Commercial Real Estate Terms – Toronto Canada
Filed Under Business and Life · Tagged: amortization, commencement date, commercial real estate, minimum rent, moving expenses, office space, real estate terms, tenant improvements
Commercial Real Estate Terms
Here are some of the key terms, in alphabetical order, that you should be familiar with when looking for Office space in Toronto.
Additional Rent – Any amounts due under a lease that are in addition to base rent. Most common form is operating expense increases.
Agency – Any relationship in which one party (agent) acts for or represents another (principal) under the authority of the latter. Agency involving real property should be in writing, such as listings, trusts, powers of attorney, etc.
Allowance – A set dollar amount provided by the Landlord under a lease to be used by the Tenant for a specific purpose. Examples include allowances for tenant improvements, moving expenses design fees, etc. If the expense exceeds the allowance amount, such excess is the Tenant’s responsibility. If the expense is less than the allowance, the savings are retained by the Landlord unless their agreement specifies otherwise.
Amortization – Payment of debt in regular, periodic installments of principal and interest, as opposed to interest only payments. May also be used in a lease where the landlord incurs costs for additional tenant improvements which are effectively treated as a debt and repaid by tenant over the term of the lease.
Base Rent – A specific amount used either as a minimum rent in a lease (retail) which uses a percentage of sales or overage for additional rent or sets a base onto which is added expenses and taxes in a net lease or increases in those items in a fully serviced lease.
Base Year – The 12 month period upon which a direct expense escalation of rent is based. Typically the calendar year the lease commences.
Commencement Date – The date on which a lease begins. This is typically but not always the day on which the tenant takes possession of the leased space, which usually occurs upon substantial completion of the tenant improvements. (See occupancy Date).
Class – Class is usually used in conjuction with an office property and refers to the quality of property. Class definitions fall with the following guidelines. Class A+: Landmark quality, highrise building with prime central business district locatation (the best of the Class A buildings).
Class A: Generally 100,000 sf or larger (five or more floors), concrete and steel construction, built since 1980, business/support amenities, strong identifiable location/access.
Class B: Renovated and in good locations. Newer building are smaller in size, wood frame construction, and/or in non-prime location.
Class C: Older, unrenovated of any size in average to fair condition.
Common Area – Common area is the area used in common by the tenants of an office building. Common area includes building and elevator lobbies, restrooms and the corridor leading from an elevator lobby to a tenant space.
Free Rent – A concession granted by a landlord to a tenant whereby the tenant is excused from paying rent for a stated period during the lease term.
HVAC – Heating, Ventilation, Air Conditioning. A general term encompassing any system designed to heat and cool a building in its entirety, as opposed to a space heater.
Premises – Typically the entire rentable area leased by lessee. Sometimes used to designate solely the useable area leased by lessee, i.e. that for which the lessee has exclusive occupancy as opposed to the common areas.
Rentable Area – The (square footage) for which rent can be charged. Generally it is the gross area of the full floor less the area of all vertical penetrations (elevator shafts, stairwells, mechanical shafts etc.) Rentable area can be measured in many ways, but the most common measurement for office buildings is according to BOMA standards.
Space Planning – Term is often loosely used. Most often it is the planning of the layout of the interior space of a building to meet the needs of the user. Can also include detailed interior design and preparation of construction drawings. Space planning and interior design only need not be licensed architects. Preparation of construction drawings for permit have to be prepared by architects licensed in the jurisdiction.
Tenant Improvements (TI’s) – Improvements to land or buildings to meet the needs of tenants. May be new improvements or remodeling, and be paid for by the landlord, tenant or part by each.
Turnkey – Referring to an owner making a property ready for a tenant to begin business by having the tenant furnish only furniture, phone and inventory, if any. Turnkey tenant improvements are provided at the landlord’s expense according to plans and specifications previously agreed upon by the parties. Unlike an allowance where the tenant pays for costs in excess of the allowance amount, the landlord bears the risk of construction in a turnkey situation.
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