Glossary of Commercial Real Estate Terms

Anchor Tenant
The anchor tenant is the major or prime tenant in a shopping center, building or neighborhood.

“As-Is” Condition
This condition is an acceptance by the tenant of the existing condition of the premises at the time the lease is consummated. This would include any physical defects.

Assessment
An assessment is a fee imposed on property, usually to pay for public improvements such as street improvements or sewers.

Automatic Renewal
An automatic renewal means that the lease continues indefinitely on the agreed upon period (weekly, monthly, yearly) until either tenant or landlord gives notice to other party they will be terminating the lease.

Build Out
A build out refers to an improvement(s) to a property per tenant specifics.

CAM
Common Area Maintenance is money paid for maintenance of shared spaces such as parking lots or lobbies.

Certificate of Occupancy
A 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.

Concessions
Cash 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.

Encumbrance
Any 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).

Estoppel Certificate
A 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).

Full Service Rent
The rent includes all operating expenses and taxes for the 1st year.

“Go Dark” clause
This clause states that when a tenant closes a business when the lease is still in effort, the landlord can void the lease.

Graduated Lease
For a graduated lease, the amount of rent in future varies. Factors can be: appraisal, gross income etc.

Gross Lease
For a gross lease, the landlord pays all owning and operating expenses. Examples: water bill or maintenance costs etc.

HVAC
Heating, Ventilation and Air-Conditioning

Index Lease
The amount of rent paid shifts with a price index such as the CPI (consumer price index)

Landlord
The landlord is also known as the lessor and is the owner of property

Landlord’s Lien (Warrant)
A landlord lien can be put in the lease. This is a warrant from the landlord for the ability to levy upon tenants personal property and to sell at them public sale to complete payment of rent.

Landlord Paid Improvements
Landlord pays for improvements to the property

Lease
A lease creates a relationship between a tenant and landlord. It is a contractually binding agreement grants a right to exclusive possession or use of property in return for a periodic payment

Legal Description
The legal description of the premise refers to how the property is identified in real estate legal transactions.

Letter of Intent (LOI)
A preliminary agreement stating proposed terms for final contract. It can be binding.

Lien
A legal claim filed against a property for payment of a debt or obligation.

Limited Partnership (LL)
This is a partnership in which one partner manages and is liable. The other partner contributes capital and profits but is not involved in day to day management is not liable.

Long Term Lease
A long term lease is at least 3 years.

Master Lease
This is a primary lease that controls subsequent leases. Example: a lease for an executive suite for which the offices are rented out.

Net Lease
In this type of lease the rent is a fixed amount plus operating expenses such as, insurance premiums, or maintenance costs.

NN or NNN (double or triple net) Lease
For the net lease, a tenant is responsible for operating costs in addition to rent. Double or triple refers to the degree to which the tenant is responsible. Triple net general refers to the requirement for the lessee to pay for its share of the property’s’ taxes, insurances and operation costs.

Party
The parties to a lease are the lessor (landlord) and the lessee (tenant). The lessor owns the property and allows the lessee to use the property in exchange for monetary payments called rent.

Percentage Lease
The amount of rent paid is a percentage gross of sales

Permitted Use Clause
This clause in the lease limits the tenant to engage in certain types of business only. Before allowing the tenant to use property for additional purposes not stated in the lease, the tenant needs to obtain the consent of the landlord.

Premise
The premise, the space to be leased, should be clearly defined/described in the lease. For example is it the entire building, is there parking included etc.

REO (renewal option)
Lease language that provides the means for tenant to give a landlord notice of intent to renew or extend the lease.

Rent concession
This is period of free rent given to tenant by the landlord.

Security Deposit
This is a sum of money the tenant pays to the landlord to guarantee that the tenant will fulfill all obligation under the lease. The landlord holds the deposit for the term of the lease to ensure that the tenant does not default on the terms of the lease or otherwise damage the property. At the end of the lease term, the tenant will receive the deposit back minus any deductions for repairs/restoration.

Shell
Shell is a description of a space, meaning without improvements or finishes.

Straight Lease (Flat lease)
The amount of rent is fixed.

Sublease
This is a lease in which the original tenant sublets all or part of the leasehold interest to another tenant while still retaining a leasehold interest in the property.

Step up Lease
Rent is increased by a preset rate or set amount at predetermined intervals.

Tenant
Aka Lessee.

Tenant at Will
The tenant has a right of possession for an uncertain duration. Either tenant or landlord may terminate the contract at any time.

Tenant Paid Improvement
Tenant pays the costs of improvements on the property.

Tenant Improvement Allowances
This allowance is a fixed amount of money contributed by the landlord towards tenant improvements that pays for rent.

Term
The term clause appears in the beginning of a lease. It states the beginning and end date.

Trade Fixtures
Certain fixtures installed at the premises which are unique to the tenant’s business, and which may generally be removed by tenant at the end of the term of the lease

Turn Key
A turn key property is completely ready for a tenant’s immediate use.

Variance
A variance is a government authorization to use or develop a property in a manner which is not permitted by the applicable zoning regulations.

Zoning
The designation of specific areas by local planning authority within a given jurisdiction for the purpose of legally defining land use or land use categories, such as residential or commercial.