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Abatement

A reduction or decrease; usually applies to the forgiveness of rent or a decrease of assessed valuation of ad valorem (according to value) taxes after the assessment and levy.

Add-on Factor

A multiplier that converts the actual usable square footage of space within a tenant’s demised premises to the rentable square footage that the landlord will actually charge rent for. Usually expressed as a numeric value greater than 1 such as 1.153.

Assignment

A transfer between parties of title to any property, real or personal, or of any rights or estates in the property. Common assignments include leases, mortgages and deeds of trust.

Base Building Improvements

A defined set of property improvements to the structural elements of a building and its common areas, such as the shell and core, HVAC systems, lobbies, restrooms, corridors, etc. These would be exclusive of interior improvements and finishes within a tenant’s demised premises.

Base Rent

A set amount used as a minimum rent in a lease which also employs a percentage or other allocation for additional rent.

Base Year

The year upon which a direct expense escalation of rent is based.

BOMA Method of Measurement

A standard adopted by the Building Owners and Managers Association for the measurement of usable and rentable office space.

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 land tenancy. Can compete at low end of Class A. Class "C" - Generally an older building with growing functional land/or economic obsolescence.

Building Standards

A list of interior improvements made to a commercial space specifying the quantity and the type of materials and finishes typically contributed by the landlord, such as partitions, doors, lights, outlets, floor coverings, etc.

Build To Suit

A method of leasing property whereby the landlord builds a new building in accordance with a tenant’s specifications.

Buildout

Refers to the construction work and costs of building the interior improvements made to a demised premises pursuant to the specifications and requirements of the tenant.

Common Areas

Land or improvements for the benefit of all tenants and property owners. Shopping center parking lots and residential parks and playgrounds are generally common areas. All the space within a development that can be used by all tenants in that development.

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.

Construction Allowance

A quantity of interior improvements made to a commercial space that is contributed by the landlord. Can be expressed as a dollar amount per square foot or pursuant to specific quantities of materials and finishes such as partitions, doors, lights, outlets, floor coverings, etc.

Construction Costs

All costs incurred in bringing a building to completion, not including land acquisition costs or finance and sales costs.

Design/Build

A system in which a single entity is responsible for both the design and construction of a facility, often involving the fast-track method of construction; also referred to as "design/construct."

Effective Rental Rate

The price per square foot per year including all rent abatement, concessions, escalation’s, moving costs, operating costs and taxes.

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.

Expense Stop

Provision in a lease establishing the maximum level of operating expense(s) to be paid by the landlord. Expenses beyond this level are to be reimbursed by the tenant. May be applied to specific expenses only (e.g., property taxes or insurance).

Floor Load

As commonly used, the live-weight-supporting capabilities of a floor, measured in pounds per square foot; the weight, stated in pounds per square foot, which may be safely placed on the floor of a building, if uniformly distributed.

Floor Plan

Scale architectural drawing(s) showing details of floor design and layout.

General Contractor

The party that contracts for the construction of an entire building or project, rather than a portion of the work. The general contractor hires subcontractors, (e.g., plumbing contractors, electrical contractors, etc.), coordinates all work, and is responsible for payment of the subcontractors.

Gross Area

The total floor area of a building, except that of unenclosed areas, measured from the outside of the exterior walls.

Gross Lease

A lease that provides that the landlord shall pay all expenses of the leased property, such as taxes, insurance, maintenance, utilities, etc.

Gross Rental Rate

Net rental rates plus taxes and operating costs on a per square foot, per year basis.

Hold Over Tenant

A tenant who retains possession after the expiration of a lease.

HVAC

An acronym for Heating, Ventilation, and Air Conditioning, which refers to the equipment and systems used to heat and cool a building.

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).

Leasehold Improvements

Items required by a tenant that are added to the premises.

Letter of Credit

A pledge by a bank, or other financial entity, made on behalf of a tenant for funds to be demanded by a landlord in the event of a default pursuant to the specific terms of a lease agreement. Often used as security for the performance of a lease agreement.

Letter of Intent

A formal method through which a prospective developer, buyer or tenant expresses his/her interest in property. Depending on the language, a legal obligation may be created.

Loss Factor

A number that reflects the portion of rentable space that is attributed to the common areas of a commercial building, such as lobbies, corridors, restrooms, etc. Often referred to as "common area factor". Usually expressed as a percentage such as 15%.

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.

Net Rentable Area

The actual square footage of a building that can be rented. Halls, lobbies, stairways, elevator shafts, maintenance areas, and the like are not included.

Operating Cost Escalation

Refers to the clause in a lease agreement used to adjust rents over the term of a lease.

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.

Pass Throughs

The real estate taxes and operating expenses of a property that are passed on to and paid by the tenant pursuant to the terms of the lease. In a net rent lease, the tenant pays for its entire pro rata share of the aforementioned taxes and expenses. In a gross rent lease, the tenant only pays for the pro rata share of future increases in the taxes and expenses subsequent to the year of tenant’s lease commencement.

Personal Liability

Personal liability arises when the borrower's assets are pledged or subject to claim in addition to a primary security.

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.

Real Estate Taxes

Generally refers to the sum total of taxes assessed to a property by the various governmental entities with the authority to levy such taxes. Real estate taxes are generally ad valorem (according to value), which is based on an official valuation of the property.

Rent

Consideration paid for use of occupancy of a part or item of property.

Rent Adjustments

Any and all provisions in a lease agreement that provides for the increase in future rental obligations, including the pass through of future increases in real estate taxes and operating expenses, fixed rental increases, and rental increases attributed to specific cost of living indexes.

Rental Abatement

A reduction or forgiveness of rent charged for a fixed period as a lease concession or inducement to lease space.

Rental Square Feet

The number of square feet that a tenant actually is charged rent on for a particular demised premises as determined by the landlord. This number is typically the usable square feet of the demised premises plus a pro rata share of the common areas of the building, such as lobbies, corridors, restrooms, etc.

Request for Proposal (RFP)

A solicitation by a tenant from a landlord detailing the specific terms, economic and otherwise, by which a tenant would consider a tenancy in the subject property.

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

A deposit of money by a tenant with a landlord as security for the performance of a lease agreement.

Soft Costs

Architectural, engineering, and legal fees, as distinguished from land and construction costs.

Space Plan

A graphic depiction of a tenant’s interior space requirements or representation of the configuration of a specific demised space. Typically includes the location of walls and doors, the size of rooms, and proposed furniture layouts. Landlords typically provide space plans to tenants free of charge as inducements to leasing space in their property.

Step-Up Lease

(Graded Lease) A lease calling for set increases in rent at set intervals. Sublease A lease executed by a lessee to a third person for a term no longer than the remaining portion of the original lease.

Tax Base

The unit of value to which the tax rate is applied to determine the tax due. For property taxes, the tax base is the assessed valuation; for income taxes, the net taxable income. Tenant Contributions All costs that are a pro rata responsibility of the tenant over and above the contract rent specified in the lease, such as area maintenance.

Tenant Improvements

Improvements made to a property for the specific needs of the tenant. Usually refers to the interior construction and finishes of the demised premises such as drop ceilings, light fixtures, partitions, doors, floor coverings, outlets, etc. Also referred to as "tenant finishes" or "leasehold improvements".

Turnkey Construction

A construction project whereby the landlord is responsible for the total completion and cost of improvements made to a property pursuant to the specific requirements and specifications of the tenant.

Usable Square Feet

The number of actual square feet within the dimensions of the demised premises.

Working Drawings

A set of architectural drawings detailing the exact specifications of construction work to be complete by a contractor. Also referred to as construction drawings.

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