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Abatement
Often and commonly referred to as free rent or early occupancy and may occur outside or in addition to the primary term of the lease.
Above Building StandardUpgraded finishes and specialized designs necessary to accommodate a tenant's requirements.
AbsorptionThe rate, expressed as a percentage, at which available space in the marketplace is leased during a predetermined period of time. Also referred to as "Market Absorption".
Absorption RateThe net change in space available for lease between two dates, typically expressed as a percentage of the total square footage.
Acceleration ClauseA clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.
Ad ValoremAccording to value. This is a tax imposed on the value of property (references a general property tax), which is typically based on the local government’s valuation of the property.
Add-On FactorOften referred to as the Loss Factor or Rentable/Usable (R/U) Factor, it represents the tenant’s pro-rata share of the Building Common Areas, such as lobbies, public corridors and restrooms. It is usually expressed as a percentage which can then be applied to the usable square footage to determine the rentable square footage upon which the tenant will pay rent.
AdjoiningIn actual contact with another object (i.e., attached). Same as "Contiguous".
Adjustable Rate Mortgage (ARM)A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.
Adjustment DateThe date the interest rate changes on an adjustable-rate mortgage (ARM).
AgentAn individual/entity who transacts, represents, or manages business for another individual/entity. Permission is provided by the individual/entity being represented.
Allowance Over Building ShellMost often used in a yet-to-be constructed property, the tenant has a blank canvas upon which to customize the interior finishes to their specifications. This arrangement caps the landlord’s expenditure at a fixed dollar amount over the negotiated price of the base building shell. This arrangement is most successful when both parties agree on a detailed definition of what construction is included and at what price.
AmortizationThe loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.
Amortization ScheduleA table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero.
Anchor TenantThe major or prime tenant in a shopping center, building, etc.
Annual Percentage Rate (APR)The actual cost of borrowing money, expressed in the form of an annual interest rate. It may be higher than the note rate because it represents full disclosure of the interest rate, loan origination fees, loan discount points, and other credit costs paid to the lender.
AppraisalAn estimate of opinion and value based upon a factual analysis of a property by a qualified professional.
Appraised ValueAn opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.
AppraiserAn individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.
AppreciationThe increase in the value of a property due to changes in market conditions, inflation, or other causes.
Assessed ValueThe valuation placed on property by a public tax assessor for purposes of taxation.
AssessmentThe placing of a value on property for the purpose of taxation.
AssetItems of value owned by an individual. Assets that can be quickly converted into cash are considered "liquid assets." These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.
AssigneeIndividual to whom a contract is assigned.
AssignmentA transfer by lessee of lessee’s entire estate in the property. Distinguishable from a sublease where the sublessee acquires something less than the lessee’s entire interest. Additionally, when ownership of a mortgage is transferred from one company or individual to another, it is called an assignment.
AssignorAn individual who transfers a contract to another individual.
Assumable MortgageA mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in order to assume the loan.
AssumptionThe term applied when a buyer assumes the seller's mortgage.
AttornTo turn over or transfer to another money or goods. To agree to recognize a new owner of a property and to pay him/her rent. In a lease, when the tenant agrees to attorn to the purchaser, the landlord is given the power to subordinate tenant's interest to any first mortgage or deed of trust lien subsequently placed upon the leased premises.
Balloon Mortgage
A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.
Balloon PaymentA large principal payment that typically becomes due at the conclusion of the loan term. Generally, it reflects a loan amortized over a longer period than that of the term of the loan itself (i.e. payments based on a 25 year amortization with the principal balance due at the end of 5 years). See "Bullet Loan".
BankruptThe condition or state of a person (individual, partnership, corporation, etc.) who is unable to repay its debts as they are, or become, due.
BankruptcyProceedings under federal statures to relieve a debtor who is unable or unwilling to pay its debts. After addressing certain priorities and exemptions, the bankrupt’s property and other assets are distributed by the court to creditors as full satisfaction for the debt. See also: "Chapter 11".
Base RentA set amount used as a minimum rent in a lease with provisions for increasing the rent over the term of the lease. See also "Escalation Clause", "Operating Expense Escalation" and "Percentage Lease".
Base YearActual taxes and operating expenses for a specified base year, most often the year in which the lease commences. Once the base year expenses are known, the lease essentially becomes a dollar stop lease.
Below-gradeAny structure or a portion of a structure located underground or below the surface grade of the surrounding land.
Bill of SaleA written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require the bill of sale (in addition to other items) to help document this source of funds.
Biweekly MortgageA mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.
Bond MarketUsually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.
Bridge LoanNot used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment. One reason for their fall from favor is that there are more and more second mortgage lenders now that will lend at a high loan to value. In addition, sellers often prefer to accept offers from buyers who have already sold their property.
BrokerBroker has several meanings in different situations. Most Realtors are "agents" who work under a "broker." Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. (See the Home Loan Library that discusses the different types of lenders). As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.
Build-outThe space improvements put in place per the tenant's specifications. Takes into consideration the amount of Tenant Finish Allowance provided for in the lease agreement. See also "Tenant Improvement Allowance".
Build-to-SuitAn approach taken to lease space by a property owner w ere a new building is designed and constructed per the tenant’s specifications.
Building ClassificationsBuilding classifications in most markets refer to Class "A", "B", "C" and sometimes "D" properties. While the rating assigned to a particular building is very subjective, Class "A" properties are typically newer buildings with superior construction and finish in excellent locations with easy access, attractive to credit tenants, and which offer a multitude of amenities such as on-site management or covered parking. These buildings, of course, command the highest rental rates in their sub-market. As the "Class" of the building decreases (i.e. Class "B", "C" or "D") one component or another such as age, location or construction of the building becomes less desirable. Note that a Class "A" building in one sub-market might rank lower if it were located in a distinctly different sub-market just a few miles away containing a higher end product.
Building CodeThe various laws set forth by the ruling municipality as to the end use of a certain piece of property and that dictate the criteria for design, materials and type of improvements allowed.
Building or "Core" FactorRepresents the percentage of Net Rentable Square Feet devoted to the building's common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Loss Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage. See also "Rentable/Usable Ratio".
Building PermitWritten government permission to develop, renovate, or repair a building.
Building StandardA list of construction materials and finishes that represent what the Tenant Improvement (Finish) Allowance/Work Letter is designed to cover while also serving to establish the landlord's minimum quality standards with respect to tenant finish improvements within the building. Examples of standard building items are: type and style of doors, lineal feet of partitions, quantity of lights, quality of floor covering, etc.
Building Standard Plus AllowanceThe landlord lists, in detail, the building standard materials and costs necessary to make the premises suitable for occupancy. A negotiated allowance is then provided for the tenant to customize or upgrade materials. See also "Workletter".
Bullet LoanAny short-term, generally five to seven years, financing option that requires a balloon payment at the end of the term and anticipates that the loan will be refinanced in order to meet the balloon payment obligation. Essentially, should the refinancing not be available, often due to the property not performing as anticipated, the borrower is "shot" and the property is subject to foreclosure. An example of this is when a developer borrows to cover the costs of construction and carry-costs for a new building with the expectation that it would be replaced by long-term (or "permanent") financing provided by an institutional investor once most of risk involved in construction and lease-up had been overcome resulting in an income-producing property.
BuydownUsually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower's payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A "lender funded buydown" is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One reason for doing this is because the borrower may get to "qualify" at the start rate and can qualify for a higher loan amount. Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.
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 ExpensesThis type of expense is most often defined by reference to generally accepted accounting principles (GAAP), but GAAP does not provide definitive guidance on all possible expenditures. Accountants will often disagree on whether or not to include certain items.
Capital ImprovementAny 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.
CapitalizationA method of determining value of real property by considering net operating income divided by a predetermined annual rate of return. See "Capitalization Rate".
Capitalization Rate (CAP Rate)The rate that is considered a reasonable return on investment (on the basis of both the investor's alternative investment possibilities and the risk of the investment). Used to determine and value real property through the capitalization process. Also called "free and clear return". See "Capitalization".
Carrying ChargesCosts incidental to property ownership, other than interest (i.e. taxes, insurance costs and maintenance expenses), that must be absorbed by the landlord during the initial lease-up of a building and thereafter during periods of vacancy.
Cash-out RefinanceWhen a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a "cash out refinance."
Certificate of EligibilityA document issued by the Veterans Administration that certifies a veteran's eligibility for a VA loan.
Certificate of OccupancyA document presented by a local government agency or building department certifying that a building and/or the leased premises (tenant's space), has been satisfactorily inspected and is/are in a condition suitable for occupancy.
Certificate of Reasonable Value (CRV)Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.
Chain of TitleAn analysis of the transfers of title to a piece of property over the years.
Chapter 11That portion of the Federal Bankruptcy code that deals with business reorganizations. Chapter 7 is that part of the Federal Bankruptcy code that deals with business liquidations.
Chapter 7That portion of the Federal Bankruptcy code that deals with business liquidations. Chapter 11 is that part of the Federal Bankruptcy co de that deals with business reorganizations.
ChattelHousehold goods, including personal property such as lamps, desks, and chairs.
Circulation FactorInterior space required for internal office circulation not accounted for in the Net Square Footage. Based upon our experience, we use a Circulation Factor of 1.35 x the Net Square Footage for office and fixed drywall areas and a Circulation Factor of 1.45 x the Net Square Footage for open area workstations. See also "Net Square Footage and "Usable Square Footage.
Clear TitleA title that is free of liens or legal questions as to ownership of the property.
Clear-Span FacilityA building, most often a warehouse or parking garage, with vertical columns on the outside edges of the structure and a clear span between columns.
ClosingThis has different meanings in different states. In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office. In others, the "closing" is a meeting where all of the documents are signed and money changes hands.
Closing CostsClosing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.
Cloud on TitleAny conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action.
Co-BorrowerAn additional individual who is both obligated on the loan and is on title to the property.
CollateralIn a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.
CollectionWhen a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to "collection." As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.
CommissionMost salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction. Realtors generally earn the largest commissions, followed by lenders, then the others.
Common AreaThere are two components of the term "common area". If referred to in association with the Rentable/Usable or Load Factor calculation, the common areas are those areas within a building that are available for common use by all tenants or groups of tenants and their invitees (i.e. lobbies, corridors, restrooms, etc.). On the other hand, the cost of maintaining parking facilities, malls, sidewalks, landscaped areas, public toilets, truck and service facilities, and the like are included in the term "common area" when calculating the tenant's or property owner's pro-rata share of operating expenses.
Common Area AssessmentsIn some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.
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, property taxes, etc. Most often, this does not include any capital improvements (see "Capital Expenses") that are made to the property.
Common LawAn unwritten body of law based on general custom in England and used to an extent in some states.
Community PropertyIn some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances.
ComparablesRecent sales or leases of similar properties in nearby areas and used to help determine the fair market value of a property. Also referred to as "comps."
ConcessionsCash or cash equivalents expended by the landlord in the form of rental abatement, additional tenant finish allowance, moving expenses, cabling expenses or other monies expended to influence or persuade the tenant to sign a lease.
CondemnationThe process of taking private property, without the consent of the owner, by a governmental agency for public use through the power of eminent domain. See also "Eminent Domain".
CondominiumA type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title. Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership.
Construction LoanA short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
Construction ManagementThe actual construction process is overseen by a qualified construction manager who ensures that the various stages of the construction process are completed in a timely and seamless fashion, from getting the construction permit to completion of the construction to the final walk-through of the completed leased premises with the tenant.
Consumer Price Index (CPI)Measures inflation in relation to the change in the price of a fixed market basket of goods and services purchased by a specified population during a "base" period of time. It is not a true "cost of living" factor and bears little direct relation to actual costs of building operation or the value of real estate. The CPI is commonly used to increase the base rental periodically as a means of protecting the landlord 's rental stream against inflation or to provide a cushion for operating expense increases for a landlord unwilling to undertake the record keeping necessary for operating expense escalations.
Contiguous Space(1) Multiple suites/spaces within the same building and on the same floor, which can be combined and rented to a single tenant. (2) A block of space located on multiple adjoining floors in a building (i.e., a tenant leases floors 6 through 12 in a building).
ContingencyA requirement in a contract that must occur before that contract can be finalized or become legally binding.
ContractAn oral or written agreement to do or not to do a certain thing.
Contract DocumentsThe complete set of design plans and specifications for the construction of a building or of a building’s interior improvements. Working Drawings specify for the contractor the precise manner in which a project is to be constructed. See also "Specifications" and "Working Drawings".
Conventional MortgageRefers to home loans other than government loans (VA and FHA).
Convertible ARMAn adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.
ConveyanceMost commonly refers to the transfer of title to property between parties by deed. The term may also include most of the instruments by which an interest in real estate is created, mortgaged or assigned.
Cooperative (Co-op)A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.
Core FactorRepresents the percentage of Net Rentable Square Feet devoted to the building’s common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Loss Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage."
Cost ApproachA method of appraising real property whereby the replacement cost of a structure is calculated using current costs of construction.
Cost of Funds Index (COFI)One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.
CovenantA written agreement inserted into deeds or other legal instruments stipulating performance or non-performance of certain acts or, uses or non-use of a property and/or land.
Covenant of Quiet EnjoymentThe old "quiet enjoyment" paragraph, now more commonly referred to as "Warranty of Possession", had nothing to do with noise in and around the leased premises. It provides a warranty by Landlord that it has the legal ability to convey the possession of the premises to Tenant; the Landlord does not warrant that he owns the land. This is the essence of the landlord's agreement and the tenant's obligation to pay rent. This means that if the landlord breaches this warranty, it constitutes an actual or constructive eviction.
CreditAn agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
Credit HistoryA record of an individual's repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk.
Credit ReportA report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.
Credit RepositoryAn organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
CreditorA person to whom money is owed.
Cumulative Discount RateThe interest rate used in finding present values that when applied to the rental rate takes into account all landlord lease concessions and then expressed as a percentage of base rent.
Debt
An amount owed to another.
DedicateTo appropriate private property to public ownership for a public use.
DeedA legal instrument transferring title to real property from the seller to the buyer upon the sale of such property.
Deed In Lieu Of ForeclosureShort for "deed in lieu of foreclosure," this conveys title to the lender when the borrower is in default and wants to avoid foreclosure. The lender may or may not cease foreclosure activities if a borrower asks to provide a deed-in-lieu. Regardless of whether the lender accepts the deed-in-lieu, the avoidance and non-repayment of debt will most likely show on a credit history. What a deed-in-lieu may prevent is having the documents preparatory to a foreclosure being recorded and become a matter of public record.
Deed Of TrustAn instrument used in many states in place of a mortgage by which real property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary), to secure repayment of a debt.
Deed RestrictionAn imposed restriction in a deed that limits the use of the property. For example, a restriction could prohibit the sale of alcoholic beverages.
DefaultThe general failure to perform a legal or contractual duty or to discharge an obligation when due. Some specific examples are: 1) Failure to make a payment of rent when due. 2) The breach or failure to perform any of the terms of a lease agreement.
Deficiency JudgmentImposition of personal liability on a borrower for the unpaid balance of mortgage debt after a foreclosure has failed to yield the full amount of the debt.
DelinquencyFailure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a "late fee" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.
DeliveryTo transfer something from one entity to another.
Demising WallsThe partition wall that separates one tenant’s space from another or from the building’s common area such as a public corridor.
DepreciationA decline in the value or usefulness of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.
Design/BuildA system in which a single entity is responsible for both the design and construction. The term can apply to an entire facility or to individual components of the construction to be performed by a subcontractor; also referred to as “design/construct”
Discount PointsIn the mortgage industry, this term is usually used in only in reference to government loans, meaning FHA and VA loans. Discount points refer to any "points" paid in addition to the one percent loan origination fee. A "point" is one percent of the loan amount.
DistraintThe act of seizing (legally or illegally) personal property based on the right and interest which a landlord has in the property of a tenant in default.
Dollar StopAn agreed dollar amount of taxes and operating expense (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its prorated share of increases. May be applied to specific expenses (e.g., property taxes or insurance).
Down PaymentThe part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
Due-on-Sale ProvisionA provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
Earnest Money
The monetary advance by a buyer of part of the purchase price to indicate the intention and ability of the buyer to carry out the contract.
EasementA right of use over the property of another created by grant, reservation, agreement, prescription or necessary implication. It is either for the benefit of adjoining land (“appurtenant”), such as the right to cross A to get to B, or for the benefit of a specific individual (“in gross”), such as a public utility easement.
Economic FeasibilityA building or project’s feasibility in terms of costs and revenue, with excess revenue establishing the degree of viability.
Economic RentThe market rental value of a property at a given point in time, even though the actual rent may be different.
Effective AgeAn appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Effective RentThe actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant, usually expressed as an average rate over the term of the lease.
Efficiency FactorRepresents the percentage of Net Rentable Square Feet devoted to the building’s common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Core Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage.
EjectmentAction to regain possession of real estate property. This is a last-ditch effort that is used when there is no relationship between landlord and tenant.
Eminent DomainA power of the state, municipalities, and private persons or corporations authorized to exercise functions of public character to acquire private property for public use by condemnation, in return for just compensation. See also “Condemnation”.
EncroachmentThe intrusion of a structure, which extends, without permission, over a property line, easement boundary or building setback line.
EncumbranceAny right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property).
EndorsementSigning one's name on the back of a check.
Environmental Impact StatementDocuments which are required by federal and state laws to accompany proposals for major projects and programs that will likely have an impact on the surrounding environment.
Equal Credit Opportunity Act (ECOA)A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
EquityA property owner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
Escalation ClauseA clause in a lease which provides for the rent to be increased to reflect changes in expenses paid by the landlord such as real estate taxes, operating costs, etc. This may be accomplished by several means such as fixed periodic increases, increases tied to the Consumer Price Index or adjustments based on changes in expenses paid by the landlord in relation to a dollar stop or base year reference.
EscrowAn item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.
Escrow AccountOnce you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner's insurance when they come due. The lender pays them with your money instead of you paying them yourself.
Escrow AgreementA written agreement made between the parties to a contract and an escrow agent. The escrow agreement sets forth the basic obligations of the parties, describes the monies (or other things of value) to be deposited in escrow, and instructs the escrow agent concerning the disposition of the monies deposited.
Escrow AnalysisOnce each year your lender will perform an "escrow analysis" to make sure they are collecting the correct amount of money for the anticipated expenditures.
Escrow DisbursementsThe use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
EstateThe ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
Estoppel CertificateA signed statement certifying that certain statements of fact are correct as of the date of the statement and can be relied upon by a third party, including a prospective lender or purchaser. In the context of a lease, a statement by a tenant identifying that the lease is in effect and certifying that no rent has been prepaid and that there are no known outstanding defaults by the landlord (except those specified).
Eviction (Actual)Physical removal of a tenant either by law or force.
Eviction (Constructive)The landlord or his agents disturb the tenant, rendering the leased space unfit for the tenant's previous use.
Eviction (Proceeding)A legal proceeding by the landlord to remove a tenant.
Examination of TitleThe report on the title of a property from the public records or an abstract of the title.
Exclusive Agency ListingA written agreement between a real estate broker and a property owner in which the owner promises to pay a fee or commission to the broker if specified real property is leased during the listing period. The broker need not be the procuring cause of the lease.
ExecutorA person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.
Expense StopAn agreed dollar amount of taxes and operating expense (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its prorated share of increases. May be applied to specific expenses (e.g., property taxes or insurance).
Face Rental Rate
The “asking” rental rate published by the landlord.
Fair Credit Reporting ActA consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
Fair Market ValueThe sale price at which a property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. Also known as FMV.
Fannie Mae (FNMA)The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds.
Federal Housing Administration (FHA)An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
Fee Simple (or Fee Simple Estate)An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.
FHA MortgageA mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan.
FiduciaryA person who represents another on financial/property matters.
Finance ChargeThe amount paid for the privilege deferring payment of goods or services purchased, including any charges payable by the purchaser as a condition of the loan.
First Generation SpaceGenerally refers to new space that is currently available for lease and has never before been occupied by a tenant. See also "Second Generation Space.
First MortgageThe senior mortgage, which, by reason of its position, has priority over all junior encumbrances. The holder of the first or senior mortgage has a priority right to payment in the event of default.
First Refusal Right or Right Of First Refusal (Adjacent Space)A lease clause giving a tenant the first opportunity to lease additional space that might become available in a property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept. This right is often restricted to specific areas of the building such as adjacent suites or other suites on the same floor.
First Refusal Right or Right Of First Refusal (Purchase)A lease clause giving a tenant the first opportunity to buy a property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept.
Fixed CostsCosts, such as rent, which do not fluctuate in proportion to the level of sales or production.
Fixed Rate MortgageA mortgage in which the interest rate does not change during the entire term of the loan.
FixturesPersonal property so attached to the land or building (e.g., improvements) that it is considered part of the real property.
Flex SpaceA building providing its occupants the flexibility of utilizing the space. Usually provides a configuration allowing a flexible amount of office or showroom space in combination with manufacturing, laboratory, warehouse distribution, etc. Typically also provides the flexibility to relocate overhead doors. Generally constructed with little or no common areas, load-bearing floors, loading dock facilities and high ceilings.
Floor Area Ratio (FAR)The ratio of the gross square footage 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.
Force MajeureA force that cannot be controlled by the parties to a contract and prevents said parties from complying with the provisions of the contract. This includes acts of God such as a flood or a hurricane or, acts of man such as a strike, fire or war.
ForeclosureA procedure by which the mortgagee (“lender") either takes title to or forces the sale of the mortgagor’s (“borrower”) property in satisfaction of a debt. See also "Deed In Lieu Of Foreclosure".
Full RecourseA loan on which an endorser or guarantor is liable in the event of default by the borrower.
Full Service RentAn all-inclusive rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount. See also "Pass Throughs".
Future Proposed SpaceSpace in a proposed commercial development which is not yet under construction or where no construction start date has been set. Future Proposed projects include all those projects waiting for a lead tenant, financing, zoning, approvals or any other event necessary to begin construction. Also may refer to the future phases of a multi-phase project not yet built.
General Contractor
The prime contractor who contracts for the construction of an entire building or project, rather than just a portion of the work. The general contractor hires subcontractors, (e.g., plumbing, electrical, etc.), coordinates all work, and is responsible for payment to subcontractors.
General PartnerA member of a partnership who has authority to bind the partnership. A general partner also shares in the profits and losses of the partnership. See also “Limited Partnership”.
Ginnie Mae (GNMA)Government National Mortgage Association. A government-owned corporation within the U.S. Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans. The difference is that Ginnie Mae provides funds for government loans (FHA and VA)
Government LoanA mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans.
Grace PeriodAdditional time allowed to complete an action (e.g., make a payment) before a default or violation occurs.
Graduated LeaseA lease, generally long term in nature, which provides that the rent will vary depending upon future contingencies, such as a periodic appraisal, the tenant’s gross income or simply the passage of time.
GrantTo bestow or transfer an interest in real property by deed or other instrument; either the fee or a lesser interest, such as an easement.
GranteeThe person to whom an interest in real property is conveyed.
GrantorThe person conveying an interest in real property.
Gross AbsorptionA measure of the total square feet leased over a specified period of time with no consideration given to space vacated in the same geographic area during the same time period. See also “Net Absorption”.
Gross Building AreaThe total floor area of the building measuring from the outer surface of exterior walls and windows and including all vertical penetrations (e.g. elevator shafts, etc.) and basement space.
Gross LeaseA lease in which the tenant pays a flat sum for rent out of which the landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc.
Ground RentRent paid to the owner for use of land, normally on which to build a building. Generally, the arrangement is that of a long-term lease ( e.g. 99 years) with the lessor retaining title to the land.
GuarantorOne who makes a guaranty. See also “Guaranty".
GuarantyAgreement whereby the guarantor undertakes collaterally to assure satisfaction of the debt of another or perform the obligation of another if and when the debtor fails to do so. Differs from a surety agreement in that there is a separate and distinct contract rather than a joint undertaking with the principal. See also "Guarantor".
Hard Cost
The cost of actually constructing the improvements (i.e. construction costs). See also “Soft Cost”.
Hazard InsuranceInsurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
High RiseIn the Central Business District, this could mean a building higher than 25 stories above ground level but in suburban sub-markets, it generally refers to buildings higher than 7 or 8 stories.
Highest and Best UseThe use of land or buildings which will bring the greatest economic return over a given time which is physically possible, appropriately supported, financially feasible.
Hold Over TenantA tenant retaining possession of the leased premises after the expiration of a lease.
Home Equity Conversion Mortgage (HECM)Usually referred to as a reverse annuity mortgage, what makes this type of mortgage unique is that instead of making payments to a lender, the lender makes payments to you. It enables older home owners to convert the equity they have in their homes into cash, usually in the form of monthly payments. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property.
Home Equity Line of CreditA mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.
Home InspectionA thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.
Homeowner's AssociationA nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
Homeowner's InsuranceAn insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
HUD1 Settlement StatementA document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the "closing statement" or "settlement sheet."
HVACThe acronym for “Heating, Ventilating and Air-Conditioning”.
Improvements
Any structure erected on a site to enhance the value of the property - for example, building a fence or adding a driveway. In the context of leasing, the term typically refers to the improvements made to or inside a building.
Income ApproachThe process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life.
IncompetentAn individual who is unable to handle his own affairs by reason of some medical condition (e.g., insanity, Alzheimer's).
Indirect CostsDevelopment costs, other than material and labor costs which are directly related to the construction of improvements, including administrative and office expenses, commissions, architectural, engineering and financing costs.
InstrumentA written legal document created to secure the rights of the parties participating in the agreement.
InventoryThe total amount of rentable square feet of existing and any forthcoming space (whether it be a tenant vacating space or new buildings coming on the market), in a given category, for example, all warehouse space in a specified submarket. Inventory refers to all space within a certain proscribed market without regard to its availability or condition, and categories can include all types of leased space such as office, flex, retail and warehouse space.
IrrevocableIncapable of being altered, changed, or recalled.
Joint Tenancy
Ownership of real property by two or more individuals, each of whom has an undivided interest with the right of survivorship.
JudgmentThe final decision of a court resolving a dispute and determining the rights and obligations of the parties. Money judgments, when recorded, become a lien on real property of the defendant.
Judgment LienAn encumbrance that arises by law when a judgment for the recovery of money attaches to the debtor’s real estate. See also "Lien".
Judicial ForeclosureA type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure.
Jumbo LoanA loan that exceeds Fannie Mae's and Freddie Mac's loan limits. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.
Just CompensationCompensation which is fair to both the owner and the public when property is taken for public use through condemnation (eminent domain). The theory is that in order to be “just”, the property owner should be no richer or poorer than before the taking.
Landlord
One who rents property to a tenant.
Landlord's LienA type of lien that can be created by contract or by operation of law. Some examples are: (1) a contractual landlord’s lien as might be found in a lease agreement; (2) a statutory landlord’s lien; and (3) landlord’s remedy of distress (or right of distraint), which in not truly a lien but has a similar effect. See also "Lien".
Landlord's Lien or WarrantA warrant from a landlord to levy upon a tenant’s personal property (e.g., furniture, etc.) and to sell this property at a public sale to compel payment of the rent or the observance of some other stipulation in the lease.
LeaseAn agreement whereby the owner of real property (i.e., landlord/lessor) gives the right of possession to another (i.e., tenant/les see) for a specified period of time (i.e., term) and for a specified consideration (i.e., rent).
Lease AgreementThe formal legal document entered into between a Landlord and a Tenant to reflect the terms of the negotiations between them; that is, the lease terms have been negotiated and agreed upon, and the agreement has been reduced to writing. It constitutes the entire agreement between the parties and sets forth their basic legal rights.
Lease Commencement DateThe date usually constitutes the commencement of the term of the Lease for all purposes, whether or not the tenant has actually taken possession so long as beneficial occupancy is possible. In reality, there could be other agreements, such as an Early Occupancy Agreement, which have an impact on this strict definition.
Lease OptionAn alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.
LeaseholdThe estate or interest a tenant has as stated in the tenant's lease.
Leasehold ImprovementsImprovements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvements to be made in the leased premises by Landlord. See also “Tenant Improvements”.
Legal DescriptionA geographical description identifying a parcel of land by government survey, metes and bounds, or lot numbers of a recorded plat including a description of any portion thereof that is subject to an easement or reservation. A legal property description is sufficient to locate and identify the property without oral testimony.
Legal OwnerThe term is in technical contrast to equitable owner. The legal owner has title to the property, although the title may actually carry no rights to the property other than as a lien. See also “Lien”.
LenderA term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as "lenders."
LesseeAn individual (i.e., tenant) to whom property is rented under a lease.
LessorAn individual (i.e. landlord) who rents property to a tenant via a lease.
Letter Of AttornmentA letter from the grantor to a tenant, stating that a property has been sold, and directing rent to be paid to the grantee (buyer). See also “Attorn”.
Letter Of CreditA commitment by a bank or other person, made at the re quest of a customer, that the issuer will honor drafts or other demands for payment upon full compliance with the conditions specified in the letter of credit. Letters of credit are often used in place of cash deposited with the landlord in satisfying the security deposit provisions of a lease.
Letter Of IntentA preliminary agreement stating the proposed terms for a final contract. They can be "binding" or "non-binding". This is the threshold issue in most litigation concerning letters of intent. The parties should always consult their respective legal counsel before signing any Letter of Intent.
LiabilitiesA person's financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.
Liability InsuranceInsurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner's insurance policy.
LienA claim or encumbrance against property used to secure a debt, charge or the performance of some act. Includes liens acquired by con tract or by operation of law. Note that all liens are encumbrances but all encumbrances are not liens.
Lien Waiver (Waiver of Liens)A waiver of mechanic’s lien rights, signed by a general contractor and his subcontractors, that is often required before the general contractor can receive a draw under the payment provisions of a construction contract. May also be required before the owner can receive a draw on a construction loan.
Life CapFor an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the mortgage.
Like-Kind PropertyA term used in an exchange of property held for productive use in a trade or business or for investment. Unless cash is received, the tax consequences of the exchange are postponed pursuant to Section 1031 of the Internal Revenue Code.
Limited PartnershipA type of partnership, created under state law, comprised of one or more general partners who manage the business and who are personally liable for partnership debts, and one or more special or limited partners who contribute capital and share in profits but who take no part in running the business and incur no liability over and above the amount contributed. See also "General Partner".
Line of CreditAn agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specified borrower.
Liquid AssetA cash asset or an asset that is easily converted into cash.
ListingAn employment contract between principal and agent that authorizes the agent (such as a broker) to perform services for the principal and his property.
Listing AgreementAn agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation. See also “Exclusive Listing Agreement”.
LoanA sum of borrowed money (principal) that is generally repaid with interest.
Loan ApplicationThe form used to apply for a mortgage loan, containing information about a borrower's income, savings, assets, debts, and more.
Loan ModificationOccasionally, a lender will agree to modify the terms of your mortgage without requiring you to refinance. If any changes are made, it is called a modification.
Loan OfficerAlso referred to by a variety of other terms, such as lender, loan representative, loan "rep," account executive, and others. The loan officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution.
Loan ServicingAfter you obtain a loan, the company you make the payments to is "servicing" your loan. They process payments, send statements, manage the escrow/impound account, provide collection efforts on delinquent loans, ensure that insurance and property taxes are made on the property, handle pay-offs and assumptions, and provide a variety of other services.
Loan-to-Value RatioThe percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).
Lock-inAn agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.
Lock-in PeriodThe time period during which the lender has guaranteed an interest rate to a borrower.
Long Term LeaseIn most markets, this refers to a lease whose term is at least three years from initial signing until the date of expiration or renewal option.
Loss FactorWhat percentage of the gross area of a space is lost due to walls, elevator, etc. Rule of thumb in Manhattan is approximately 15%.
LotGenerally, one of several contiguous parcels of land making up a fractional part or subdivision of a block, the boundaries of which are shown on recorded maps and “plats”.
Low RiseA building with fewer than 4 stories above ground level.
Lump-Sum ContractA type of construction contract requiring the general contractor to complete a building or project for a fixed cost normally established by competitive bidding. The contractor absorbs any loss or retains any profit.
Maker
One who creates or executes a promissory note and promises to pay the note when it becomes due.
MandatoryA requirement that must be conformed to as specified in any written document.
MarginThe difference between the interest rate and the index on an adjustable rate mortgage. The margin remains stable over the life of the loan. It is the index which moves up and down.
Market PriceThe actual selling or leasing price of a property.
Market RentThe rental income that a property would command on the open market with a landlord and a tenant ready and willing to consummate a lease in the ordinary course of business; indicated by the rents that landlords were willing to accept and tenants were willing to pay in recent lease transactions for comparable space.
Market StudyA forecast of future demand for a certain type of real estate project that includes an estimate of the square footage that can be absorbed and the rents that can be charged. Also called “Marketability Study”.
Market ValueThe highest price a property would command in a competitive and open market under all conditions requisite to a fair sale with the buyer and seller each acting prudently and knowledgeably in the ordinary course of trade.
Marketable TitleA title which is free from encumbrances and could be readily marketed (i.e., sold) to a reasonably intelligent purchaser who is well informed of the facts and willing to accept such title while exercising ordinary business prudence. See also “Encumbrance”.
Master LeaseA primary lease that controls subsequent leases and which may cover more property than subsequent leases. An Executive Suite operation is a good example in that a primary lease is signed with the landlord and then individual offices within the leased premises are leased to other individuals or companies.
MaturityThe date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
Mechanic's LienA claim created by state statutes for the purpose of securing priority of payment of the price and value of work performed and materials furnished in constructing, repairing or improving a building or other structure, and which attaches to the land as well as to the buildings and improvements thereon.
Meeting of the MindsWhen all individuals to a contract agree to the substance and terms of that contract.
Metes and BoundsThe boundary lines of land, with their terminal points and angles, described by listing the compass directions and distances of the boundaries. Originally, metes referred to distance and bounds referred to direction.
Mid-RiseA building with between four and eight stories above g round level although in a Central Business District, this might extend to buildings up to twenty-five stories.
MinorA person under a legal age, usually under 18 years old.
Mixed-UseSpace within a building or project providing for more than one use (i.e., a loft or apartment project with retail, an apartment building with office space, an office building with retail space).
MortgageA written instrument creating an interest in real estate and that provides security for the performance of a duty or the payment of a debt. The borrower (i.e., mortgagor) retains possession and use of the property.
Mortgage BrokerA mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
Mortgage InsuranceInsurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time home buyer programs require mortgage insurance regardless of the loan-to-value.
Mortgage Life and Disability InsuranceA type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines. Some policies also cover the borrower in the event of disability. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days.
MortgageeThe lender in a mortgage agreement.
MortgagorThe borrower in a mortgage agreement.
Multiple ListingAn arrangement among Real Estate Board of Exchange Members, whereby each broker presents the broker's listings to the attention of the other members so that if a lease results, the commission is divided between the broker bringing the listing and the broker making the lease.
Negative Amortization
Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment, which is why this is called "deferred interest." The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.
Net AbsorptionThe square feet leased in a specific geographic area over a fixed period-of-time after deducting space vacated in the same area during the same period. See also “Gross Absorption”.
Net LeaseA lease in which there is a provision for the tenant t o pay, in addition to rent, certain costs associated with the operation of the property. These costs may include property taxes, insurance, repairs, utilities, and maintenance. There are also “NN” (double net) and “NNN” (triple net) leases. The difference between the three is the degree to which the tenant is responsible for operating costs. See also “Gross Lease”.
Net Rentable AreaThe floor area of a building that remains after the square footage represented by vertical penetrations, such as elevator shafts, etc., has been deducted. Common areas and mechanical rooms are included and there are no deductions made for necessary columns and projections of the building. (This is by the Building Owner and Manager Association - BOMA, Standard).
Net Square Footage (S.F.)The space required for a function or staff position. Also see "Circulation Factor and "Usable Square Footage".
No-Cost LoanMany lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-points" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
Non-Compete ClauseA clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and that no other tenant operating the same or similar type of business can occupy space in the building. This clause benefits service-oriented businesses desiring exclusive access to the building’s population (i.e. travel agent, deli, etc.).
Non-DisturbanceThe tenant signs this to prevent himself from being evicted if the property owner does not p ay its mortgage to the bank.
Non-Recourse LoanA loan which bars a lender from seeking a deficiency judgment against a borrower in the event of default. The borrower is not personally liable if the value of the collateral for the loan falls below the amount required to repay the loan.
Normal Wear and TearThe deterioration or loss in value caused by the tenant’s normal and reasonable use. In many leases the tenant is not responsible for “normal wear and tear”.
Notary PublicA public officer who is authorized to witness and verify certain documents (e.g., contracts, deeds, mortgages). Also, an affidavit may be sworn before this public officer.
NoteA legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
Notice of DefaultA formal written notice to a borrower that a default has occurred and that legal action may be taken.
Obligee
The person who will receive the outcome of an obligation.
ObligorAn individual who has engaged to perform an obligation to another person (i.e., obligee).
Open ListingA listing given to any broker without liability to compensate any broker except the one who first secures a buyer who is ready, willing, and able to meet the terms of the listing, or secures the acceptance by the landlord of a satisfactory offer; the lease of the property automatically terminates the listing.
Open SpaceAn unimproved area of land or water, or containing only such improvements as are appropriate to the use and enjoyment of the open area, and dedicated for public or private use or enjoyment or for the use and enjoyment of owners and occupants of land adjoining or neighboring such open spaces.
Operating Cost EscalationAlthough there are many variations of escalation clauses, all are intended to adjust rents by reference to external standards such as published indexes, negotiated wage levels, or expenses related to the owner ship and operation of buildings. During the past thirty years, Landlords have developed the custom of separating the base rent for the occupancy of the leased premises from escalation rent. This technique enables the landlord to better ensure that the “net” rent to be received under the lease will not be reduced by the normal costs of operating and maintaining the property. The landlord’s definition of Operating Expenses is likely to be broad, covering most costs of operation of the building. Most landlords pass through proper and customary charges, but in the hands of an overly aggressive landlord, these clauses can operate to impose obligations which the tenant would not willingly or knowingly accept.
Operating Expense EscalationAlthough there are many variations of operating expense escalation clauses, all are intended to adjust rents by reference to external standards such as published indexes, negotiated wage levels, or expenses related to the ownership and operation of buildings.
Operating ExpensesThe actual costs associated with operating a property including maintenance, repairs, management, utilities, taxes and insurance. A landlord’s definition of operating expenses is likely to be quite broad, covering most aspects of operating the building.
OptionA right given to purchase or lease a property upon specified terms within a specified time. If the right is not exercised, the option holder is not subject to liability for damages. If the holder of the option exercises it, the grantor of option must perform the option's requirements.
Original Principal BalanceThe total amount of principal owed on a mortgage before any payments are made.
Origination FeeOn a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called "discount points." One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.
Owner FinancingA property purchase transaction in which the seller provides all or part of the financing.
Parking Ratio or Index
The intent of this ratio is to provide a uniform method of expressing the amount of parking that is available at a given building. Dividing the total rentable square footage of a building by the building’s total number of parking spaces provides the amount of rent able square feet per each individual parking space (expressed as 1/xxx or 1 per xxx). Dividing 1000 by the previous result provides the ratio of parking spaces available per each 1000 rentable square feet (expressed as x per 1000).
Partial PaymentA payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.
Partial TakingThe taking of part (a portion) of an owner’s property under the laws of eminent domain.
Pass ThroughsRefers to the tenant's pro rata share of operating expenses (i.e. taxes, utilities, repairs) paid in addition to the base rent.
Payment Change DateThe date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the interest rate adjustment date.
Percentage LeaseRefers to a provision of the lease calling for the landlord to be paid a percentage of the tenant's gross sales as a component of rent. There is usually a base rent amount to which "percentage" rent is then added. This type of clause is most often found in retail leases.
Performance BondA surety bond posted by a contractor guaranteeing full performance of a contract with the proceeds to be used to complete the contract or compensate for the owner’s loss in the event of nonperformance.
Periodic Payment CapFor an adjustable-rate mortgage where the interest rate and the minimum payment amount fluctuate independently of one another, this is a limit on the amount that payments can increase or decrease during any one adjustment period.
Periodic Rate CapFor an adjustable-rate mortgage, a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
Personal PropertyAny property which is not real property. Examples include furniture, clothing, and artwork.
PITI ReservesA cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.
Planned Unit Development (PUD)A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.
Plat (Plat Map)Map of a specific area, such as a subdivision, which shows the boundaries of individual parcels of land (e.g. lots) together with streets and easements.
PointA point is 1 percent of the amount of the mortgage.
Power of AttorneyA written instrument duly signed and executed by an individual which authorizes an agent to act on his behalf to the extent indicated in the document. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Power of SaleClause inserted in a mortgage or deed of trust giving the mortgagee (or trustee) the right and power, on default in the payment of the debt secured, to advertise and sell the property at public auction.
Pre-ApprovalA loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and makes assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification.
Pre-QualificationThis usually refers to the loan officer's written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.
Precast ConcreteConcrete components (i.e. walls) of a building which a re fabricated at a plant site and then shipped to the site of construction.
PreleasedRefers to space in a proposed building that has been l eased before the start of construction or in advance of the issuance of a Certificate of Occupancy.
PrepaymentAny amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.
Prepayment PenaltyA fee that may be charged to a borrower who pays off a loan before it is due.
Prime SpaceThis typically refers to first generation (new) space that is currently available for lease and which has never before been occupied by a tenant.
Prime TenantThe major tenant in a building or, the major or anchor tenant in a shopping center serving to attract other, smaller tenants into adjacent space because of the customer traffic generated.
PrincipalThe amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. The term "principal" can also mean the employer (e.g., landlord) of an agent or broker. This is the agent's or broker's client.
Principal, Interest, Taxes, and Insurance (PITI)This stands for principal, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.
Pro rataProportionately; according to measure, interest, or liability. In the case of a tenant, the proportionate share of expenses for the maintenance and operation of the property. See also "Common Area" and "Operating Expenses".
Promissory NoteA written promise to repay a specified amount over a specified period of time.
Punch ListAn itemized list, typically prepared by the architect or construction manager, documenting incomplete or unsatisfactory items after the contractor has notified the owner that the tenant space is substantially complete.
Qualifying Ratios
Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The "top" or "front" ratio is a calculation of the borrower's monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner's association fees) as a percentage of monthly income. The "back" or "bottom" ratio includes housing costs as will as all other monthly debt.
Quiet EnjoymentThe right of a landlord or tenant to use the property without disturbances.
Quitclaim DeedA deed operating as a release that is intended to pass any title, interest, or claim that the grantor may have in the property, but not containing any warranty or professing that such title is valid.
Raw Land
Unimproved land that remains in its natural state.
Raw SpaceUnimproved "shell space" in a building.
Real Estate AgentA person licensed to negotiate and transact the sale of real estate.
Real Estate BoardAn organization whose members consist primarily of real estate professionals such as brokers.
Real Estate Settlement Procedures Act (RESPA)A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
Real Estate SyndicateWhen partners (either with or without unlimited liability) form a partnership to participate in a real estate venture.
Real PropertyLand, and generally whatever is erected on or affixed to the land, such as buildings, fences, and including light fixtures, plumbing and heating fixtures, or other items which would be personal property if not attached.
Realtor®A coined word which may only be used by an active member of a local real estate board, affiliated with the National Association of Realtors®.
Recapture(1) When the IRS recovers the tax benefit of a deduction or a credit previously taken by a taxpayer, which is often a factor in foreclosure since there is a forgiveness of debt. (2) As used in leases, a clause giving the lessor a percentage of profits above a fixed amount of rent; or in a percentage lease, a clause granting the landlord a right to terminate the l ease if the tenant fails to realize minimum sales.
RecorderThe public official who keeps records of transactions that affect real property in the area. Sometimes known as a "Registrar of Deeds" or "County Clerk."
RecordingThe noting in the registrar's office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
RecourseThe right of a lender, in the event of a default by the borrower, to recover against the personal assets of a party who is secondarily liable for the debt (e.g. endorser or guarantor).
RefinanceThe process of paying off one loan with the proceeds from a new loan using the same property as security.
RehabAn extensive renovation of a building or project which is intended to cure obsolescence of such building or project.
Renewal OptionA clause giving a tenant the right to extend the term of a lease, usually for a stated period of time and at a rent amount as provided for in the option language.
RentCompensation or fee paid, usually periodically (i.e. monthly rent payments, for the occupancy and use of any rental property, land, buildings, equipment, etc.
Rent Commencement DateThe date on which a tenant begins paying rent. The dynamics of a marketplace will dictate whether this date coincides with the lease commencement date or if it commences months later (i.e., in a weak market, the tenant may be granted several months free rent). It will never begin before the lease commencement date.
Rent Loss InsuranceInsurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.
Rent-Up PeriodThat period of time, following construction of a new building, when tenants are actively being sought and the project is approaching its stabilized occupancy.
Rentable Square FootageRentable Square Footage equals the Usable Square Footage plus the tenant’s pro rata share of the Building Common Areas, such as lobbies, public corridors and restrooms. The pro-rata share, often referred to as the Rentable/Usable (R/U) Factor, will typically fall in a range of 1.10 to 1.16, depending on the particular building. Typically, a full floor occupancy will have an R/U Factor of 1.10 while a partial floor occupancy will have an R/U Factor of 1.12 to 1.16 times the Usable Area.
Rentable/Usable RatioThat number obtained when the Total Rentable Area in a building is divided by the Usable Area in the building. The inverse of this ratio describes the proportion of space that an occupant can expect to actually utilize/physically occupy.
Rental ConcessionConcessions a landlord may offer a tenant in order to secure their tenancy. While rental abatement is one form of a concession, there are many others such as: increased tenant improvement allowance, signage, lower than market rental rates and moving allowances are only a few of the many. See also "Abatement".
REO (Real Estate Owned)Real estate that has come to be owned by a lender, including real estate taken to satisfy a debt. Includes real estate acquired by lenders through foreclosure or, in settlement of some other obligation.
Repayment PlanAn arrangement made to repay delinquent installments or advances.
Replacement Reserve FundA fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.
Representation AgreementAn agreement between the owner of a property and a real estate broker giving the broker the authorization to attempt to sell or lea se the property at a certain price and terms in return for a commission, set fee or other form of compensation. See also “Exclusive Listing Agreement”.
Request for Proposal (RFP)The formalized Request for Proposal represents a compilation of the many considerations that a tenant might have and should be customize d to reflect their specific needs. Just as the building’s standard form lease document represents the landlord’s “wish list”, the RFP serves in that same capacity for the tenant.
RestrictionA restriction, often specified in the deed, on the use of property.
RevocationAn act of rescinding power previously authorized.
Revolving DebtA credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.
Right Of First RefusalSee “First Refusal Right”.
Right of Ingress or EgressThe right to enter or leave designated premises.
Right of SurvivorshipIn joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
Rule of ThumbA common or ubiquitous benchmark. For example, it is often assumed that each worker in an office will need approximately 250 square feet of space.
Sale-Leaseback
An arrangement by which the owner occupant of a property agrees to sell all or part of the property to an investor and then lease it back and continue to occupy space as a tenant. Although the lease technically follows the sale, both will have been agreed to as part of the same transaction.
Second Generation or Secondary SpaceRefers to previously occupied space that becomes avail able for lease, either directly from the landlord or as sublease space. See also "First Generation Space.
Second MortgageA mortgage on property that ranks below a first mortgage in priority. Properties may have two, three, or more mortgages, deeds of trust, or land contracts as liens at the same time. Legal sequence priority, indicate d by the date of recording, determines the designation first, second, third, etc.
SecurityThe property that will be pledged as collateral for a loan.
Security DepositA deposit of money by a tenant to a landlord to secure performance of a lease. This deposit can also take the form of a Letter of Credit or other financial instrument.
Seisen (Seizen)Possession of real property under claim of freehold estate. This term originally referred to the completion of feudal investiture by which a tenant was admitted into the feud and performed the rights of homage and fealty. Presently it has come to mean possession under a legal right (usually a fee interest). As the old doctrine of corporeal investiture is no longer in force, the delivery of a deed gives seisen in law.
ServicerAn organization that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
SetbackThe distance from a curb, property line or other reference point, within which building is prohibited.
Setback OrdinanceSetback requirements are normally provided for by ordinances or building codes. Provisions of a zoning ordinance regulate the distance from the lot line to the point where improvements may be constructed.
Shell SpaceThe interior condition of the tenant's usable square footage when it is without improvements or finishes. While existing improvements and finishes can be removed, thus returning space in an older building to its "shell" condition, the term most commonly refers to the condition of the usable square footage after completion of the building's "shell" construction but prior to the build out of the tenant's space. Shell construction typically denotes the floor, windows, walls and roof of an enclosed premises and may include some HVAC, electrical or plumbing improvements but not demising walls or interior space partitioning. In a new multi-tenant building, the common area improvements, such as lobbies, restrooms and exit corridors may also be included in the shell construction. With a newly constructed office building, there will often be a distinction between improvements above and below the ceiling grid. In a retail project, all or a portion of the floor slab is often installed along with the tenant improvements so as to better accommodate tenant specific under-floor plumbing requirements.
Site AnalysisThe study of a specific parcel of land which takes into account the surrounding area and is meant to determine its suitability for a specific use or purpose.
Site DevelopmentThe installation of all necessary improvements, (i.e. installment of utilities, grading, etc.), made to a site before a building or project can be constructed upon such site.
Site PlanA detailed plan which depicts the location of improvements on a parcel of land which also contains all the information required by the zoning ordinance.
SitusThe location of a property.
SlabThe exposed wearing surface laid over the structural support beams of a building to form the floor(s) of the building or laid slab-on-grade in the case of a non-structural, ground level concrete slab.
Soft CostThat portion of an equity investment other than the actual cost of the improvements themselves (i.e. architectural and engineering fee s, commissions, etc.) and which may be tax-deductible in the first year. See also “Hard Cost”.
Space PlanA graphic representation of a tenant’s space requirements, showing wall and door locations, room sizes, and sometimes includes furniture layouts. A preliminary space plan will be prepared for a prospective tenant at any number of different properties and this serves as a “test-fit” to help the tenant determine which property will best meet its requirements. When the tenant has selected a building of choice, a final space plan is prepared which speaks to all of the landlord and tenant objectives and then approved by both parties. It must be sufficiently detailed to allow an accurate estimate of the construction costs. This final space plan will often become an exhibit to any lease negotiated between the parties.
Special AssessmentAny special charge levied against real property for public improvements (e.g., sidewalks, streets, water and sewer, etc.) that benefit the assessed property.
Specific PerformanceA requirement compelling one of the parties to perform or carry out the provisions of a contract into which he has entered.
Speculative SpaceAny tenant space that has not been leased before the start of construction on a new building. See also "First Generation Space".
Square FeetThe usual method by which rental space is defined. It is the area of that space, calculated by taking length times width. For example, a room 30 feet by 60 feet has an area of 1,800 square feet.
StatuteA law established by an act of a legislature.
Statute of FraudsState law (founded on ancient English law) which requires that contracts must be reduced to written form if it is to be enforced by law.
Statute of LimitationsA law barring all right of redress after a certain period of time from the moment when a cause of action first arises.
Step-Up Lease (Graded Lease)A lease specifying set increases in rent at set intervals during the term of the lease.
Straight Lease (Flat Lease)A lease specifying the same, a fixed amount, of rent t hat is to be paid periodically during the entire term of the lease. This is typically paid out in monthly installments.
Strip CenterAny shopping area, generally with common parking, comprised of a row of stores but smaller than the neighborhood center anchored by a grocery store.
SubagentAn agent of an individual already acting as an agent of a principal.
SubcontractorA contractor working under and being paid by the general contractor. Often a specialist in nature, such as an electrical contractor, cement contractor, etc.
SubdivisionA housing development that is created by dividing a tract of land into individual lots for sale or lease.
Subdivision PlatA detailed drawing which depicts the manner in which a parcel of land has been divided into two or more lots. It contains engineering considerations and other information required by the local authority.
SublettingThe leasing of space from one tenant to another tenant.
Subordinate FinancingAny mortgage or other lien that has a priority that is lower than that of the first mortgage.
Subordination AgreementAs used in a lease, the tenant generally accepts the leased premises subject to any recorded mortgage or deed of trust lien and all existing recorded restrictions, and the landlord is often given the power to subordinate the tenant's interest to any first mortgage or deed of trust lien subsequently placed upon the leased premises.
Subscribing WitnessThe witness to the execution of an instrument who has written his name as proof of seeing such execution.
SuretyOne who at the request of another, and for the purpose of securing to him a benefit, voluntarily binds himself to be obligated for the debt or obligation of another. Although the term includes guarantor and the terms are commonly, though mistakenly, used interchangeably, surety differs from guarantor in a variety of respects.
Surface RightsA right or easement granted with mineral rights, enabling the possessor of the mineral rights to drill or mine through the surface.
SurrenderThe cancellation of a lease by mutual consent of the tenant and the landlord.
SurveyThe process by which a parcel of land is measured and its boundaries and contents ascertained. The survey drawing or map shows the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
Sweat EquityContribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
Taking
A common synonym for condemnation or any actual or material interference with private property rights but it is not essential that there be physical seizure or appropriation.
Tax BaseThe assessed valuation of all the real property that lies within the jurisdiction of a taxing authority, which is then multiplied by the tax rate or mill levy to determine the amount of tax due.
Tax LienA statutory lien, existing in favor of the state or municipality, for nonpayment of property taxes which attaches only to the property upon which the taxes are unpaid.
Tax RollA list or record containing the descriptions of all land parcels located within the county, the names of the owners or those receiving the tax bill, assessed values and tax amounts.
Tenancy at WillA license to occupy or use lands and buildings at the will of the landlord.
Tenancy by the EntiretyAn estate which exists only between husband and wife. Each has equal right of enjoyment and possession during their joint lives, and each has the right of survivorship.
Tenancy in CommonOwnership of property by two or more individuals, each of whom has an undivided interest, without the right of survivorship.
Tenant (Lessee)One who rents real estate from another and holds an estate by virtue of a lease.
Tenant At WillOne who holds possession of premises by permission of the owner or landlord, the characteristics of which are an uncertain duration (i.e. without a fixed term) and the right of either party to terminate on proper notice.
Tenant Improvement (TI) Allowance or Work LetterDefines the fixed amount of money contributed by the landlord toward tenant improvements. The tenant pays any of the costs that exceed this amount. Also commonly referred to as "Tenant Finish Allowance.
Tenant ImprovementsImprovements made to the leased premises by or for a tenant. Generally, especially in new space, part of the negotiations will include in some detail the improvements to be made in the leased premises by the landlord. See also “Leasehold Improvements”, “Workletter”.
Tenants at SufferanceAn individual who comes to possess land via lawful title and keeps it in perpetuity without any title.
Tie-in ArrangementA contract where one transaction depends upon another transaction.
TitleThe means whereby the owner of lands has the just and full possession of real property.
Title CompanyA company that specializes in examining and insuring titles to real estate.
Title InsuranceA policy issued by a title company after searching the title and which insures against loss resulting from defects of title to a specifically described parcel of real property, or from the enforcement of liens existing against it at the time the title policy is issued.
Title SearchA review of all recorded documents affecting a specific piece of property to determine the present condition of title.
TortA wrongful act or violation of a legal right for which a civil action will lie.
Total InventoryThe total amount of square footage of a type of property (i.e. office, industrial, retail, etc.) within a geographical area, whether vacant or occupied. This normally includes owner-occupied space.
Trade FixturesPersonal property that is attached to a structure (i.e. the walls of the leased premises) that are used in the business. Since this property is part of the business and not deemed to be part of the real estate, it is typically removable upon lease termination.
Transfer of OwnershipAny means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.
Transfer TaxState or local tax payable when title passes from one owner to another.
Treasury IndexAn index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
Triple Net (NNN) RentA lease in which the tenant pays, in addition to rent, certain costs associated with a leased property, which may include property taxes, insurance premiums, repairs, utilities, and maintenances. There are also “Net Leases" and “NN” (double net) leases, depending upon the degree to which the tenant is responsible for operating costs. See also “Gross Lease”.
TrusteeA fiduciary who holds or controls property for the benefit of another.
Truth-in-Lending ActA federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
Turn Key ProjectThe construction of a project in which a third party, usually a developer or general contractor, is responsible for the total completion of a building (including construction and interior design) or, the construction of tenant improvements to the customized requirements and specifications of a future owner or tenant.
Two-Step MortgageAn adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
Under Construction
When construction has started but the Certificate of Occupancy has not yet been issued.
Under ContractA property for which the seller has accepted the buyer’s offer to purchase is referred to as being “under contract”. Generally, the prospective buyer is given a certain period of time in which to perform its due diligence and finalize financing arrangements. During the period of time the property is under contract, the seller is precluded from entertaining offers from other buyers.
UnencumberedDescribes title to property that is free of liens and any other encumbrances. Free and clear. See also "Encumbrances."
Unenforceable ContractA contract that has all the elements of a valid contract, yet neither party can sue the other to force performance of it. For example, an unsigned contract is generally unenforceable.
Unilateral ContractA one-sided contract wherein one party makes a promise so as to induce a second party to do something. The second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise.
Unimproved LandMost commonly refers to land without improvements or buildings but can also mean land in its natural state. See also, “Raw Land”.
Urban PropertyProperty in a city or a high-density area.
Usable Square FootageUsable Square Footage is the area contained within the demising walls of the tenant space. Total Usable Square Footage equals the Net Square Footage x the Circulation Factor. See also, "Circulation Factor and Net Square Footage".
UseThe specific purpose for which a parcel of land or a building is intended to be used or for which it has been designed or arranged.
UsuryCharging interest at a higher rate than the maximum rate established by state law.
VA Mortgage
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
Vacancy FactorThe amount of gross revenue that pro forma income statements anticipate will be lost because of vacancies, often expressed as a percentage of the total rentable square footage available in a building or project.
Vacancy RateThe total amount of available space compared to the total inventory of space and expressed as a percentage. This is calculated by multiplying the vacant space times 100 and then dividing it by the total inventory.
Vacant SpaceRefers to existing tenant space currently being marketed for lease. This excludes space available for sublease.
ValidA binding situation that is authorized and enforceable by law.
ValuationEstimated price, value, or worth. Also, the act of identifying a property's worth via an appraisal.
VarianceRefers to permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship. Included would be such things as the particular physical surroundings, shape or topographical condition of the property and when compliance would result in a practical difficulty and would deprive the owner of the reasonable use of the property.
VestedHaving the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.
Veterans Administration (VA)An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.
ViolationAct, condition, or deed that violates the permissible use of property.
VoidSomething that is unenforceable.
VoidableA situation which is capable of being unenforceable but is not so unless direct action is taken.
Waiver
The intentional relinquishment or abandonment of a specific claim, privilege, or right.
Warranty of PossessionThis is the old "quiet enjoyment" paragraph, which of course had nothing to do with noise in and around the leased premises. It provides a warranty by Landlord that it has the legal ability to convey the possession of the premises to Tenant; the Landlord does not warrant thathe owns the land. This is the essence of the landlord’s agreement and the tenant’s obligation to pay rent. This means that if the landlord breaches this warranty, it constitutes an actual or constructive eviction.
Weighted Average Rental RatesThe mean proportion or medial sum made out of the unequal rental rates in two or more buildings within a market area.
Working DrawingsThe set of plans for a building or project that comprise the contract documents that indicate the precise manner in which a project is to be built. This set of plans includes a set of specifications for the building or project.
WorkletterA list of the building standard items that the landlord will contribute as part of the tenant improvements. Examples of the building standard items typically identified include: style and type of doors, lineal feet of partitions, type and quantity of lights, quality of floor coverings, number of telephone and electrical outlets, etc. The Workletter often carries a dollar value but is contrasted with a fixed dollar tenant improvement allowance that can be used at the tenant’s discretion. See also Leasehold Improvements and "Tenant Improvements.
Zone
An area, delineated by a governmental authority, which is authorized for and limited to specific uses.
ZoningThe division of a city or town into zones and the application of regulations having to do with the structural, architectural design and intended use of buildings within such designated zone (i.e. a tenant needing manufacturing space would look for a building located within an area zoned for manufacturing).
Zoning OrdinanceRefers to the set of laws and regulations, generally, at the city or county level, controlling the use of land and construction of improvements in a given area or zone.
