Commercial Real Estate Glossary - Back to Commercial Homepage

From 'Adjoining' to 'Zoning Ordinance', real estate terms explained.
Choose a letter from the list below and browse alphabetically.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z - New York City Commercial Building Types

A
Term Description
Adjoining A property that is in contact with, or attached to, another property. Same as "contiguous."
Agent An individual who has the authority to act as the acknowledged representative for another individual (i.e., a tenant).
Air-handling light fixture A light fixture that enables quiet, draft-free air distribution in a given area. 
Amortization The process of paying off the principal of a debt and the interest accumulated at the same time. These payments are made at regular intervals over a given period of time.
Amortized mortgage A mortgage loan in which the principal amount of the loan and the interest accumulated together are paid in periodic installments over the life of the loan.
Annual loan constant The constant annual payment of a loan – including principal and interest – required to pay off a debt at a given interest rate over a certain period of time.
Appraisal An estimate of the value of a particular property, based on a comprehensive examination of the property, its location, and other related factors.
Approaches to value Methods used by a real estate appraiser to estimate the value of real estate property. The three approaches to value used are: cost approach, income approach, and market data approach.
Architect A professional who serves as the general administrator of construction for a structure, including creating specifications, drafting drawings, and coordinating designs for the property being developed.
Architectural drawing A formal illustration drafted by an architect that includes all layouts for a planned building, including plot plans, floor plans, elevations, sections, details, schedules, and other information. These exclude mechanical, electrical, and structural drawings, as well as specialized illustrations that are typically created and controlled by specialists.;
Assessed value The value of a land and the structures on the land, as assessed by a township or county assessor. Used to determine annual property taxes for a particular property. ;
Assignment The transfer, in writing, of an interest in a contract from one party to another. The holder of the lease effectively transfers the contract to another individual, who is the new tenant, for the remaining time and amount left on the lease. The new tenant is now liable for rent to the original owner of the lease.

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B
Term Description
Base lease A contract for lease that contains the established minimum requirements that apply to all potential tenants.
Base year A year that is used as the standard for escalator clauses. Operating costs for the next year are judged as higher or lower than the operating costs in the base year.
Bay An unfinished area or space between a row of columns and the bearing wall. A bay is usually the smallest area into which a building floor can be partitioned.
Bids Offers placed by bidders to execute construction work for a specified sum. Bids contain relevant information that discusses the proposed terms of the project from those that would carry out the work. A bid is then selected by the client and the architect.
Binder A preliminary agreement that puts into writing a meeting of the minds and is effective until the principal agreement is reached.
Building core; The central structural section of a multi-story building that integrates both functional and service-based needs for the building’s occupants. The building core normally contains toilet facilities, elevator banks, supply closets, utilities, mechanical facilities, smoke shafts, and stairwells.
Building permit A formal, written approval granted to a builder by a state or local authority. Drawings and specifications for the proposed structure must be filed with legal authorities in order for the building permit to be issued.
Building shell The internal structural skeleton of a building to which the finished exterior and interior are both applied. Building shells include the building foundation.
Building standard A specific construction standard created by the owner and the architect to achieve a uniform element of design throughout the building, and also to establish a cost basis for charges and/or allowances.
Build Out The construction or improvement of an interior space, including flooring, walls, finished plumbing, electrical work, etc
Build-to-suit An agreement between a landlord and a new tenant in which the landlord agrees to arrange the contracted living space to the tenant’s specification within the constraints of building standards. At the conclusion of the construction or renovation, the tenant takes possession.

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C
Term Description
Capitalization The process of determining property value by using 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 expressed as: Income/Rate = Value.
Cash flow The net operating income of a property (minus its debt servicing fee, interest, and other expenses). An amount, expressed in a percentage, calculated by dividing a property’s cash flow by the total amount invested in the property and multiplying by 100. This is also called the cash yield.
Certificate of insurance A certificate issued by an insurance company and its authorized agents. Verifies that there is a current and valid insurance policy in effect for certain amounts and coverage for a particular property. Also contains the named beneficiaries of the policy.
Channeling A construction technique that involves cutting, chipping, or routing a prescribed sectional area in a linear pattern on any surface, usually in concrete or plaster.
Class A Building A classification in a system created by the Building Owners and Managers Association (BOMA). A Class A building is defined by BOMA as the most prestigious building, 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 Buildinga A classification in a system created by the Building Owners and Managers Association (BOMA). A Class B building is defined by BOMA as a building 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 A classification in a system created by the Building Owners and Managers Association (BOMA). A Class C building is defined as a building competing for tenants with rents below the average price for the area.
Clear span The amount of floor area that is clear of interference from structural columns
Common areas Areas that are used by two or more tenants and/or third parties, not controlled by any one tenant; public areas that are open to use from the building’s tenants.
Condemnation Seizing control of private property for public use under the right of eminent domain. Condemnation includes adequate compensation for the owner of the property.
Consideration Something of value given by one party to entice another party to enter into a contract. Consideration includes anything from money to personal services and other concepts.
Construction allowance The amount of funds a landlord contributes to the cost of construction and/or alterations necessary to prepare a space for a tenant. A construction allowance is usually an established amount, but is negotiable.
Construction cost The total cost of building a property, including normal overhead and profit margin.
Constructive eviction The process by which a landlord, through negligence or a willful act, renders a property unsuitable for occupancy. The tenant is not liable for further payment of rent and may seek damages.
Constructive notice A notice given to all parties by the recording of documents with a public official. All parties are assumed to have knowledge of such documents and their contents, whether or not they have actually examined the documents in question.
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. 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 contracted to 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 is normally selected through bidding procedures and is wholly responsible for completion of the project in a skillful manner that is acceptable to both the architect and owner. The contractor also could be contracted on a time-and-material basis, which may or may not have a guaranteed maximum cost.
Cost approach An approach to value that estimates the value of a property by (1) obtaining an estimate by an appraiser of the replacement cost of the building, minus depreciation, and (2) adding this estimate to the estimated land value of the property.

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D
Term Description
Default The failure of a party to meet a financial obligation when due, or to perform any provision of a lease, mortgage, or other agreement.
Demarcation point The boundary at which a telecommunication provider’s network ends and a private network begins.
Demised premises Premises, or parts of real estate, in which an interest has been transferred temporarily, such as an interest in real property represented by a lease.
Demolition clause A clause within a lease or contract that calls for the demolition of a building if or when a ground lease has expired. The owner of the lease must notify the tenants of the building within an established time of such a condition.
Diffuser A device that reduces air flow velocity from a mechanical duct system supplying a building with air. The shape of a diffuser 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, or other unit necessary for transporting substances. The term is mostly identified with air-conditioning systems. Also applicable to under-floor duct systems for telephone lines and other electrical conductors.

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E
Term Description
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 seize 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 upon the compensation for the owner.
Encroachment A building or structure that extends beyond the legal limits of the owner’s land past the borders of public or private land next to it.
Encumbrance Any lien, such as a mortgage, tax, or judgment lien, placed on a property. It can also be an easement of 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 that can increase or decrease the amount of rent owed based on fluctuations of certain costs or expenses of the landlord.
Escrow A process by which two or more parties, through a written agreement, agree to place certain instruments, assets, or property with a third party for temporary possession until certain conditions are fulfilled. The holdings are then delivered to a designated party upon completion.
Exclusive listing A listing that grants an agent the exclusive right to sell the property.
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 complete.

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F
Term Description
Fee simple The largest possible estate, held by an owner who has absolute right of ownership of the estate. It can be held without time limitation and is freely transferable and inheritable.
Fiduciary An individual to whom power or property is entrusted for the benefit of another party. A real estate broker is a fiduciary for an owner who is selling his or her property.
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.
Footprint The shape and configuration of a building.
Foreclosure A court action in which the owner of a mortgage or lien has the underlying property sold in order to pay for a debt owed by a debtor. A landlord who does not pay the mortgage as stipulated in the mortgage agreement is subject to foreclosure.

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G
Term Description
General lien A lien on all property, both real and personal, of a debtor.
Graduated lease A lease that provides for specific increases or decreases in rent at specified times during the term of the lease.
Grantee A person to whom an interest in land is conveyed by deed, grant, or other written instrument.
Grantor A person who transfers his or her interest in land to another by a written instrument.
Gross rent multiplier A figure that produces an estimate of the property's value when used as a multiplier of the gross income of a property.
Ground lease A lease of land to a tenant who intends to occupy and develop the land for a specified period of time. If the tenant defaults, the owner may foreclose on the tenant (see "subordinated ground lease").

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H
Term Description
Hard construction costs The costs of constructing a building shell plus most of the covering materials.
HVAC An abbreviation for Heating, Ventilating, and Air Conditioning.
Holdover Tenant A tenant who remains in possession of leased property after the lease has expired.

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I
Term Description
Income approach An approach to value that estimates the value of an income-producing property by capitalization of the annual net income expected to be produced by the property during its remaining useful life.
Insured The beneficiaries of an insurance policy in the event of insurable loss or damage.
Insured The beneficiaries of an insurance policy in the event of insurable loss or damage.
Instrument A written legal document created to secure the rights of the parties participating in the agreement.
Interior partitions All types of interior non-load-bearing partitions that subdivide tenant space. Such partitions may be either movable or non-movable, prefabricated, or built on the job, and are usually constructed from masonry, steel, wood, or a combination of materials.
Irrevocable Incapable of being altered, changed, or recalled.

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J
Term Description
Joint tenants Two or more landowners who have been specifically named in an agreement as joint tenants. Upon the death of a joint tenant, the surviving joint tenant or tenants receive the deceased tenant's interest by the right of survivorship.
Judgment A formal decision issued by a court relating to the specific claims and rights of the parties to a formal legal action or suit.

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K
Term Description
Keyed Elevator An elevator that usually opens directly to an apartment or the foyer of an apartment. These elevators are usually seen in lofts or penthouses, or any large apartment that covers the entire floor of an apartment.

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L
Term Description
Landlord One who leases property to a tenant.
Lease A contract that allows a party to occupy a property for a specified period of time for a specified consideration (i.e., rent).
Leasehold The interest or estate that a lessee of real estate holds under the provisions of a lease.
Lessee The tenant in a lease.
Lessor The landlord in a lease.
Letter of Intent An informal, usually non-binding, agreement among parties indicating their serious desire to move forward with negotiations.
Levy To impose or assess a tax on a person or property; also the taxes imposed by a government agency.
Listing An employment contract between principal and agent that authorizes the agent (such as a real estate broker) to perform services for the principal and his property. A property for sale is represented by a listing.
License Permission given by the landlord for a person to enter the premises of a tenant for a particular purpose. A license is of temporary character, purely a personal right, revocable, and cannot be sold.
Lien A right, given by law, to a creditor to have a debt satisfied out of the property of the debtor, usually through a right to possession. A tax lien, for example, is a lien placed on a piece of property by government for failure to pay taxes.
Loss Factor The percentage of the gross area of a given space that is taken up by walls, elevators, etc.

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M
Term Description
Market Price The actual selling or leasing price of a property.
Market Value The expected price that a property will bring if put on the market for rent or purchase. Assumes that the property is on the market for a reasonable period of time with reasonably competent owners and potential tenants.
Market data approach An approach to value that estimates the value of a property through the examination and comparison of actual sales of comparable properties in a given area.
Mechanic's lien A lien established by law in favor of those who provide labor or material for the improvement of real estate.
Meeting of the Minds When all individuals to a contract agree to the substance and terms of that contract.
Month-to-month tenancy A tenancy from month to month is generally created when no definite lease term is specified by the parties and the rent is payable monthly. Such a lease may be terminated by either party at the end of any month.
Mullions Metal strips placed at regular intervals along a window line. They are designed to ensure a smooth, soundproof connection between window partitions.
Multiple Listing An arrangement between real estate brokers that calls for each broker to make available his or her real estate listings to other brokers. Then, if a lease is written, commission for the listing is divided between the broker who owns the listing and the broker who makes the lease.

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N
Term Description
Net lease A lease under which the tenant pays the contracted rent plus utilities and taxes. .
Net-net-net lease A net lease plus insurance and maintenance.
Net operating income (NOI) The gross income generated from a property minus operating expenses.
Non-Disturbance Agreement An agreement signed by the tenant to prevent the tenant from being evicted from the property if the owner of the property defaults on the property’s mortgage.
Notary public An officer appointed by a state governor with authority to formally identify and acknowledge persons executing documents, sign the certificate, and affix a seal.

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O
Term Description
Obsolescence A condition in which a property loses value because it is obsolete or out of date due to changes in design and use. Also used as an element of depreciation.
Offer to lease A binding agreement that ensures the lender will continue negotiations in good faith once a qualified tenant has been found, until all negotiating points have been covered. In other words, an offer to lease removes the property from the market during the negotiating period.
Open listing A listing contract under which the broker's commission is contingent upon the broker producing a buyer before the property is sold by the owner or another broker.
Option A contractual agreement giving one party a privilege of demanding, within a specified time, the carrying out of a transaction upon stipulated terms.

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P
Term Description
Pass-through Expenses, or a portion of expenses, that “pass through” from the landlord to the tenant. The tenant then pays these costs that are associated with tenancy.
Percentage Lease A lease in which the rent charged for the property is based on a percentage of sales volume made on the property. This is typically accompanied by a clause that stipulates a minimum rent floor.

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Q
Term Description
Quiet enjoyment A clause present in leases that guarantees the tenant will be able to reside or do business in the premises in peace and without disturbance from the landlord.

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R
Term Description
Realtor A term designating an active member of a local real estate board that is affiliated with the National Association of Real Estate Boards. A realtor facilitates the buying, selling, and leasing of real estate.
Real Estate Board An organization comprised of real estate professionals, such as agents and brokers.
Real Estate Broker An individual, association, or business that facilitates the buying, selling, or leasing of any real estate or real estate improvements and represents interested parties involved in the process. In turn, the broker receives compensation or consideration per the terms of contractual agreements. Real estate brokers must be licensed by the state in order to operate within its jurisdiction.
Real Estate Salesperson An individual who is employed or contracted by a real estate broker to buy, sell, or lease a property, or to help in facilitating the negotiations involving buying, selling, or leasing a property. These individuals receive compensation per the contract between the salesperson and the broker.
Real Estate Syndicate A partnership formed by real estate partners to participate in a real estate venture.
Real Property Land, plus any capital improvements (e.g., buildings and structures) erected on the property.
Recapture A clause providing for the legal repossession of the premises, usually by cancelling the lease under certain circumstances.
Rent Compensation from tenant to landlord for the use of real estate.
Restriction A limitation, often specified in the deed, on the use of property by the lessee.
Revocation The act of rescinding a power or privilege previously authorized by the terms of an agreement.
Recording The official act of entering record of documents representing real estate in a county recorder's office. Until recorded, a deed or mortgage generally is not effective against subsequent purchasers or mortgages or other third parties (see "constructive notice").
Redemption period A period established by state laws during which the property owner has the right to redeem his or her real estate from a foreclosure or tax sale by paying the sale price, interest, and costs. Many states do not have mortgage-redemption laws.
Rentable area A standard established by BOMA that defines the area being rented by the lessee. Rentable area is measured from the inside of the outside wall to the outside of the inside wall, and center to center on the division walls. Not to be confused with usable area.
Replacement cost The current cost of completely replacing a property with property containing the exact same utility (usefulness) and amenities.
Rules and Regulations Building standards of use that are binding on the tenants and are usually established in a part of the lease. Consequences for violating rules and regulations are usually stipulated in a lease agreement.

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S
Term Description
Save harmless To indemnify or protect another individual or party from any costs, expenses, or consequences; to secure another against loss or damage or claims of a third party. Often referred to as hold harmless. A tenant typically agrees to save harmless the landlord from certain events or situations outside of the landlord’s control in a standard lease agreement.
Schematic design (1) A building design resulting from an inspection of the site and conferences with the client to ascertain client needs and requirements. (2) A suggested plan, design, or program of action.
Sites The physical location of the property.
Specific Performance A court order that requires a part to carry out the terms of an agreement or contract, usually entailing fulfilling a specific act laid out in the contract.
Square Feet The usual method by which rental space is defined. It is the area of that space, calculated by multiplying the length of the space times its width.
Statute A law established by an act of a legislature.
Statute of frauds A state law that requires certain agreements in real estate to be made in writing in order to be enforceable in a court of law. Details of this law vary from one state to another.
Statute of Limitations The legal time limit on seeking remedy for particular event, breach of contract, or violation of regulation. After the statute of limitations has passed, all rights of redress are denied.
Subagent An agent of an individual already acting as an agent of a principal.
Surrender The cancellation of a lease by mutual consent of the tenant and the landlord.
Sublease A lease that exists between a party or individual who is currently leasing a particular property or section of property from the property owner. The new lessee then takes possession of the property or property portion for a shorter term than what is on the original lease. When the entire estate is sublet for the entire remainder of the original term, it is called an assignment. A ground lease in which the owner places his right in relation to the structure behind that of others, such as the holder of a mortgage (see "ground lease").
Subordination An agreement that places an interest held in a property by a lien holder or lessee behind the interests held in the property by other parties, such as the mortgage lender.

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T
Term Description
Tenant representation agreement An agreement in which a client agrees to work solely with the salesperson designated in the contract, to the exclusion of any other salesperson. In this arrangement, the salesperson is the exclusive agent of the prospective tenant.
Tenancy by the Entirety An estate which exists only between husband and wife. Each has equal right of enjoyment and possession of the property during their joint lives, and each has the right of survivorship.
Tenancy at Will A license to occupy or use lands and buildings at the will of the landlord.
Tenant Improvements Work done on the interior of a space, which can be paid for by the landlord, tenant, or some combination of both.
Tenancy in Common Ownership of property by two or more individuals, each of whom has an undivided interest, without the right of survivorship.
Trade fixtures Articles installed by a tenant under terms of a lease and removable by the tenant before the lease expires. Shelves are a common example of trade fixtures.
Triple net lease See "net-net-net-lease."
Tenants at Sufferance Occupation of a property after a lease has expired but before the landlord demands the tenant leave the property. This is also called a “holdover” tenancy.
Tort A wrongful act or violation of a legal right as established by civil law.

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U
Term Description
Unit office space An enclosed or semi-enclosed workspace for a single occupant.
Usable area Any area in a given floor that could be used by the tenant. This area includes a point from the perimeter glass line to party walls that separate one tenant’s space from the other. Not to be confused with rentable area.

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V
Term Description
Value The worth of a property – real or personal – and the power of said property to command other goods in exchange. Also defined as the present worth of future income and benefits that are associated with ownership of the property.
Valuatione Estimated price, value, or worth. Also, the act of identifying a property's worth via an appraisal.
Variance Government authorization to use or develop a property in a manner which is not permitted by the applicable zoning regulations.
Violation Act, condition, or deed that violates the permissible use of property.
Void Something that is unenforceable.
Voidable A situation which is capable of being unenforceable but is not so unless direct action is taken.

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W
Term Description
Wall base A defined material applied to the base of walls for general protection and finish, available in various heights, colors, and materials. It is also available as a variety of configurations for various purposes.
Waiver The intentional relinquishment or abandonment of a specific claim, privilege, or right.
Work Letter An amount of money that a landlord agrees to spend on the construction of the interior of a space per the lease, usually negotiated.
Wet columns Columns where provisions are made to have a plumbing fixture for drinking fountains, sinks, etc. In wet columns, the pipes are taken through the small enclosure (chase) against the column.
Working drawings Detailed floor space plans that diagram all improvements to be made. They are designed as instructions to the various contractors involved.

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Z
Term Description
Zone An area defined and designated by a governmental authority, which is authorized for and limited to specific uses. Residential, commercial, and industrial are the three most common types of zones.
Zoning Ordinance A law by a local governmental authority that sets the parameters for which the property within a particular zone may be put to use.

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