Real Estate Finance Flashcards
Gross (full-service) lease
Tenant pays rent only, and the property owner provides all services and pays all operating expenses.
Modified (full service) lease
The tenant pays rent that is lower than rent payable under a full-service lease. The owner provides all services but recovers from the tenant specific expenses identified in the lease. Such expenses tend to be highly variable in nature (e.g. energy related) and represent an expense risk that property owners may not be willing to assume.
Direct Pass Throughs
When some tenants, because of the nature of their business, use a greater amount of a service than other tenants occupying a property, owners usually attempt to link and “pass through” related expenses directly to those tenants. In these cases, owners may provide all services. However, instead of prorating expenses, owners will use submetering and other methods to assure that such costs are better matched to tenants relative to their usage.
Nonoperating expense pass throughs
Lease modifications are sometimes made when a property owner negotiates a pro rata “pass through” of certain, specific, nonoperating expenses to tenants. These nonoperating expenses are deemed “costs of doing business,” but they are not manageable by the property owner. Examples of such expense pass throughs are property taxes and insurance.
Single net lease
Tenant pays rent and pays for all operating expenses identified in the lease.
Double net or net, net lease
The tenant pays rent and pays all operating expenses directly. In addition, the owner “passes through” nonoperating expenses such as property taxes and insurance costs to the tenant.
Real Estate Definition
Land and Structures permanently attached to the land
Real property
The legal interest held in land and buildings and the financial obligations they support
Personal Property
Movable property not attached to land; Chattels
Fixtures
Chattels which have become affixed to the land or permanent structures
Leased Fee Interest
The ownership estate created by leasehold; Leased fee owner known as the Lessor – Landlord; Carries with it the Right of Reversion
Freehold Estates
The right of ownership
Fee Simple Interest
An ownership interest unencumbered by any other interest or estate
Title
Proof of ownership in property
Deed
A legal document transferring title in real estate
