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Glossary


“AS IS” CONDITION

Premises taken by buyer or tenant without any modifications and with no warranty as to the condition of the premises.

ATTORNMENT

To agree to continue as a tenant under a new Landlord. Without such a provision in a sublease, should the Sublessor default under the Master Lease, the rights of the Subtenant will terminate regardless of the term of the sublease.

BASE RENT

The primary rental to be paid, exclusive of expense pass-throughs, additional rent, or rental increases.

BASE YAER

The year on which the tenant’s operating costs are based – typically the calendar year during which the tenant’s occupancy commences.

BOMA

Building Owners and Managers Association.

BUILDING CODES

Laws – local, state, and national – which govern building construction. Industry standard is the Uniform Building Code, or UBC.

BUILDING PERMIT

Permission granted by a public authority to proceed with construction according to the approved plans.

C.C. & R.'S

Covenants, conditions and restrictions of record concerning a particular property. Includes items such as setbacks, easements and property-oriented restrictions.

CERTIFICATE OF OCCUPANCY

Issued by a public authority upon completion of construction of tenant improvements.Authorizes use of the space for specific activities and for a defined number of people.

COMMON AREA

Those areas in the building which are used by all office tenants or which service all office areas. Common areas include corridors, public lobbies, janitorial closets, rest rooms and, in some buildings, mechanical space, loading docks and other service areas which benefit all tenants.

COMMON AREA MAINTENANCE

CAM refers to the maintenance of any and all areas which are for the convenience of all tenants.The costs associated therewith may be paid by the landlord by incorporation in the rent structure with a base year established and increases passed on to the tenants, or by a formula in which all costs including management thereof are directly passed on to the tenant.

CONTIGUOUS

Generally refers to actually touching or bordering on, as in contiguous space.

C.P.I.

Consumer Price Index

DEMISING

Demising walls that separate tenants from each other and from public corridors.These partitions require high fire proof ratings, typically run higher than the ceiling height, and often run to the concrete slab of the floor above.

EXPENSE STOP

An identified dollar amount, usually on a dollar per square foot per year basis, that the landlord is responsible for paying for operating costs.Any expenses over the stop will be charged to the tenant.

HVAC

Acronym that stands for heating, ventilating and air conditioning systems.

LEASE TYPES INDUCTRIAL LEASE

Net Lease – where the rent that is paid to the Landlord is exclusive of all operating expenses, and typically the tenant has the responsibility for all services, taxes, maintenance, etc.

Industrial Gross – where the tenant has the responsibility for the payment of internal maintenance, repairs, utilities, janitorial, etc., and the Landlord has the responsibility for taxes, insurance, external maintenance, etc.

Modified Net – where each and every expense must be identified as to where the responsibility for payment lies. Taxes are always paid for by the tenant; all other expenses may be negotiated.

OFFICE LEASE

Full Service Lease – where the Landlord contracts for all services and operational costs and includes those expenses in a rental amount.

Net Lease – where, despite the fact that the Landlord contracts for all services and pays all operational costs directly, the costs are prorated and bill to each tenant separately in addition to the tenant’s base rent.

LOSS FACTOR, OR LOAD FACTOR

The factor (expressed as a %) that when multiplied by the usable square footage of a multi-tenant building yields the proration of common area allocated to that usable space. Rentable area is then the usable square footage plus the common area proration.

OPERATING EXPENSES

All expenses associated with the operation of a building including, but not limited to, utilities, taxes, insurance, maintenance, janitorial service and security.

OPERATING EXPENSE PASS THROUGH

An agreement between the tenant and landlord which states that the tenant will pay a pro-rate share of the increases in operating expenses over those in the designated base year, or in addition to the expense stop.

PRELIMINARY PLAN

A floorplan, which shows the degree to which your space requirements and layout will fit into a particular space.This plan typically shows interior office walls only.

PROPORTIONATE SHARE, OR PRO RATE SHARE

The area of the building, expressed as a percentage, which a tenant leases (the tenant’s rentable area divided by the total rentable area of the building).This number is used in allocating building operating expenses and taxes.

PUNCH LIST

An itemized list that notes any incomplete or unsatisfactory construction. It is prepared after the contractor has notified the owner that the tenant improvements are substantially complete. Major problems on the punch list should be fixed prior to move-in. Minor ones are usually dealt with after the move-in.

RENT COMMENCEMENT DATE

The date on which the tenant begins paying rent. Depending on the nature of the market, it may coincide with the lease commencement date or it may be several months after that.

RENTABLE AREA

The total area for which rent is paid. It includes the space actually occupied by the tenant, as well as a pro-rate allocation for common areas such as public corridors, building lobbies, core areas, and restrooms.

RENTAL TERMS

Effective Rent – The dollar per square foot per year figure, which the tenant pays on an average over the term of the lease. Example:A 5-year lease with 6 months’ free rent offers an effective rate with a 10% discount from the face rate.

Face Rate – The identified rental rate in a lease, which is subsequently discounted by concessions offered by the landlord, also known as contract rate.

Free Rent – Period of time in which the tenant occupies the premises under the lease, but does not pay rent.

Full Service – A rental rate which includes normal building standard services as provided by the landlord within the base year rental.Tenant will pay its pro-rate share of subsequent increases in the operating expenses over the base year or expense stop.

Net Rent – A lease in which the tenant is responsible for operating expenses associated with its proportionate share of occupancy of the building as of the lease commencement date.There is no base year or expense stop.

Rent Escalations – Changes in the base rent during the term of the lease. Usually tied to “fair market” or C.P.I. reviews.

Stair-Stepped Rent – A rental rate which increases by fixed amounts during the period of the lease term.

SPACE PLAN

See Preliminary Plan.

SUBORDINATION

An agreement to give priority to a right over another right.

SUBROGATION

The substitution of one creditor for another, coupled with transference of the claims and rights of the old creditor. Thus, without a “waiver of subrogation”, if a tenant negligently causes the destruction of or damage to the lease hold premises, the landlord’s insurance company, after paying for the damage, will have the rights of the landlord to sue the tenant for its negligence.

SUBSTANTIAL COMPLETION

The point in the construction process when the contractor certifies that the majority of work has been completed, after which the tenant is expected to move in.To avoid unnecessary expense and confusion, a tenant should make sure his understanding of substantial completion is the same as the landlord’s.Without a mutually agreed upon definition, a tenant may be expected to move in before long-lead-time items are complete (such as the installation of glass doors or special lighting), or before the tenant has had a chance to compile a punch list that identifies items needing repair or completion.

TENANT IMPROVEMENT ALLOWANCE

A dollar amount or a list of items which the landlord contributes to the tenant in exchange for the rent being charged.

TURN-KEY

A complete build-out of the tenant’s premises to the tenant’s specifications.

USABLE AREA

The space which the occupant actually occupies, which is less than the rentable area.

WAIVER OF CIVIL CODE SECTIONS

Civil Code Sections 1932(2) & 1933(4) – Provides that a lease shall terminate on a major destruction of the premises.These Civil Codes must be waived, because the tenant’s rights in the event of such destruction will be governed solely by the lease provisions. Civil Code Section 1942 – Provides that if the landlord neglects to make certain repairs to the premises as required by the lease, the tenant may vacate the premises and terminate the lease.This provision is customarily required to be waived by the landlord, because it would otherwise give the tenant the right to terminate the lease for a relatively small repair cost.

WORKING DRAWINGS

Detailed construction drawings required for obtaining building permits and the buildout of the space.

 

 
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