Staying on top of the real estate terms
Do the mere words "triple net lease" make you sweat? Eyes glaze over each time you confront your office space issues? Then consult our handy guide to common commercial real estate terms:
Attorn: To transfer to another or to agree to recognize a new owner of a property and to pay them rent.
Built-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.
Common area maintenance: An additional, annual charge often assessed to tenants for maintenance of the property's "common area", such as its entryways, hallways or bathrooms.
Lease: 1. A contract between owner and tenant setting forth conditions upon which a tenant may possess and use the property and the term of the occupancy. 2. Sometimes used as a method of financing as an alternative to purchasing property outright.
Lessor: An owner or landlord who entered into a lease agreement and granted a tenant possession and use.
Lessee: The party commonly referred to as the tenant who has the right to possession and use of real estate for a limited time under a lease agreement.
Lease expiration exposure schedule: A listing of the total square footage of all current leases that expire in each of the next five years, without regard to renewal options.
Lease option: A lease in which the lessee (tenant) has the right to purchase real property under certain conditions such as a stipulated price or within a stipulated time frame either during or at the end of the lease term.
Lease-purchase: An option sometimes used by sellers to rent a property to a consumer, who has the option to buy the property within a specified period of time. Typically, part of each rental payment is put aside for the purpose of accumulating funds to pay the down payment and closing costs.
Leasehold interest: The right to hold or use property for a fixed period of time at a given price, without transfer of ownership.
Sale-leaseback: A financing arrangement usually designed to raise capital for the property owner or obtain favorable income tax results.
Renewal option: Lease language that provides the means for tenant to give landlord notice of its intent to renew (extend) the lease.
Tenant's use clause: Lease language which specifies the business activities tenant will engage in at the leased premises.
Triple net lease: A lease that requires the tenant to pay all expenses of the property being leased in addition to rent. Typical expenses covered in such a lease include taxes, insurance, maintenance and utilities. Commonly referred to as "NNN" lease or "3N".
Sources: Real Estate Words; Commercial leasing terms from First Martin Corporation; Real estate terms at RentLaw
