Demystifying the office search: Understanding the jargon

17th June 2021 | 3 min read

LABS_TheOfficeSearch-Header_0000_LABS_VH_May-21_11-Demystifying the office search: Understanding the jargon

Every industry has its fair share of jargon and the real estate sector is no different. However, if you are looking for an office understanding some of the baffling terminology being used is key. So, for part two of our demystifying the office search guide we’ve collated a glossary of terms used within the property sector.

The Glossary

Alienation: The ability to dispose of a lease.

Alterations: It’s common for contracts to mention alterations, which indicate how much an office can be modified, such as adding partition walls, replacing the electrics or changing the interior décor.

Authorised guarantee agreement (AGA): AGA is a common requirement on granting a lease. The outgoing tenant gives an AGA to the landlord if it assigns the lease, guaranteeing that the incoming tenant or assignee will pay the rent and observe the covenants specified under the lease.

Break clause: This is a clause in the lease contract or license made between the respective parties to allow for a lease to be ended prior to the full expiry of the lease term. Usually these have to be negotiated into a contract, but can be useful in providing extra flexibility within a lease.

Business rates: Is the tax payable on commercial property and is assessed in a rating list. To obtain details of your rateable value you need to contact the local authority for the area of the building you are interested in and provide the address, including postcode.

Common areas: Parts of the building, such as the core elements, lobbies and changing rooms that are shared by all tenants.

Dilapidations: The lease contract will generally have a clause requiring the tenant to return the office space it has occupied to the condition it was acquired in or repair liabilities during the course of their lease.

Headline rent: Rent per square foot excluding any incentives.

HVAC: Heating, ventilation, and air conditioning, including the ductwork and filters of the system.

Lease term: Specific dates for the beginning and end of the lease.

FRI lease: A full repairing and insuring lease (FRI) is when the cost of all repairs and insurance are borne by the business tenant.

Landlord and Tenant Act 1954, Part II: Provides that at the end of a lease, a business tenant has a right both to remain in occupation of the premises and to a new lease of the premises on substantially the same terms. The Act provides that at the end of the contractual term, the tenancy will not automatically terminate but is, instead, continued under the Act on the same terms as the expired lease.

Lessee: Name of the tenant; the person or entity taking the lease.

Lessor: Name of the landlord or the person or entity giving the lease.

Net effective rent: Rent per square foot including incentives.

NIA (Net internal area): NIA is defined as the usable space within the perimeter walls of a property. It excludes areas such as the space occupied by solid dividing walls, staircases, lifts etc. NIA is the standard figure quoted for office space.

Rent review: Usually, the landlord will review the rental rate every five years, measuring it against the current market plus the value of the property or the Retail Price Index.

Service charge: Cover the cost of providing various services to the tenants, such as maintenance and repair of the building and common parts, provision of heating, lighting and security.

Stamp Duty Land Tax (SDLT): Tax payable to the government, which is calculated on the purchase price of a property.

Sublease: Allows a tenant to lease part or all of its space. In a sublease, the tenant becomes the sublessor; the entity the tenant is subleasing to becomes the sublessee.