Finance and Investment

Definition: 1. Cash or other liquid assets held back by a business to cover both anticipated and unforeseen costs and expenses.
2. Money collected from a borrower (mortgagor or trustor of a deed of trust) and held by the lender (mortgagee or beneficiary of a deed of trust) in an escrow or impound account to pay for expenses such as homeowner's insurance, private mortgage insurance, and property taxes.

Terms, Definitions, and Concepts: Finance and Investment, Legal (Law), Management, Real Estate, Taxes and Taxation, Title and Title Insurance

The legal process through which an estate is returned to the grantor, usually in fee ownership, after the grantee's estate ends.

The grantee's estate may end for a number of reasons. For example, the grantor may have specified that the grantee's interest in the property expires on a certain date. Other examples of different estates and the events that might end them include:
1. The death of the life tenant (conventional life estate) or the person upon whose life the duration of the life estate was based (life estate pur autre vie).
2. Violation of a condition (estate in qualified fee subject to condition subsequent) or limitation (estate in qualified fee determinable) specified by the grantor.

Contrast with remainder.

The interest in a conventional life estate (or an estate pur autre vie) that is retained by the grantor of the estate if no remainderman is named and that allows the grantor to recover ownership of the property once the life estate ends.

Live trees of merchantable species that are suitable for harvesting and sawing into lumber according to specific criteria. Generally, sawtimber should be greater than eight inches (8") diameter at breast height (dbh), and should contain at least one (1) sawlog. Merchantable sawlogs are usually a minimum of eight feet (8') in length.

A relative lack or limited supply of a good or commodity. Scarcity is one of the economic properties of real estate that makes it valuable and desirable.

1. A commercial or residential building with a finished exterior facade and landscaping and unfinished interior units, to allow for tenant improvements (TI) and the installation of furniture, fixtures, and equipment (FFE). "Base shell" and "grey shell" refer to a more or less unfinished interior. "Vanilla shell" refers to a minimally finished interior, usually with ceilings, lighting, plumbing, heating and cooling (HVAC,), interior walls (painted or unpainted), electrical outlets, rest rooms, and a concrete floor.
2. The completeness of a building at a specific stage of construction; usually refers to a completely finished exterior and a minimally finished or unfinished interior.

Definition: A lease agreement wherein a tenant leases the unfinished shell of a building, as in a new shopping center, and agrees to complete construction himself by installing ceilings, plumbing, heating and air conditioning systems (HVAC), and electrical wiring, as well as those trade fixtures necessary for the operation of the business.

Discussion: Like many real estate terms and phrases, those associated with shell leases (e.g., vanilla shell, base shell, cold shell, warm shell, etc.) differ by location and situation, sometimes even within the same region or municipal area. As they say, the devil is in the details. The lease or sales contract should clearly and exactly specify the degree to which construction of any sort of "shell" building has been or will be completed prior to tenant occupancy.

Shell leasing and its various forms (warm, cold, base) are used primarily in commercial real estate, but are gaining popularity in upscale condominiums and townhouses and other high-end residential real estate transactions. The idea is to attract either tenants or buyers, or both, by offering customizable living units. Financial incentives in the form of tenant (or buyer) improvement allowances afford new residents the opportunity to select nearly all aspects of interior decor, including relatively large projects such as plumbing and fixtures, wiring, and interior walls.


Terms, Definitions, and Concepts: Real Estate, Construction and Building, Title and Title Insurance, Appraisal, Auction, Finance and Investment, Management, Legal (Law)

When a property is distressed or in foreclosure lenders are sometimes willing to accept less than the full amount due, commonly referred to a "short pay" or "short sale."

Landlord-provided improvements to a grey shell or cold shell building, usually limited to the construction of interior partition walls.

One who divides, separates, or apportions something into smaller parts, especially with respect to subdivision of real estate.

1. The process of buying undeveloped land, dividing it into smaller, usable lots, and selling the lots to potential users or investors. 2. Land that has been divided by the owner (subdivider) into individual parcels or lots which have been grouped into blocks. These lots, together with streets, alleys, parks, schools, planned commercial areas, and public utility easements, are recorded on a plat. Subdivision is subject to local and state regulations, and in most areas a lengthy application process and filing fee is required.

The transfer or conveyance of title to or an estate in real property to another. In essence, one landowner substitutes for another, with all rights intact except for those reserved by deed restriction.
Substitution began to replace subinfeudation (the granting of subordinate tenancies) with the decline of the feudal system.

A group form of investment including partnerships, limited partnerships, corporations, limited liability companies (LLC), and trusts.

A group form of investment including partnerships, limited partnerships, corporations, limited liability companies (LLC), and trusts. Synonym of syndicate.

The acquisition of private property for public use by state, federal, or municipal governments. The concept of taking originates in the takings clause of the Fifth Amendment to the U.S. Constitution, which states that when property is taken through the government or court actions of eminent domain and condemnation, the owner must receive just compensation.

A phrase in the Fifth Amendment to the United States Constitution, which states in part, "...nor shall private property be taken for public use, without just compensation".

1. Real or personal property that is visible and has physical form, as opposed to incorporeal property such as rights or patents.
Also known as corporeal property. 2. Real property consisting of land, improvements to the land (tenements), and physical appurtenances such as sidewalks.

Financial incentives offered by landlords to prospective tenants to pay for or partially defray the costs associated with structural changes necessary for occupancy.

Interior structural changes made to a commercial or residential building prior to tenant occupancy. The nature and extent of such changes are varied and depend on the needs and desires of the future tenant. The tenant may take possession of a grey shell, vanilla shell, or completely improved interior space depending on these needs and desires. Responsibility for design of, installation of, and payment for tenant improvements is negotiated at the time of the lease agreement.
The landlord may furnish all or part of the tenant improvements, or may offer a financial incentive in the form of a tenant improvement allowance (TIA), usually on a per square foot basis. Landlord-provided tenant improvements can be either "under-ceiling" or "slab-to-slab".
Examples of tenant improvements may include HVAC systems, plumbing and wiring, partitions and interior walls, flooring, ceiling tiles, lighting, signs, shelving and storage, restroom fixtures, fire protection, and security systems.

1. A buildings, structure, or other improvement to land.
2. Land, buildings, offices, franchises, etc. owned by another and held in tenure (leased).
3. A rooming house; a set of rooms divided from the remainder of a building and leased as a separate dwelling (a flat or apartment).
4. A parcel of real property, either with or without improvements, as in the dominant and servient tenements of an easement.

1. Live trees of merchantable species and sufficient size that they can be profitably harvested and sold. Timber is then milled and made into lumber and other wood products. 2. Forest land covered by trees of suitable size, kind, and quality to be of commercial value.

Timber investment management organizations (TIMOs) are group forms of investment created to oversee the growth and production of timber and other forest products. TIMO's generally take the form of C-corporations, the traditional way that large businesses and investment groups are organized. TIMO's structured as C-corporations (C-corps), however, are at a direct tax disadvantage to other forms of land and business ownership, such as limited liability corporations (LLCs), S-corporations (S-corps), and especially real estate investment trusts (REITs). This is due to the fact that TIMOs and other C-corporations are subject to double taxation - profits are taxed once at the corporate level and again at the individual investor level (as taxes on shareholder dividends).

Terms, Definitions, and Concepts: Finance and Investment, Forestry and Silviculture, Real Estate, Timber Management

The total amount of timber available for harvesting at a given or specified time.

1. The ownership of and right to own real estate.
2. Documentary evidence of real estate ownership in the form of a deed.
3. The set of circumstances that would allow one to recover or retain ownership of real estate if that ownership was challenged in court. These circumstances often include possession of the land and the existence of a recorded deed showing ownership.

An indemnity policy that protects a lender or buyer of real estate against losses due to defects in title.