Abatement: A reduction or decrease. Usually applies to the forgiveness of rent or a decrease of assessed valuation of ad valorem taxes after the assessment and levy. For example, a landlord might give a new tenant several months of free rent. The exact number of free months might be added to the total term of the lease. In that instance, three months free rent would extend a 60-month lease term to 63 months.

Above Building Standard: Specialized design and engineering services and all construction necessary (including carpet, paint, flooring, lighting, etc.) to personalize tenant space. Over and above the basic levels offered to tenants.

Acre: A measure, usually of land, equal to 160 square rods (43,560 square feet) in any shape.

Amenities: On-site management, covered parking, deli, health-club facilities, conference rooms and other enticements offered by building owners.

Americans with Disabilities Act (ADA): A law passed in 1990 that out laws discrimination against a person with a disability in housing, public accommodations, employment, government services, transportation and telecommunications.

Annual Percentage Rent: Used in retail leases, a percentage of tenant's sales over a predetermined sales threshold paid to the landlord as additional rent.

Appraisal: An opinion of the value of a property at a given point in time, given by an expert.

Asbestos: A fire-resistant mineral used for insulation and home products that have been found to pose a health hazard.

"As Is" Condition: Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.

Assignment: An agreement conveying the leasehold interest, including all financial responsibilities, from one tenant to another.

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

Base Year: The intent of the base year is that tenants pay for the inflationary increases in operating expenses, common area maintenance (CAM) and real estate taxes, in excess of such expenses incurred in the base year. For example, an original lease was for a period of five years, commencing in 2001, with 2001as base year. Any increases in operating expenses, CAM and taxes in the subsequent five years will be paid by the tenant. The time to pay attention is when the rental rate is negotiated at the renewal of the lease. For a renewal in 2006 the tenant should insist on an adjustment in the base year to 2006. Here’s why: Without this change in the base year, the tenant would pay significantly more than just the increases over the renewal term, because he would be paying increases over 2001 expenses, not over 2006 expenses. (It is assumed that expenses are going up each year.) This is very important when negotiating a new lease or lease renewal.

Base Year/Stop Amount/CAP: A lease may provide for a base year, such as year 2002, or a stop amount on operating expenses, CAM and taxes. The stop amount serves as a baseline, meaning that tenants pay for anything in excess of that amount. For example, if the stop amount is $14 per square foot, any expense over $14 in subsequent years is borne by the tenant. However, the tenant or the tenant representative should inquire as to prior year expenses, so as not to set the stop amount lower than expenses in the previous year. The tenant also may negotiate a maximum increase, also known as a cap. That can be stated as a maximum percentage increase or a dollar amount per square foot. And instead of determining increases only with a stop amount or a base year amount, the tenant could combine the two. In such a case, the tenant would be obligated to pay for expenses in excess of the higher of the two, stop or base year.

Building Classifications: Class "A" buildings have excellent location and access to attract the highest quality tenants. Buildings must be of superior construction and finish, relatively new or competitive with new buildings, and providing professional on-site management. Class "B" buildings have a good location, management, and construction land tenancy. Can complete at low end of Class "A". Class "C" buildings generally is an older buildings with growing functional land/or economic obsolescence. Class "D" buildings is an older building in need of extensive renovation as a result of functional obsolescence or deterioration.

Building Standard: A list of construction materials and finishes used in building out office space for a tenant that the landlord contributes as part of the tenant improvements. Examples of standard building items are: doors, partitions, lights, floor covering, telephone outlets, ceiling tiles, paint, etc. May also specify the quantity and quality of the materials to be used and often carries a dollar value.

Build-out: The cost of configuring and finishing new or relet space in accordance with a tenant’s specifications.

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

Buyout: Payoff of a large tenant's existing lease. Building owners may enable the tenant to sign a lease in that owner's building.

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C.A.M.: Common Area Maintenance

Cap: A maximum amount that a tenant must pay for certain operating expenses of a property, no matter how much they actually increase; usually a set amount or a percentage of increase.

Capital Costs: Amount spent on building improvements.

Capitalization or Cap Rate: Used by investors to determine the economic value of an investment by dividing the rate into the net operating income. A percentage rate composed of return on investment, risk factors and rate of recapture.

Cancellation or Termination Clause: A passage in a lease that gives either the tenant or the landlord, depending on the circumstances, the right to terminate lease. For the tenant, there may be financial penalties if right is exercised.

Cash Flow: The net proceeds of an investment after all operation expenses and debt service have been paid.

Certificate of Occupancy: A certificate issued by a local government building department or agency stating that a building is in a condition suitable for occupancy. Sometimes also called a "C of O" or a Non-Residential Use and Occupancy Permit (NON RUP).

Closing: (1) In real estate sales, the final procedure in which documents are executed and/or recorded, money is paid and the sale (or loan) is completed. (2) A selling term meaning the point at which the client or customer is asked to agree to the sale or purchase and sign the contract. (3) The final call in a metes and bounds legal description which "closes" the boundaries of the property.

Closing Costs: Expenses incidental to a sale of real estate, such as loan fees, title fees, survey, commissions, etc.

Commission: An amount, usually a percentage, paid to an agent (real estate broker) as compensation for his or her services. The amount paid to a real estate broker is generally a percentage of the sales price or total rental.

Common Area: The total area within the shopping center that is not designed for rental to tenants but is available for common use by all tenants or groups of tenants, their invitees, and adjacent stores. Parking and its appurtenances, malls, sidewalks, landscaped areas, public toilets, truck and service facilities, and the like are included in the common area.

Common Area Charges: Include income collected from tenants for operating and maintaining items pertaining to common areas. Shopping center leases usually contain a clause requiring the tenant to pay its share of operation and maintenance on common areas and defining the basis on which charges are made and the type of cost items allocable to maintenance of the common area. Of the ways to prorate the charges among tenants, the most common are (1) a prorated charge based on a tenant’s leased area as a portion of the total leasable area of the center or the linear exposure in store frontage, (2) a fixed charge for a stated period, and (3) a variable charge based on a percentage of sales. Some centers include a cost-of-living increase in the common area charges.

Common Area Factor: Percentage of the total building allocated to areas shared by all the tenants. May include hallways, restrooms, telephone/network closets, main lobby, elevators, etc. This percentage is added to the useable square footage rented to the tenant. For example, if a tenant rents office space totaling 1,000 square feet, and the building common area factor is 15%, the tenant’s rentable area would be 1,150 square feet.

Construction Cost: The cost of tenant improvements, including contractor, management, engineering, design, and architectural fees.

Consumer Price Index (CPI): An index of the increase or decrease in the cost of living over a given period of time, published by the government. Used in leases as an objective method for calculating rental rate increases.

Contiguous Space: Adjoining office space.

Continuous Operations: The contingency clause is contrasted with the clause relating to continuous operations. Shopping center landlords require this clause, which is different and separate from the clause relating to hours of operation for the center. Under a "continuous operations clause", the tenant may not discontinue its business. Leases also are specific as to the type of product lines, such as fresh meat in a grocery store or first-run movies in a movie theater. The opposite of the continuous operations clause is that the tenant has the right to "go dark". The tenant continues to be obligated to pay rent, but it may cease operations. This would impact the activities of other tenants in the center. National retailers are causing landlords to be more vulnerable, with the increase of bankruptcies. The courts may void the bankrupt tenant’s obligation for continuous operations, and for any or all lease obligations.

Contingency: Contingency is an example of a type of clause that creates value for the tenant by protecting the tenant from uncertainties. The nonanchor tenant is concerned that if the anchor tenant in the shopping center closes, it will impact the sales of the nonanchor tenant in the center, due to the lack of traffic to the anchor tenant. The nonanchor tenant wants assurance that the anchor tenant will continue to operate. If the anchor tenant ceases to operate, the contingency clause gives a right to the tenant, after a stipulated period of time, to reduce the rental payments or to terminate the lease. To prevent the nonanchor tenant exercising their rights of contingency and protect against this vulnerability, the lease may provide that the landlord has the right to re-lease the anchor tenant’s premises to a comparable tenant.

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Debt Service: The payment of a loan including interest, principal and any other charges.

Demised Premises: The actual space a tenant is renting within partition boundaries that separate the tenant's space from other tenant's spaces and any common areas of a commercial property such as corridors, restrooms, lobbies, etc.

Demographics: Vital statistics of the market area; that may include average income, age, number of children, males or females, cost of homes, race, education and income.

Due Diligence: Research activities carried out by a prospective purchaser of real property to confirm that the property is as represented by the seller and is not subject to structural, zoning, environmental or other problems.

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Easement: Non-possessory interest that permits limited use of someone else's land. Conveys only a right to use the land. Examples are railroads, community greenbelts, walkways, gas and oil lines underground and overhead.

Effective Date: The latest date appearing on the signature page of the lease and the date upon which the lease contract becomes binding even though the commencement date may be months away. In a contract of sale, usually the date on which all contract time periods commence.

Equity: Initially the term "equity" refers to the amount of assets, normally cash, that the owner personally contributes toward the purchase and/or development of land and improvements. Thereafter, the term equity refers to the market value of the property less the amount of all debt secured by the property.

Escalation Clause: A clause in a lease providing for increased rent at a future time. May be accomplished by several means such as (1) Fixed increase- A provision that calls for a definite, periodic rental increase; (2) Cost of living- A clause that ties the rent to a government cost of living index, with periodic adjustments as the index changes; or (3) Direct expense- Rent adjustments based on changes in expenses paid by the landlord, such as tax increases, increased maintenance costs, etc.

Escrow: A neutral third party that "holds" money, documents or instructions between two parties who are in the process of closing a transaction. Transactions can take one day to many months to complete.

Estoppel Certificate: A statement concerning the status of an agreement and the performance of obligations under the agreement 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).

Exclusive Letter of Representation: A letter written by a tenant to a landlord that gives a real estate broker the exclusive right to represent to tenant's interest in any new lease agreement or renewal.

Exclusive Listing: A 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 sold or leased during a stated period. No other broker may have a listing on the property during the term of the agreement; however, the broker may share the commission or fee with another broker representing a buyer or tenant.

Expansion Option: A right conveyed by a landlord to a tenant for the opportunity to lease and occupy additional space should space become available.

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

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Face Rate: The rental rate to be charged before the application of any concessions.

Fair Market Value: A term usually found in appraisals that attempts to determine the cash price that would likely be negotiated between a willing seller and willing buyer in a reasonable amount of time. For a sale to be considered a reflection of "Fair Market Value," it must meet all the conditions of a fair sale whereby: (1) both buyer and seller act prudently, knowledgeably and under no necessity to buy or sell, i.e., other than in a forced or liquidation sale; (2) the property must be offered on the open market for a reasonable amount of time, taking into consideration the property type and local market; and (3) payment is made in cash or terms equivalent to cash. When a sale is unlikely, i.e., when it is unlikely to be completed within 12 months, the appraiser must discount all cash flows generated by the property to ascertain the estimate of Fair Value.

First Refusal Right: A clause occasionally inserted in a lease that gives a tenant the first opportunity to buy a property if the owner decides to sell. The owner must have a legitimate offer, which the tenant can match, or refuse. Also called "Right of First Refusal". May also be a clause giving the tenant first opportunity to lease additional and/ or contiguous space in the building or property when the landlord has received a legitimate offer for the space.

Flex Space: One or two-story buildings with little or no common areas, high ceilings, load-bearing floors and loading dock facilities. Usually configured to allow a small amount of office space in combination with light assembly or warehouse/distribution uses.

Floodplain: Land adjoining a river that would flood if the river overflowed its banks.

Floor Plate: A term used to describe the size of a floor of an office building.

Force Majeure: Any uncontrollable act that delays tenant's or landlord's obligations under the lease (cannot be due to lack of funds). usually includes labor strikes, weather, earthquakes or other natural disasters.

Foreclosure: A legal process that may be exercised by a lender to gain lawful possession of a property in case of default by the debtor/owner.

Full Service Rent: A rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increases in operating expenses over the base year amount.

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Garden Office : Generally a two story building with surface parking.

Gross Building Area: The total floor area in an office building measured in square feet or square meters that is associated with that building’s use as office building. The area extends to the outer surface of exterior walls and windows and includes office, retail and other rentable areas such as vending machine space and storage areas, but excludes parking and roof space.

Gross Lease: Typically an industrial lease that provides that the landlord shall pay all expenses of the leased property, such as taxes, insurance, maintenance. It may or may not include utilities.

Gross Up: An adjustment made to operating expenses to account for the occupancy level in a building. When operating expenses are "grossed up," the building's variable expenses have been increased to the level that those expenses would be if the building was fully occupied (typically 95%). Prevents a tenant from paying for the occupancy costs of vacant space.

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Hard Costs: The brick-and-mortar elements of a project such as the land, the building and building improvements. Does not include architectural drawings, fees, etc.

High Rise: A building higher than 25 stories above ground level.

Hold Harmless: A legal term used when one party agrees to relieve another party of responsibility for damage or liability.

Hold Over Tenant: A tenant who retains possession after the expiration of a lease. The landlord may charge the tenant a penalty rent such as 150% to 200% of the original rental rent as an inducement for the tenant to sign a new lease or move out.

HVAC: The acronym for Heating Ventilating and Air-Conditioning. Refers to the equipment used to heat and cool a building.

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Inventory: When referring to a market of office or industrial space, the total amount of rentable square feet of existing and delivered space in a given category, for example, prime office space. Inventory refers to all space within a certain proscribed market without regard to its availability or condition, and can include both office and flex and warehouse space.

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Lease: An agreement whereby the owner of real property (i.e., landlord) gives the right of possession to another (i.e., tenant) for a specified period of time (i.e., term) and for a specified consideration (i.e., rent).

Lease Commencement Date: The date on which beneficial occupancy commences and the legal terms of the lease go into effect.

Legal Description: A method of geographically identifying a parcel of land that is acceptable in a court of law.

Lessee: The party (tenant) to whom a lease (the right of possession) is given in return for a consideration (rent).

Lessor: The party (usually the owner and/or landlord) who gives the lease (right to possession) in return for a consideration (rent).

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

Letter of Intent: A formal method through which a prospective developer, buyer or tenant expresses his/her interest in property by outlining the basic business terms of a proposed transaction. Depending on the language, a legal obligation may be created.

Listing Agreement: An agreement between a real estate broker and the property owner which authorizes the broker to assist in the sale or lease of that property in return for a fee, commission or other form of compensation.

Long Term Lease: A lease whose term exceeds 10 years from initial signing until the date of expiration or renewal option.

Lot: A parcel of land, generally part of a series of parcels which make up a subdivision, the boundaries of which are created by and shown on a "plat".

Low Rise: A building with fewer than seven stories above ground level.

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Market Price: The price a property brings in a given market. Commonly used interchangeably with market value, although not truly the same.

Market Rent: The rental income that a property would probably command on the open market; indicated by current rents paid and asked for comparable space as of the date of the appraisal.

Market Value: The probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and acting in what they consider their own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financial or sales concessions granted by anyone associated with the sale.

Master Lease: A primary lease that controls subsequent leases and which may cover more property than subsequent leases.

Mid-Rise: A building with between seven and 25 stories above ground level.

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Net Lease: A lease in which the tenant pays, in addition to rent, certain costs associated with a leased property, including property taxes, insurance premiums, repairs, utilities, and maintenance. There are also "net-net" (double net) and "net-net-net" (triple net) leases, depending upon the degree to which the tenant is responsible for operating costs.

Net Rentable Area: Floor area of a building less any vertical penetrations of the floors. No deductions are made for necessary columns and projections of the building. (BOMA Standard)

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Open Space: The total area of land and/or water not improved by a building, structure, street, road or parking area, or containing only such improvements as are complementary, necessary or appropriate to the use and enjoyment of the open area.

Operating Expenses: The actual cost of operating income-producing property, including utilities and similar day-to-day expenses, taxes, insurance and reserves for the replacement of items that wear out.

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Parking Ratio: The relationship of space used for parking to land area covered by buildings or space within the buildings. This relationship can be expressed in the number of car spaces per 1,000 square feet of rentable area. For example, a landlord may grant a tenant 3 parking spaces for a 1,000 square foot lease based on a ratio of 1 parking space for every 333 square feet leased.

Pass Through: Building and operating expenses that are paid by the tenant under the terms of a lease.

Plat (Plat Map): A map dividing a parcel of land into lots, as in a subdivision.

Plus Electricity: A rental rate quoted as "plus electricity" includes taxes, insurance, common area maintenance, water and janitorial but excludes electricity. Electricity is an additional expense paid by the tenant. Landlords may quote a base year for those expenses which are included in the rental rate.

Punch List: An itemized list noting incomplete or unsatisfactory construction. Usually prepared by the tenant's architect after the contractor has notified the owner that the tenant space is substantially complete.

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Quiet Enjoyment: The right to occupy space under lease by a tenant, so long as the tenant is not in default of the lease agreement. It has nothing to do with the loud noises made by other tenants or landlords employees. Likewise a Non Disturbance Clause has nothing to do with noise. It gives the right to maintain their lease if a lender takes over the property.

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Real Estate Broker: One who is licensed by the state to carry on the business of dealing in real estate. A broker may receive a commission for his or her part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange.

Real Estate License: A state license granted to one as a broker or salesperson, after passing an examination. In Texas there are educational requirements before the brokers’ examination may be taken.

Relocation Clause: A lease clause that gives a landlord the right to move the tenant to another location within the building or shopping center.

Renewal Option: The right of a tenant to renew (i.e., extend the term of) a lease for a stated period of time and rent at an amount that can be determined.

Rent: Consideration paid for the occupancy and use of real property. A general term covering any consideration (not only money).

Rent Commencement Date: The date on which a tenant begins paying rent. Depending upon the nature of the marketplace, it may coincide with the lease commencement date or it may be several months after. It will never begin before the lease commencement date.

Rentable Square Feet: Usable square feet plus a percentage (the common area factor) of the common areas on the floor, including hallways, restrooms and telephone closets. (And sometimes main lobbies.) Rentable square footage is the number of square feet on which a tenant’s rent is based.

Rentable/Usable Ratio: The number resulting from dividing the Total Rentable Area in a building by the Usable Area. The inverse of this ratio describes the proportion of space that an occupant can expect to utilize.

Request for Proposal: A solicitation by a tenant to a prospective landlord detailing the specific terms, financial parameters and other factors by which a tenant would consider a tenancy in a property.

Right of First Offer: A right given to a tenant or potential buyer by an owner to exercise the first opportunity to lease space or buy the property, if offered as available.

Right of First Refusal: A right given to a tenant or prospective buyer by an owner to exercise the first opportunity to match an offer to lease space or buy the property, if an offer is make by another interested party.

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Security Deposit: Generally, a deposit of money by a tenant with a landlord to secure performance of a lease. The security deposit may be equivalent to one or two months rent. It is typically paid, along with the first month’s rent, when the lease is fully executed by the tenant and landlord.

Site Plan: A detailed plan, to scale, depicting development of a parcel of land and containing all information required by the zoning ordinance.

Space Plan or Layout: A graphic depiction made by an Interior Designer or Space Planner of a tenant's interior space requirements or representation of the configuration of a specific demised space. Includes the location of walls and doors, the size of rooms, proposed furniture layouts and estimate of the total square footage size of the space. Landlord's may provide space plans to tenants free of charge as inducements to leasing space in their property.

Space Planner: An architect or interior designer that prepares the layout of interior spaces for a tenant. they will often also provide the interior design and the preparation of the construction drawings.

Step-up Rent: Leases provide different methods of calculating increases in rent. In a lease with a step-up rent clause, the yearly increases in rent will be stipulated ahead of time, and incorporated into the lease from the beginning. For example, in the initial year, if market rate is $16 per square foot, a step-up clause might still establish that the tenant will pay $14 the first year, but in later years will pay more to offset the lower rate in the first year (for example, $14, $15, $16, $17, $18). In such a case, the advantage for a tenant is getting a break the first year. However, later increases are fixed and non-negotiable.

Sublease: A lease, under which the lessor is the lessee of a prior lease of the same property. The sublease may be different in terms from the original lease but cannot contain a longer term. Example: A leases to B for five years. B may sublease to C for three years, but not for six years.

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Tenant: (1) A holder of property under a lease. (2) Originally, one who had the right to possession, irrespective of the title interest.

Tenant Allowance: An incentive sometimes provided by the landlord to induce a tenant to lease. Could include free rent paid moving costs or other concessions.

Tenant Improvements (TI or Finish-out or Leasehold Improvements): Improvements to demised premises to meet the needs of tenants. May be new improvements or remodeling, and may be paid for by the landlord, the tenant, or shared. May include drop ceilings, lights, doors, paint, carpeting, etc.

Title: The means whereby one has just and full possession of real property.

Title Company: A company acting as agent for a Title Insurance Company.

Title Insurance: Title insurance is not a traditional form of insurance - it is as much a process as it is a product. A title insurance policy is the end result of a partnership between purchasers and sellers during which title defects that have developed over time are discovered and cured. The title company investigates the condition of the title to the property and advises all parties on the necessary steps make sure the title is clear. Once the process is complete, a title insurance policy is issued insuring that the purchasers get the property they expect. It is the process that makes title insurance an essential part of the real estate transaction. A title insurance product insures that, at every step in the chain of title, an examination and cure will take place, thereby assuring that title continues to be clear as it passes from one person to another. The process and insurance enable buyers and sellers who are strangers to each other to knowledgeably proceed with a transaction.

Title Insurance Company: A company which issues insurance regarding title to real property.

Total Inventory: Total square footage of rentable office or industrial space, vacant and occupied, ready for tenant finish. Includes owner-occupied space.

Tract: A parcel of land. In some states, synonymous with a subdivision.

Triple Net (NNN) Rent: Rent stipulated in a lease in which the tenant agrees to pay 100 percent of the landlord’s real estate taxes, insurance and maintanence for the building proportionate to the amount of space it occupies.

Turn-key Construction: Landlord is responsible for the total completion and cost of all tenant's construction based on tenant's specifications.

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Under Contract: A property for which a purchase offer that has been accepted by the seller is said to be “under contract”. Generally, the prospective buyer is given a certain period of time in which to perform feasibility studies and finalize financing arrangements. During the time, the seller cannot entertain offers from other buyers unless the purchase contract is allowed to expire without going to closing.

Unencumbered: Describes title to property that is free of liens and any other encumbrances. Free and clear.

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Vacant Space: Existing space, which is currently being marketed for sale or lease, excluding sublet space.

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Warranty: A legal, binding promise made at the time of a sale whereby the seller gives the buyer certain assurances as to the condition of the property.

Workletter: Usually an Exhibit in a commercial lease specifies the construction work that will be done to a tenant's demised premises. It provides the timetable for approvals and decisions regarding design and construction, who is responsible for the completion of the construction, and how the construction costs are allocated between the tenant and landlord.

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Zoning: A method of regulating use of real estate by dividing a city or other area into zones and designating which uses may be permitted for land in each zone.

Zoning Map: A map of a community showing the zones of permitted use under zoning ordinances.

Zoning Ordinance: The set of laws and regulations, generally at the city or county level, that control the use of land and construction of improvements in a given area or zone.