General Real Estate Terms

Letter of Intent - A preliminary agreement stating the proposed terms for a final contract. It can be binding or non-binding.

Sublease - A rental agreement or lease between a tenant and a new tenant (called a sublessee) who will either share the rental or take over from the first tenant. The sublessee pays rent directly to the tenant. The tenant is still completely responsible to the landlord for the rent and for any damages, including those caused by the sublessee. Most landlords prohibit subleases unless they have given prior written consent.

Some Terms for Residential Real Estate

(coming soon)

Some Terms for Commerical Real Estate

Triple Net Lease - A lease where the tenant pays the monthly base rent plus all or part of the taxes, insurance, and maintenance associated with use of the property. Common in retail properties.

Percentage Lease - A lease where the tenant pays the base rent plus a percentage based on monthly sales volumes.

Full Service Lease - A lease where the total monthly rent already includes building maintenance, utilities, and taxes. Common in office properties.

Gross Lease - A lease where the landlord pays all the costs associated with ownership and maintenance of a space including utilities, repairs, taxes, and insurance.

Modified Net Lease - A lease where the landlord and tenant compromise on certain expenses. For example, the tenant may agree to pay taxes and insurance while the landlord agrees to split the maintenance and utilities with the tenant. Becoming more common.

Usable Square Feet - The space rented and used exclusively by the tenant including private rest rooms, closets, and storage.

Rentable Square Feet - The Usable Square Feet plus a percentage of the common area.

Common Area Maintenance (CAM) - Fixed and variable fees that all tenants are required to pay based on the proportion of space they rent. CAM fees include building repairs, maintenance, supplies, administrative salaries, parking, elevators, and other shared elements.

Gross-Up - If a building is less than 90-95% occupied, the expenses are still calculated for the tenants pro-rated share of operating expenses. Usually applies to full service leases.

Rent Abatement - A period of free rent. Sometimes offered by the landlord as an incentive, it is typically spread out over the lease term rather than allowed to be redeemed fully at the beginning of the lease.

Vanilla (or Warm) Shell - A space offered by the landlord with minimal improvements and often consisting of drywall painted white, rough-in for restroom(s) with basic plumbing elements, HVAC units without ducts, and some electrical. Floors are usually unfinished and ceilings may or may not be dropped.

Cold (or Dark) Shell - A completely unfinished space with no interior walls, floor finishes, HVAC, plumbing, or electrical elements.

Turn Key - Landlord-provided tenant improvements, usually including everything (walls, doors, floor and window coverings, electrical) except telecommunications wiring and tenant furniture.

Tenant Improvements (also called Build-Outs) - Structural changes a tenant makes to a leased property to suit their business needs. These may be paid fully or partially by the landlord or tenant.

Space Plan - A graphic representation of a tenant's space requirements, showing all wall and door locations, room sizes, and sometimes furniture layout.

Absorption Rate - The rate, expressed as a percentage, at which available space in the marketplace is leased during a predetermined period of time.