One of the biggest issues that people run into when renting
their first commercial property is trying to understand the many
technical terms used. In order to help you combat this, we're going
to document some the major, less-commonly heard terms used in the
property market.  If you're struggling to make your way
through the paperwork, this jargon buster should help:

AGA (Authorised Guarantee Agreement)

This is the guarantee by an outgoing tenant to the landlord that
the incoming tenant will continue to adhere to the obligations in
the lease (such as paying rent).  This will keep the original
tenant on the hook should the assignee default.

Alienation

This is the right of a tenant to dispose of a lease should they
no longer want it.    A lease will usually allow
passing the lease over to a third party, and will sometimes allow
subletting if certain conditions are in place.

Assignment

The process of handing the lease to the tenant once the landlord
has completed financial referencing.  Three documents are
required for assignment: the License to Assign, the Authorised
Guarantee Agreement and a Deed of Assignment.

Break Clause

The tenant's right to end the lease early - this is usually
condition heavy.

Covenants

These are the terms of tenancy agreement and include any
obligations made by either the landlord or the agent.

Equivalent Yield

This is the expected income return of a property, and based on
the value at the time the return is received.

Expectations and reservations

These are the parts of a property that the landlords hold back
for themselves.

FRI lease

This is a form of lease where the tenant is expected to meet the
costs of all repairs as well as insurance for the property.

Gross Internal Area

This is the total area within the perimeter walls of a property
(this includes space occupied by staircases, WCs, etc).

Headline Rent

This is rent paid once rent-free periods and other concessions
have expired.  For example, a landlord may offer a rent-free
period to entice a tenant to take a property.

Indexation

This is the adjustment of rent against a specific index, such as
the rental price index.

Initial Yield (Gross)

The yield is calculated by dividing the property's annual rent
by the property value.  The result is expressed as a
percentage.  The gross percentage is calculated immediately
after the purchase, and 'gross' doesn't account for costs such as
legal, agents and valuation fees.

Initial Yield (Net)

This is the Yield available once fees and operational costs have
been factored in.  The net yield will better reflect whether
the property purchaser is making profit or loss.

 

 

 

 

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