Accredited Investor: Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000. Or any natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.
Adjoining: In actual contact with another object (i.e., attached). Same as 'Contiguous'.
Agent: An individual/entity who transacts, represents, or manages business for another individual/entity. Permission is provided by the individual/entity being represented.
Assessment: The process of placing a value on an asset for the purpose of taxation. Also refers to the tax itself. Also called property assessment.
Assignee: Individual to whom a contract is assigned.
Assignment: The manner by which a contract is transferred from one individual to another individual.
Assignor: An individual who transfers a contract to another individual.
Beneficiary: A person or entity named in a will or a financial contract as the inheritor of property when the property owner dies. A beneficiary can be a spouse, child, charity or any entity or person to whom the property owner would like to leave his or her possessions and assets.
Build Out: The construction or improvements of the interior of a space, including flooring,walls, finished plumbing, electrical work, etc.
Building Permit: Written government permission to develop, renovate, or repair a building.
Cancellation Clause: A provision in a contract (e.g., lease) that confers the ability of one in the lease to terminate the party's obligations. The grounds and ability to cancel are usually specified in the lease.
Cap Rate: The discount rate used to determine the present value of a stream of future earnings. Typically this will be an appropriate risk-free return plus a premium to reflect the risk of that specific investment.
In real estate, the rate of return on a property.
Capital Improvement: Any major physical development or redevelopment to a property that extends the life of the property. Examples include upgrading the elevators, replacement of the roof, and renovations of the lobby.
Certificate of Occupancy (CO): The government issues this official form, which states that the building is legally ready to be occupied.
Chattel: Household goods, including personal property such as lamps, desks, and chairs.
Common Area Maintenance (CAM): 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.
Contiguous: Touching at some point or along a boundary.
Contingency: A requirement in a contract that must occur before that contract can be finalized.
Contract: A legal agreement between entities that requires each to conduct (or refrain from conducting) certain activities. This document provides each party with a right that is enforceable under our judicial system.
Covenants: Wording found in deeds that limits/restricts the use to which a property may be put (e.g., no bars).
Deed: A signed, written instrument that conveys title to real property.
Deed Restriction: An imposed restriction in a deed that limits the use of the property. For example, a restriction could prohibit the sale of alcoholic beverages.
Default: Failure to fulfill a promise, discharge an obligation, or perform certain acts.
Delivery: Transfer something from one entity to another.
Down Payment: The part of the purchase price paid in cash up front, reducing the amount of the loan or mortgage.
Due Diligence: The process of gathering information about the condition and legal status of assets to be sold.
Ejectment: Action to regain possession or real property. This is a last-ditch effort that is used when there is no relationship between landlord and tenant.
Eminent Domain: The government's right to condemn and acquire property for public use. The government must provide the owner fair compensation.
Endorsement: Signing one's name on the back of a check.
Equity: Ownership interest in a corporation in the form of common stock or preferred stock. It also refers to total assets minus total liabilities, in which case it is also referred to as shareholder's equity or net worth or book value. In real estate, it is the difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house). In the context of a futures trading account, it is the value of the securities in the account, assuming that the account is liquidated at the going price. In the context of a brokerage account, it is the net value of the account, i.e. the value of securities in the account less any margin requirements.
Ownership interest in a corporation in the form of common stock or preferred stock.
Total assets minus total liabilities; here also called shareholder's equity or net worth or book value.
The value of a property minus the owner's outstanding mortgage balance.
Fairness in law.
Escrow: A written agreement among parties, requiring that certain property/funds be placed with a third party. The object in escrow is released to a designated entity upon completion of some specific occurrence.
Estoppel Certificate: A legal instrument executed by the one taking out the mortgage (i.e., mortgagor). The owner of a property may require an individual leasing a property to sign an estoppel certificate, which verifies the major points (e.g., base rent, lease commencement and expiration) existing lease between the landlord and tenant.
Eviction (Actual): Physical removal of a tenant either by law or force.
Eviction (Constructive): The landlord or his agents disturb the tenant, rendering the leased space unfit for the tenant's previous use.
Eviction (Proceeding): A legal proceeding by the landlord to remove a tenant.
Exclusive Agency: An agreement in which one broker has exclusive rights to represent the owner or tenant. If another broker is used, both the original and actual broker are entitled to leasing.
Fiduciary: A person who represents another on financial/property matters.
Fixtures: Personal property so attached the land or building (e.g., improvements) it is considered part of the real property.
Grace Period: Additional time allowed to complete an action (e.g., make a payment) before a default or violation occurs.
Gross Lease: A lease of property whereby the landlord (i.e., lessor) pays for all property charges usually included in ownership. These charges can include utilities, taxes, and maintenance, among others.
Holdover Tenant: A tenant who remains in possession of leased property after the lease term expiration.
Income: For corporations, revenues minus cost of sales, operating expenses, and taxes, over a given period of time. Income is the reason corporations exist, and are often the single most important determinant of a stock's price. Income is important to investors because they give an indication of the company's expected futuredividends and its potential for growth and capital appreciation. That does not necessarily mean that low or negative earnings always indicate a bad stock; for example, many young companies report negative income as they attempt to grow quickly enough to capture a new market, at which point they'll be even more profitable than they otherwise might have been. also called earnings.
Incompetent: An individual who is unable to handle his own affairs by reason of some medical condition (e.g., insanity, Alzheimer's).
Instrument: A written legal document created to secure the rights of the parties participating in the agreement.
Insurance: A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest. Examples include car insurance, health insurance, disability insurance, life insurance, and business insurance.
Interest Rate: A rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve policies. For example, if a lender (such as a bank) charges a customer $90 in a year on a loan of $1000, then the interest rate would be 90/1000 *100% = 9%.
Irrevocable: Incapable of being altered, changed, or recalled.
Joint Tenancy: Ownership of real property by two or more individuals, each of whom has an undivided interest with the right of survivorship.
Judgement: A formal decision issued by a court relating to the specific claims and rights of the parties to an act or suit.
Landlord: One who rents property to a tenant.
Lease (Commercial): A contract whereby the landlord grants the tenant the right to occupy defined space for a set period at a specific price (i.e., rent).
Leasehold: The estate or interest a tenant has as stated in the tenant's lease.
Lessee: An individual (i.e., tenant) to whom property is rented under a lease.
Lessor: An individual (i.e. landlord) who rents property to a tenant via a lease.
Letter of Intent (LOI): An informal, usually non-binding, agreement among parties indicating their serious desire to move forward with negotiations.
Listing: An employment contract between principal and agent that authorizes the agent (such as a broker) to perform services for the principal and his property.
Loss: A reduction in the value of an investment.
A condition in which a company's expenses exceed its revenues. Opposite of profit.
Loss Factor: What percentage of the gross area of a space is lost due to walls, elevator, etc. Rule of thumb in Manhattan is approximately 15%.
Mandatory: A requirement that must be conformed to as specified in any written document.
Market Price: The actual selling or leasing price of a property.
Market Value: The expected price that a property should bring if exposed for lease in the open market for a reasonable period of time and with market savvy landlords and tenants.
Meeting of the Minds: When all individuals to a contract agree to the substance and terms of that contract.
Minor: A person under a legal age, usually under 18 years old.
Multiple Listing: An arrangement among Real Estate Board of Exchange Members, whereby each broker presents the broker's listings to the attention of the other members so that if a lease results, the commission is divided between the broker bringing the listing and the broker making the lease.
Net Income: In business, what remains after subtracting all the costs (namely, business, depreciation, interest, and taxes) from a company’s revenues. Net income is sometimes called the bottom line. Also called earnings or net profit.
For an individual, gross income minus taxes, allowances, and deductions. An individual's net income is used to determine how much income tax is owed.
Net Lease: Also called triple net lease. The lessee pays not only a fixed rental charge but also expenses on the rented property, including maintenance.
Non-Accredited Investors: Persons or entities who do not satisfy one or more of the alternative definitions of the term "Accredited Investor" and who, by virtue of their financial resources acumen, satisfy a joint venture manager or its authorized representatives that such investors satisfy the suitability standards imposed by Rule 506 of Regulation D and otherwise meet the finanacial investment standards so required by each joint venture manager.
Non-Disturbance Agreement: The tenant signs this to prevent himself from being evicted if the property owner does not pay its mortgage to the bank.
Notary Public: A public officer who is authorized to witness and verify certain documents (e.g., contracts, deeds, mortgages). Also, an affidavit may be sworn before this public officer.
Obligee: The person who will receive the outcome of an obligation.
Obligor: An individual who has engaged to perform an obligation to another person (i.e., obligee).
Open Listing: A listing given to any broker without liability to compensate any broker except the one who first secures a buyer who is ready, willing, and able to meet the terms of the listing, or secures the acceptance by the landlord of a satisfactory offer; the lease of the property automatically terminates the listing.
Option: A right given to purchase or lease a property upon specified terms within a specified time. If the right is not exercised, the option holder is not subject to liability for damages. If the holder of the option exercises it, the grantor of option must perform the option's requirements
Passive Income: Income that does not require active participation.
Per Annum: The amount of return on investment each year.
Percentage Lease: A lease of property in which the rent is based upon the percentage of the sales volume made on the specific premises. There is usually a clause for a minimum rent as well.
Personal Property: Any property which is not real property. Examples include furniture, clothing, and artwork.
PMI (Private Mortgage Insurance): PMI (Private mortgage insurance) is paid by a borrower to protect the lender in case the borrower defaults on the loan. PMI is required when the downpayment is less than 20% of the property's market value.
Power of Attorney: A written instrument duly signed and executed by an individual which authorizes an agent to act on his behalf to the extent indicated in the document.
Principal: The employer (e.g., landlord) of an agent or broker. This is the agent's or broker's client.
Private Placement Offerings (PPO): The sale of securities directly to institutional investors, such as banks, mutual funds, insurance companies, pension funds, and foundations. Does not require SEC registration, provided the securities are bought for investment purposes rather than resale, as specified in the investment letter.
Profit: The positive gain from an investment or business operation after subtracting for all expenses. Opposite of loss.
Property: That which is legally owned by an individual or entity.
Quiet Enjoyment: The right of an landlord or tenant to use the property without disturbances.
Rate of Return: The annual rate of return on an investment, expressed as a percentage of the total amount invested. Also called return.
Real Estate Board: An organization whose members consist primarily of real estate professionals such as brokers.
Real Estate Syndicate: When partners (either with or without unlimited liability) form a partnership to participate in a real estate venture.
Real Property: Land and any capital improvements (e.g., buildings) erected on the property.
Realtor: A coined word which may only be used by an active member of a local real estate board, affiliated with the National Association of Real Estate Boards.
Rent: Compensation from tenant to landlord for the use of real estate.
Restriction: A restriction, often specified in the deed, on the use of property.
Return on Investment (ROI): The income that an investment provides in a year.
Revocation: An act of rescinding power previously authorized.
SEC: The Securities and Exchange Commission.
Situs: The location of a property.
Specific Performance: When a court requires a defendant to carry out the terms of an agreement or contract.
Square Feet: The usual method by which rental space is defined. It is the area of that space, calculated by taking length times width. For example, a room 30 feet by 60 feet has an area of 1,800 square feet.
Statute: A law established by an act of a legislature.
Statute of Frauds: State law (founded on ancient English law) which requires that contracts must be reduced to written form if it is to be enforced by law.
Statute of Limitations: A law barring all right of redress after a certain period of time from the moment when a cause of action first arises.
Subagent: An agent of an individual already acting as an agent of a principal.
Subletting: The leasing of space from one tenant to another tenant.
Subscribing Witness: The witness to the execution of an instrument who has written his name as proof of seeing such execution.
Subscription Agreement: An application by an investor to join a limited partnership. In most cases, the investor will have to fill out a form created by the general partner evaluating the investor's suitability for the investment in the partnership. Note:
All limited partners must be approved by the general partner. Becoming a limited partner rather than a partner is an attractive option since it means the investor's liability is limited to the amount he or she has invested in the partnership.
Surrender: The cancellation of a lease by mutual consent of the tenant and the landlord.
Tenancy at Will: A license to occupy or use lands and buildings at the will of the landlord.
Tenancy by the Entirety: An estate which exists only between husband and wife. Each has equal right of enjoyment and possession during their joint lives, and each has the right of survivorship.
Tenancy in Common: Ownership of property by two or more individuals, each of whom has an undivided interest, without the right of survivorship.
Tenant Improvements: 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.
Tenants at Sufferance: An individual who comes to possess land via lawful title and keeps it in perpetuity without any title.
Terms: The period of time that an agreement is in effect.
Tie-in Arrangement: A contract where one transaction depends upon another transaction.
Tort: A wrongful act or violation of a legal right for which a civil action will lie.
Triple Net Lease: A lease requiring tenants to pay all utilities, insurance, taxes, and maintenance costs.
Urban Property: Property in a city or a high-density area.
Valid: A binding situation that is authorized and enforceable by law.
Valuation: Estimated price, value, or worth. Also, the act of identifying a property's worth via an appraisal.
Variance: Government authorization to use or develop a property in a manner which is not permitted by the applicable zoning regulations.
Violation: Act, condition, or deed that violates the permissible use of property.
Waiver: The intentional relinquishment or abandonment of a specific claim, privilege, or right.
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.
Zone: An area, delineated by a governmental authority, which is authorized for and limited to specific uses.
Zoning Ordinance: A law by a local governmental authority (e.g., city or county) that sets the parameters for which the property may be put to use.
