Real estate words, in plain English

A

Additional rent

Your share of the building’s operating costs and property tax, paid on top of base rent. Also called operating costs, CAM or “op costs”. It changes every year, so ask for the last two or three years of statements.

Agency

The legal relationship between you and the brokerage that represents you. In BC, your agent has to tell you in writing who they represent before giving you real estate services.

Asset sale

Selling a business by selling its assets, such as equipment, inventory, goodwill and the lease, rather than the company. The seller’s company keeps its liabilities. Buyers usually prefer it. See tax planning before you sell.

Assignment

Handing your whole lease to someone else, usually when you sell your business. Most leases need the landlord’s consent, and many keep you liable unless you get a release.

B

Base rent

The rent per square foot per year for the space itself, before additional rent, GST and other charges.

BCFSA

The BC Financial Services Authority, which licenses and regulates real estate agents and brokerages in BC.

Building permit

City approval for construction work, including most tenant improvements. In Vancouver you usually need one before work starts, plus separate trade permits.

Business licence

The licence a city requires before you operate a business at an address. In Vancouver you need one for each location, and it has to be updated if you move.

C

Cap rate

Net operating income divided by price. A quick way to compare investment properties. A higher cap rate means more income for each dollar paid, and usually more risk or less growth.

Capital gains reserve

A CRA rule that can let you spread the taxable gain over up to five years when you get paid over time, such as with a vendor take-back mortgage. Your accountant decides whether it applies.

CIM

Confidential information memorandum. The detailed package about a business for sale, shared with buyers only after they sign a confidentiality agreement.

Commercial Tenancy Act

The BC law for commercial leases. It is short, and most of the rules come from the lease itself, so the wording matters more than it does for a home rental.

Condition precedent

A subject in an offer that must be met or waived before the deal is firm, such as financing, inspection or landlord approval. Also called a subject.

Contingency reserve fund

A strata corporation’s savings for repairs that don’t happen every year. A small fund next to big upcoming work can mean special levies.

Covenant

A promise in a lease or contract. “Tenant covenant” also means how strong the tenant is financially in the landlord’s eyes.

D

Demolition clause

A lease clause that lets the landlord end the lease early, with notice, to redevelop. Read it before you sign, and price it in if the building is a likely redevelopment site.

Deposit

Money paid when an offer becomes firm, usually held in trust. In a lease, the deposit is often first and last month’s rent or a set amount held as security.

Depreciation report

A professional study of a strata building’s major components and what they will cost to repair or replace. Since July 2024, BC stratas with five or more lots must get one at least every five years.

Development permit

City approval for a use or a building design. In Vancouver a change of use can need one before you can get a building permit.

Disclosure of Representation in Trading Services

The BCFSA form an agent gives you before providing services. It explains whether they represent you and what that means.

Dual agency

One agent representing both sides of a deal. BC has banned it since June 15, 2018, except in rare remote-area cases.

Due diligence

Your investigation before a deal goes firm: documents, inspections, environmental reports, zoning, financials and the lease.

E

EBITDA

Earnings before interest, taxes, depreciation and amortization. A common starting point buyers use to value a mid-size business.

Escalation

A built-in rent increase during the lease term, either fixed steps or tied to an index.

Estoppel certificate

A signed statement from a tenant confirming the lease terms, the rent being paid, the deposit held, whether either side is in default, and any side agreements. Buyers and lenders rely on it, so a surprise in one can delay or reprice a sale.

Exclusive use

A lease clause that stops the landlord renting to a direct competitor in the same property. Valuable for retail and restaurants.

F

Fixturing period

Time at the start of a lease to build out the space, often with no base rent. Additional rent may still apply.

Form B

The strata Information Certificate. It shows fees, the contingency reserve fund, special levies, bylaw issues and legal matters for a strata lot.

Free rent

Months with no base rent, usually at the start of the term. A landlord may prefer it to a lower rent because the face rate stays higher.

G

Gross lease

A lease where the rent includes most operating costs. Less common for commercial space in Vancouver than net leases.

Gross-up

Adjusting operating costs as if the building were fully leased, so tenants aren’t charged more when it has vacancies.

GST

The 5% federal Goods and Services Tax. It applies to commercial rent and to many commercial property and new home purchases.

H

Home buyer rescission period

In BC, buyers of most residential property can cancel within three business days after acceptance by paying the seller 0.25% of the price. It can’t be waived. Some properties, like leasehold and auction sales, are exempt.

I

Indemnity

A promise to cover the other side’s losses. Personal indemnities in a lease put your own assets on the line.

L

Landlord’s work

The work the landlord agrees to complete before you take possession. Spell it out in the offer, with drawings if you can.

Letter of intent

A short, mostly non-binding document setting out the main terms before the full agreement is drafted. Common in business sales.

Load factor

The add-on that turns usable area into rentable area to cover your share of lobbies, corridors and washrooms. A 15% load factor turns 2,000 usable square feet into 2,300 rentable.

N

Net effective rent

The average rent over the whole term once free rent and allowances are taken out. The fair way to compare two offers.

Net operating income

Rent and other income from a property, less operating costs, before mortgage payments and income tax. Often called NOI.

O

Offer to lease

The document where the real deal gets made: rent, term, inducements, landlord’s work and conditions. The lease follows from it.

Overholding

Staying in the space after the lease ends without a new agreement. Leases often charge a higher rent for it.

P

Personal guarantee

A promise by an owner to pay if the business tenant can’t. Try to limit it by amount or time.

Presale

Buying a home before it is built. In BC the developer must give you a disclosure statement, and you can rescind within seven days after the later of signing the agreement and acknowledging you had a chance to read it.

Property Transfer Tax

The BC tax paid by the buyer when title is registered: 1% on the first $200,000, 2% up to $2 million, 3% above $2 million, plus 2% more on residential value over $3 million.

R

Renewal option

Your right to extend the lease for another term on set conditions. Watch the notice deadline. Miss it and the right can be gone.

Rentable area

The area you pay rent on, including your share of common areas. Usable area times the load factor.

Right of first refusal

A right to match an offer someone else makes, for example on space next door or on the building itself.

S

Sale-leaseback

Selling a building you own and occupy, then leasing it back from the buyer.

Share sale

Selling a business by selling the company’s shares. The company keeps its assets, contracts, leases, liabilities and history. Sellers usually prefer it, partly because the lifetime capital gains exemption can apply to qualifying shares. See tax planning before you sell.

Special levy

A one-time charge to strata owners for costs the reserve fund doesn’t cover.

Strata corporation

The owners of a strata building, acting together through council. It runs the building and enforces the bylaws.

Subject removal

The point where the buyer confirms the conditions are met and the deal becomes firm.

Sublease

Renting some or all of your space to someone else while you stay on the lease.

T

Tenant improvement allowance

Money the landlord puts toward your build-out, usually per square foot. Often shortened to TI.

Term

How long the lease runs. Longer terms usually get better inducements but less flexibility.

Triple net lease

A lease where the tenant pays base rent plus its share of property tax, insurance and operating costs. Often written NNN.

U

Usable area

The space you actually use inside your premises, before the load factor.

V

Vendor take-back mortgage

When the seller lends part of the price to the buyer and gets paid back over time. Also called a VTB or seller financing.

W

Working capital

The cash and short-term assets a business needs to run day to day. Many business sales set a target level that stays with the business.

Z

Zoning

City rules about what can be built and what uses are allowed at an address. Check it before you sign for a new use.