Glossary of Real Estate Terms
Absorption. The amount of additional space that becomes occupied during a given period. It is a "demand side" indicator and does not account for the amount of space available. The key indicator is "Net" absorption which is the net change in occupied space.
Acknowledgment. A declaration before a notary public or other officer by a party executing a legal document that the execution is his free and voluntary act and deed.
Affidavit. A voluntary statement in writing, sworn to before a notary public or other officer.
Agent. One who acts or who has power to act for another. A licensed real estate broker authorized to act under a listing or management agreement executed by a property owner (the Principal); this creates a fiduciary relationship under the law of agency.
Air-handling light fixture. A light fixture into which air is introduced by means of an air diffuser for quiet, draft-free air distribution.
Amortization. The process of paying off a debt together with interest, usually with equal payments at regular intervals over a period of time.
Amortized mortgage. A mortgage loan in which the principal, as well as the interest, is payable in monthly or periodic installments during the term of the loan.
Annual loan constant. The principal and interest of a loan expressed as the constant annual payment required to retire a debt at a certain rate of interest over a certain period of time.
Appraisal. An estimate of quantity, quality or value. The process through which conclusions of property value are obtained; also refers to the report setting forth the estimate and conclusion of value.
Approaches to value. Used by an appraiser to estimate the value of real estate. The three approaches are: cost approach, income approach and market data approach.
Architect. A person who normally functions as a creator, coordinator, author of the drawings and specifications and the general administrator of construction.
Architectural drawing. Includes all architectural contracts and drawings such as plot plans, floor plans, elevations, sections, details, schedules, etc., and any architectural drawing that forms a part of the contract documents. Exceptions include mechanical, electrical and structural drawings, as well as specialized data that are normally handled by specialists in those fields.
Assessed value. The value placed on land and buildings by a township or a county assessor for use in levying annual real estate taxes.
Assignment. The transfer in writing of an interest in a lease, mortgage or other instrument. The assignor, or lessee, transfers the entire remainder of the term created by the lease, and the assignee becomes liable to the original lessor for rent. Assignor may or may not retain secondary liability for performance under the lease, depending upon the terms of the lease pertaining to assignment.
Banked elevators. A group of elevators adjacent to each other with a specific demised enclosure.
Base lease. A contract stating the minimum established requirements that are applicable to all tenants.
Base year. The year of a lease term that is used as the standard when implementing an escalator clause. Operating costs are judged higher or lower during the next year when compared to the base year.
Bay. An unfinished area or space between a row of columns and the bearing wall. Usually the smallest area into which a building floor can be partitioned.
Bids. A competitive system in which each bidder submits a sealed proposal to execute construction work for a specified sum. The list of bidders (bid list) is controlled by the client and architect.
Binder. A preliminary agreement evidencing a meeting of the minds and effective until the principal agreement can be executed.
Borrowed light. A partition containing glass or plastic panels between an interior dark space and a space illuminated by daylight or high-intensity artificial light.
Building core. The central or arterial part of a multistory building that integrates functions and service needs for established occupants. Such areas are normally composed of toilet facilities, elevator banks, janitors' closets, utilities, mechanical facilities, smoke shafts and stairwells.
Building permit. The approval that must be obtained under state or local regulations. Drawings an specifications must be filed with the legal authorities in control of building operations.
Building shell. The skeleton of a building to which the finished exterior and interior are applied. It includes the building foundation.
Building skin. The exterior materials that cover a building's shell (see Building shell).
Building standard. The specific construction standards that have been established by the owner and architect to achieve a uniform element of design throughout the building and to establish a cost basis for fitting up charges and/or allowances. Such items may be changed only with the approval of the building owner or the managing representative.
Build-to-suit. An agreement between a landlord and a new tenant whereby the landlord assumes the obligation of fitting up the demised space to the tenant's specification within the constraints of building standards. The tenant takes possession when the space is completed.
Cancellation clause. A provision in a lease that confers upon one or both of the parties to the lease the right to terminate the lease upon the occurrence of the condition or contingency set forth in the said clause.
Capitalization. The process of ascertaining the value of a property by the use of a proper investment rate of return and the net income expected to be produced by the property. The formula of net annual income divided by proper capitalization rate is express: Income/Rate=Value.
Cash flow. The net operating income of a property minus its debt service.
Cash-on-cash return. A Percentage figure arrived at by dividing the cash flow from a property by the total investment in the property and multiplying by 100. Also call Cash yield.
Ceiling plenum. A totally enclosed area above the ceiling used for the handling of air.
Certificate of insurance. A certificate issued by an insurance company or its agent. It verifies that a certain insurance policy is in effect for stated amounts and coverages and names those insured.
Change order. An order issued any time there is a change in the specification, price or time set forth in the building contract as authorized by the owner, architect or engineer.
Channeling. Cutting, chipping or routing a prescribed sectional area in a linear pattern on any surface, usually in concrete or plaster.
Chattels. Personal property items.
Circulation allowance. The space needed to have sufficient access to, from and around workspaces.
Class A Building classification system; defined by BOMA as the most prestigious buildings competing for premier office users with above average rental rates for the area along with high-quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence
Class B Building classification; defined by BOMA as buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area and the systems are adequate, but the building does not compete with Class A at the same price.
Class C Building classification; defined by BOMA as buildings competing for tenants requiring functional space at rents below the average for the area.
Clear span. The amount of floor area clear of interference from columns.
Commitment. A pledge, promise or affirmation of agreement.
Common areas. Areas used by two or more tenants and/or third parties and not under the control of any one tenant.
Condemnation. The taking of private property for public use, with adequate compensation to the owner, under the right of eminent domain.
Consideration. Anything of value given by one party to induce another to enter into a contract. It may be money, personal services or even "love and affection."
Construction allowance. The amount a Landlord contributes to the cost of construction and/or alteration necessary to prepare a space for a tenant's occupancy. This is usually an established amount, but is negotiable.
Construction cost. Total expense, plus normal overhead and profit, that must be paid for the job in question.
Constructive eviction. Any disturbance by the landlord of the tenant's possession of leased premises, whereby they are rendered unsuitable for occupancy (the purpose for which they were leased). In such a case, the tenant is not liable for further payment of rent.
Constructive notice. Notice given to the world by the recording of documents with a public official. Al persons are charged with knowledge of such documents and their contents, whether or not they have actually examined them.
Contract documents. Documents consisting of the agreement and the conditions of the contract (general, supplementary and other conditions). They include the drawings, the specifications, all addenda issued prior to execution of the contract and all modifications thereto. A modification is (1) a written amendment to the contract signed by both parties; (2) a written interpretation issued by the architect in the form of a drawing or otherwise; (3) a change order; or (4) a written order issued by the architect for a minor change in the work.
Contractor. An individual and/or firm used in performing work on construction projects. There are different classes of contractors, which are normally listed under the heading of subcontractors. The function of the subcontractor is to perform a particular task only under the direction and coordination of the general contractor, who takes on the responsibility of managing the project in accordance with the construction documents. The general contractor is normally selected through bidding procedures and is totally responsible for completion of the project in a skillful manner that is acceptable to both architect and owner. However, the general contractor may be persecuted to handle all work within a particular project. This is usually the case for multistory office buildings where the general contractor is the same for all tenant space construction. The contractor also could be contracted on a time-and-material basis, which may or may not have an upset maximum.
Core. (See Building core.)
Cost approach. The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the replacement cost of the building, less depreciation.
Coworking Space. Is a style of work which involves a shared working environment, sometimes an office, yet independent activity. Unlike in a typical office environment, those coworking are usually not employed by the same organization. Typically it is attractive to work-at-home professionals, independent contractors, or people who travel frequently who end up working in relative isolation. Coworking is the social gathering of a group of people, who are still working independently, but who share values, and who are interested in the synergy that can happen from working with talented people in the same space.
Default. Failure to meet an obligation when due or to perform any provision of a lease, mortgage or other agreement.
Demarcation point The location where a telecommunications provider's network ends and a private network begins
Demised premises. Premises, or parts of real estate, in which an interest or estate has been transferred temporarily, such as an interest in real property conveyed in a lease.
Demolition clause. A clause within a lease denoting the fact that if or when the ground lease has expired, the building will be demolished per such clause. The lessor must notify the tenants within an established time of such condition.
Design development. The process by which, upon approval of the schematic design, the architect proceeds with development of he plans and elevation of the building. Drawings establishing all major elements and outline specifications are prepared. A revised statement of probable construction cost is usually made at this time.
Diffuser. a device for reducing the velocity of air flow from a mechanical duct system supplying air. Its shape is usually circular or square and it is set in the ceiling at predetermined locations to diffuse air within that space.
Duct. A pipe, tube, channel or any other unit necessary for conveying gases, liquids or solid units from one point to another. The term is mostly identified with air-conditioning systems where the transfer of air is necessary. This is accomplished through sheet-metal ducts. The term is also applicable to under-floor duct systems for conveyance of telephone lines and other electrical conductors.
Economic obsolescence. Impairment of desirability or useful life or loss in the use and value of property arising from economic forces outside the building or property, such as changes in optimum land use, legislative enactments that restrict or impair property rights and changes in supply-demand relationships.
Effective gross income. The scheduled gross income of a property minus the vacancy rate.
Egress. The right to leave a tract of land. Often used in connection with access.
Eminent domain. The right of a government or municipal quasi-public body to acquire private property for public use. It is acquired through a court action called condemnation in which the court determines the use is a public use and decides the price or compensation to be paid to the owner.
Encroachment. A building or some portion of it, or a wall or fence, that extends beyond the land of the owner and illegally intrudes upon land of an adjoining owner, a street or an alley.
Encumbrance. Any lien, such as a mortgage, tax or judgment lien. It can also be an easement a restriction on the use of the land or an outstanding dower right that may diminish the value of the property.
Equity. The interest or value an owner has in real estate over and above the mortgage against it.
Escalation clause. A clause in a contract providing for increases or decreases in rent payments in accordance with fluctuations of certain costs or expenses of the landlord.
Escrow. A written agreement between two or more parties providing that certain instruments or property be placed with a third party to be delivered to a designated person upon the fulfillment or performance of some act or condition.
Eviction. The forced removal, by legal means, of a tenant from the leased premise (see Constructive eviction).
Exclusive agency listing. A listing contract under which the owner appoints a real estate broker as the one exclusive agent for a designated period of time to sell the property on the owner's stated terms, and under which the owner agrees to pay the broker a commission. However, the owner reserves the right to sell without a commission to a prospect not introduced or claimed by the broker (see Exclusive right to sell).
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Exclusive listing. A contract to sell property as an agent, whereby the agent is given the exclusive right to sell the property or is made the exclusive agent for its sale.
Exclusive right to sell. A listing contract in which the owner appoints a real-estate broker as the exclusive agent for a designated term. The broker must sell the property on the owner's stated terms, and the owner agrees to pay the broker a commission when the sale is consummated.
Expense ratio. The percentage of gross income that is consumed by the operating expenses of a property.
Expense stop. A ceiling or limit on the dollar amount one party, typically the landlord, will pay in an expense category. This ceiling is determined by adding a percentage or dollar amount to the base year costs.
Fee simple. The largest possible estate or absolute right of ownership of real property. I ca be held without time limitation and is freely transferable and inheritable.
Fiduciary. A person to whom power or property is entrusted for the benefit of another.
Fixture. Personal property or improvements so attached to the land as to become part of the real property. The right of the tenant to remove fixtures may be given by stipulation in the lease or by separate written agreement between the parties.
Footcandle. A measurement of light level. It is equivalent to the light intensity made by one candle at a distance of one foot.
Footcandles maintained. The level of light that will be maintained after the initial drop-off of footcandles following installation. Usually it will be after the first 100 hours of burning.
Footprint. The shape and configuration of a building.
Foreclosure. A court action initiated by the mortgagee or a lien or for the purpose of having the court order the debtor's real estate sold to pay the mortgage or other lien (mechanic's lien or judgment).
Functional obsolescence. Defects in a building or structure that detract from its value or marketability (see Obsolescence). Garden-type building. A modern, low-rise building typically found in suburban areas, that is built to blend in with its surroundings. Often of stucco exterior.