Frequently Asked Questions

Commercial Real Estate Terms


  • ADA - Americans With Disabilities Act U.S. civil-rights law, enacted 1990, that forbids discrimination of various sorts against persons with physical or mental handicaps. Its primary emphasis is on enabling these persons to enter the job market and remain employed, but it also outlaws most physical barriers in public buildings, transportation, telecommunications, and government services.
  • Allowance - A set dollar amount provided by the Landlord under a lease to be used by the Tenant for a specific purpose. Examples include allowances for tenant improvements, moving expenses design fees, etc.
  • Amortization - The process of paying off a debt together with interest, usually with equal payments at regular intervals over the term of the lease.
  • Base Year - The year of a lease term that is used as the standard when implementing an escalator clause. Operating costs are judged higher or lower during the next year when compared to the base year.
  • CAM Charges - Common Area Maintenance charges. This is the amount of additional rent charged to the tenant, in addition to the base rent, to maintain the common areas of the property shared by the tenants and from which all tenants benefit. Examples include: snow removal, outdoor lighting, parking lot sweeping, insurance, property taxes, etc. Most often, this does not include any capital improvements that are made to the property.
  • Commencement Date - The date on which a lease begins. This is typically but not always the day on which the tenant takes possession of the leased space.
  • Certificate of Occupancy (CO) - The government / township issues this official form, which states that the building is legally ready to be occupied.
  • Demised Area - The walled off and secured area of a leased space, separated from spaces leased to others (by a "demising" wall). Also measured as useable area.
  • Expense Stop - A ceiling or limit ( typically per Sq Ft.) on the dollar amount one party, typically the landlord, will pay in an expense category. This is determined by adding some percentage or dollar amount to the base year costs.
  • Extension Option – A agreement of continuation of occupancy under the same conditions, as opposed to a renewal, which implies new terms or conditions. In a lease, it is a right granted by the landlord to the tenant whereby the tenant has the option to extend the lease for a longer term.
  • Gross Lease - A lease of property whereby the landlord pays for all property charges typically included in ownership. Some of These charges can include utilities, taxes, and maintenance,etc.
  • HVAC - Heating, Ventilation, Air Conditioning. A general term encompassing any system designed to heat and cool a building.
  • Landlord (Lessor) - The party (usually the owner) who gives the right to possession in return for a rent.
  • Lease Term - The length of term that the tenant has the right to possess a specific piece of real estate.
  • Lessee (Tenant) - The party to whom a lease  is given in return for rent.
  • Open Listing - Any property that is leased directly by the owner. Useually, these are called open listings, in which the owner will pay a full commission to any broker who brings a tenant to the property.
  • Rentable Area - The square footage for which rent can be charged.  Including all walls interior and exterior.
  • Request For Proposal (RFP) - A document typically issued by a tenant's agent to an owner(s), inviting the owner to submit a proposal to lease vacant space. The RFP is intended to outline specifics of th lease and identify and concerns that the lessee may have with the space.
  • Right of First Refusal - A right, usually given by an owner to a tenant, which gives the tenant a first chance to buy the property or lease a portion of the property if the owner decides to sell or lease.
  • Sublease - A lease, under which the lessor is the lessee of a prior lease of the same property. The sublease may be different in terms from the original lease, but cannot contain a greater property interest.
  • Tenant Improvements(TI's) - Work done on the interior of a space, can be paid for by landlord, tenant, or some combination of both, depending on the terms of the lease.
  • Triple Net Lease- A lease requiring the tenant to pay in addition to a fixed rental, the expenses of the property leases, such as taxes, insurance, maintenance, utilities, cleaning etc.
  • Useable Area - The square footage occupied exclusively by tenant within a tenant's leased space. The useable area times the load factor for common area results in rentable area on which rent is charged.
  • Work Letter - An amount of money that a landlord agrees to spend on the construction of the interior of a space per the lease, usually negotiated.