Chapter 24 - Commercial Property Overview

Question 1

Amenity Purchaser

Answer 1

Person who values a property based on its ability to fulfill his specific business needs, unlike investors who value a property based primarily on its investment return

Question 2

Commercial Broker’s Lien

Answer 2

A lien that may be filed by a real estate broker on commercial real estate, or any interest that commercial real estate, in the amount of commission the broker is due under a written agreement with either the owner of the property or the prospective buyer or tenant

Question 3

Common Area Maintenance (CAM)

Answer 3

A line item fee owed by most commercial tenants to pay for their share of cost of maintaining common areas or service ares such as the lobby, corridors, elevators, restrooms, and stairwells, which are used by two or more tenants and/or third parties and are not under the control of any one tenant

Question 4

Escalation Clause

Answer 4

Lease clause that allows an increase in rent for increases in expenses paid by the landlord, such as real estate taxes, operating costs, and cost of living expenses

Question 5

Graduated Lease

Answer 5

A lease in which the the rent changes throughout the lease term. The contract specifies how much as well as when the rent will change

Question 6

Gross Lease

Answer 6

A lease in which the lessor pays all operating and maintenance costs associated with the property

Question 7

Land Lease (Ground Lease)

Answer 7

A lease in which a tenant leases unimproved land on a long-term basis and typically includes a provision that provides the tenant will construct a building on the property, which he will own upon completion. The lessor retains the rights to the land. Essentially, ownership of the land and improvements (building) are separated.

Question 8

Net Lease

Answer 8

Lease for which a tenant pays all taxes, insurance etc., plus utilities and rent.

Question 9

Pass-Through

Answer 9

A clause found in leases, most commonly in commercial leases, that allows property owners to pass along unexpected increases in operating costs to tenants

Question 10

Sale and Leaseback

Answer 10

A method for financing commercial or industrial properties in which a company constructs the building then becomes a tenant by selling the building to an investor

Question 11

Setback

Answer 11

The legal distance that a building must be from a designated position such as a property line; determined by setback requirements.

Question 12

Subdivision

Answer 12

1. Land divided into two or more parcels. 2. A residential development