Commercial Real Estate Terms

Commercial real estate is a complex industry, full of terms that most tenants and buyers aren’t familiar with. To help you, we’ve compiled this glossary of real estate term definitions. Please let us know if there’s anything we missed!

  • Agent

    A specific individual mandated by another person or entity to conduct their business transactions and represent them in any matters relating to that particular business.

  • Adjoining

    Attached or in contact with another object (also see contiguous), esp. in suites/spaces.

  • Assignment

    The process in which a specific contract is legally transferred from one person to another.

  • Assignee

    The person or individual whose name a specific contract is assigned to.

  • Assignor

    The person involved in transferring a specific contract to another party, entity or individual.

  • Building Permit

    Permission provided in writing by the government or local authorities to authorize construction, reconstruction or repairs in buildings.

  • Build Out

    Refers to the interior construction or remodeling of a particular building. Build out often includes electrical wiring, plumbing, painting and general finishing on the interior walls and floors.

  • Cancellation Clause

    A section or provision in a lease contract that allows one or either parties bound by the contract to cancel it before the expiration date. The clause also outlines the circumstances that to all parties are acceptable for a cancellation of the contract.

  • Certificate of Occupancy

    A certification issued by the local authorities or the government that confirms a specific building is ready and safe for occupation. The Certificate of Occupancy is often shortened to CO.

  • Capital Improvement

    Refers to remodeling and improvement of a given property with the view of increasing its life. Capital improvements can include roof replacement, lift repairs and sometimes a complete renovation.

  • Chattel

    A general term used to define all the major household goods mostly individual or personal possessions.

  • Common area maintenance

    Refers to additional fees charged to tenants on top of the agreed rent to help in maintaining the common surroundings of the given property in which all tenants benefit. The fees are often used to cater for outdoor lighting, the removal of snow, parking fees, taxes and sometimes even insurance.

  • Contiguous

    Contact between one object and another, often along a boundary. Typically refers to two or more suites in a building that can be combined to create one large suite.

  • Contingency

    A prerequisite in a specific contract that must be fulfilled in order to finalize the contract.

  • Contract

    A binding agreement recognized by law that spells out the responsibilities that each party signed to it should adhere to.

  • Covenants

    Provisions found in property deeds that outline the uses which the property in question cannot be put to.

  • Deed

    A legal, written and signed document or instrument that indicates the title of a specific property.

  • Deed restriction

    Provisions in deeds which prohibit the use of a specific property for specific purposes such as the sale of alcohol or drugs.

  • Default

    A complete failure by a given individual or entity to fulfill the terms of a contract, live up to their promises or perform their responsibilities.

  • Delivery

    The act of transferring something from one person or party to another.

  • Ejectment

    The last ditch effort by landlords to regain possession of a given property normally after a fall out with tenants.

  • Eminent Domain

    The government’s exclusive prerogative to acquire specific properties intended for public use. However, owners of such properties must be compensated duly and fairly.

  • Endorsement

    The act of signing on the back of a given check for purposes of integrity

  • Escrow

    A written agreement between two or more entities that stipulates funds related to the acquisition or lease of a given property be held by a third party acceptable to all entities. The funds are then released based on the fulfillment of specific prerequisites by one or all the parties.

  • Estoppel Certificate

    An instrument in law that is often executed by the mortgagor. The certificate may be signed by a tenant as requested by the landlord.

  • Actual eviction

    The forceful removal of a tenants from a specific premise or property.

  • Constructive eviction

    The process in which landlords render the space leased by a given tenants unusable leading to the latter’s departure.

  • Proceeding eviction

    A legal process initiated by the landlord with the aim of forcing a given tenant out of a space.

  • Exclusive agency

    A mutual agreement in which only one real estate broker is mandated to represent the landlord or the tenants. The broker is entitled to a commission even if another second broker is involved in the transaction.

  • Fiduciary

    A representative of a given party or individual in financial matters relating to a given property.

  • Fixtures

    Individual possessions that are attached to the real property.

  • Grace period

    Additional time accorded a party or individual to fulfill their obligations set out in a contract beyond the set default date.

  • Gross Lease

    A type of lease where the owner or landlord takes care of all the auxiliary property charges such as taxes and insurance. Tenants only have to pay the base rent.

  • Holdover Tenant

    Name accorded to a tenant who remains in possession of a property or space after the expiration of the set lease time frame.

  • Instrument

    A legal document that is designed to ensure the rights of all parties partaking in a given contract are secured.

  • Irrevocable

    Cannot be altered or changed in any way

  • Joint Tenancy

    The ownership of a property by multiple persons or entities. Each party has an indivisible interest in survivorship rights.

  • Judgment

    A directive issued in a court of law relating to specific claims involving one or either of the parties or entities signed to a given contract.

  • Landlord

    The person who is mandated to rent a given property to a tenant.

  • Lease

    A legal agreement where a landlord gives a tenant the right to occupy a specific space in a property or the entire property for a specific price and a specified time frame.

  • Leasehold

    The interest held by a specific tenant as outlined in the lease agreement with the landlord.

  • Lessee

    The person or entity in whose name the property or space is leased to.

  • Lessor

    The person or entity that rents out a space or a property to another person through a lease

  • Letter of intent

    A letter of good will often non binding designed to express desire by the different parties to move into serious negotiations about a specific deal.

  • Listing

    An agreement between a real estate agent and a principle or property owner that accords the former the right to undertake different tasks on behalf of the latter.

  • Loss Factor

    Refers to the total area of a given property lost due to elevators or walls expressed as a percentage.

  • Mandatory

    A provision in a written contract between two or more parties that must be complied with.

  • Market Price

    The most current and actual selling or leasing costs of a given property

  • Market Value

    The total financial value of a given property after exposure to an open market for lease or for sale over a relatively longer period.

  • Meeting of the minds

    That time when parties in a contract agree unanimously to all the terms set out in the contract.

  • Net Lease

    The total amount paid by the lessee including the base rent plus maintenance costs.

  • Non-disturbance agreement

    A contract signed by a tenant to protect him or her from evictions should the property owner default on their mortgage payments relating to that property.

  • Notary Public

    A recognized local or public official who is mandated to verify legal documents and witness signing of contracts.

  • Obligee

    The entity or individual who gets the results of a given obligation

  • Obligor

    A party, entity or person required to undertake a specific obligation to another party, individual or entity.

  • Option

    It is a prerogative given to an individual to lease or buy a given property if some set terms and prerequisites are fulfilled. However, the individual can choose to lease/buy or decline with no fear of liability.

  • Percentage Lease

    The rent a tenant is supposed to pay as a percentage of the total volume of sales generated from a given commercial space. However this also includes minimum rent.

  • Personal Property

    Personal possessions such as furniture, electronics etc

  • Power of Attorney

    A written document duly signed by a person or an entity that mandates and authorizes another person or party to act on their behalf.

  • Principal

    A real estate agent’s employers, typically the landlord or property owner.

  • Quiet enjoyment

    An exclusive right that is accorded to either the landlord or the tenant to use a given property without disturbances.

  • Real Estate Board

    A registered organization whose members are only real estate experts.

  • Real Estate Syndicate

    A partnership designed to venture in real estate investment.

  • Real Property

    Real property which includes the land on which it stands. Real property can also refer to land without any capital developments.

  • Realtor

    A term used to describe active members of a real estate board and its affiliates.

  • Rent

    The amount of money paid by tenants to landlord in order to use their properties.

  • Restriction

    A limitation specified in a contract or deed that involves the property.

  • Revocation

    The process of rescinding a previously authorized power.

  • Rule of the Thumb

    A common standard or practice that is accepted as norm in a given field.

  • Situs

    The specific area in which a property is located.

  • Specific Performance

    A court order that obliges a defendant to carry out a set of specific terms spelled out in a contract.

  • Square Feet

    The standard measure of defining rental space in commercial real estate. One square foot is an area 12 inches wide by 12 inches long.

  • Statute

    A legal framework as a result of an act of parliament

  • Sub-Agent

    An agent who is a representative of another agent

  • Subletting

    The type of lease where a tenant rents a space to another tenant

  • Surrender

    The process of lease cancellation through mutual agreement.

  • Tenancy at Will

    Leasing or occupying a property through the landlord’s will

  • Tenancy by the Entirety

    Real estate ownership between a husband and his wife in which both have equal interest in the said property

  • Tenants Improvements

    The renovation or original construction and finishing work that is done in the interior of a given space for lease.

  • Tie-in Arrangement

    A contract where a specific transaction occurs as a results of another different transaction.

  • Tort

    The violation of a civil right that may lead to legal redress.

  • Triple Net Lease (NNN)

    A type of lease where tenants have to pay additional costs on top of the base rent to cater for maintenance, insurances and taxes.

  • Urban Property

    A property located in a city of an area of high density population.

  • Valid

    Legal and Binding

  • Valuation

    The estimated value or price of a property at a specific time frame.

  • Variance

    The process of developing property by the government or local authorities contrary to local zoning laws

  • Void

    Cannot be enforced

  • Waiver

    The abandonment of a specific claim by an individual or entity

  • Zone

    An area that is designated for specific uses by the government or local authorities

  • Zoning Ordinance

    Laws or statutes set by local authority to ensure compliance of zoning regulations.