although the title may Commonly used interchangeably actually carry no rights to the partnership created under state with market value, although not property other than to act as a law which consists of one or more truly the same. See also “Market lien. general partners who conduct the Value.”

    Glossary: Page 8 of 13

    Master Lease: A primary lease Mortgagee: The party that lends

    Market Rent: See “Economic that controls subsequent leases the money and receives the Rent.” and which may cover more mortgage.

     property than subsequent leases.

    Market Study: A forecast of Mortgagor: The party that

    Master Plan: (1) A zoning plan future demand for a type of borrows the money and gives the project along with for an entire governmental mortgage on the property. recommendations as to quantity subdivision, (e.g., a city). A

    Net Absorption: Absorption is a to be sold or leased and prices to comprehensive plan to allow a

    be charged. Also called city to grow in an orderly manner, measure of the amount of office “Marketability Study).” both economically and space leased over a period of

     ecologically. (2) A developer‟s time. Net absorption is a measure Marketable Title: Title to real plan for a multi-phase office park of the total square feet leased property that can be readily or mixed-use development that over a period of time taking into marketed (i.e.. sold) to a takes into account all proposed or consideration office space reasonably prudent purchaser projected uses, improvements vacated in the same area during aware of the facts and their legal and amenities. the same period. See also: meaning concerning liens and “Gross Absorption.”

    Mechanic’s Lien: A claim encumbrances.

    Net Lease: A lease in which the created by state statutes for the

    Market Rent: The rental income purpose of securing priority of tenant pays, in addition to rent, that a property would most payment for the price or value of certain costs associated with a probably command on the open work performed and materials leased property, including market: indicated by current rents furnished in construction or repair property taxes, insurance paid and asked for comparable of improvements to land, and premiums, repairs, utilities and space as of the date of the which attaches to the land as well maintenance. There are also appraisal. as to the improvements. “net-net” (double net) and

     “net-net-net” (triple net) leases, Market Value: The most Metes and Bounds: The depending upon the degree to probable price which a property boundary lines of land described which the tenant is responsible for should bring at competitive and in accordance with their terminal operating costs. See also “Gross open market under all conditions points and angles. Originally Lease.”

    requisite to a fair sale, the buyer metes referred to distance and

    Net Rentable Area: Floor area of and seller, each acting prudently bounds referred to direction.

    and knowledgeably, and Today the words have no a building less any vertical assuming the price is not affected individual meaning of practical penetrations of the floors. No by undue stimulus. Implicit in this significance. deductions are made for definition is the consummation of necessary columns and

    Mid-Rise: A building with a sale as of a specified date and projections of the building. the passing of title from seller to between seven and 25 stories (BOMA Standard)

    buyer under conditions whereby: above ground level.

    Non-Competitive Space: Space (1) buyer and seller are typically

    Mixed-Use: Space within a motivated; (2) both parties are in office buildings which contain well informed or well advised, and building or project provided for or are intended to contain one acting in what they consider their more than one use (e.g., an office occupant so that the space own best interests; (3) a apartment building with office is rarely if ever available for lease reasonable time is allowed for space, a hotel with office space, or sublease.

    exposure in the open market; (4) or a retail establishment with

    Non-Recourse Loan: A loan payment is made in terms of cash apartments).

    in U.S. dollars or in terms of which does not allow for a

    Mortgage: The instrument that financial arrangements deficiency judgment against a comparable thereto; and (5) the evidences an interest in real borrower in the event of default. price represents the normal estate and created to provide a The borrower cannot be held consideration for the property pledge as security for the personally liable. The lender‟s sold unaffected by special or performance or repayment of a only available recourse in the creative financial or sales loan. The borrower (i.e., event of default is the collateral of concessions granted by anyone mortgagor) retains possession property.

    associated with the sale. and use of the property.

    Nonjudicial Foreclosure Sale:

    A property sale by a trustee under

    Glossary: Page 9 of 13

    Prime Space: First generation a deed of trust, or a mortgage or “base” rent in the event of poor

    under a power of sale of a sales. (new) space that is currently mortgage. available for lease but has never

    Performance Bond: A bond before been occupied by a tenant. Open Space: The total area of posted by a contractor

    Prime Tenant: The major tenant land and/or water not improved by guaranteeing the owner that the

    a building, structure, street, road, bonding company will complete in a building, shopping center etc. or parking area, or containing only construction if the contractor

    Proffer: A development plan such improvements as are defaults.

    complementary, necessary or and/or written condition that,

    “Phantom” Space: Generally appropriate to the use and when offered by an owner and enjoyment of the open area. refers to space that is under lease accepted by the county, becomes

     to a tenant but not presently a legally binding part of the Operating Expenses: The actual occupied. Usually created when a property in question. cost of operating income - tenant consolidates or reduces

    Punch List: An itemized list producing property, including operations in space it leases prior

    utilities and similar day-to-day to the end of its lease term. The noting incomplete or expenses, taxes, insurance and vacant but leased space may or unsatisfactory construction. reserves for the replacement of may not be formally marketed on Usually prepared by the tenant items that wear out. a sublet basis or counted among architect after the contractor has

     a market‟s vacancy. notified the owner that the tenant Operating Cost Escalation: space is substantially complete.

    PITI (Principal, Interest, Taxes Refers to the clause in a lease

    And Insurance): Acronym used Quitclaim Deed: A deed agreement used to adjust rents

    over the term of a lease. to indicate what is included in a operating as a release and, as

     monthly mortgage payment on such, intended to pass to the Ownership: Rights to the use, real property. Principal, interest, grantee any title, interest, or claim enjoyment, and alienation of taxes and insurance are the four that the grantor may have in the property to the exclusion of major portions of a typical property, but not containing any others. monthly payment. warranty of valid interest or title in

     the grantor.

    Parking Index: Figure Planned Delivery Space: Office

    RA: Resident Architect. representing the number of space that is currently under

    parking spaces available per construction or renovation and

    Raw Land: Land in its natural 1,000 square feet of gross will be completed (delivered to the

    leasable area. market) within two years. Does state. Land that has not been

     not include Proposed or Future subdivided into lots, does not Partial Taking: The taking of part Proposed Space. have water, sewers, streets,

     of an owner‟s property under the utilities, or other improvements

    Plat (Plat Map): A map dividing a laws of eminent domain. necessary before a structure can Compensation must be based on parcel of land into lots, as in a be constructed.

    damages or benefits to the subdivision.

    REO (Real Estate Owned): All remaining property, as well as the

    Power of Sale: Clause in a portion taken. real estate directly owned by a

     mortgage or deed of trust giving lender, including real estate taken Pass Throughs: Building and the mortgagee or trustee the to satisfy a debt. Includes real operating expenses that are paid power to sell the property in the estate acquired by lenders by the tenant under the terms of a event of default. through foreclosure or in lease. settlement of any other obligation

    Precast Concrete: Concrete to the lender.

    PE: Professional Engineer building components fabricated at

    Real Property: (1) Land and Building and operating expenses a plant site and shipped to the site

    that are paid by the tenant under of construction. anything permanently affixed to the terms of a lease. the land, such as buildings,

    Prelease: Assigned lease for fences and those things attached Percentage Lease: A lease, space in a multi-tenant office to the buildings, such as light generally on a retail business building which has not yet fixtures, plumbing and heating property, in which the rent is received a Certificate of fixtures, or other items which calculated as a percentage of Occupancy. would be personal property if not sales. There is usually a minimum attached. (2) May refer to rights in

    Glossary: Page 10 of 13

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