Building Classifications: Buildings are categorized as either “A”, “B”, or “C”. A building classified as an “A” property is typically the best and most sought after building type as they possess the finest construction elements, high quality building infrastructure and normally have the best curb appeal. Class “B” is next in line as they are generally a little older but still have notable building infrastructure and distinguished property features. Class “C” is the lowest classification for buildings as they were built much earlier than other properties in the market and are located in less desirable areas that may be in need of extensive renovations.
CAM Charges: Common Area Maintenance (CAM) charges refer to those areas within a building that are available for the common use by all tenants such as lobbies and restrooms as well as landscaping and snow removal, etc.
Comparables: In order to determine the fair market lease rate for your property, a Listing Agent will assemble a list of comparable properties with similar characteristics to the subject property. Some of the features that are evaluated include size, construction quality, age, use and typically located within the same sub market as the subject property.
Full Service Gross Lease: Refers to an “all inclusive” lease in which the pre-determined rental rate includes maintenance, upkeep, taxes, insurance and utilities and other operating expenses for a property. A pure full service lease is the best type of lease for a tenant as they can focus on growing their business without micromanaging additional fees and services.
Letter of Intent (LOI): Generally this is a written statement that expresses a desire to enter into a contract without actually doing so. It can also set the binding ground rules of a negotiation. The reason LOIs are utilized is they generally cost less to develop and negotiate than a formal lease for both the buyer/seller and lessor/leasee.
Modified Gross Lease (MG): Although very similar to a Full Service Gross Lease, a gross lease excludes utilities, janitorial and sometimes trash from their rental rates. The landlord is responsible for the maintenance of all common areas and the buildings structural components, but the tenant must maintain certain areas stated within the lease. A modified gross lease is commonly associated with multi-tenant office buildings.
Net Lease: When a Net Lease is agreed upon, the tenant is required to pay some or all of the expenses related to real estate ownership on top of a fixed rental rate. The common expenses are divided into three categories and are referred to as the three nets, including: Property Tax, Insurance and Maintenance. Depending on which expenses are to be covered by the Tenant, you will hear the terms Single Net (N), Double Net (NN) or Triple Net (NNN), with their appropriate expenses represented.
Non-Compete Clause: This clause prevents the Landlord from leasing space on the premises to a direct competitor of yours, or to those who own a business similar to yours. Although it is hard to enforce, the obvious reason to include this in your lease agreements would be to limit potential competitors near your business operations
Turnkey: Simply means that the space being rented or purchased is move-in ready for immediate use. Specifically, all of the wiring, fixtures, flooring and superficial decorative items are already in place.
Zoning: Each city is divided into zones, which have specific regulations regarding structural and architectural design and intended use of buildings respectively. For example a commercial building cannot be built in a residential area and vice versa, unless there is a modification in zoning ordinances. Similarly, if you are a tenant needing manufacturing space, you will need to find an area that is zoned industrial as these places usually present environmental concerns, like noise, water or air pollution.