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CRE Common Terms and Definitions

This section of Halo Publishing's website has been created to help introduce the definitions of several commercial real estate common terms. We hope that this web page will aid you ---- but if you have any specific legal or financial questions, consult your legal or financial advisior. Their experts will be glad to answer your questions.

Halo Publishing believes these terms or definitions may be useful in helping to understand commercial real estate; however, we can not accept any responsibility for the reader's specific interpretation of them.

For additional CRE definitions see the following:    1) CRE Legal Definitions;    2) CRE Title Definitions; and
3) CRE Square Footage Measurement Terms and Definitions.

Disclaimer - From Our Friends in the Legal Department

This Halo Publishing web page has been designed to be introductory and educational only. It is not to be construed as a statement of legal or financial advice, duties or liabilities.


Commercial Real Estate
Common Terms and Definitions

[ 1031 ]      [ 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 ]      Home


1031 [Top]

diamond gif IRC Code 1031 Exchange: Simply put, a 1031 Tax-Deferred Exchange allows you to dispose of investment property and acquire "like-kind" properties while deferring federal capital gains taxes. It allows you to reinvest sales proceeds that would otherwise be paid to the government in the form of taxes.

diamond gif IRC Code 1031 Information: See separate article located at: IRC Code 1031.

diamond gif 1031 Exchange: Section 1031 is the section of the tax code that governs tax treatment of certain types of investment real estate transactions. There are several types of 1031 exchange methods commonly used today, including delayed, simultaneous, and reverse exchanges.

diamond gif Accommodator: A Qualified Intermediary who enters into a contract to assist the exchanger to effect a tax deferred exchange. The Qualified Intermediary (also known as an Accommodator) substitutes in place of the Exchanger and assumes the responsibility of transferring the Relinquished Property to a buyer and completes the exchange by purchasing the Replacement Property from a seller before transferring the Replacement Property to the Exchanger. The Intermediary maintains the exchange trust accounts to be sure that the funds are beyond the constructive receipt of the exchanger. Also described as a Facilitator or an Intermediary, an Accommodator cannot be the taxpayer or a related party.

diamond gif Accommodating Party: In an exchange of properties there is always a person or entity that steps in to accommodate or facilitate the exchange transaction. This is necessary even in a simultaneous exchange without an exchange company involved. Occasionally, the seller of the replacement property or the buyer of the Relinquished Property will agree to act as an accommodating party to complete the exchange. Depending on how the transaction is structured, the accommodating party may incur additional liability in their efforts to assist in the exchange.

diamond gif Adjusted Basis: The adjusted basis is equal to the purchase price plus capital improvements less depreciation. Transactions involving exchanges, gifts, probates, and receiving property from a trust can have an impact on calculating the property's adjusted basis.

diamond gif Boot: Boot is any type of property received in an exchange that is not like kind, such as cash, mortgage notes, a boat or a can of anchovies. The Exchanger pays taxes on the boot to the extent of recognized gain.

diamond gif Capital Gain: Generally speaking, this is the difference between the sales price of the relinquished property less selling expenses and the adjusted basis of the property.

diamond gif Constructive Receipt: The critical question in a delayed exchange is whether the Exchanger has control over the proceeds during the exchange period. Any type of account to maintain exchange proceeds must substantially limit and restrict the Exchanger's control to avoid having the exchange disallowed.

diamond gif Delayed Exchange: Also called non-simultaneous, Starker or deferred, a delayed exchange is when the Replacement Property is received after the transfer of the Relinquished Property. All potential Replacement Properties must be identified within 45 days from the transfer of the Relinquished Property and the Exchanger must receive all Replacement Properties within 180 days or the due date of the Exchanger's tax return, whichever occurs first.

diamond gif Direct Deeding: At the direction of the Accommodator, title passes directly to the ultimate owners without the Accommodator being in the chain of title.

diamond gif Identification Period: Within forty-five days from the close of the Relinquished Property the Replacement Property must be identified by one of the three adopted rules:

  1. Up to three properties of any value;
  2. If over three properties, the aggregate fair market value of the replacement property can only be 200 percent of the fair market value of the relinquished property; or
  3. If the aggregate fair market value of the replacement property is over 200 percent, 95 percent of the identified property must be acquired.

diamond gif Improvement Exchange: Also called a build to suit exchange. In this type of exchange transaction the replacement property needs capital improvements before the exchanger takes title. To avoid the receipt of Boot, the Facilitator will take title to the Replacement Property during the construction phase. The property is transferred to the Exchanger when the improvements are complete. If all of the funds are used at the end of the 180 day period the property can be transferred and the exchange will be valid. This is true even if the improvements are not completed.

diamond gif Like Kind Property: Refers to the nature of the property the Exchanger gives up or receives in the exchange, such as real property for real property. It does not have to be similar in use such as raw land for raw land. The land could be exchanged for any other real property that will be used in a trade or business or held for investment.

diamond gif Passive Activities: Any activity that involves the conduct of any trade or business in which the taxpayer does not materially participate. Losses from passive activities generally are deductible only to the extent of passive income.

diamond gif Realized Gain: Refers to gain that is not necessarily taxed. In a successful exchange the gain is realized but not recognized and therefore not taxed.

diamond gif Recognized Gain: Refers to the amount of gain which is subject to tax when property is disposed of at a gain or profit in a taxable transfer.

diamond gif Relinquished / Replacement Property: The property given up / acquired by the exchanger in the 1031 exchange transaction.

diamond gif Reverse Exchange: An exchange where the Exchanger acquires or gains control of the Replacement Property before disposing of the Relinquished Property.

diamond gif Simultaneous Exchange: Also referred to as a concurrent exchange when the Exchanger transfers out of the Relinquished Property and receives the Replacement Property at the same time.

A [Top]

diamond gif ad valorem: (According to value) which refers to the value of property used in the computation of taxes.

diamond gif as-is: The existing condition of real estate, prior to any improvements contemplated under a lease.

diamond gif assignment: The transfer of leasehold interest in a property to a second party.

diamond gif attorn: To transfer to another or to agree to recognize a new owner of a property and to pay them rent.

B [Top]

diamond gif BOCA: Building Officials Conference of America, which writes the guidelines for basic, community building codes.

diamond gif BOMA: Building Owners and Managers Association which, among other things, established widely-accepted methods of computing square footage in commercial buildings. NOTE: Not use by all developers.

diamond gif base rent: The minimum monthly rent, usually computed on a per-square-foot-per-year basis, due under the lease (see percentage rent).

diamond gif base year: A specific year of a lease against which certain rent escalations and additional expense reimbursements to landlord may be calculated.

diamond gif building standard: A list of materials and finishes used in the the build-out, repair or restoration of a tenant's suite.

diamond gif build-out: Refers to the interior construction of a tenant's space whether new construction or the reconfiguration of existing space.

diamond gif build-to-suit A customized design and build approach to a tenant's space usually resulting in a single occupant building which is then leased or sold to the tenant.

C [Top]

diamond gif CCIM: Certified Commercial Investment Member. An internationally prestigious real estate designation from the CCIM Institute based in Chicago, IL. Formerlly know as the Commercial Investment Real Estate Institute or CIREI, CCIM's are among an elite corps of more than 9,000 professionals who hold the CCIM designation across North America and more than 30 countries. A Certified Commercial Investment Member (CCIM) is a recognized expert in the disciplines of commercial and investment real estate, and is an invaluable resource to the commercial real estate owner, investor, and user. For further information visit: www.ccim.com.

diamond gif certificate of occupancy "CofO": Presented by city building department to landlord or tenant after completion of tenant improvements and satisfactory inspections by city building department inspectors.

diamond gif commercial property: Other than residential. Owned or leased property such as office, research, retail and industrial properties.

diamond gif commercial real estate advocate: James T. Saint, CCIM, MRICS is a commercial real estate advocate specializing in tenant, corporate, or private investor consulting and advisory services for medium sized real estate projects through-out the Western United States and internationally. In addition, Saint provides services as a real estate advocate by helping to resolve real estate problems.

diamond gif commission: The fee paid to a real estate broker as procuring cause and/or for his or her services rendered in a real estate transaction. May be paid by either party in a transaction; it is usually governed by a prior written agreement.

diamond gif common area maintenance (CAM): An additional, annual charge often assessed to tenants for maintenance of the property's "common area", such as its entryways, hallways or bathrooms.

diamond gif construction management: Construction supervision by a qualified manager.

diamond gif Contact Us Form: Web mail form used for contacting Halo Realty & Investments Corporation.

diamond gif contract documents: The complete set of drawings, specifications, bidding instructions, construction agreement, etc. used in the construction industry. The AIA (American Institute of Architects) standard forms are routinely used, but are not mandatory.

diamond gif CPI: (Consumer Price Index) A measure of inflation as determined by the US federal government by using a "basket of goods". Used in leases as an impartial benchmark for the calculation of escalations.

diamond gif CRE: abbreviation for Commercial Real Estate.

D [Top]

diamond gif demising wall: The wall which separates a tenant's suite from another tenant's suite, or building common areas. In most cases, a demising wall will be constructed from floor to either the building roof deck or floor deck. The wall may also be a fire rated wall (see "partition wall").

diamond gif DBA: The abbreviation for "doing business as".

diamond gif deal: The state of agreement both parties are looking for.

E [Top]

diamond gif eminent domain: The right of a government entity to take (condemn) property with just compensation for the public good.

diamond gif escalation: The mechanism in a lease which increases the rent, usually annually. May be set forth in fixed steps, tied to increases in operating expense, or to increases in the Consumer Price Index (CPI).

diamond gif estoppel certificate: A statement concerning the status of an agreement, (usually a lease) and the performance of obligations under the agreement. A third party such as a lender, relies on the statement (which is usually unilaterally executed by the tenant) for such things as making a loan on property.

F [Top]

diamond gif fair market value (FMV): The price which the market would bring, over a reasonable period of time, for a property for sale or for lease.

diamond gif flex space: A building providing use flexibility between office, and other uses such as manufacturing, laboratory, warehouse, etc. Usually provides high bays and relocation flexibility for overhead doors and other entrances.

diamond gif force majeure: (An uncontrollable force) an event outside the reasonable control of the parties to a contract such as an "Act of God", war, riots or strikes which would prevents the parties from complying with the provisions of an agreement.

G [Top]

diamond gif go-dark: The condition that results from a tenant's closing its business, even though the lease is still in effect. Lease language may provide a means for a landlord to void a lease and take back the leased premises if the tenant ceases to operate its business at that location.

diamond gif grey shell: The purpose is to give the prospective owner or tenant a customizable "shell" in which to create an ideal commercial space that best suits their particular business, and generally consists of an unfinished interior and lacking heating, ventilating, and air conditioning (HVAC), and usually without lighting, plumbing, ceilings, elevators, or interior walls. A gray shell is ready for warm shell or vanilla shell improvements as well as tenant improvements (TI's), which are to be completed by the owner after taking delivery of the property or tenant once the lease agreement has been negotiated and executed.

diamond gif grey shell - additional concerns: Like many real estate terms and phrases, practical use and meanings of those terms associated with shell leases (e.g., vanilla shell, base shell, cold shell, warm shell, etc.) differ by location and situation, sometimes even within the same region or municipal area. As they say, the devil is in the details. The lease or sales contract should clearly and exactly specify the degree to which construction of any sort of "shell" or "box" building has been or will be completed prior to tenant occupancy. As either a tenant or landlord, you should not assume that the other party's definitions of shell lease terminology are the same as yours. Get it in writing, and make sure you understand and agree with all the terms and conditions of the shell lease agreement before you sign. If necessary, have a real estate attorney review the contract prior to its execution.

diamond gif gross lease: Commonly specifies one rental amount inclusive of rent, taxes, utilities, maintenance, etc. associated with the rental of a property.

diamond gif gross square feet: Usually refers to gross area of a building by measuring from the outside of its exterior walls and including all vertical penetrations, such as elevator shafts. Also includes basement space.

diamond gif ground lease: A long-term lease of land, entered into by a tenant to construct a building (at its expense) from which to conduct its business.

H [Top]

diamond gif Halo Realty, Halo Realty & Investments Corporation: Commercial real estate company specializing in corporate, private investor or tenant consulting and advisory services for medium sized real estate projects through-out the Western United States.

diamond gif HVAC: Acronym for heating, ventilation and air conditioning.

diamond gif hold over: The condition that results when a tenancy exists beyond the end of the term of a lease.

I [Top]

diamond gif improvements: See "leasehold improvements".

J [Top]

diamond gif James T. Saint, CCIM, MRICS Commercial Real Estate Advocate™ specializing in tenant, corporate, or private investor consulting and advisory services for medium sized real estate projects through-out the Western United States.

K [Top]

L [Top]

diamond gif lease commencement date: The date upon which the lease commences and the obligations of the parties begins (see also "rent commencement date").

diamond gif leasehold improvements: Construction or improvements for the purpose of preparing the premises for the conduct of tenant's business. Improvements permanently attach to the premises unless they are trade fixtures, and they remain with the premises after the end of term of the lease.

diamond gif letter of attornment: see "attorn".

diamond gif lien waiver: A waiver of mechanic's lien rights signed by a general contractor and his subcontractors.

diamond gif load factor: The amount of square footage is a lease, in addition to a tenant's usable square footage, which represents tenant's pro rata share of the building's common area/s. May also be referred to as a percentage of building's rentable square feet.

M [Top]

diamond gif mechanic's lien: A claim provided for under state statutes securing the priority of payment for the value of work and materials furnished in the construction or repair of real property.

diamond gif month-to-month: A lease for a specific period of time, usually one month, which automatically renews itself for the same period of time, unless landlord or tenant provide notice to terminate.

diamond gif MRICS: Member of the Royal Institution of Chartered Surveyors (RICS). The Royal Institution of Chartered Surveyors (RICS), with headquarters in London, UK is the leading organization of its kind in the world for more than 100,000 professionals in property, land, construction and related environmental issues. The designation of MRICS is a badge of achievement and the professionals who carry it are expected to show the highest level of accomplishment throughout their career. For further information visit: www.ricsamericas.org.

N [Top]

diamond gif Net or NNN: See net lease or triple-net below.

diamond gif net lease: Structured such that a base rent for a rental property is paid to landlord. In addition, other charges such as utilities and building property taxes, insurance and maintenance are also payable by tenant. Sometimes referred to as net, triple net or absolute net lease.

diamond gif notice of commencement: Legal notice to the county's register of deeds that remodeling or improvements will be undertaken at an address.

diamond gif notice of furnishing: Legal notice by a subcontractor or supplier that it furnished labor or materials, subsequent to the notice of commencement, thereby establishing the legal right to be paid for the services rendered.

O [Top]

diamond gif operating expenses: The costs associated with operating income producing property usually before interest and income tax expense, but including property taxes, insurance, repairs and maintenance, replacement reserves.

diamond gif option: A term in a lease for the rights either tenant or landlord may have with respect to one another, usually with stipulations regarding timing of those rights.

P [Top]

diamond gif partition wall: A wall constructed to create work areas such as offices or conference rooms. Depending on security needs, a partition wall may not be constructed to the roof or floor decking, but may terminate at lower point such as a suspended ceiling.

diamond gif party wall: Usually located in a fraternity house.

diamond gif pass-through expense: An expense associated with tenancy in which landlord "passes through" to tenant certain increases in building operating expenses occurring after a base year in the lease.

diamond gif percentage rent: Provides for a rent to be paid as a percentage of retail sales, usually quarterly or annually. Often coupled with a base rent.

diamond gif planned unit development (PUD): A zoning category in which each of the proposed buildings or uses are approved in advance as a part of a parcel's overall use. Usually preserves large common or open areas on a site.

diamond gif premises: In commercial real estate, the description of the leasehold and the specific square footage for which the parties enter into a lease.

diamond gif punch list: A list of incomplete or unacceptable construction items which upon remedy and completion will usually complete the obligations of the contractor under a construction contract.

Q [Top]

R [Top]

diamond gif Real Estate Advocate™: Halo Realty's James T. Saint, CCIM, MRICS is licensed to act as an agent for another person or business that results in non-commission driven advice provided soley in the client's best interests. With this unique advocacy retainer relationship that transcends the norm, Halo Realty places the client's long term financial objectives as the primary motivation of any real estate analysis and decisions.

diamond gif real estate broker: A person licensed to act as an agent for another person or business to negotiate a lease or purchase of a leasehold or property, respectively, for a fee.

diamond gif real property: The land and anything permanently attached to the land such as buildings, parking lots, landscaping, or other items which would otherwise be classified personal property if not attached, excluding fixtures designed to be removable and reusable (see "trade fixtures").

diamond gif Registration Form: Web mail form used to register with the Halo Realty Web Site Data Base and receive a free gift.

diamond gif renewal option: Lease language that provides the means for tenant to give landlord notice of its intent to renew (extend) the lease.

diamond gif rent commencement date: The date upon which the rent and usually the term of the lease begins. May be different from the lease commencement date when certain obligations must be fulfilled such as the construction of tenant improvements.

diamond gif rentable area: Denotes the number of square feet in a commercial building deemed to be rentable, according to BOMA. May include a common area load factor or allowance for building amenities such as common area hallways and lavatories.

diamond gif RICS: Royal Institution of Chartered Surveyors (RICS) with headquarters in London, UK is the leading organization of its kind in the world for more than 100,000 professionals in property, land, construction and related environmental issues. For further information visit: www.ricsamericas.org.

S [Top]

diamond gif sale-leaseback: A financing arrangement usually designed to raise capital for the property owner or obtain favorable income tax results.

diamond gif security deposit: Generally, a deposit of money by a tenant with a landlord to secure performance of a lease.

diamond gif setback: Zoning requirement that requires a building or an improvement to be set back a certain number of feet from the property line.

diamond gif shell space: The interior condition of either a new or existing building without improvements or finishes. Typically denotes floor, windows, walls and roof of an enclosed premises. May include some electrical or plumbing improvements, but not demising walls.

diamond gif shell leasing: Shell leasing and its various forms (warm, cold, base, etc.) are used primarily in commercial real estate, but are gaining popularity in upscale condominiums and townhouses and other high-end residential real estate transactions. The idea is to attract either tenants or buyers, or both, by offering customizable living units. Financial incentives in the form of tenant (or buyer) improvement allowances afford new residents the opportunity to select nearly all aspects of interior decor, including relatively large projects such as plumbing and fixtures, wiring, and interior walls.

diamond gif special assessment: Any special charge levied against real property for public improvements the benefit the assessed property.

diamond gif subordination agreement: An agreement by which the tenant agrees to the priority of a mortgage over the leasehold interest, or other claim held by the tenant on the property.

diamond gif substantial completion: The point during construction at which the contractor is ready to turn the property over to the tenant or client for acceptance and final punch list. Usually occurs upon the issuance of a certificate of occupancy.

T [Top]

diamond gif tenant representation: Arrangement whereby a prospective tenant engages a real estate broker as its exclusive agent in negotiating a lease for commercial space. Also know as a "buyer's broker."

diamond gif tenant's use clause: Lease language which specifies the business activities tenant will engage in at the leased premises.

diamond gif trade fixtures: Certain fixtures installed at the premises which are unique to tenant's business, and which may generally be removed by tenant at the end of the term of the lease.

diamond gif triple net or NNN: Generally refers to the requirement for the lessee to pay for its share of the property's taxes, insurance and operating expenses.

U [Top]

diamond gif usable square feet: Denotes the number of square feet in a commercial building or suite deemed to be usable by BOMA.

V [Top]

diamond gif vanilla box or vanilla shell: The interior condition of either a new or existing building or suite in which the limited tenant improvements generally consist of heating/cooling with delivery systems, lighting, electrical switches and outlets, lavatories, a finished ceiling, walls that are prepped for painting, and a concrete slab floor or in some cases a dirt floor. Also called a "white box".

W [Top]

diamond gif Web Site Registration Form: Web mail form used to register with the Halo Realty Web Site Data Base and receive a free gift for registering.

diamond gif white box: The interior condition of either a new or existing building or suite in which the limited tenant improvements generally consist of heating/cooling with delivery systems, lighting, electrical switches and outlets, lavatories, a finished ceiling, walls that are prepped for painting, and a concrete slab floor or in some cases a dirt floor. Also called a "vanilla box or vanilla shell".

X [Top]

Y [Top]

Z [Top]


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