Dictionary

 

 

 

ADLS

Auckland District Law Society. An organisation that publishes commercial Lease forms, and agreement for Sale and Purchase forms, which are almost universally used throughout New Zealand.

 

Agent or agency

The third party standing between two other parties involved in a property transaction, usually between the buyer and seller or between landlord and tenant.

 

 

Agreement for Sale and Purchase of Real Estate

The legal contractual document stating intent to buy and or sell land or buildings

 

 

Agreement to Lease

The initial agreement between tenant and landlord over agreement to occupy a property.

 

 

Arbitration

The process by which parties attempt to reach a resolution in a dispute. This applies in particular to landlords and tenants when they cannot agree. A valuer or property manager might be called in to arbitrate on matters such as rent disputes or disagreements about conditions of occupation.

 

Assignment

The right to transfer an agreement to another party. This particularly applies to leases where a tenant might want to assign their right to lease to another tenant (assignee). This can only be done if it is outlined in the initial lease between the landlord and the tenant. (see also sub-let and sub-lease)

 

 

Blue chip

In the property sector, this applies to tenants and their financial stability particularly. A blue chip tenant could be a government department or a large corporation.

 

BOMA

Building owners and managers association-now called the Property Council. BOMA is still the term used to describe the lease form and method of measurement of buildings prescribed by the Property Council.

 

 

Body corporate

A legal entity made up of the owners of units in a property. This entity appoints a secretary to administer the property.

 

 

Building certifier

A private employed person approved to check the plans and building work during construction as an alternative to council officers.

 

Building consent

Council approval for building work. It replaces the multiple permits previously issued.

 

 

Building warrant of fitness

An annual certificate singed by the building owner or manager saying that requirements under the compliance schedule have been met.

 

 

Capital appreciation or growth

The rise in the value of an asset, particularly the total market worth of a building over a period of time. Investment in a real estate is viewed as a long-term prospect because property performs better over a number of years than it does in the short term.

 

 

Capitalisation rate (Cap rate)

The term used to express the link between income and value. A mathematical calculation which expresses the relationship between a property's net income(worth on the open market). The overall capitalisation rate is the direct realtionship between a property's cash flow or net income and its value or price. The figure is expressed as a percentage; for example, a building has a cap rate of 10 per cent (see also yield)

 

CBD

Central business district.

 

Certificate of Title

The document which contains a legal description of a property including ownership.

 

Chattels

Moveable possessions usually owned by the tenant or occupier and brought to the premises for the time of tenure, then removed on vacation of the premises. These can include carpets, drapes and light fittings. (see also fittings and fixtures)

 

Code Compliance Certificate

A certificate issued when building work is finished, confirming that the

building complies with the New Zealand Building Code.

 

Common Area Factor

Any space in a building affording common use for all tenants, with the exception of vertical penetrations. Translation-lobbies, corridors, restrooms, building breakrooms, building conference room, health facility, janitorial closets and storage rooms. It does not include the stairwells or the elevator shafts, flues or vertical ducting.

 

Commencement

The date at which an agreement is due to start. This usually refers to when a lease begins.

 

Class A Building

A term commonly used when referring to the highest quality buildings. Building classification may rate how the building is generally accepted in the market, or could be a personal classification by the individual referring to that structure.

 

Class B Building

A term commonly used to describe an average building.

 

Class C Building

A term commonly used to describe a below average building.

 

 

Compliance schedule

A council document listing the inspection, maintenance and reporting procedures for safety systems such as fire alarms and lifts to ensure they are safe to use.

 

Complying activity

An activity permitted either with or without conditions by the local authority.

 

Conditional clauses

Usually part of the Agreement for Sale and Purchase of Real Estate, setting out what the buyer wants to do before the contract becomes final and binding. "Going unconditional" is the period following all these conditional clauses have been satistified or despensed with.

 

Conveyance

The transfer of property, usually referring to the sale. A conveyancer is a lawyer who prepares documents for the transfer of ownership of property.

 

Covenant

A legal agreement between two or more parties. For example, a lease contains covenants stating what the arrangements are between the landlord and the tenant.

 

Cross lease

When each owner has an equal undivided share of the land but leases their own site and building from all land owners.

 

Deed of Lease

A formal legal agreement between tenant and landlord over occupation of the property.

 

Default

Breaking an agreement or arrangement. This particularly refers to the non-payment of rent, which can result in a tenant being in default of the lease.

 

Deposit

The initial sum of money paid for the purchase of a property due before the full amount is paid. In most cases the deposit is paid to an agency, and a commission is deducted from it.

 

Disbursements

Costs or payments particularly made to a lawyer apart from legal fees on the settlement of a property transaction, commonly stamp duty and registration fees.

 

Discharge of mortgage

The document which releases a property from a mortgage.

 

Due diligence

A legal term referring to an in-depth investigation into a company or property you intend to buy. It is usually carried out by a team of lawyers, accountants and valuers.

 

Easement

A right-of-way or other rights over ground or property, usually registered on a Certificate of Title.

 

Environmental audit

An in-depth investigation of all the environmental factors which might affect a property.

 

Equity

The proportion of the capital value of the property represented by the investor's money. The total value of a property minus the total borrowed funds in a mortgage or loan.

 

Fittings

Objects affixed to a property which can be removed, such as light bulbs. A fitting can also be a chattel.

 

Fixtures

Objects fixed to a building not intended to be removed, such as the light socket into which a bulb fits.

 

 

Floating rate mortgage

When the interest paid on borrowings moves up or down in line with general interest rate movements.

 

 

Freehold

Property which is freehold is often referred to as an estate in fee simple, which means the subject can be an owner or holder of an estate in the land of the highest order under English law.

 

 

Fundamentals

The base or cornerstone of any property investment, including aspects such as location, growth prospects, quality of the property, quality of the lease and financial strength of the tenant.

 

 

Gearing

The ratio of equity to borrowings or the level of debt against the value of your assest. Negative gearing is where the debt costs exceed the return from the asset.

 

 

Goods and Services Tax (GST)

A consumption tax, currently 12.5 per cent.

 

 

Guarantor

A person, persons or legal entity providing a guarantee or security for the fulfilment of certain conditions. This usually applies to lease documents where tenants are asked to nominate a party to provide a legal guarantee that the rent will be paid on time and in full and that the conditions of the lease will be adhered to.

 

 

Head lease

Agreement between tenant and landlord which gives authority to one particular tenant: the head lesse. That tenant then assumes the majority of the lessor's responsibilities. This usually results in the tenant renting an entire building or floor and sub-letting some of that space to another tenant.

 

Holding costs

The expenses involved in owning a property often before it is able to generate a return. This particularly applies to the outgoings on bare land before a developer begins construction and would include the interest payable on any loans, rates and any other charges for which the owner was liable.

 

HVAC

A term used when referring to heating, air-conditiong and other ventilation systems within the building.


Incentive or inducement

A concession made by the landlord to the tenant, or by the head lessee to other tenants, to make a deal more attractive. This particularly applies to lease agreements where, in order to lease space, certain financial concessions are made, such as rent holidays (periods of non-payment) and the payment of fit-out costs. Incentives are common when the property market is depressed or when a property cannot be leased easily.

 

Indemnity insurance

A policy under which any damage is compensated for at present-day or market value after allowing for depreciation.

 

Land Information Memorandum (LIM)

A report on a property's relationship with the local authority. This includes the rating position, zoning, town planning matters, designations and consents as well as other matters.

 

Lease

The contract between the landlord and tenant on the conditions and provisions of occupying the property.

 

Lease-gross

The tenant pays a gross rent and the landlord pays out of that the expenses incurred in owning the property such as rates, insurance, etc.

 

Lease-net

The rent paid is the net or near net return to the landlord because the tenant pays all or many of the other expenses such as rates, insurance, etc.

 

Leasehold

Title in the land or property for a specific time and usually for the payment of a rental. A lease creates and vests in the lessee an estate or interest in the property as defined by the lease contract.

 

Lessee

The tenant or occupier-the party leasing or renting a property.

 

Lessor

The owner or landlord- the parting leasing out or renting a property to a tenant.

 

 

Load Factor or Loss Factor

Also referred to as common area factor. It is the difference between the rentable and useable square metreage in the building.


 

Market value

The estimated amount for which an asset should be exchanged on a certain date between a willing buyer and a willing seller in an arm's-length transaction.

 

Mortgage

A legal document recording the financial transactions on a property, usually the borrowing of money secured against that property.

 

Mortgagor

Person or entity lending money secured against a property.

 

Naming right

The right to name a leased building. This usually attracts an extra rent.

 

Operating expenses or outgoings

The ongoing costs of occupying costs a property over and above the base rent including repairs and maintenance, the payment for utilities such as electricity and statutory expenses such as rates and insurance.

 

Permit

Consent or approval to carry out a cetain action. A slightly outdated term now replaced by the term "resource consent." In the property sector, this usually refers to a written document issued by the local authority for a property owner to carry out a certain activity and most usually the right to develop or build. (see also resource consent)

 

Permitted use

The use to which land or buildings can be put under local authority rules as well as under legislation.

 

Possesion

Ownership. This is usually referred to in terms of a possession date, i.e. the time when a new owner can obtain possession.

 

Project Information Memorandum (PIM)

A council document providing information on land relevant to a building proposal. It helps the owner to see whether a specific project is likey to gain approval.

 

Property performance

The variation in net annual aggregate of income and capital value.

 

Public liability insurance

Insurance which protects against legal liability if a person or their property is damaged due to an incident on the policy holder's property.

 

Ratchet

A clause in a lease document which states the rental payable by the tenant can only rise and not fall upon review. These are more common in a buoyant market than in times of depression. Modified ratchet clauses have become common. They prevent the rent falling below the commencement level.

 

Refurbishment

The process of renovation and redocoration, particularly renovating the interior of an older building to make it more attractive to prospective tenants.

 

Rent-base

The amount of rent paid before certain expenses are added on. This applies particularly to shops in a shopping centre which can be leased on a base rent or a percentage rent or a combination of the two.

 

Rent-percentage

Income derived from a percentage of turnover. This applies again to shops where the property owner might lease the premises on the basis that a percentage of the tenant's turnover is paid as the rent for the premises. This type of rent usually only applies to large malls or shopping centres.

 

Rent review

The time agreed on between the tenant and landlord when the rental can be renegotiated.

 

Resource consent

A local authority permit issued to enable a property owner or occupier to carry out a certain activity, usually the development and construction of building. (see also permit)

 

Right of renewal

The ability or otherwise of a tenant to renew an existing lease. This is a clause which often appears in a lease document and is in favour of the tenant, not the landlord.

 

Settlement

A period or date agreed between buyer and seller when the final amount of money for the purchase of land or buildings will be paid.

 

Stamp duty

A financial charge on certain legal documents.

 

Strenght of covenant

The ability of a lessee to meet financial commitments in a lease.

 

Subdivision

The breaking up of certain entities into a number of new entities. This applies particularly to land when it is being developed and the creation new titiles or sections.

 

Sub-let and sub-lease

An agreement where a lessee leases all or part of the lease property to a sub-lessee.

 

Tenant

Occupier of land or buildings usually paying rent to a landlord.

 

Tenure

Right, title, interest or estate under which property is held.

 

Termination

The end of an agreement, particularly a lease and therefore the time at which a tenant or occupier must leave.

 

Unit or stratum title

Individual ownership for multi-owner properties such as high-rise office blocks. It was legislated in New Zealand in 1972 as an alternative to cross-leasing.

 

Vacancy rates

The percentage of property available for rent in a certain sector at a certain time. These rise in depressed times like the late 1980's but firm when the economy is doing well and vacant space is at a premium.

 

Vacant possession

Possession of a property which does not have tenants or other occupiers.

 

Valuation

Oral or written appraisal or estimate of a property including its worth. A comprehensive valuation will reveal all aspects of a property.

 

Vendor

Property seller.

 

Yield

The rate of return on an asset. In property terms, the yield or capitalisation rate is a percentage term expressing the ratio of income to the capital value of a property. Yields firm in times of economic buoyancy and soften in times of depression. The lower the yield, the higher the value; the higher the yield the lower the value. (see also capitalisation rate)

 

 

Zoning

Governmentally regulated permitted uses of a certain area or building. Zoning controls the type of businesses that can operate within this area

 

 

 

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