GLOSSARY OF TERMS - L
|LAND CONTRACT: |
A contract used in a sale of real property where the seller retains title to the property until all or part of the purchase price has been paid. Also commonly called a conditional sales contract, installment sales contract or real property sales contract.
|LANDLORD-PAID TENANT IMPROVEMENTS (LPTI): |
The total cost (outlay) of necessary tenant improvements paid by the landlord netted against any contribution made by the tenant.
|LAND SALE-LEASEBACK: |
The same concept as a sale-leaseback, but only the land is sold and leased back using a ground lease.
|LEAKAGE (RETAIL): |
Purchases made in other service areas by consumers located within the subject area (representing a loss of revenue for retailers located within the trade area in which those consumers reside).
A contract that creates the relationship of landlord and tenant. A contractually binding agreement that grants a right to exclusive possession or use of property, usually in return for a periodic payment called rent.
Property is sold to an investor and the seller becomes a tenant. Used to free cash tied up in real estate while retaining the use of the property. Under the tax laws, a sale-leaseback can give rise to Unrelated Business Income for ERISA qualified pension plans who act as buyers.
|LEASE BUYOUT: |
The process by which a landlord, tenant, or third party pays to extinguish the tenant's remaining lease obligation and rights under its existing lease agreement.
|LEASED FEE: |
In exchange for permitting a tenant to use the property, the owner/lessor has the right to receive rental income and the right to repossess the property upon termination of the lease.
|LEASED FEE INTEREST: |
The value (to the owner) of the rental payments plus the value of the property at the end of the lease term (reversionary interest).
|LEASEHOLD ESTATE: |
In exchange for rent, the tenant has the right to occupy and use the property for the duration of the lease.
|LEASEHOLD IMPROVEMENTS: |
Construction or improvements for the purpose of preparing the premises for the conduct of tenant's business. Improvements permanently attach to the premises unless they are trade fixtures, and they remain with the premises after the end of the term of the lease.
|LEASEHOLD INTEREST: |
The value (to the tenant) of the lease. The value of the leasehold interest is determined by calculating the present value of the difference between the current market rent and the contract rent. Tenants who hold long term leases with no or minimal built in rent increase can realize substantial profits by subleasing their leased space at market.
|LEGAL DESCRIPTION: |
One that is sufficiently specific that an independent surveyor could locate the exact dimensions of the property being described.
|LEGAL INTERESTS: |
There are several types of legal interest in a property including possessory vs. non possessory, fee simple, leasehold and easements.
The person renting or leasing the property. Also known as a tenant.
The person who rents or leases a property to another. Also known as a landlord
|LIKE-KIND EXCHANGE: |
The sale or disposition of real estate or personal property (relinquished property) and the acquisition of like-kind real estate or personal property (replacement property) structured as a tax-deferred, like-kind exchange transaction pursuant to Section 1031 of the Internal Revenue Code and Section 1.1031 of the Treasury Regulations in order to defer the payment of Federal, and in most cases state, capital gain and depreciation recapture taxes.
|LIKE-KIND PROPERTY: |
Property that is exchangeable with another property. Refers to the nature or character of the property and not to its grade or quality.
|LIMITED LIABILITY COMPANY (LLC): |
Members of Limited Liability companies enjoy the limited liability offered by corporations and the minimum requirements of an S corporation. Limited Liability Companies typically contain two or more members and must file articles of organization with the secretary of state, although single member LLC's are allowed in certain states.
|LIMITED PARTNERSHIP: |
Investors who pool their money to develop or purchase income-producing properties. Income from these properties is distributed as dividend payments. In a limited partnership, each limited partner's liability is limited to the amount of his or her investment. A limited partner only contributes money and is not actively involved in the business. A limited partnership must have one general partner, who is personally liable for all debts.
|LIS PENDENS: |
A recorded legal document giving constructive notice that an action affecting a particular property has been filed in either a state or a federal court.
|LOAD FACTOR: |
Amount of a tenant's useable space that accounts for the tenant's proportionate share of the common area (restrooms, elevator lobby, mechanical rooms, etc.). The load factor is usually expressed as a percentage and ranges from a low of 5% to as high as 15%.
|LOAN TO VALUE (LTV): |
The ratio of the amount of the loan to the value of the property. For example if an investor put $200,000 down and placed a $800,000 loan on a $1,000,000 property the LTV would be 80% ($800,000/$100,000).
The duty of loyalty requires the agent to place the principal's interests above those of all others, including the agent's own self-interest. The agent must be particularly sensitive to any possible conflicts of interest. Confidentiality about the principal's personal affairs is a key element of loyalty.
This Glossary of Commercial Real Estate Terms is provided for general understanding purposes. Readers should consult with their legal and/or accounting professionals for specific situations and questions. TM 1031 Exchange Inc. and its employees provide neither legal nor accounting services or advice.