Commercial Real Estate Glossary | Star Commercial Real Estate

CAM (Common-Area Maintenance)

Charges that cover the upkeep of shared areas in a commercial property, such as parking lots, landscaping, and common hallways. In a triple-net lease, CAM is billed to the tenant on top of base rent; in a gross lease, the landlord covers it. Ask for CAM history, not an estimate, and ask whether it has a cap before signing.

Cap Rate (Capitalization Rate)

A property's net operating income divided by its price, expressed as a percentage. Investors use it to compare returns across properties: a lower cap rate generally means buyers are paying more per dollar of income, usually reflecting lower perceived risk.

Easement

A legal right for someone other than the landowner to use part of a property for a specific purpose, such as a utility line or pipeline. A tract without deeded access, or with an easement running through its buildable area, can still be a fine investment, but at a different price. A title commitment and current survey will show what's recorded against a property.

Franchise (Margin) Tax

Texas has no personal or traditional corporate income tax, but most entities doing business here owe the state's franchise tax, commonly called the margin tax, which is calculated differently from an income tax. A Texas-licensed CPA should model the actual liability for a specific entity before it factors into a business or relocation decision.

Gross (Full-Service) Lease

A lease structure where the landlord covers property taxes, building insurance, and common-area maintenance inside a single, higher base rent, as opposed to billing those costs separately as in a triple-net lease. Compare total occupancy cost between a gross quote and an NNN quote, not just the base rent.

Modified Gross Lease

A middle ground between a gross lease and a triple-net lease, where the landlord and tenant negotiate which operating costs (taxes, insurance, CAM) each party pays, rather than the tenant paying all of them or none.

NNN (Triple-Net) Lease

A lease in which the tenant pays base rent plus the three "nets": property taxes, building insurance, and common-area maintenance. Because Texas has no state income tax, local governments lean heavily on property taxes, so the tax line is often the largest of the three nets on a Texas commercial building.

Non-Disclosure State

Texas does not require commercial sale prices to be recorded in any public database. Websites that estimate property values from public records are working without real transaction data, so market value here comes from brokers, appraisers, and lenders who were actually in the closed deals, not a public price history.

Personal Guarantee

A landlord's requirement that a business owner personally back a lease, usually requested when the tenant entity is new or thinly capitalized. The realistic negotiation is over scope, such as limiting the guarantee to the first years of the term or capping it at a set dollar amount, rather than avoiding it entirely.

Rollback Taxes

Back taxes owed when land loses an agricultural valuation, for example because a buyer converts it to commercial use. The county can bill the difference between taxes paid under the exemption and what full market-value taxes would have been for a recent lookback period. Contracts should state clearly which party pays.

TI (Tenant Improvement) Allowance

Money or construction work a landlord contributes to prepare a leased space for a tenant's use, from paint and flooring to a full build-out. It is among the most negotiable dollars in a lease, and its exact scope should be written into the signed lease rather than left as a verbal understanding.

Will-Serve Confirmation

Written confirmation from a utility provider (water, sewer, or electric) that service can actually reach a specific tract, along with the cost to extend it. Distance to the nearest line is only part of the picture; capacity, easements, and district boundaries decide whether a site really has utilities available.

Commercial real estate glossary.