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

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.

CAP Rate
Abbreviation for Capitalization rate. This is the financial rate of return an investor would receive if the property continues to perform in perpetuity. For example, a 10% CAP rate means an investor would receive $10 every year, in perpetuity, if they paid $100 for the building. It is supposed to measure the degree of risk of the investment which would include quality of income stream, probability of continuing, and the overall market.

Capital Expenses
This 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 Improvement
Any 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.

Capitalization 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"".

Capitalization
A method of determining value of real property by considering net operating income divided by a predetermined annual rate of return. See ""Capitalization Rate"".

Carrying Charges
Costs 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.

Certificate of Occupancy (CO)
The government issues this official form, which states that the building is legally ready to be occupied.

Chapter 11
That 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 7
That portion of the Federal Bankruptcy code that deals with business liquidations. Chapter 11 is that part of the Federal Bankruptcy code that deals with business reorganizations.

Chattel
Household goods, including personal property such as lamps, desks, and chairs.

Circulation Factor
Interior 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.

Class A,B, or C
This refers to the quality of the building. Usually, it is based on price or rental rates with the presumption that price reflects the image and appeal a property has. This classifiying term is challenging, as each of us perceives quality differently.

Clear-Span Facility
A building, most often a warehouse or parking garage, with vertical columns on the outside edges of the structure and a clear span between columns.

Commencement Date
A date which Landlord and Tenant agree the lease actually started. This may be different than the occupancy or lease date. Often, a lease document has a commencement date exhibit that both parties sign. The commencement date often triggers the start of rent and acceptance of the property condition.

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 that are made to the property.

Common Area
There 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 pro-rata share of building operating expenses.

Comparables
Lease rates and terms of properties similar in size, construction quality, age, use, and typically located within the same sub-market and used as comparison properties to determine the fair market lease rate for another property with similar characteristics.

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.

Condemnation
The 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"".

Construction Management
The 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).

Contiguous
Touching at some point or along a boundary.

Contingency
A requirement in a contract that must occur before that contract can be finalized.

Contract Documents
The 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"".

Contract
A legal agreement between entities that requires each to conduct (or refrain from conducting) certain activities. This document provides each party with a right that is enforceable under our judicial system.

Conveyance
Most 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.

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.""

Cost Approach
A method of appraising real property whereby the replacement cost of a structure is calculated using current costs of construction.

Covenant of Quiet Enjoyment
The 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.

Covenant
A 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.

Covenants
Wording found in deeds that limits/restricts the use to which a property may be put (e.g., no bars).

Cumulative Discount Rate
The 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.

Dedicate
To appropriate private property to public ownership for a public use.

Deed In Lieu Of Foreclosure
A deed given by an owner/borrower to a lender to satisfy a mortgage debt and avoid foreclosure. See also ""Foreclosure"".

Deed Of Trust
An 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 Restriction
An imposed restriction in a deed that limits the use of the property. For example, a restriction could prohibit the sale of alcoholic beverages.

Deed
A legal instrument transferring title to real property from the seller to the buyer upon the sale of such property.

Default
The 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 Judgment
Imposition 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.

Delivery
Transfer something from one entity to another.

Demising Walls
The partition wall that separates one tenant’s space from another or from the building’s common area such as a public corridor.

Depreciation
Spreading out the cost of a capital asset over its estimated useful life or a decrease in the usefulness, and therefore value, of real property improvements or other assets caused by deterioration or obsolescence.

Design/Build
A 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”.

Distraint
The 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 Stop
An 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).

Dual Agent
Refers to a Licensed Real Estate Agent who claims to be representing the best interests of both the Tenant and Landlord, or both the Buyer and Seller.

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.

Easement
A 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 Feasibility
A building or project’s feasibility in terms of costs and revenue, with excess revenue establishing the degree of viability.

Economic Rent
The market rental value of a property at a given point in time, even though the actual rent may be different.

Effective Rent
The 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 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 Core Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage.

Ejectment
Action to regain possession or real property. This is a last-ditch effort that is used when there is no relationship between landlord and tenant.

Eminent Domain
A 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”.

Encroachment
The intrusion of a structure which extends, without permission, over a property line, easement boundary or building setback line.

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)..

Endorsement
Signing one's name on the back of a check.

Environmental Impact Statement
Documents 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.

Equity
The fair market value of an asset less any outstanding indebtedness or other encumbrances.

Escalation Clause
A 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.

Escalations
Refers to how much a Tenants rent or obligation for expenses will increase. Usually quoted as a rate per foot per year,or as an annual percentage. Some are tied to the CPI. Others are just negotiated up front. Not all leases have these.

Escrow Agreement
A 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
A written agreement among parties, requiring that certain property/funds be placed with a third party. The object in escrow is released to a designated entity upon completion of some specific occurrence.

Estoppel Certificate
A document signed by the Tenant that confirms they are the tenant, that their lease is legitimate, and the amount of any security deposit the Landlord is holding. It is usually required to be signed by the Tenant when an owner sells the property.

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.

Exclusive Agency
An agreement in which one broker has exclusive rights to represent the owner or tenant. If another broker is used, both the original and actual broker are entitled to leasing commissions.

Executive Suite
An office within an office. Usually less than 200 square feet. In addition to the space, the tenant may receive secretarial-receptionists services, copies, fax, phone. The price is usually 2 to 4 times typical space. Great option for one or two man shows or startups. Lease terms may be as short as month to month.

Expansion or Escape Clause
Wording in a lease document that allows Tenant to end their lease obligation earlier than the original term. Used for rapidly expanding companies, or startups that may be at risk for success. Usually, there are associated written notices required and payments of additional fees to the Landlord.

Expense Stop
A dollar amount (usually stated as an amount per foot per year) that the Landlord agrees to pay for building expenses. If expenses of the building exceed this amount, then the Tenant pays the amount above the expense stop.