Property Management Terms

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Accredited Residential Manager (ARM)

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A property management designation offered by the Institute of Real Estate Management (IREM).

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Accredited Management Organization (AMO)

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A property management designation offered by the Institute of Real Estate Management (IREM) to property management companies that meet prescribed high standards.

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Americans with Disabilities Act (ADA)

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A law passed by Congress in 1990 requiring any business or public facility to be accessible to everyone, including those with disabilities.

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Capitalization Rate

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The desired rate of return on an income producing property expressed as a decimal or percentage indicating the relationship between the value and the income.

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Certified Apartment Maintenance Technician (CAMT)

Certified Apartment Property Supervisor (CAPS)

Certified Apartment Supplier (CAS)

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A designation offered by the National Apartment Association (NAA).

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Certified Apartment Manager (CAM)

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A designation for on-site property managers offered by the National Apartment Association (NAA).

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Certified Manager of Community Associations (CMCA)

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A designation for multi-site supervisors offered by the Community Associations Institute (CAI).

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Certified Property Manager (CPM)

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The most advanced property management designation offered by the Institute of Real Estate Management (IREM).

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Double Net Lease

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An arrangement whereby the tenant pays the rent utilities property taxes special assessments and insurance premiums.

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Economic Rent Increase

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An increase in rent prompted by a shrinking supply of comparable rental units in an area and the ability of tenants to afford the increase.

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Economic Occupancy

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Net Rental Income divided by Gross Potential Rent

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Effective Gross Income

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Also known as adjusted gross income the income actually collected after deducting for collection losses.

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Escalation Clause

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A clause in a lease that allows for rent increases based on the occurrence of a certain event.

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Estate

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Ownership arrangements that tell the types and duration of interests that an individual has in real property.

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Eviction

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The legal process by which the tenant is removed from the property due to violations of terms of the lease.

Removal of a tenant from rental property by a law enforcement officer. First, the landlord must file and win an eviction lawsuit, also known as an "unlawful detainer."

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Fair Housing Laws

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Federal laws that prohibit housing discrimination on the basis of race or color, national origin, religion, sex, familial status or disability. The federal Acts apply to all aspects of the landlord/tenant relationship, from refusing to rent to members of certain groups to providing different services during tenancy.

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Fair Labor Standards Act

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A law enacted during the depression regulating certain aspects of labor that the lodging industry feels is in need of revision.

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Federal Deposit Insurance Corporation (FDIC)

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A federal agency which insures depositors in banks and savings and loan associations to protect their deposits in case of bank failure.

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Federal Housing Administration (FHA)

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A federal agency established in 1934 to insure certain types of home loans protecting the lender and allowing a small down payment from the borrower.

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Gross Lease

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A commercial real estate lease in which the tenant pays a fixed amount of rent per month or year, regardless of the landlord's operating costs, such as maintenance, taxes and insurance. A gross lease closely resembles the typical residential lease. The tenant may agree to a "gross lease with stops," meaning that the tenant will pitch in if the landlord's operating costs rise above a certain level. In real estate lingo, the point when the tenant starts to contribute is called the "stop level," because that's where the landlord's share of the costs stops.

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Gross Potential Rent

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The projected amount of rental income based on current leases assuming all units are occupied (market rents less loss to lease)

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Housing and Urban Development (HUD)

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The U.S. Department of Housing and Urban Development. This is the agency responsible for enforcing the federal Fair Housing Act.

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Industrial Property

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A property where products are manufactured or assembled.

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Lease

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A written agreement by which possession of the property is transferred and the stream of income is secured. An oral or written agreement (a contract) between two people concerning the use by one of the property of the other. A person can lease real estate (such as an apartment or business property) or personal property (such as a car or a boat). A lease should cover basic issues such as when the lease will begin and end, the rent or other costs, how payments should be made, and any restrictions on the use of the property. The property owner is often called the "lessor," and the person using the property is called the "lessee."

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Leasing Agent

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An agent who secures qualified tenants for leases on residential commercial or industrial property.

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Loss to Lease

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The difference between the market rate and the current lease rate.

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Loss to Vacancy

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The total market rent of unleased available units

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Market Analysis

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A study which gives an understanding of the economic factors operating in the local marketplace related to the subject property.

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Market Rate (Rent)

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The amount the property or unit is leased at under standard market conditions. Typically a survey is used to determine what the competition is receiving in rent for similar space with similar amenities.

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Month-to-Month Tenancy

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A rental agreement that provides for a one-month tenancy that is automatically renewed each month unless either tenant or landlord gives the other the proper amount of written notice (usually 30 days) to terminate the agreement. Some landlords prefer to use month-to-month tenancies because it gives them the right to raise the rent after giving proper notice. This type of rental also provides a landlord with an easy way to get rid of troublesome tenants, because in most states month-to-month tenancies can be terminated for any reason.

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Multi-Family Units

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Residential structures intended to house more than one family unit, such as duplexes or apartment buildings.

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Net Lease

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An arrangement whereby the tenant pays the rental payment plus certain agreed upon expenses.

A commercial real estate lease in which the tenant regularly pays not only for the space (as he does with a gross lease) but for a portion of the landlord's operating costs as well. When all three of the usual costs--taxes, maintenance and insurance--are passed on, the arrangement is known as a "triple net lease." Because these costs are variable and almost never decrease, a net lease favors the landlord. Accordingly, it may be possible for a tenant to bargain for a net lease with caps or ceilings, which limits the amount of rent the tenant must pay. For example, a net lease with caps may specify that an increase in taxes beyond a certain point (or any new taxes) will be paid by the landlord. The same kind of protection can be designed to cover increased insurance premiums and maintenance expenses.

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Net Operating Income

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Also called net annual income; the amount of income left from an income producing property after operating expenses have been deducted excluding financing, extraordinary expenses, and taxes.

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Net Rental Income

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The actual rent for existing leases

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Nuisance

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Something that interferes with the use of property by being irritating, offensive, obstructive or dangerous. Nuisances include a wide range of conditions, everything from a chemical plant's noxious odors to a neighbor's dog barking. The former would be a "public nuisance," one affecting many people, while the other would be a "private nuisance," limited to making your life difficult, unless the dog was bothering others. Lawsuits may be brought to abate (remove or reduce) a nuisance. See quiet enjoyment, attractive nuisance.

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On-Site Manager

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A property manager who lives on-site, handles day-to-day activities, and interacts with tenants on a regular basis.

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Property Management

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The practice of real estate that manages and preserves the real property assets of another person.

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Property Supervisor

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A property manager who is responsible for several properties and supervises the on-site managers of those properties.

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Physical Occupancy

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The percentage of leased units to total units

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Regional Manager

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A property manager who works for a large property management company and oversees the work of property supervisors or on-site managers.

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Registered Property Manager (RPM)

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A property management designation offered by the International Real Estate Institute (IREI).

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Rent Control

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A local ordinance prohibiting rent increases on certain types of property.

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Residential Property

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A property where people reside, including single family residences, condominiums, and apartment buildings.

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Security Deposit

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A payment required by a landlord to ensure that a tenant pays rent on time and keeps the rental unit in good condition. If the tenant damages the property or leaves owing rent, the landlord can use the security deposit to cover what the tenant owes.

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Strip Center

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A small retail center located in the suburbs containing half-a-dozen to a dozen stores of various kinds.

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Sublease

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A rental agreement or lease between a tenant and a new tenant (called a sublessee) who will either share the rental or take over from the first tenant. The sublessee pays rent directly to the tenant. The tenant is still completely responsible to the landlord for the rent and for any damage, including that caused by the sublessee. Most landlords prohibit subleases unless they have given prior written consent.

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Subletting

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The process by which the original tenant gives up use or possession of all or part of the property but receives payment from the sub-lessee and remains fully responsible for the entire lease payment to the landlord.

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Tenant

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Anyone, including a corporation, who rents real property, with or without a house or structure, from a management company or landlord. The tenant may also be called the "lessee."

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Triple Net Lease

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An arrangement whereby the tenant pays the rent, utilities, property taxes, special assessments, and insurance premiums; and takes responsibility for repairs and maintenance.