Glossary - A-B, C-E, F-K, L-O, P-R, S-U, V-Z

1031 exchange
Related to payment of taxes on the sale of commercial property. Allows the Seller to defer payment of certain taxes if they buy another property(s) within a specified time frame. A reverse exchange is less common, but is possible. Because of the implications, good tax and legal counsel is always recommended. "

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 Standard
Upgraded finishes and specialized designs necessary to accommodate a tenant’s requirements.

Absorption Rate
The net change in space available for lease between two dates, typically expressed as a percentage of the total square footage.

Absorption
The 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"".

Ad Valorem
According 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 Factor
Often 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.

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

After hours services
Many larger buildings will charge a tenant for electricity usage if they occupy their space beyond normal business hours. Normal hours are usually 7 to 7 during the week, plus 8 to 12 on Saturdays. If you plan on working in your space 24 X 7, then this could be expensive. Anywhere from $6 to $40 per hour for each hour beyond the normal. If you are a typical tenant, this could be good, because it allocates the expense to the real user of the electricity and you don't end up paying for the work-aholics electric overload.

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

Allowance Over Building Shell
Most 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.

ALTA Survey
This is a document prepared under the direct supervision of a licensed Land Surveyor. This is dictated not only by the Arizona State Code as directed by the Board of Technical Registration, but is also a requirement of the current 1999 ALTA/ACSM Standards for Land Title Surveys. ALTA surveys are required anytime that ""extended coverage"" is requested from the title company. An ALTA survey is a boundary survey, but will also locate all observable improvements on the property and locate, where possible, all encumbrances of record (easements, setbacks, flood zones). ALTA surveys are performed to a higher standard than a typical boundary survey. Property corners may or may not be set, as requested in the optional Table A. In Arizona, if property corners are set, a Record of Survey must also be prepared and recorded with the County Clerk's office by a certified Civil Engineer that details where all the easements, right-of-ways, and property lines are. It is usually required by a Title Company to confirm the accuracy of the title policy they are issuing in a purchase. Within an ALTA Survey, there are various items that may be required. Ask about the Table A requirements. ALTA stands for American Land Title Association, a coordinating body.

American with Disabilities Act (ADA)
Federal regulations intended to equalize access for people with disabilities in buildings. New buildings must comply in order to obtain their building permits. Lease spaces being substantially remodeled need to comply in order to obtain permits. Older buildings not being remodeled have not normally been required to change. Changes can include wider restroom stalls, ramps, handrails.

Amortizing payment
Refers to spreading the payment out over the life of the lease or other time frame. An example might be a Landlord who spreads out the cost of tenant improvements over three years and adds the amount to your monthly rent. The Landlord pays for the work up-front, but is being reimbursed over lease term.

Anchor Tenant
The 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.

Appraisal
An estimate of opinion and value based upon a factual analysis of a property by a qualified professional.

Appreciation
The increased value of an asset.

"As-Is" Condition
The 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
A fee imposed on property, usually to pay for public improvements such as water, sewers, streets, improvement districts, etc.

Assignee
Individual to whom a contract is assigned.

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

Assignments
The transfer of the obligations and rights of the lease or purchase contract to another party. This is often used in an offer letter, so that a Buyer would have the time to establish its final form of ownership, such as an LLC. An assignment does not necessarily relieve the assigning party of its obligation or liabilities. Confer with legal counsel.

Assignor
An individual who transfers a contract to another individual.

Attorn
To 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.

Attornment Provisions
Lease provision in which the tenant agrees, in advance, to accept or pay rent to a new landlord or new owner. This is important if the current landlord defaults on their mortgage.

Balloon Payment
A 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"".

Bankrupt
The condition or state of a person (individual, partnership, corporation, etc.) who is unable to repay it's debts as they are, or become, due.

Bankruptcy
Proceedings 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 Rent
Amount of money paid to the Landlord, usually qouted on an annual basis per foot or monthly amount. It typically does not include rental tax, but may include all other charges for expenses related to the building operation (electricity, water, insurance, janitorial, repair). See Overages and Escalation terms.

Base Year
Actual 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-grade
Any structure or a portion of a structure located underground or below the surface grade of the surrounding land.

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

Building Classifications
Building 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 Code
The 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"" Factor
Represents 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 Permit
Written government permission to develop, renovate, or repair a building.

Building Standard Plus Allowance
The 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"".

Building Standard
A 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.

Build-out
The 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-Suit
An approach taken to lease space by a property owner where a new building is designed and constructed per the tenant’s specifications.

Bullet Loan
Any 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.

Buyers Representative
A Licensed Real Estate Agent working solely for the Buyer, not the Seller. Agency rules in Arizona allow the Buyers Agent to receive a commission from the Seller even though he does not represent the Seller. Most Sellers have their own Sellers agents working to get them the best price and terms. The parties to the transaction must be informed ahead of the negotiations of this status.