Absolute Net - Lease requiring tenant to pay in addition to base rent all costs associated with the operation, repair and maintenance of the building, all real estate taxes, and utilities including repair and maintenance of the building's structure and roof. Often the tenant is directly responsible both for all such costs and for the active handling of the items themselves. Distinguished from Triple Net (see below) by tenant's responsibility for maintenance and repair of the building structure and roof.
ADA - Americans With Disabilities Act passed by Congress in 1994 with intent to provide persons with disabilities accommodations and access equal to or similar to that of the general public.
Additional Rent - Any amounts due under a lease that are in addition to base rent. Most common form is operating expense increases.
Agency - Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the latter. Agency involving real property should be in writing, such as listings, trusts, powers of attorney, etc.
Allowance - A set dollar amount provided by the Landlord under a lease to be used by the Tenant for a specific purpose. Examples include allowances for tenant improvements, moving expenses design fees, etc. If the expense exceeds the allowance amount, such excess is the Tenant's responsibility. If the expense is less than the allowance, the savings are retained by the Landlord unless their agreement specifies otherwise.
Alternative Workspace - Term embodies numerous concepts related to utilization of space including telecommuting, hotelling, office sharing and open office plans.
Amortization - Payment of debt in regular, periodic installments of principal and interest, as opposed to interest only payments. May also be used in a lease where the landlord incurs costs for additional tenant improvements which are effectively treated as a debt and repaid by tenant over the term of the lease.
As-is - The existing condition of real estate, prior to any improvements contemplated under a lease.
Assignment - A transfer to another of any property, real or personal, or any rights or estates in said property. Common assignments are of leases, mortgages, deeds of trust, but the general term encompasses all transfers of title.
Attorn - To transfer to another or to agree to recognize a new owner of a property and to pay them rent.
Base Building - The existing shell condition of a building prior to the installation of tenant improvements. This condition varies from building to building, landlord to landlord, and generally involves the level of finish above the ceiling grid.
Base Rent - A specific amount used either as a minimum rent in a lease (retail) which uses a percentage of sales or overage for additional rent or sets a base onto which is added expenses and taxes in a net lease or increases in those items in a fully serviced lease.
Base Year - The 12 month period upon which a direct expense escalation of rent is based. Typically the calendar year the lease commences.
BOCA - Building Officials Conference of America, which writes the guidelines for basic, community building codes.
BOMA - Building Owners and Managers Association. BOMA publishes the definition of rentable and useable area, which is used to determine the square footage leased in most commercial office buildings.
Building standard - A list of materials and finishes used in the the build-out, repair or restoration of a tenant's suite.
Build-out - Refers to the interior construction of a tenant's space whether new construction or the reconfiguration of existing space.
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.
CAM Charges - Common Area Maintenance charges. Those charges levied on or the expenses incurred in maintaining the common areas of a building.
CDs –See “Construction Drawings”
Certificate of occupancy - Presented by city building department to landlord or tenant after completion of tenant improvements and satisfactory inspections by city building department inspectors.
Certificate of Substantial Completion - A statement, usually issued by the general contractor, sufficient to receive a Certificate of Occupancy by the local government. The Certificate of Substantial Completion frequently is used as the lease document evidence of actual lease commencement, or when precisely the leasehold is transferred from landlord to Tenant, thus commencing the lease.
Circulation - Those areas (hallways, corridors, etc.) in an office space that are used to travel between offices, cubicles and the like.
Class - Class is usually used in conjuction with an office property and refers to the quality of property. Class definitions fall with the following guidelines. Class A+: Landmark quality, highrise building with prime central business district locatation (the best of the Class A buildings). Class A: Generally 100,000 sf or larger (five or more floors), concrete and steel construction, built since 1980, business/support amenities, strong identifiable location/access. Class B: Renovated and in good locations. Newer building are smaller in size, wood frame construction, and/or in non-prime location. Class C: Older, unrenovated of any size in average to fair conditionCommencement Date - The date on which a lease begins. This is typically but not always the day on which the tenant takes possession of the leased space, which usually occurs upon substantial completion of the tenant improvements. (See occupancy Date).
Commercial property - Other than residential. Owned or leased property such as office, research, retail and industrial properties.
Commission - The fee paid to a real estate broker as procuring cause and/or for his or her services rendered in a real estate transaction. May be paid by either party in a transaction; it is usually governed by a prior written agreement.
Common Area - Common area is the area used in common by the tenants of an office building. Common area includes building and elevator lobbies, restrooms and the corridor leading from an elevator lobby to a tenant space.
Common area maintenance (CAM): An additional, annual charge often assessed to tenants for maintenance of the property's "common area", such as its entryways, hallways or bathrooms.
Construction Drawings – Complete architectural drawings with notes sufficient for vendors and subcontractors to construct and for government to issue permits.
Construction management - Construction supervision by a qualified manager.
Contingent Fees - Fees to be paid only in the event of a future occurrence. Examples include: Attorneys (especially in negligence cases) paid based on winning the suit and collecting damages; and a broker's commission paid only upon closing the sale of a piece of property.
Contract documents - The complete set of drawings, specifications, bidding instructions, construction agreement, etc. used in the construction industry. The AIA (American Institute of Architects) standard forms are routinely used, but are not mandatory.
CPI: (Consumer Price Index) A measure of inflation as determined by the US federal government by using a "basket of goods". Used in leases as an impartial benchmark for the calculation of escalations.
Deal - The state of agreement both parties are looking for.
Demising wall: The wall which separates a tenant's suite from another tenant's suite, or building common areas. In most cases, a demising wall will be constructed from floor to either the building roof deck or floor deck. The wall may also be a fire rated wall (see "partition wall").
Demised Area - The walled off and secured area of a leased space, separated from spaces leased to others (by a "demising" wall). Also measured as useable area.
Discount Rate - The rate of interest used in a present value analysis representing the "time value of money".
Effective Rent - The average per square foot rent paid by the tenant over the term of a lease. Takes into account only free rent and stepped rents. Does not include allowances, space pockets, free parking and other similar landlord concessions.
Effective Useable Area - Excludes those areas within the Useable Space (see below) that the tenant pays rent on but effectively cannot use such as columns and sharply angled spaces.
Eminent domain - The right of a government entity to take (condemn) property with just compensation for the public good.
Equivalent Level Rate (ELR) - The ELR is the flat rate per square foot that, if paid each year in nominal dollars, will equal the same total present value as a proposed lease's variable cash flows. The ELR is calculated by discounting all cash flows to a net present value per square foot and then amortizing this lump sum amount evenly over the term of the lease on a cost per square foot basis.
Escalation - A clause in a lease providing for an increased rental at a future time. May be accomplished by several types of clauses, such as: (1) fixed increases -- a clause which calls for a definite, periodic rental increase; (2) cost of living -- a clause which ties the rent to a government cost of living index, with periodic adjustments as the index changes; (3) direct expense -- the rent adjusted according to changes in the expenses of the property paid by the lessor, such as tax increases, increased maintenance costs, etc.
Estoppel Certificate - A statement concerning the status of an agreement, (usually a lease) and the performance of obligations under the agreement. An instrument which itself prevents individuals from later asserting facts different from those contained in the document. Often required by the buyer of an office building. A third party such as a lender, relies on the statement (which is usually unilaterally executed by the tenant) for such things as making a loan on property. The tenant and landlord both sign the estoppel certificate, confirming the lease and pertinent facts thereto. Thereafter, neither party may make claims to the contrary. Some Leases contain language where the landlord may execute estoppels certificates in behalf of the tenant. Requires serious legal review.
Exclusive Listing - Any property where the owner has signed an agreement with a real estate broker to lease and/or sell their property. That broker has an "exclusive listing" on the owner's property.
Expansion Option - A right granted by the landlord to the tenant whereby the tenant has the option(s) to add more space to its premises pursuant to the terms of the option(s).
Expense Stop - A fixed amount (typically per square foot) in a lease where the tenant is responsible for all building operating expenses and taxes in excess of said amount.
Extension Option - An agreed continuation of occupancy under the same conditions, as opposed to a renewal, which implies new terms or conditions. In a lease, it is a right granted by the landlord to the tenant whereby the tenant has the option to extend the lease for an ad.
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.
Flex space - A building providing use flexibility between office, and other uses such as manufacturing, laboratory, warehouse, etc. Usually provides high bays and relocation flexibility for overhead doors and other entrances.
Force Majeure - (An uncontrollable force, major force) an event outside the reasonable control of the parties to a contract such as an "Act of God", war, riots or strikes which would prevents the parties from complying with the provisions of an agreement.
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 Lease - A lease in which the stated rent includes the operating expenses and taxes for the building. Same as Gross Lease. Opposite of Net Lease.
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