Abatement: Often 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 rate at which rentable space is filled. Gross absorption is a measure of the total square feet leased over a specified period with no consideration given to space vacated in the same geographic area during the same time period. Net absorption is equal to the amount occupied at the end of a period minus the amount occupied at the beginning of a period and takes into consideration space vacated during the period.

Advances: Payments made by the servicer when the borrower fails to make a payment.

Amortization: The liquidation of a financial debt through regular periodic installment payments. For tax purposes, the periodic deduction of capitalized expenses such as organization costs.

Anchor: The tenant who serves as the predominant draw to a commercial property, usually the largest tenant in a shopping center.

Appraisal: An estimate of a property's fair market value that is typically based on replacement cost, discounted cash flow analysis and/or comparable sales price.

Appreciation: An increase in the value or price of an asset.

As-is condition: The acceptance by the tenant of the existing condition of the premises at the time a lease is consummated, including any physical defects.

Assessment: A fee imposed on property, usually to pay for public improvements such as water, sewers, streets, improvement districts, and so on.

Assignment: A transfer of the lessee's entire stake in the property. It is distinguishable from a sublease where the sub-lessee acquires something less than the lessee's entire interest.

Attorn: To agree to recognize a new owner of a property and to pay him/her rent.

Average downtime: Expressed in months, the amount of time expected between the expiration of a lease and the commencement of a replacement lease under current market conditions.

Average free rent: Expressed in months, the rent abatement concession expected to be granted to a tenant as part of a lease incentive under current market conditions. Commonly used in hard to rent centers or to allow for tenant improvements.

Average occupancy: The average occupancy rate of each of the preceding 12 months. A high occupancy rate is nice to have. 

Balloon, or bullet, loan: A loan with a maturity that is shorter than the amortization period.

Balloon risk: The risk that a borrower will not be able to make a balloon (lump sum) payment at maturity due to a lack of funding.

Bankruptcy: Proceedings under federal statutes to relieve a debtor who is unable or unwilling to pay its debts. After addressing certain priorities and exemptions, the bankrupt entity's property and other assets are distributed by the court to creditors as full satisfaction for the debt. 

Base principal balance: The original mortgage amount adjusted for subsequent fundings and principal payments without regard to accrued interest or other unpaid debt.

Base rent: A set amount used as a minimum rent with provisions for increasing the rent over the term of the lease.

Basis point: 1/100 of 1 percent.

Below-grade: Any structure or portion of a structure located underground or below the surface grade of the surrounding land.

Beneficiary: An employee covered by an employee benefit plan.

Bid: An offer, stated as a price or spread, to buy whole loans or securities.

Broker: A person who acts as an intermediary between two or more parties in connection with a transaction.

Building code: The various laws set forth by the ruling municipality as to the end use of a certain piece of property. They dictate the criteria for design, materials and types of improvements allowed.

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.

Build-out: 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.

Build-to-suit: A method of leasing property whereby the developer/landlord builds to a tenant's specifications.

Capital expenditures: Investment of cash or the creation of a liability to acquire or improve an asset, as distinguished from cash outflows for expense items that are considered part of normal operations.

Capital improvements: Expenditures that arrest deterioration of property or add new improvements and appreciably prolong its life.

Carrying charges: Costs incidental to property ownership that must be absorbed by the landlord during the initial lease-up of a building and thereafter during periods of vacancy.

Cash flow: The revenue remaining after all cash expenses are paid.

Certificate of occupancy: A document presented by a local government agency or building department certifying that a building and/or the leased area has been satisfactorily inspected and is in a condition suitable for occupancy.

Class "A": A real estate rating generally assigned to properties that will generate the highest rents per square foot due to their high quality and/or superior location.

Class "B": Good assets that most tenants would find desirable but lack attributes that would permit owners to charge top dollar.

Class "C": Buildings that offer few amenities but are otherwise in physically acceptable condition and provide cost-effective space to tenants who are not particularly image-conscious.

Collateral: Asset(s) pledged to a lender to secure repayment of a loan in case of default.

Common area: For lease purposes, the areas of a building and its site that are available for the non-exclusive use of all its tenants, e.g., lobbies, corridors, and so on.

Common area maintenance: Rent charged to the tenant in addition to the base rent to maintain the common areas. Examples include snow removal, outdoor lighting, parking lot sweeping, insurance, property taxes, and so on.

Comparables: Used to determine the fair market lease rate or asking price, based on other properties with similar characteristics.

Concessions: Cash or cash equivalents expended by the landlord in the form of rental abatement, additional tenant finish allowance, moving expenses or other monies expended to influence or persuade a tenant to sign a lease.

Current occupancy: The current leased portion of a building or property expressed as a percentage of its total area or units.

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.

Deferred maintenance account: An account a borrower is required to fund that provides for maintenance of a property.

Demising wall: The partition wall that separates one tenant's space from another or from the building's common areas.

Depreciation: A decrease or loss in property value due to wear, age or other cause. In accounting, depreciation is a periodic allowance made for this real or implied loss.

Due diligence: Activities carried out by a prospective purchaser or mortgager of real property to confirm that the property is as represented by the seller and is not subject to environmental or other problems. In the case of an IPO registration statement, due diligence is a reasonable investigation by the parties involved to confirm that all the statements within the document are true and that no material facts are omitted.

Due on sale: A covenant that makes a mortgage due if the property is sold before the maturity date.

Earnest money: The monetary advance of part of the purchase price to indicate the intention and ability of the buyer to carry out the contract.

Easement: A right created by grant, reservation, agreement, prescription or necessary implication to use someone else's property.

Eminent domain: A power to acquire by condemnation private property for public use in return for just compensation.

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

Encumbrance: A right to, or interest in, real property held by someone other than the owner that does not prevent the transfer of fee title.

Escalation clause: A clause in a lease that provides for the rent to be increased to reflect changes in expenses paid by the landlord such as real estate taxes and operating costs.

Escrow agreement: A written agreement made between an escrow agent and the parties to a contract setting forth the basic obligations of the parties, describing the money (or other things of value) to be deposited in escrow, and instructing the escrow agent concerning the disposition of the monies deposited.

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.

Fee simple interest: When an owners owns all the rights in a real estate parcel.

Finance charge: The amount paid for the privilege of deferring payment of goods or services purchased, including any charges payable by the purchaser as a condition of the loan.

First mortgage: The senior mortgage that, by reason of its position, has priority over all junior encumbrances. The holder has a priority right to payment in the event of default.

First refusal right, or right of first refusal: A lease clause giving a tenant the first opportunity to buy a property or lease additional space in a property at the same price and on the same terms and conditions as those contained in a third-party offer that the owner has expressed a willingness to accept.

Full recourse: A loan on which an endorser or guarantor is liable in the event of default by the borrower.

Full-service rent: An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount.

Graduated lease: A lease, generally long-term in nature, in which rent varies depending upon future contingencies.

Ground rent: Rent paid to the owner for use of land, normally on which to build a building. Generally, the arrangement is that of a long-term lease (e.g. 99 years) with the lessor retaining title to the land.

Guarantor: One who makes a guaranty.

Guaranty: Agreement whereby the guarantor assures satisfaction of the debt of another or performs the obligation of another if and when the debtor fails to do so.

Hold-over tenant: A tenant retaining possession of the leased premises after the expiration of a lease.

Improvements: In the context of leasing, the term typically refers to the improvements made to or inside a building but may include any permanent structure or other development, such as a street, sidewalk, utilities, and so on.

Joint venture: An investment entity formed by one or more entities to acquire or develop and manage real property and/or other assets.

Landlord's warrant: A warrant from a landlord to levy upon a tenant's personal property (e.g., furniture, etc.) and to sell this property at a public sale to compel payment of the rent or the observance of some other stipulation in the lease.

Lease: An agreement whereby the owner of real property gives the right of possession to another for a specified period of time and for a specified consideration.

Lease agreement: The formal legal document entered into between a landlord and a tenant to reflect the terms of the negotiations between them.

Lease commencement date: The date usually constitutes the commencement of the term of the lease, whether or not the tenant has actually taken possession, so long as beneficial occupancy is possible.

Lease expiration exposure schedule: A listing of the total square footage of all current leases that expire in each of the next five years, without regard to renewal options.

Leasehold interest: The right to hold or use property for a fixed period of time at a given price, without transfer of ownership.

Legal description: A geographical description identifying a parcel by government survey, metes and bounds, or lot numbers of a recorded plat including a description of any portion that is subject to an easement or reservation.

Legal owner: The legal owner has title to the property, although the title may actually carry no rights to the property other than as a lien.

Letter of intent: A preliminary agreement stating the proposed terms for a final contract.

Lien: A claim or encumbrance against property used to secure a debt, a charge or the performance of some act.

Like-kind property: A term used in an exchange of property held for productive use in a trade or business or for investment. Unless cash is received, the tax consequences of the exchange are postponed pursuant to Section 1031 of the Internal Revenue Code.

Limited partnership: A type of partnership comprised of one or more general partners who manage the business and are personally liable for partnership debts, and one or more limited partners who contribute capital and share in profits but who take no part in running the business and incur no liability above the amount contributed.

Liquidity: The ease with which assets can be converted to cash without loss in value.

Listing agreement: An agreement between the owner of a property and a real estate broker giving the broker authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation.

Long-term lease: In most markets, this refers to a lease whose term is at least three years from initial signing to the date of expiration or renewal.

Lot: Generally one of several contiguous parcels of land making up a fractional part or subdivision of a block, the boundaries of which are shown on recorded maps and plats.

Low-rise: A building with fewer than four stories above ground level.

Market rental rates: The rental income that a property most likely would command in the open market, indicated by the current rents asked and paid for comparable space.

Market study: A forecast of future demand for a certain type of real estate project that includes an estimate of the square footage that can be absorbed and the rents that can be charged.

Market value: The highest price a property would command in a competitive and open market under all conditions requisite to a fair sale.

Maturity date: The date when the total principal balance comes due.

Mechanic's lien: A claim created for the purpose of securing priority of payment of the price and value of work performed and materials furnished in constructing, repairing or improving a building or other structure.

Meeting space: In hotels, space made available to the public to rent for meeting, conference or banquet uses.

Metes and bounds: The boundary lines of land described by listing the compass directions and distances of the boundaries. Originally, metes referred to distance and bounds referred to direction.

Mid-rise: A building with four to eight stories above ground level. In a central business district this might extend to buildings up to 25 stories.

Mixed-use: Space within a building or project providing for more than one use.

Mortgage: A legal document by which real property is pledged as security for repayment of a loan until the debt is repaid in full.

Negative amortization: The accrual feature found in numerous participating debt structures that allows an investor to pay, for an initial period of time, an interest rate below the contract rate stated in loan documents.

Net square footage: The space required for a function or staff position.

Non-compete clause: A clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and that no other tenant operating the same or similar type of business can occupy space in the building. This clause benefits service-oriented businesses desiring exclusive access to the building's population.

Open space: An area of land or water dedicated for public or private use or enjoyment.

Out-parcel: Individual retail sites in a shopping center.

Parking ratio: Dividing the total rentable square footage of a building by the building's total number of parking spaces provides the amount of rentable square feet per each individual parking space.

Percentage rent: Rent payable under a lease that is equal to a percentage of gross sales or gross revenues received by the tenant. It is commonly used in retail center leases.

Plat: Map of a specific area, such as a subdivision, that shows the boundaries of individual lots together with streets and easements.

Punch list: An itemized list documenting incomplete or unsatisfactory items after the contractor has notified the owner that the tenant space is substantially.

Quitclaim deed: A deed operating as a release that is intended to pass any title, interest or claim that the grantor may have in the property, but not guaranteeing such title is valid.

Real property: Land, and generally whatever is erected or affixed to the land that would be personal property if not attached.


Renewal option: A clause giving a tenant the right to extend the term of a lease.

Rent: Compensation or fee paid for the occupancy and use of any rental property, land, buildings, equipment, and so on.

Rent commencement date: The date on which a tenant begins paying rent.

Rentable/usable ratio: A building's total rentable area divided by its usable area. It represents the tenant's pro-rata share of the building's common areas and can determine the square footage upon which the tenant will pay rent. The inverse describes the proportion of space that an occupant can expect to actually use.

Rental concession: What landlords offer tenants to secure their tenancy. While rental abatement is one form of a concession, there are many others such as increased tenant improvement allowance, signage, below-market rental rates and moving allowances.

Rental growth rate: The expected trend in market rental rates over the period of analysis, expressed as an annual percentage increase.

Replacement cost: The estimated current cost to construct a building with utility equivalent to the building being appraised, using modern materials and current standards, design and layout.

Replacement reserves: An allowance that provides for the periodic replacement of building components that wear out more rapidly than the building itself and must be replaced during the building's economic life.

Sale-leaseback: An arrangement by which the owner-occupant of a property agrees to sell all or part of the property to an investor, then lease it back and continue to occupy space as a tenant.

Special assessment: Special charges levied against real property for public improvements that benefit the assessed property.

Straight lease (flat lease): A lease specifying a fixed amount of rent that is to be paid periodically, typically monthly, during the entire term of the lease.

Sublessee: A person or identity to whom the rights of use and occupancy under a lease have been conveyed, while the original lessee retains primary responsibility for the obligations of the lease.

Tax base: The assessed valuation of all real property that lies within a taxing authority's jurisdiction. When multiplied by the tax rate, it determines the amount of tax due.

Tax lien: A statutory lien for nonpayment of property taxes that attaches only to the property upon which the taxes are unpaid.

Tenant (lessee): One who rents real estate from another and holds an estate by virtue of a lease.

Tenant at will: One who holds possession of premises by permission of the owner or landlord. The characteristics of the lease are an uncertain duration and the right of either party to terminate on proper notice.

Tenant improvement (TI): Improvements made to the leased premises by or for a tenant.

Tenant improvement (TI) allowance: Defines the fixed amount of money contributed by the landlord toward tenant improvements. The tenant pays any of the costs that exceed this amount.

Tenant in Common (TIC): Method of Ownership whereby there are multiple owners, each owning a deed to their share of ownership.

Term: The lifetime of a loan.

Title: The means whereby the owner has the just and full possession of real property.

Title insurance: A policy issued by a title company that insures against loss resulting from defects of title to a specifically described parcel of real property, or from the enforcement of liens existing against it at the time the title policy is issued.

Title search: A review of all recorded documents affecting a specific piece of property to determine the present condition of title.

Triple net lease: A lease that requires the tenant to pay all expenses of the property being leased in addition to rent. Typical expenses covered in such a lease include taxes, insurance, maintenance and utilities. Commonley referred to as "NNN" lease or "3N". Also see CAM charges.

Trustee: The trustee oversees the flow of funds through the CMBS structure on behalf of the bondholders. The trustee is responsible for collecting principal and interest from the servicer, distributing payments to bondholders and reporting to bondholders.

Turn key project: The construction of a project in which a third party is responsible for the total completion of a building, or for the construction of tenant improvements to the customized requirements and specifications of a future owner or tenant.

Usable square footage: The area contained within the demising walls of the tenant space that equals the net square footage multiplied by the circulation factor.

Vacancy factor: The amount of gross revenue that pro forma income statements anticipate will be lost because of vacancies, often expressed as a percentage of the total rentable square footage available in a building or project. You might see 3% or 10% or more. Could be due to competition, expiring leases, economic outlook and so on.

Vacant space: Existing tenant space currently being marketed for lease excluding space available for sublease. Subleases may be marketed by lessee for competitive purposes.

Variance: Permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship. Applicant must prove a need or fault.

Workout: The process by which a borrower attempts to negotiate with a lender to restructure the borrower's debt rather than go through foreclosure proceedings.

Zoning: The division of a city or town into zones and the application of regulations having to do with the architectural design and structural and intended uses of buildings within such zones.

Zoning ordinance: The set of laws and regulations controlling the use of land and construction of improvements in a given area or zone.

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