...Toronto Office Space...
COMMERCIAL REAL ESTATE TERMS
The following definitions may be useful when dealing with Commercial Real Estate:
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ABSORPTION RATE
The estimate of the rate at which commercial office, warehouse or industrial space will be leased or occupied in a given market within a specified period.
AGENT
A person or entity that is licensed under the applicable real estate board(s) to represent a party in a real estate transaction.
AMENITY
A feature of a building or neighborhood that improves the enjoyment and use for a commercial tenant.
AMORTIZE
To spread debt or leasehold improvement costs or other monetary inducements over a defined period of time at an agreed upon
interest rate.
APPRAISAL
An estimate of value for an asset such as an office or industrial
building based upon the opinion of a certified professional.
APPRECIATION
The increase in value of a real estate asset.
AS IS CONDITION
An agreement by a tenant or purchaser that a industrial or office property
is accepted in its current condition as inspected, including any
known or unknown defects or deficiencies.
ASSIGNMENT
An agreement conveying the leasehold interests, including the
financial responsibilities, from one tenant to another tenant.
BASE RENT
The amount of rent to be paid by the tenant excluding operating
costs maintenance, insurance, hydro etc. Base rent is synonymous
with minimum, net or basic rent.
BOMA
(Building Owners and Management Association) A national
association developed as a forum for building owners and managers and developers.
BOMA STANDARD
An international standard for the measurement of industrial, office, commercial or retail space often referred to in the lease agreement.
BROKER
A term equivalent to “agent”, being a party licensed to trade in real estate in return for a fee.
BUILD-TO-SUIT
The construction of an office or industrial building to meet the specific requirements of a large tenant or purchaser.
CAM - COMMON AREA MAINTENANCE
The amount of additional rent charged to the tenant to maintain the common areas of an industrial, commercial or office building or property. These charges are shared by the tenants on a pro-rata basis.
CAPITAL IMPROVEMENTS
Improvements made by the landlord or owner of building or site that potentially increases the value of the asset. Capital Improvements should not be included in a buildings operating expenses.
CAPITALIZATION RATE
The rate typically used to calculate or make an estimate on the underlying value of a property based on the Net Income derived from the property. Formula: Net Income divided by Cap Rate = Estimated Value.
CERTIFICATE OF INSURANCE
A written certificate verifying the insurance coverage, parties involved and term of coverage.
CHATTLES
Items that are found within premises and are not affixed to the premises, which may be removed.
CLASS OF BUILDING
A method used to determine the desirability of one building over another using age, location and quality of improvements as
determining factors. Usually defined as Class AAA, A, B, or C.
COMMON AREA
An area of an office or industrial building that is used in common by tenants and their visitors and generally include areas such as lobbies, corridors, restrooms etc. This term can also be extended to include the cost of maintaining parking areas, sidewalks, landscaped areas, public washrooms, loading facilities and often form part of the tenant's
pro-rata share of the buildings operating expenses .
CONCESSION
Benefits granted by the landlord or owner to entice a new tenant to lease premises or an existing tenant to remain within their premises. Common concessions include free rent, lower rent, cash, cash for improvement work, moving expenses and any other item agreeable
to both parties.
CONSTRUCTION DRAWINGS
Architectural drawings with keyed notes detailing the work required
and types of materials to be used in constructing the improvements. Synonymous with Working Drawings.
CONTIGUOUS SPACE
Space that is adjacent to another space or series of spaces. May also be used in describing space that is on a floor either directly above or directly below the vacant space in an office or industrial complex.
CORE FACTOR
The percentage of net rentable square feet of a building devoted to common areas, such as washrooms, hallways, lobbies, etc. Calculated as rentable square footage divided by the usable square footage.
Also known as R/U factor or loss factor.
DEFAULT
Breaking any section of the terms contained within a lease document. Examples include failure to pay rent, using the premises for purposes not agreed upon in the lease or failure to perform any one of the agreed upon terms.
DEMISED PREMISES
A term used to describe a location in a multi unit office, industrial or retail building individually divided by walls into a singe space.
DEMISING WALLS
Partitions or walls that separate one tenant's space from the
buildings common areas, or from another tenant’s space in a commercial, office, or industrial or retail property.
EASEMENT
The right of use of the property by another as allowed through an agreement or necessary implication. Common examples include easement for the purposes of access to adjoining land and access to public utility equipment/services.
ECONOMIC RENT
The minimal net rental rate that makes a property viable and
profitable to the landlord after paying all expenses and debt servicing.
EFFECTIVE RENT/RATE
The actual rent per square foot or amount received by a landlord
after deducting free rent, tenant allowance, realtor commissions,
and landlord work.
EQUITY
The difference between a property's current market value and the
debt, mortgages and liens against it.
ESCALATION CLAUSE
A provision within a lease stating the preset rate increases in
operating costs increase over the term of the lease.
ESTOPPEL AGREEMENT
An agreement between a tenant and landlord wherein the tenant certified that the lease is in force and effect, the date of
commencement and expiration is correct, the landlord has performed
its part of the Lease Agreement to the date of the certificate and
there are no outstanding promises or agreements outside the lease.
EXCLUSIVE LETTER OF REPRESENTATION
A tenant’s written authorization specifying a particular realtor as the tenant’s representative with respect to a lease or renewal or purchase of a commercial property.
FACE RATE
The rental rate stated in the formal lease agreement without
factoring in inducements or concessions.
FIRST RIGHT OF REFUSAL
A tenants right to lease additional space that is often adjacent.
Usually the tenant would be required to match whatever bona
fide offer to lease is made by the third party.
FIXED RATE OPTION
The right for a tenant to renew their lease agreement at a predetermined net rate.
FIXTURING PERIOD
The period prior to the commencement date that the tenant uses to renovate or build-out the premises; usually free of base rent and operating costs but often including utilities consumed.
FLOOR PLAN
An area within a building, showing the partitions and improvements.
FLOOR PLATE
The total square footage of a floor in an industrial or office building.
FORMAL LEASE AGREEMENT
A legal document outlining and defining all terms and conditions of
the leased space by the tenant from the landlord for a given period
of time as referred to as the lease term.
FREE RENT
A concession granted to a tenant that allows the tenant to carry on business within the premises for a specified period of time without the payment of net rent. In some cases this concession may include additional rent as well.
FULL SERVICE LEASE
A lease that requires the landlord to provide all services for the
tenant’s occupancy throughout the lease term. The cost associated
with providing such services are included in the base rent.
GROSS LEASE
A lease in to which the tenant pays a stated sum or “gross” amount of rent out of which the landlord is required to pay all expenses.
GUARANTY
An agreement promising that if the tenant falls into default the rent
will be paid to the landlord and all other obligations in accordance
with the lease will be performed by the guarantor named.
HEATING, VENTILATING, AND AIR CONDITIONING (HVAC)
The mechanical system of the building that heats provides fresh or conditioned air and ventilates it from the building. High-rise office buildings and shopping centers have one or two main HVAC systems that supply tenants cooperatively, while strip malls and industrial buildings tend to have individual rooftop HVAC systems for each
tenant or occupant.
HOLDING OVER
A provision of a lease that allows a tenant to maintain possession
of its premises for a period of time beyond the expiry if the tenant does not renew its lease.
INCENTIVE
An allowance or benefit concession that is offered by the landlord to encourage the tenant to renew a lease or to sign a lease.
INDUCEMENT
An concession, allowance or benefit offered by a landlord to a prospective tenant in order to encourage the prospective tenant to
sign a lease commitment or renewal.
LANDLORD
The owner of a property can be a group, an individual or a corporation.
LANDLORD'S WORK
Work and improvements carried out by the landlord for the tenant as according to a specified agreement.
LEASE BUY OUT
A payout (by a tenant or a landlord) to the other party, therefore relieving both parties of all obligations to each other in the lease.
LEASE TERM
The set out period of time that a lease is in effect and binding for
both the landlord and the tenant for a leased premises.
LEASEHOLD IMPROVEMENTS
Improvements or leaseholds made to the property as required by the tenant and approved by the landlord. These typically include items
such as partitioning, door frames, doors, carpet, side lights, electrical, mechanical etc.
LENDER
A person or company who provides the tenant with financing by
lending money.
LESSEE
The tenant, as it pertains to a lease agreement.
LESSOR
The landlord or property owner, as it pertains to a lease agreement.
LETTER OF INTENT
An informal offer to lease or purchase. This letter requests certain conditions to be allowed by the parties before entering into any formal agreements.
LISTING AGREEMENT
An agreement between a property owner and real estate broker
giving the broker the right to attempt to lease the property at agreed upon terms and conditions in return for a commission or fee.
LISTING BROKER/AGENT
The individual or real estate brokerage that has rights in listing and leasing space for a landlord or owner
LOSS FACTOR
The percentage of net rentable square feet of a building devoted to common areas, such as washrooms, hallways, lobbies, etc. Calculated as the rentable square footage divided by the usable square footage. Also known as R/U factor or loss factor.
MANAGEMENT FEE
A fee paid out to the company that manages a property for the
landlord and included operating costs.
MARKET RATE/RENT
The rent a landlord can reasonably charge within the current market area of the property.
MARKET VALUE
The price a property would command in a competitive and open market under all conditions necessary to a fair sale with the seller and buyer each acting prudently and knowledgeably.
MINIMUM RENT
The basic monthly rental rate for the property, usually excluding operating costs. Also called net rent.
MONTH TO MONTH LEASE/TENANCY
An agreement between the tenant and landlord to rent or lease
space for no more than one month. Unless there is a letter of termination from either party, every month the term renews for an additional month.
MOVING ALLOWANCE
A payment made by a landlord to a tenant offset for moving costs. The concession may be provided to move a tenant in or out of a location.
MUNICIPALITY
An area such as Toronto, Etobicoke, Mississauga, Vaughan, Markham, Scarborough, Pickering, Milton, Thornhill, Newmarket, North York, Unionville, Richmond Hill, Brampton, Oakville, or Burlington
NET ABSORPTION
The square feet leased over a period after deducting space vacated in the same area during the same period.
NET LEASE
A lease which requires the tenant to pay in addition to base rent, the expenses of the office or industrial property such as taxes, insurance, maintenance, utilities etc.
NET OPERATING INCOME (NOI)
The net proceeds of income after first deducting a reasonable
operating expenses and all vacancy allowance, but before the
payment of any service or return on an investment or income
producing property.
NET RENT
Net rent is often equated with triple net leasing: as most elements, taxes, maintenance and operating costs are subject to escalation
and therefore netted out. Thus, a tenant would agree to pay a certain net rental rate plus their portion of taxes, maintenance costs and
operating.
NONDISTURBANCE
The term requiring that mortgage holder honor the terms of a lease agreement in the case of a foreclosure, provided all terms and conditions of the agreement are being met.
NOTICE CLAUSE
The clause that establishes the time frame and method each party
must use to inform the other of matters that require notifications as outlined in a lease agreement.
OCCUPANCY RATE/LEVEL
The relation of space currently rented within a property in relation
to the total space and the vacancies contained within.
OFFER TO LEASE
A formal document that creates an agreement between a landlord
and tenant for a specified property.
OPERATING EXPENSES
The cost for property taxes, maintenance, insurance, salaries, utilities, and similar items paid in connection with the operation of a commercial , office, industrial or warehouse property by the landlord.
OPERATION COSTS
The actual costs associated with operating a property including taxes, repairs, management, utilities, and insurance; which is proportionately charged back to the tenants.
OPTION TO CANCEL
A lease clause that gives either a tenant or a landlord the right to
cancel the remaining term of the lease based previously agreed upon conditions.
OPTION TO PURCHASE
A lease clause that gives a tenant the right to purchase the building if certain previously agreed to conditions within the lease agreement are met.
OPTION TO RENEW
A lease clause that gives the commercial tenant the right to renew the current lease for an additional term subject to clauses and conditions as
set out in the lease.
OVERHOLDING PERIOD/CLAUSE
The portion of a lease agreement stating the basic rental terms should the lessee remain in occupancy of a suite or building without a lease renewal.
OWNER
The individual or entity in legal possession of a property.
PARKING AREA RATIO
The size of the parking area in relation to the size of the building.
Often Calculated as the number of parking spaces per 1000 square
feet of Gross Lease able Area.
PERSONAL GUARANTEE
The provision in a lease naming a guarantor who is held personally responsible for the payment of all the amounts for rent and additional rent and other terms as set out in the lease.
PLANNERS
Individuals employed by municipalities and other levels of government who are trained in urban planning and advice governments with
respect to zoning and planning matters .
PRELEASING
The leasing of a real estate property before construction is completed.
PRESENT VALUE ANALYSIS
A method used to determine the present value of money for the payment of future rent.
PRO FORMA RATE
The original projected rental rate as estimated by the landlord.
PRO RATA SHARE
The leased area of the tenants premises divided by the total gross lease able area for the premises, the resulting fraction being used to compute the tenant’s share of operating expenses, taxes, common
area maintenance fees, HVAC charges, and insurance.
PROPERTY MANGAER
The individual who manages and supervises all day-to-day operations
of a property.
QUIET POSSESSION/ENJOYMENT
A covenant inserted in a lease promising that the tenant shall enjoy possession of the premises in peace and without disturbance.
R/U RATIO
Rentable/usable – also commonly referred to as the “Loss Factor”.
RENEWAL OPTION
A clause within a lease agreement allowing the option to extend the term of the lease, for a term and rate usually based on then current market conditions.
RENT ABATEMENT
Free rent provided by the landlord to the tenant. May or may not be included in the terms of lease, such as early occupancy.
RENT RELIEF
A concession to the tenant in the form of reduction of payable rent.
RENT-FREE PERIOD
Period in which tenant is not required to pay rent, as contained in the lease.
RENTABLE AREA
The area of the leased premises computed by measuring to the inside finished surface of the dominant portion of the permanent outer
building walls, excluding any major vertical penetrations of the floor.
No deduction shall be made for columns and projections necessary to the building. The rentable area of an office on the floor shall be computed by multiplying the usable area of the office by the quotient
of the division of the rentable area of the floor by the usable area of
the floor resulting in the R/U Ratio.
RENTABLE SQUARE FOOTAGE
Calculated as the usable square footage plus the pro rata share of the buildings common areas, using the R/U factor.
RENTABLE/USABLE (R/U) FACTOR
The percentage of net rentable square feet of a building devoted to common areas, such as hallways, washrooms, lobbies, etc. Calculated as the rentable square footage divided by the usable square footage. Also known as loss factor or core factor or gross up.
RENTAL RATE
Annual cost per square foot to be paid by the tenant to the Landlord
for leased premises.
REQUEST FOR PROPOSAL
Written request from the tenant or real estate broker to the landlord
for information on leasing the building.
RIGHT OF FIRST REFUSAL
A right granted to a party to enter into a contractual arrangement on terms identical to those offered by some third party.
RIGHT TO RENEW
A clause which allows the tenant the right to remain in possession of premises beyond the lease expiry, at agreed upon terms and conditions.
RIGHT TO TERMINATE
A special clause in the lease agreement giving one of the parties (usually the tenant or lessee) the right to cancel the lease.
SECURITY DEPOSIT
An amount of money the tenant pays the landlord before the tenant takes up occupancy in the new leased space.
SHELL SPACE
The condition of a vacant space before any leasehold improvements have been constructed.
SPACE PLANNER
An organization or individual that is retained by the building owner to develop drawings for the design of tenant space.
SPECULATIVE SPACE
Space that is built on the speculation there will be tenants or buyers interested in leasing or buying upon the developer’s completion of construction of the building.
SQUARE FEET
Length times’ width, measured in feet.
SQUARE FOOTAGE
The number of square feet within the demised premises as determined in accordance with the applicable standard measurement.
STEPPED RATE
A method used to formulate a rent agreement, with a lesser amount, paid at the beginning of the tenancy and great amount paid toward
the end of the tenancy.
SUB-LEASE
An agreement between a tenant and a sub-tenant that requires the tenant to remain responsible for the performance of the lease to the head landlord.
SUB-LEASE SPACE
Space that is available to rent from an existing tenant therefore not from the building owner.
SUBLET
The procedure in which a tenant rents out their premises and allows another entity to take over their space.
TAXES
Typically referring to property taxes assessed against a tenants premises and a proportionate share of the property taxes assessed against the common areas of the property.
TENANT
The entity responsible for paying rent to the landlord developer in
order to occupy a site location for a specific term.
TENANT IMPROVEMENT ALLOWANCE
An amount of money paid or credited by the landlord to a tenant to assist the tenant in the cost of the improvements needed to the
leased premises.
TENANTS WORK
Improvements to be carried out within the premises.
TERM
The duration of time for a tenant’s lease.
TITLE
The right to ownership of a real property, and the document of verification.
TMI
Acronym for Taxes, Maintenance and Insurance. This is used interchangeably with Common Area Maintenance – CAM .
TURNKEY SPACE
Space which has been newly completed with leasehold improvements
to allow a tenant occupancy.
USABLE AREA
The area of the leased premises computed by measuring to the
finished surface of the office side of corridors and other permanent walls, to the center of partitions that separate the office from
adjoining Usable Areas, and to the inside finished surface of the dominant portion that occupies more than 50% of the wall space. For example: If your are measuring an office and one of the walls has a window that occupies more than half of the surface of the wall, you measure to the surface of the glass.
USE CLAUSE
A lease provision that restricts a commercial tenant’s use of the
rented space by indicating what business activities are allowable
by the tenant.
VACANCY RATE
A percentage ratio comparing vacant space to total area available for rent.
VALUATION
Used by, investors, brokers, developers and lending institutions as a method of determining the current or potential market value of a
new or existing property.
WORKING DRAWINGS
Architectural drawings with keyed notes detailing the work required
and type of materials to be used in constructing the improvements. Synonymous with Construction Drawings.
ZONING
The division of a city, town or municipality into districts in which construction and use is limited to a stated type of building and land usage, in accordance with legislative act.
