It's frustrating talking to a broker or other property owner and your terminology isn't matching up. This happens all the time between people that sell real estate all day and those who may not be as familiar. It also happens in different regions between different brokers, all trying to get the same information out. There are lease terms, sales terms, relationship terms and an entire slew of weird ways for all of us to discuss a property or deal.
So how can we do better at communicating terms? We can ask. We can stop and take a little bit of time to be sure everyone is on the same page and talking about the same things. If I had a commission for each time I have had to clarify NNN's and CAM expenses I would retired by now but had we just taken a few minutes to be sure everyone understood a proper terminology it could have saved everyone some frustration. So to help here are a few that seem to give the most grief.
NNN. It is really cool btw to say you invest in these types of investments right now, even though they have always been around. A triple net lease, often abbreviated as NNN, is a type of commercial real estate lease agreement where the tenant is responsible for paying the base rent plus three additional categories of property expenses: real estate taxes, building insurance, and maintenance costs (including common area maintenance, or CAM). These three "nets" shift most operational and upkeep responsibilities from the landlord to the tenant, making it a popular structure for commercial properties like retail stores, offices, or industrial spaces. So when someone says it's NNN plus CAM thats confusing. It can just be NNN. The tenant is literally paying all expenses associated with their space.
CAM. CAM (Common Area Maintenance) expense refers to the costs associated with the upkeep, operation, and repair of shared or "common" areas in a commercial property, such as lobbies, hallways, elevators, parking lots, landscaping, restrooms, and other communal spaces in multi-tenant buildings like office parks or shopping centers. Typically a landlord or management company gives an estimate on those fees and collects it monthly on top of the base rent. At the end of the year they reconcile those expenses and charges and make adjustments as needed.
Pro Rata Share. A pro rata share in a commercial lease refers to a tenant's proportionate allocation of shared building expenses, such as common area maintenance (CAM), property taxes, insurance, or utilities, based on the size of their leased space relative to the total leasable area of the property. So if you occupy 52% of a building your pro rata share would be 52% of all expenses.
Modified Gross. A modified gross lease (sometimes called a modified net lease) is a type of commercial real estate lease agreement that acts as a hybrid between a full gross lease and a triple net (NNN) lease. The tenant pays a portion but not all expenses related to a lease. Many times the landlord will include utilities or taxes in the base lease amount, typically in stabilized multi tenant buildings. We rep an office building that provides nightly cleaning of the common areas but also the individual spaces, which is included in the rent.
TI. No it's not the rapper. A tenant improvement allowance (TIA), also known as TI, TA, or build-out allowance, is a negotiated sum of money provided by a landlord to a tenant to cover the costs of customizing, renovating, or improving the leased commercial space to fit the tenant's specific needs. This is most typical in new construction as the landlord is finishing the space specifically for the first tenant but can be applied in most transactions. The amount will always vary based on the tenant, the lease terms and motivation of the owner.
Credit Tenant. A "good credit tenant" in commercial real estate leasing refers to a tenant with a strong financial profile and creditworthiness, making them a low-risk option for landlords. These tenants are typically large, established companies or entities with a proven track record of financial stability, consistent revenue, and the ability to meet lease obligations reliably. I honestly don't understand why a broker would be running around with a bad credit tenant but this term gets thrown around as kind of a golden goose.
So as confusing as terminology can be it is really important that everyone is talking about the same things. When we are discussing hundreds of thousands of dollars in negotiables it is costly to not be clear and concise. Next time you are meeting with a broker, tenant or owner be sure you are asking the right questions and ensuring your communication is accurate and ready to go for the next deal.