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E

Earnest Money: The monetary advance by a buyer of part of the purchase price to indicate the intention and ability of the buyer to carry out the contract.

Easement: A right of use over the property of another created by grant, reservation, agreement, prescription or necessary implication. It is either for the benefit of adjoining land (“appurtenant”), such as the right to cross A to get to B., or for the benefit of a specific individual (“in gross”), such as a public utility easement.

Economic Feasibility: A building or project’s feasibility in terms of costs and revenue, with excess revenue establishing the degree of viability.

Economic Rent: The market rental value of a property at a given point in time, even though the actual rent may be different.

Effective Gross Income (EGI):  Term used for an income-producing property, derived from the potential gross income, less a vacancy factor and a collection loss amount.

Effective Rent: The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant, usually expressed as an average rate over the term of the lease.

Efficiency Factor: Represents the percentage of Net Rentable Square Feet devoted to the building’s common areas (lobbies, rest rooms, corridors, etc.). This factor can be computed for an entire building or a single floor of a building. Also known as a Core Factor or Rentable/Usable (R/U) Factor, it is calculated by dividing the rentable square footage by the usable square footage.

Eminent Domain: A power of the state, municipalities, and private persons or corporations authorized to exercise functions of public character to acquire private property for public use by condemnation, in return for just compensation. See also “Condemnation”.

Encroachment: The intrusion of a structure which extends, without permission, over a property line, easement boundary or building setback line.

Encumbrance: Any right to, or interest in, real property held by someone other than the owner, but which will not prevent the transfer of fee title (i.e. a claim, lien, charge or liability attached to and binding real property)..

Environmental Impact Statement: Documents which are required by federal and state laws to accompany proposals for major projects and programs that will likely have an impact on the surrounding environment.

Equity: (1) A legal doctrine based on fairness, rather than strict interpretation of the letter of the law. (2) The market value of real property, less the amount of existing liens. (3) Any ownership investment (stocks, real estate, etc.) as opposed to investing as a lender (bonds, mortgages, etc.).

Equity Participation:     The right of a Lender to a share in the gross profits, net profits or net proceeds in the event of a sale or refinance of a property on which the Lender has made a loan.  Also known as an “equity kicker.”   

Escalation Clause: A clause in a lease which provides for the rent to be increased to reflect changes in expenses paid by the landlord such as real estate taxes, operating costs, etc. This may be accomplished by several means such as fixed periodic increases, increases tied to the Consumer Price Index or adjustments based on changes in expenses paid by the landlord in relation to a dollar stop or base year reference.

Estoppel Certificate: A signed statement certifying that certain statements of fact are correct as of the date of the statement and can be relied upon by a third party, including a prospective lender or purchaser. In the context of a lease, a statement by a tenant identifying that the lease is in effect and certifying that no rent has been prepaid and that there are no known outstanding defaults by the landlord (except those specified).

Escrow Agreement: A written agreement made between the parties to a contract and an escrow agent. The escrow agreement sets forth the basic obligations of the parties, describes the monies (or other things of value) to be deposited in escrow, and instructs the escrow agent concerning the disposition of the monies deposited.

Exclusive Agency Listing: A written agreement between a real estate broker and a property owner in which the owner promises to pay a fee or commission to the broker if specified real property is leased during the listing period. The broker need not be the procuring cause of the lease.

Expense Ratio:  A comparison of the operating expenses to potential gross income. This ratio can be compared over time and with that of other properties to determine the relative operating efficiency of the property considered.  

Expense Stop: An agreed dollar amount of taxes and operating expense (expressed for the building as a whole or on a square foot basis) over which the tenant will pay its prorated share of increases. May be applied to specific expenses (e.g., property taxes or insurance).

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F

Face Rental Rate: The “asking” rental rate published by the landlord.

Fair Market Value: The sale price at which a property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. Also known as FMV.

Federal National Mortgage Association (FNMA):  Commonly known as "Fannie Mae", the FNMA is the largest buyer of existing mortgages. The Federal National Mortgage Association was originally organized by the federal government in 1938 to purchase FHA-insured mortgages. The association was reorganized in 1968 as a quasi-private corporation whose entire ownership is private. Fannie Mae raises capital by issuing corporate stock which is actively traded on the New York Stock Exchange and by selling mortgages out of its portfolio to various investors.

Fee Simple:      An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Commonly, a synonym for ownership.

Finance Charge: The amount paid for the privilege deferring payment of goods or services purchased, including any charges payable by the purchaser as a condition of the loan.

First Generation Space: Generally refers to new space that is currently available for lease and has never before been occupied by a tenant. See also "Second Generation Space.”

First Mortgage: The senior mortgage which, by reason of its position, has priority over all junior encumbrances. The holder of the first or senior mortgage has a priority right to payment in the event of default.

First Refusal Right or Right Of First Refusal (Purchase): A lease clause giving a tenant the first opportunity to buy a property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept.

First Refusal Right or Right Of First Refusal (Adjacent Space): A lease clause giving a tenant the first opportunity to lease additional space that might become available in a property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed a willingness to accept. This right is often restricted to specific areas of the building such as adjacent suites or other suites on the same floor.

Fixed Expenses:  Expenditures such as property taxes, license fees, and property insurance that are not directly affected, by the occupancy of the property. Fixed expenses along with operating expenses are subtracted from effective gross income to determine the net operating income of property.

Flex Space: A building providing its occupants the flexibility of utilizing the space. Usually provides a configuration allowing a flexible amount of office or showroom space in combination with manufacturing, laboratory, warehouse distribution, etc. Typically also provides the flexibility to relocate overhead doors. Generally constructed with little or no common areas, load-bearing floors, loading dock facilities and high ceilings.

Floor Area Ratio (FAR): The ratio of the gross square footage of a building to the land on which it is situated. Calculated by dividing the total square footage in the building by the square footage of land area.

Force Majeure: A force that cannot be controlled by the parties to a contract and prevents said parties from complying with the provisions of the contract. This includes acts of God such as a flood or a hurricane or, acts of man such as a strike, fire or war.

Forward Commitment: An agreement between a permanent lender and an interim (typically construction) lender wherein the permanent lender issues a conditional commitment that will replace the construction loan once a given set of terms and conditions have been achieved.

Foreclosure: A procedure by which the mortgagee (“lender”) either takes title to or forces the sale of the mortgagor’s (“borrower”) property in satisfaction of a debt. See also "Deed In Lieu Of Foreclosure".

Full Recourse: A loan on which an endorser or guarantor is liable in the event of default by the borrower.

Full Service Rent: An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount. See also "Pass Throughs".

Fully Amortized Mortgage (Loan):  A loan that is fully repaid at maturity by periodic (monthly) reductions of the principal. The first part of each monthly payment covers interest on the outstanding debt as of the payment due date and the remainder of the payment goes to reduce the outstanding debt.

Future Proposed Space: Space in a proposed commercial development which is not yet under construction or where no construction start date has been set. Future Proposed projects include all those projects waiting for a lead tenant, financing, zoning, approvals or any other event necessary to begin construction. Also may refer to the future phases of a multi-phase project not yet built.

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