Commercial Real Estate Glossary Of Terms

by developer on May 15, 2012

Adjoining. In actual contact with another object (i.e., attached). Same as “Contiguous”.

Agent. An individual/entity who transacts, represents, or manages business for another individual/entity. Permission is provided by the individual/entity being represented.

Assignee. Individual to whom a contract is assigned.

Assignment. The manner by which a contract is transferred from one individual to another individual.

Assignor. An individual who transfers a contract to another individual.

Build Out. The construction or improvements of the interior of a space, including flooring, walls, finished plumbing, electrical work, etc.

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

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.

Capital Improvement. Any major physical development or redevelopment to a property that extends the life of the property. Examples include upgrading the elevators, replacement of the roof, and renovations of the lobby.

Certificate of Occupancy (CO or C of O). The government issues this official form, which states that the building is legally ready to be occupied.

Common Area Maintenance (CAM). This is the amount of additional rent charged to the tenant, in addition to the base rent, to maintain the common areas of the property shared by the tenants and from which all tenants benefit. Examples include: snow removal, outdoor lighting, parking lot sweeping, insurance and property taxes. Most often this does not include any capital improvements that are made to the property.

Contiguous. Touching at some point or along a boundary.

Contingency. A requirement in a contract that must occur before that contract can be finalized.

Contract. A legal agreement between entities that requires each to conduct (or refrain from conducting) certain activities. This document provides each party with a right that is enforceable under our judicial system.

Covenants. Wording found in deeds that limits/restricts the use to which a property may be put (e.g., no bars), or the actions that a borrower must take (e.g., get lender approval before signing any leases with tenants) .

Deed. A signed, written instrument that conveys title to real property.

Deed Restriction. An imposed restriction in a deed that limits the use of the property. For example, a restriction could prohibit the sale of alcoholic beverages.

Default. Failure to fulfill a promise, discharge an obligation, or perform certain acts.

Delivery. Transfer something from one entity to another.

Eminent Domain. The government’s right to condemn and acquire property for public use. The government must provide the owner fair compensation.

Escrow. A written agreement among parties, requiring that certain property/funds be placed with a third party. The object in escrow is released to a designated entity upon completion of some specific occurrence.

Estoppel Certificate. A legal instrument executed by the one taking out the mortgage (i.e., mortgagor). The owner of a property may require an individual leasing a property to sign an estoppel certificate, which verifies the major points (e.g., base rent, lease commencement and expiration) existing lease between the landlord and tenant.

Exclusive Agency. An agreement in which one broker has exclusive rights to represent the owner or tenant. If another broker is used, both the original and actual broker are entitled to leasing commissions.

Fair Market Rent. The rent which would be normally agreed upon by a willing landlord and tenant in an “arm’s length transaction” for a specific property at a given time, even though the actual rent may be different. In a lease, the term “fair market rent” is defined in a number of different ways and is subject to extensive negotiation and interpretation.

Free Rent. A concession granted by a landlord to a tenant whereby the tenant is excused from paying rent for a stated period during the lease term.

Fully Serviced (Full Service, or FS) Lease. A lease in which the stated rent includes the operating expenses and taxes for the building. Same as Gross Lease in some circumstances (in other circumstances, Gross Lease does not include electric).

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