Glossary Commercial Real Estate

 

Addendum : An agreement modifying or adapting an initial contract by the addition of new clauses.

Agrément : The agrément is a form of administrative consent, granted by the Préfet de Région, that is required before new areas of office space, industrial premises, warehouses, technical, or premises used for technical, specific or educational purposes can be created in the Paris region. The agrément procedure was revised in a decree dated 29 April 2000. This revision abolished the consent formerly required by large occupiers and altered the size thresholds for which the agrément is required for commercial property (to 1,000 sq. m for offices and 5,000 sq. m for warehouses and industrial premises).

Allocation of premises : Determination of a specific function for which the property will be used.

Asset manager : A specialist in charge of improving the value of a portfolio. Asset managers manage a fund for one or several investors with whom they may act as joint investors.

Average weighted rent : Average rent in a given geographical area weighted by the stock of space in each arrondissement or town forming the area.

Bare ownership : A real right resulting from the division of rights associated with ownership. Bare ownership gives the holder the right to dispose of the property but does not allow him to use or enjoy the property. These fall under the right of usufruct of the same property.

Blocks of premises : Two approaches are used to appraise the market value of blocks of premises, in particular blocks of flats.

  • Either the sale of the whole block
  • Or the sale unit by unit (flat by flat, split sales

Block sale : Sale of an entire multiple occupancy building to the same person or body corporate, bought with the intention of making a profit when the building is sold, often by selling the building in units.

Building density : This is the gross internal area in square metres or the number of cubic metres that can be built on one square metre of land.

Building lease : Long term lease (18 to 99 years) in which the lessee, holder of a real right, agrees to build and maintain constructions on the leased site. Upon lease termination unless stipulated otherwise the constructions become the lessor’s property.

Building open to the public : (place of assembly) The term describes public or private buildings that receive customers or users other than employees. These establishments are subject to specific regulations on safety, security and accessibility.

Business concern : All tangible (materials, tool, goods) and intangible (lease right, logo, clientèle, patents, and brands) assets that belong to a trader or industrialist that enable the trader or industrialist to run its business. Total assets form a legal universality that is subject to specific rules.

Business lease : A contract wherein the owner of a business concern (the lessor) grants a rental contract for the management of the business to a manager who exploits the business in his own name, for himself and at his own risks. In exchange the tenant manager pays the owner a rent or dues.

Capital value : (valuation charter for real estate) The capital value is the value that could be attributed to real estate in the framework of contribution of property or transfer of the asset. The capital value will vary depending on the type of transaction and the use of the property agreed between the parties. This value only exists within the framework of a specific transaction. The parties contributing and receiving the property must therefore define what type of value should be used and how the value can be calculated, a process which will also be subject to the control by the relevant watchdog, the Commissaires aux apports.

Capitalisation rate : This is the ratio between potential income from a property and the property’s purchase price.

Carrez law : This makes it compulsory, in commonhold buildings, to mention the floor area of the separately owned parts in any preliminary or final sales contract. The floor area to be taken into consideration is that of the floors of premises that are enclosed and roofed, after deducting areas occupied by walls, partitions, steps, stair wells, ducts, doorways and windows. Premises with a ceiling height lower than 1.8 metres are not counted. The floor areas of cellars, garages, parking spaces, and units or parts of units less than 8 sq. m do not have to be given.

Catchment area : The real or theoretical area or population from which a retailing establishment attracts customers. The outer outline of the zone is influenced by distance and transport times. When these zones are illustrated on a map, there may be isometric or isochronous curves. The definition of the zone plays an important role in the estimation of the potential turnover of the establishment or for its scope of advertising.

Cladding or siding : Thin protective covering, that can dilate freely, on the structural or exterior walls of a building.

Collateral security : In civil law this is a contract in which a borrower offers real estate assets or other assets to the lender as collateral for a loan. In France when movable property is pledged it is known as a “gage”, when real estate is pledged it is known as antichrèse or living pledge.In commercial law this is a form of pledge without loss of ownership of the borrower for example a business concern, material or tools can be pledged.

Commercial lease : Lease for premises in which the lessee operates a business concern owned by the lessee. Commercial leases are subject to a specific protective legal regime covered by articles L.145-1 onwards of the Nouveau Code de Commerce and provisions in the decree of 30 September 1953 which is still in force. One of the features of this statute is the business tenant’s right to renew the lease, giving the tenant what is commonly referred to as commercial ownership.

Communal areas : The parts of a building or site used by all the occupiers or of use to all the occupiers.

Condition subsequent : A future and uncertain event that, if it takes place, will make a right disappear retroactively.

Consignor : Industrialist or major retailer that organises and puts goods in a form of transport. This term also designates the shipper of the goods. In shipping the consignor is the charterer.

Contract for sale and purchase (Reciprocal sales promise or synallagmatic contract) : A contract in which both parties reciprocally agree to buy/sell a property at a set price. This promise binds both parties from the outset. In practice this preliminary contract means the total payment of the price and the transfer of the property can be delayed until the final sales deeds are exchanged.

Contracting authority : A person or body corporate, owner of a site, for whom a development project is carried out.

Co-ownership : A form of ownership in which an entire building or group of buildings is owned by several people. The property is split into several units, each unit having a private area and a share in the common areas. The law of 10/07/1965 and its decree of application of 17/03/1967 instituted a widely mandatory single regime.

Co-ownership charges : Costs incurred by the landlord that the landlord can claim back from the tenant(s). Recovered charges are independent of rents. For residential buildings a complete list of recoverable charges is given in the decree of 26/08/87. They cover costs pertaining to the daily upkeep of the property, equipment mentioned in the contract as well as small repairs and specific taxes.

Cost of construction index : A reference index calculated and published quarterly by INSEE that measures the change in prices of building materials. This index is particularly used by lessors as a basis to readjust rent annually. This index is often used by lessors in commercial leases as a basis for annual readjustments of the rent. For residential properties it has now been replaced by the rent reference index.

Current or alternative use : Several approaches can be used to appraise the market value depending on whether the building is assumed used for its current usage or another usage. A change of use can lead to very different values depending on the market and the cost of transforming the building.

Deed : A written document drawn up by a lawyer or public official which is authentic until civil proceedings to challenge its authenticity are undertaken.

Department commission for retail equipment : This commission is charged with examining applications for approval to open large stores. This approval has to be obtained for retail areas exceeding 300 sq. m. The commission uses criteria such as environmental protection, consumer convenience, the retail density in the catchment area, and so on.

Development zone : Literally Zone d’aménagement concertée (ZAC) In the new Schéma de renouvellement urbain, article L. 311-1 of the urban code has not been changed, defining a ZAC as zones in which a public body or organisation with authority of the zone decides to develop or equip sites, particularly sites that the body or organisation acquired with a view to disposing or transferring at a later date to public or private occupiers”.

Down payment : Sum of money paid accompanying a bilateral letter of intent to buy a property. The amount is deducted from the amount due if the sale goes through.

Easement : A charge on land or a building (the servient tenement) to the benefit of another (dominant tenement) belonging to a different owner, for example view easements, rights of way, easements prohibiting the construction above a certain height etc.

Economic rent : The economic rent is the rent that is actually paid by the tenant, after deduction of fees and other incentives;

Emphyteutic lease : A lease running from 18 to 99 years for a building and giving the lessee a title right.

Estate agent : A professional person that acts for owners, buyers, tenants or landlords during the sale or leasing of apartments, retail business concerns, or building sites. Estate agents are not owners of the property being sold or leased; they are intermediaries providing services to help find tenants or buyers that have the financial and legal guarantees to meet provisions in the Law of 2 January 1970 (known as Loi Hoguet) and the decree of application of 20 July 1972.

Estimated rental value : (valuation charter for real estate) This is an annual financial payment that is made to be able to use a property under a lease agreement. It is therefore the estimated rent which could be obtained in theory for a property under standard lease conditions for a category of property in a given region. The estimated rental value integrates the effect of any capital payment made to the preceding tenant or the landlord.  The estimated rental value is given excluding lease duties, VAT and any service charges or other expense that may be charged to the tenant. For residential buildings laws and regulations strictly define the charges incumbent on the tenants and owners respectively. In commercial real estate there is not such a detailed breakdown and charges may be recovered or not from the tenants depending on the terms of rental agreement.

Eviction indemnity : An indemnity owed by a lessor who does not wish to renew a commercial lease. The amount of this indemnity must equal the prejudice suffered by the lease not being renewed.

Exemption lease : A lease allowed in provisions of article L. 145-5 of the Nouveau Code de Commerce (formerly article 3-2 of the Decree of 30 September 1953). Exemption leases are not covered by the scope of application of the protective statute of commercial leases, on condition that they do not exceed 24 months. If at the end of this period the lessee still has possession of the premises a new lease takes effect under the statute of commercial leases.  Emphyteutic lease A lease running from 18 to 99 years for a building and giving the lessee a title right.

Expropriation : Procedure undertaken by the authorities in which the owner of a building is forced to transfer its property rights to the State for reasons of public interest and in exchange of a fair and prior indemnity.

Forced sale value : (valuation charter for real estate) Value of the sale of a property or property rights in a situation of duress, for whatever reason (legal, psychological, financial or other). In the majority of cases a forced sale value is significantly lower than the average market value.  Expropriation does not, on principle, fall within the scope of forced sale. Although alienation is compulsory, the basis for compensation must equal the market value plus the prejudice suffered by the expropriated person at the referral date.

Forfeit : The possibility given to the purchaser to forfeit the purchase commitment in exchange of payment of a sum of money.

Fouché project : A bill aimed at better controlling the opening of large retailer stores to “guarantee the balance between different forms of retail in France”. The law gives five criteria for any request for authorisation to open: maintain or improve actual competition, promote well balanced territorial development, protect the environment, improve urbanism, satisfy consumers’ needs by diversifying supply and help employment and the improvement of working conditions.

Franchise : A system of selling products, services or technologies based on a close and on-going cooperation between the franchiser and franchisee, two companies that are legally and financially distinct and independent. In exchange for certain fees, the franchisee has the right to exploit a brand or concept in exchange for regular services from the franchiser.

Future supply :

Definite supply

  • premises being constructed, redeveloped or renovated.
  • premises on which works have not yet started but for which the works start date is set;
  • space that will definitely be vacated.

Probable supply

  • premises for which full administrative approval has been granted but building works will only start when one or several occupiers have agreed to take some or all of the space.
  • premises for which planning permission has been filed or ones for which planning permission has been granted but will only become definitive once the period for third-party recourse has ended.
  • premises that will probably be vacated.

Possible supply

  • sites controlled by a developer that has clearly expressed an intention to build
  • development projects that for some reason, such as feasibility or construction date, are still very uncertain
  • premises that will possibly be vacated.

Gross replacement cost : Cost that can be used to define the replacement value of a building. It includes the price of the land and the construction cost of buildings and other fixtures, non-recoverable taxes, fees and taxes.

Ground occupancy ratio : This ratio can reduce the amount of ground area occupied by buildings without taking their height into consideration. The ground occupancy ratio is defined as the ratio of the site area occupied by the vertical erection on the ground of the volumes of buildings, to the surface of the site. When the property is partially covered by roads, the area of the site considered is the site that is left without the part taken by the road.

Guarantor : A person who commits to guaranteeing the performance of a contract for one of the parties to the other party’s benefit. A guarantor who accepts to perform if the principal debtor defaults is known as a personal guarantor. If, instead of committing to perform, a guarantor offers a mortgage on a building it owns as security, it is known as a real guarantor.

Head contractor : A person or body corporate contracted to construct a building or carry out works on behalf of an owner or to direct the construction.

Headline rent : The headline rent corresponds to the value on the lease agreed between the parties.

High Environmental Quality (“HQE”) : A classification given in France when all the stages of a building, from construction to management, have been carried out in an environmentally-friendly way. To be awarded the HQE status 7 out of 14 “green” criteria for building construction, management or user comfort have to be respected. The 14 targets of the HQE standard 1. Harmony between the buildings and their environment. 2. Integrated choice of products, systems and construction procedure 3. Low nuisance building site 4. Energy management 5. Water management 6. Business waste management 7. Upkeep and maintenance management 8. Hygrothermal comfort 9. Acoustic comfort 10. Visual comfort 11. Olfactory comfort 12. Health quality of space  13. Health quality of air 14. Health quality of water

High rise building : A building in which the lowest floor slab of the top level is more than 50 metres from the ground for residential buildings and more than 28 metres for other buildings. They are subject to strict safety regulations, particularly in the field of fire prevention.

Hypermarket : A hypermarket is a self-service retail establishment making at least a third of its turnover from food sales and with a shopping area of at least 2,500 sq. m.

Immediate supply : The amount of space that is currently vacant and available to let or for sale.

Industrial park : An enclosed area with a clearly defined boundary. The owners and/or occupiers in the zone have a “community of interests”. The main features of an industrial park are: a minimum of 8 units, minimum 3,000 m², and the existence of a community of interests (shared services or equipment). Several types of zones exist: industrial parks in which the share of office space is equal or inferior to 35% of total space; office and industrial parks where the share of office space exceeds 35%; logistics parks where the share of warehousing exceeds 80%; and peripheral retail parks.

Instructions : Contract in which a person (the principal) gives another person (the agent) the power to act on his behalf for one or several legal purposes (sale, leasing or purchase of property). Agents and other property managers require instructions to sell, let or manage a third party’s property.

Insurance value : (valuation charter for real estate) Value for which the property is insured with an insurance company. This value is used as a basis to calculated the payment of annual premiums and as a basis for negotiation if a claim is made. The insurance value covers two notions:

  • The reinstatement value (see definition)
  • The reinstatement value less wear and tear (the reinstatement value to which is applied an ageing coefficient depending on the age of the building and its state of repair).

Inventory of fixtures : A deed drawn up jointly by the landlord and tenant detailing the nature and quality of the property being let as well as the number and condition of objects forming the property.  Exemplified copy A copy of the deed issued by a public officier (in France usually a notaire) who is authorised depository of the original.

Investment funds : These are investment vehicles, often collective (owned by many), that manage financial or real estate assets with a defined investment goal (type of financial assets, management policy, objectives, fees, share value, rhythm of calculation of value and so on). Closed funds have a limited number of shares (or units), do not issue new shares or buy shares that have already been issued. Open-ended funds issue new shares and buy shares that have already been issued.

Key money : In France key money is distinguished into the “pas de porte” (literally “threshold”) and “droit au bail” (literally right to lease). The two fall under different tax regimes. A pas de porte is an inducement paid by the tenant to the landlord when a commercial lease is signed or by the in-going tenant to the out-going tenant when a commercial lease is renewed. The droit au bail, is the average price that a tenant is likely to be able to secure from the transfer of its lease to a successor. Droit au bail is the financial consideration of advantages that are contained in an existing lease with more or less advantageous clauses and a rent that is significantly lower than going market rates. For a shop, its position is of particular importance as it directly affects business activity. Appraising the droit au bail involves assessing the value of all the advantages that will benefit the tenant for a variable period of time. The value of droit au bail is generally inversely proportional to the rent agreed in the lease. It rises as the period considered lengthens and the degree of protection or the advantages benefiting the tenant in the lease increase. The droit au bail should not be confused with the business concern, of which it may be one of the components. The droit d’entrée or the pas de porte which are inducements paid to the owner when a lease, amendment or renewal is signed. These are equivalent to the capital value of a rent and are governed by legal and tax frameworks that differ considerably from the Droit au bail.

Land survey register : The set of documents that enable plots of land and buildings to be situated geographically, show the divisions, identify the owners and supply the cadastral rental value. In France, land survey registers are available in town councils. They are used as a base to determine land taxes.

Land tax : Land taxes cover several taxes levied by local or regional authorities: the waste removal tax in some towns, special facilities taxes, management fees for direct local taxes (rate 8%), for the state. Land tax is levied on constructions and land. It is payable by the owners or the usufructuary.

Latest generation of buildings : New or heavily redeveloped building with modern architecture. With cutting-edge technical equipment and interior design such buildings can be used as head offices.

Lease back : A medium term credit contract whereby a credit company purchases the commercial real estate or other capital equipment of a client company on condition that they are leased back to the user client for an agreed rent over a set term. At the end of the term the client has the option of giving the assets back to the credit company, or asking for the contract to be renewed, or buying the asset for a price that at least partially takes into consideration the payments paid in rents.

Lease : A contract in which a natural person or body corporate grants, for a defined period, the usage of a property to another person in exchange for a sum of money, pursuant to terms and conditions stipulated in the contract or by the law.

Lease-sale : Contract in which the owner of a property rents the property to a person who, at the end of a set period, has the option or the obligation to buy the property (credit-lease, lease-back, rent ownership).

Legal density limit : This gives the maximum floor area that can be built per square metre of land. Above this ceiling limit, the construction right has to be bought from the local authorities.

Light industrial space : A building or part of a building with a ground floor of a headroom exceeding 4 metres and ground level or loading bay access.  The main function of light industrial space is to accommodate manufacturing activities, small assembly lines, small-scale distribution and/or storage. Such premises enable all the functions of a company to be housed under the same roof. Typical specifications of light industrial space are: inferior or equal to 35% of space used for offices, floor-to-ceiling height at least 4 metres in manufacturing zones, direct lorry access to manufacturing and storage areas, ground floor or loading bay access, and load bearing capacity of 1 ton per square metre.

Listed real estate investment company (SIIC) : The French introduced the regime for the SIIC to promote the ownership, development and sale of assets on the letting market (commercial, housing, services or operational estate markets). The minimum time period for ownership using this regime is 10 years. The status enables companies to benefit from two tax breaks as they are exempt from company tax as well as from tax on any capital gains. In exchange, companies are required to distribute at least 85% of their operating profit, 50% of capital gains and 100% of dividends received from subsidiaries.

Local council maps : Given the status as a town planning document in the new law on solidarity and urban renewal (Solidarité et Renouvellement Urbain or SRU), local council maps are documents enabling small councils that do not have a local town plan (Plan Local d’Urbanisme PLU) to set constructible and green boundaries in their territory.

Logistician : Organiser and manager whose role is to optimise the movement or storage of raw materials or manufactured goods to reduce the costs of these movements to a minimum. Logisticians manage the circulation of goods whatever the field of activity of the client company. They therefore work for industrialists, carriers or in mass retailing.

Logistics : The management of the flow of goods for a third party. The main activities in logistics are transport and storage, but may also include wrapping, labelling, product dispatching, traceability, and assembly.

Luxury building : A qualitative description of a new, renovated or redeveloped building with modern architecture. Equipment is technically advanced and interior design of good quality.

Market Value : (valuation charter for real estate) The market value is the price at which the sale of a property or property interest would be completed in an arm-length transaction at the date of the valuation, assuming:

  • a willing seller and buyer;
  • a reasonable period (having regard to the nature of the property and the state of the market) for the proper negotiation;
  • that the state of the market, level of values and other circumstances were stable during this period;
  • that the property was offered in an open market, unconditionally and with adequate marketing
  • that neither party had a special interest in the property

Other terms are also used for the market value such as open market value, fair market value or fair value. In the decree of 5 November 1990 for insurance companies the term realisation value was used. The market value may be defined as:

  • The value of the vacant property or assumed to be vacant,
  • The value of the property “”occupied””; this takes into consideration the presence of occupiers, whether entitled or not. It therefore depends on the legal and financial conditions of the occupation and of the quality of the occupier(s).

The market value is generally given excluding transfer duties or VAT for commercial property subject to the VAT regime, but inclusive of all taxes for residential properties subject to VAT and excluding acquisition fees (publicity, deed costs, fees). In general the market value is determined either by directly comparing similar transactions or by capitalising or discounting a theoretical or real income. Other valuation methods, particularly the reinstatement cost method, are only used in exceptional circumstances, either as a cross-check or when the other methods are impossible or difficult.”

Mixed office and light industrial space : A building or individual units with at least 35% office space that can be exploited vertically or horizontally for light industrial (non office) uses such as laboratories, research centres, small production or assembly processes etc. The main specifications of such buildings are a floor-to-ceiling height under 4 metres with more than 35% of office space.

Modalities for switching from the POS to the PLU (article L. 123-19 of the urban planning code) POS plans approved before the law on Solidarité et Revouvellement Urbain of 13 December 2000 came into force are subject to the new PLU legal regime but their provisions are applicable in their existing state until the next revision date.

  • POS plans that were published before the law came into force are opposable and their approbation is still subject to the former regime, on condition that the approbation is given within one year of the law coming into force.
  • When a POS was being revised and the project had been decided before the law came into force, the revision is subject to the former regime on condition that the approbation is given within one year of the law coming into force.
  • If the anticipated application of the provisions of a POS was decided before the law came into force, the provisions are applicable until a period of 6 months has expired from the date at which the application was enforced.

Mortgage : A legal title burdening a property that acts as a guarantee to pay a debt contracted on the property. The mortgage enables the lender to use legal means to force the sale of the property belonging to the debtor if the latter cannot reimburse the amounts owed.

National commission for retail equipment : This commission is composed of magistrates and senior civil servants. It deals with appeals made by retailers when the department commission has refused approval.

Net absorption : The balance between the amount of space taken and vacated by occupiers in a market in a given year.

Net initial yield : Gives as a percentage the ratio between the net income (excluding taxes and charges) from a property and the acquisition cost (price of the building plus fees and transfer duties).

Net replacement cost : Gross replacement cost depreciated to take into account dilapidation and obsolescence.

New building : A newly constructed building, less than 5 years old, that has never been occupied. This category of buildings is subject to VAT when sold.

Occupier sale : Sale of premises (offices, industrial, etc.) to the future occupier, i.e. the buyer is not buying the property to put it on the letting market.

Office stock : The total of office space built in a given zone (in Ile-de-France, data is estimated by the Observatoire Régional de l’Immobilier d’Entreprise in each town and by EPAD in La Défense).

Office, retail or warehouse tax : This tax affects owners of offices (bigger than 100 sq. m), retail premises (bigger than 2,500 sq. m) and storage premises (bigger than 5,000 sq. m) that are situated in Ile-de-France. Certain premises that meet these criteria may be exempt (for example premises owned by associations of public utility).

Old building : A building that is more than 10 years old and has not been renovated or redeveloped.

Partitions : In general, partitions are non-load bearing structures that separate rooms in a construction. Partitions can be separating partitions or distributing partitions. They may be made of brick, breeze blocks, plaster blocks and so on. They are usually 5 to 7 cm thick. Partitions can also be fixed against walls to improve sound or heat insulation. These are known as inner partitions or linings.

Penalty clause : A clause in which a set rate of damages and interests owed by the debtor are fixed contractually in the event the debtor does not perform. Under article 1152 paragraph 2 of the Civil Code, the judge can increase or reduce the amount provided if this amount is manifestly derisory or excessive.

Pension funds : Pension funds invest the capital given to them by individual savers in securities and real estate in order to pay the pension of future retirees. These types of funds usually seek low-risk investments. When real estate is the chosen investment, pension funds usually opt for secure assets – those in good condition, well located, already let and so on.

Plan local d’urbanisme, PLU – Literally Local urban plan (PLU) : A new form of urban planning document in France that have replaced the POS (Plan d’occupation des sols). The PLU enacts the rules for developing land and now includes strategic development plans and sustainable development regulations, particularly for local policy on housing, the treatment of public spaces, conservation areas, and identifying areas that have to be renewed or protected.  PLU regulations must cover the entire territory of the council (POS rules covering different sections have been abolished) and will integrate Zone d’Aménagement Concertée (development zones).  PLUs must comply to provisions in the Schéma de Cohérence Territoriale (SCOT, see this term), plans for the protection of the seaside, regional or national park charters, urban movement plans and local habitation programmes.

Planning permission : An administrative order that authorises the construction or redevelopment of a building; barring exceptions, planning permission is compulsory and must be received before building begins. A certificate that must be obtained from the local government by the owner or constructor before buildings or repair works begin and which has to be posted in a very visible position until the works are finished and signed off by a construction inspector.

Portfolio : The real estate assets owned by an investor with a view to receiving direct revenue or capital gains.

Possible development (future pipeline) : A credible potential project for which some administrative procedures are still to be fulfilled or are pending approval.

Precarious occupation agreement : A convention resulting from case law on the fringe of lease contracts. Its main feature is the precarious and fragile right of enjoyment given to the lessee. The length of occupancy is uncertain because the owner can reclaim the premises at any time. In addition the use of such conventions must be justified by a motive that is mentioned in the convention.  Precarious occupation agreements are not subject to the commercial lease statute. They also lie outside the scope of work by contract agreements covered by the Civil Code

Pre-emption right : Option given by law or by convention to a private person or a public body to have the first right of refusal to purchase a property before any other buyer.

Pre-letting : A binding commitment by an occupier given more than 6 months before the building is actually available.

Prime rent : Average rent of the ten most expensive transactions identified during the previous six months in a given area. Only transactions on units larger than 500 sq. m are considered.

Private areas : The parts of a building reserved for the use of a specific owner or tenant.

Private contract or agreement : A document drawn up by a private individual that bears the signature of all parties. The most common purpose of such documents is to act as proof of the existence of a legal situation.

Professional lease : A lease contract for premises exclusively used for professional purposes (other than commercial, specialised trades, industrial or agricultural); the lessee can exercise a (liberal) profession in the premises (doctor, lawyer, dentist etc.). Professional leases are governed by article 57-A of the law of 23 December 1986 and additionally by provisions in articles 1717 and 5 of the Civil Code.

Professional tax : Professional tax is due each year by individuals or body corporates exercising a non-salaried professional activity in France on a regular basis. Exemptions may be permanent or temporary. The tax is worked out in each town where the person has premises or land. The tax is used to finance the town, the departements, the region as well as other organisations such as the chamber of commerce or other professional chambers.

Property agent : Specific to France, a property agent is a broker who buys real estate for his own benefit himself, then sells the property (either in its entirety or split into units) with the aim of making a profit.

Property company : A real estate company is a company whose business is owning real estate which is let and/or used to maximise the profitability and yield. The core of the business is managing a real estate portfolio. The real estate may be residential, commercial (offices, retail, warehouses, industrial) or operational (hotels, retirement homes, university residences etc.)

Property developer : A developer is an economic intermediary that erects buildings with a view to selling them again to first time buyers, occupiers or investors. The developer organises the construction of buildings. In parallel, real estate operators can play a wider role. They can act at each stage of the construction process and the sale of the building. They design, develop, own, sell, invest, operate and manage real estate assets.

Rapid parcel services : Rapid mail services are a way of transporting goods, usually using road transport, in loads of less than three tons, composed of parcels that are collected, grouped, divided and distributed.

Real estate development contract : A contract deemed to be of common interest in which a person known as the “real estate developer” contracts with the owner of a site to construct a building for an agreed price using work by contract agreements. The developer can also carry out, or have carried out, for an agreed price some or all legal, administrative and financial issues pertaining to the construction project.

Real estate investment trust (OPCI) : The OPCI is a new mutual savings scheme dedicated to real estate. OPCIs enjoy a regime that is very similar to the one for securities mutuals, or OPCVM (Organismes de Placement Collectif en Valeurs Mobilières). Two types of OPCIs exist (inspired by the organisation of SICAVs and FCPs) with two different tax regimes. OPCIs are investment products, at least 60% of which are invested in real estate and 10% in liquidities. They have more flexible tax regimes that are better suited to real estate. OPCIs are controlled by the markets’ watchdog, the AMF and, like SCPIs, the newest form of OPCI must obtain prior approval from the AMF.  OPCIs are also subject to strict rules on the distribution of rental income and capital gains which vary for different forms of OPCI.

Real estate investment trust (SCPI) : Real estate investment companies are collective investment companies whose exclusive purpose is to own and manage a portfolio of assets leased to tenants. At least 90% of the portfolio of an OPCI SCPI investment company must consist of real estate assets. SCPIs sell shares in the buildings that have been acquired to shareholders. SCPIs are not listed on the stock exchange but are financed by savings from the public. These trusts are not subject to company tax. Each shareholder is taxed personally on the revenues received from the trust. Partners in an SCPI will have to decide by 17 April 2012 whether they wish to transform their SCPI into an OPCI or keep the SCPI status.

Recent building : A building less than 10 years old that has not been renovated or redeveloped and has already been occupied.

Recoverable charges : Costs incurred by the landlord that the landlord can claim back from the tenant(s). Recovered charges are independent of rents. For residential buildings a complete list of recoverable charges is given in the decree of 26/08/87. They cover costs pertaining to the daily upkeep of the property, equipment mentioned in the contract as well as small repairs and specific taxes.

Redeveloped building : A building that has been completely redeveloped and transferred to the VAT regime. The main facades may or may not be conserved.

Reinstatement value : (valuation charter for real estate) This is defined as the cost of reconstructing buildings and equipment (considered fixtures), including fees and technical costs. It differs from the market value in that it is generally identical or equivalent to estimates. It only applies to buildings and related equipment (general services or equipment for comfort).

Renovated building : A building that has already been occupied and has been renovated to a degree that does not require planning permission.

Reservation fee : A sum of money for the promissor (seller) in a unilateral sales promise held as compensation for the immobilisation of the promised asset during the option period. This reservation fee is given to the promissor by the buyer if the latter renounces his option to buy.

Residential lease : A rental contract for premises to be used as a principal residence or for mixed residential-professional use. Since 1982 and by virtue of the law of 6 July 1989 (some details of which were modified by the law of 21 July 1994) the leasing of premises for a principal residence or for mixed residential-professional usage is subject to a specific regime which has become common law. This type of contract binds the lessor for 3 years minimum, whereas the tenant can leave at any time by giving 3 months prior notice.

Retail : Direct sale on a site to consumers of goods and/or services.

Retail park : These are retailing zones on the outskirts of towns. Such zones have large areas and are home to various types of premises in an open-air site close to major traffic hubs and meeting the needs of large retailers catering for the general public. Retail parks generally have a hypermarket or other anchor store and are owned by several owners. There is generally a unified architectural and development style, with a single management organisation but multiple tenants, not unlike shopping centres.

Sale on plan : The sale on plan is a sale concluded before the development is completed. The buyer immediately becomes owner of the land and takes ownership of the building as and when construction advances.

Sale subject to conditions precedent : A sales agreement that will only become definitive once a future and uncertain event has occurred. The contract is completed but does not produce the effects normally resulting from a sale until the condition has been fulfilled. e.g. sale concluded on condition that planning permission is granted within a period stipulated in the contract. If the planning permission is granted within this period the sale is completed and dated retroactively to when the contract was signed.

Sales agreement (literally unilateral promise to sell) : Convention in which one party (the promissor) consents to the other party (the beneficiary) for a set period the option to purchase a property (a building) at a set price.

Sales in units : This technique is mainly used for residential property. It involves selling multiple occupancy buildings by dividing them into individual, separately owned units. The units may be vacant or occupied at the time of sale.

Schémas de cohérence territorial (SCOT) (literally a Plan for territorial coherence) : A new category of urban planning documents that will replace the former Schémas Directeurs, or regional plans. SCOTs have been introduced to harmonise development across a wider region. They set the basic orientations for strategic planning and development in territories rather than zoning by the permitted use of land. SCOTs will be enforced by complementary sector plans. NB Territories not covered by a SCOT Principle (L. 122-2 of the Urban planning code): in the absence of a SCOT, nature areas and future urban zones fixed by communal PLUs cannot be open to development (measure applicable from 1st January 2002). In this case only a “limited extension to urban development” provided by the PLU and the Carte Communales (see definition of Communal Map) is possible. This measure is designed to stop the anarchical development that may occur around the periphery of the SCOT and incite local councils to introduce a PLU.

Security deposit : Sum of money given to guarantee performance of a contract. For rental contracts, the deposit is given to the lessor by the lessee when the latter takes possession of the premises. In principle the deposit is returned to the lessee at the end of the lease on condition that the lessee has paid all rents and charges owed and has properly maintained the premises.

Semi-speculative development : A development project for which all procedures prior to construction have been carried out for example the site purchased, preparatory studies made, project defined, and planning approval fully granted as are any other administrative authorisations. Only the actual construction remains and this considerably reduces the time needed before the occupier can move into the new premises as works are ready to start.

SEVESO directive : The Seveso directive was introduced to help the prevention of major industrial hazards. Each member state must implement a procedure for controlling hazards in the chemicals industry, refineries, the storage of toxic products or liquid gases which may be responsible for fires, explosions or the release of toxic gases.

Shopping centre : A shopping establishment in the centre or on the outskirts of towns, with a floor area equal or superior to 5,000 sq. m, where at least 10 shops or service suppliers of various sizes are based. Shopping centres are as a rule designed, developed and managed as a single entity and usually have parking facilities.

Space planning : A detailed layout plan involving the analysis of each occupier’s workstation. The position and type of furniture takes into consideration ergonomics, health and safety regulations, such as the minimum width of passageways or minimum space per user, the amount of light recommended for working on screens, and the distance from emergency exits.

Special interest price : The special interest price is the price achieved for the sale of a property on the market in circumstances which have skewed the existing balance of supply and demand. This price results from one party having a special interest in buying or selling the property that is removed from the real estate market in general. The special interest price is therefore different from the average market value even if the parties taking part in the transaction consider that they have not concluded an unfavourable transaction.

Specific light industrial space : A building that does not correspond to standard definitions of industrial space because of its size and/or technical features (designed for a specific function, e.g. a factory).

Speculative development : A building development, usually to let, that is constructed without any occupier(s) committing to take space in it.

Standard building : New or renovated building with traditional architecture. Technical equipment is of a basic standard and interior design simple.

Surface Hors Oeuvre Nette (SHON) : Approximately equal to the Gross Internal Area The SHON is defined by article R 112-2 of the Urban code. It is the sum of floor areas of each floor of the construction after deduction of certain areas in particular the attics and basements that cannot be inhabited (headroom inferior to 1.80 metres, plant rooms etc), flat roofs, balconies, loggias and non enclosed areas on the ground floor and parking areas.

Surface Utile Brute or surface locative (SUB) : Approximately equal to the Gross Lettable Area. The SUB is equal to the SHON minus structural elements (posts, exterior walls, supporting walls etc), technical rooms not in the eaves or basement (boiler rooms, ventilation equipment, transformer room or switch room) and communal areas that are not reserved for the exclusive use of a tenant or co-owners. The lettable area can be broken down into three categories: corridors, WCs and other employee service premises and premises ranked by their usage (commercial or administrative offices, storage areas, manufacturing rooms, fundamental research areas, other areas).

Suspended ceiling : A ceiling fitted underneath another ceiling to reduce the floor-to-ceiling height or hide piping and/or electrical cables.

Take-up : The totality of transactions to let or sell carried out by occupiers, including turnkey schemes in a given period.

Town centre (high street) : One of three retailing domains (with shopping centres and peripheral retail zones). The town centre is usually composed of shops on the ground floor of buildings.  Co-ownership charges The costs of maintaining and repairing the communal areas and services in a building. These charges are split into those that can be recovered from the tenants by the landlord and those that are borne by the landlord.

Transfer duty : Tax levied on the transmission of property, of usufruct or of enjoyment of movables or immovable property.

Turnkey scheme : A transaction concluded when the building is still a project or under construction, but whose structure will be modified to suit the needs of the occupier.

User-owned property : A development undertaken for the company that will occupy the building that may or may not own the land.

Usufruct : A real right resulting from the division of property rights, the holder of the usufruct (usufructary) has the right to use and receive the fruits from the property but not the right to dispose of the property which belongs to the bare owner. Reminder : Property rights are divided into three prerogatives for the holder: the right to use the property, the enjoyment or the right to receive the fruit (e.g. by renting the property), the right to dispose of the property (sale, destruction etc.).

Vacancy rate : The ratio of the immediate supply of space to total stock of space for a type of asset in a given area.

Valeur de droit au bail : See key money (valuation charter for real estate)

Valorpark : The purpose of the “Valorpark” label in France is to improve the image of real estate on the periphery or at the “gateways” of towns, especially in the eyes of major retailers, consumers and the public authorities. This label is awarded when a retail estate is developed to certain preset criteria for quality developments. Criteria considered include accessibility, signposting, friendliness, architecture, environmental respect, legibility, and safety.

Value-in-use : (valuation charter for real estate) The value-in-use is the amount of money (or the total investment) that a prudent and informed manager would accept to spend to be able to dispose of a property directly necessary for his business activity. The value-in-use is also known as the utility value. It can be compared to the notion of replacement cost or that of “current value” as defined in the Code of Commerce, i.e. “the estimated value as appraised by considering the market and the use of the property for the company.” The value-in-use can be calculated using two methods depending on the type of the property being appraised: either the property is relatively “standard” or “common”, in which case the value-in-use is the market value raised by taxes, duties and acquisition costs as well as any fit out works that may be needed; or, the property is very specific in which case the replacement cost method would be used.

Valuer surveyor or appraiser : A professional whose function is to estimate and appraise the market sales or rental value of real estate, including housing, on going retail concerns, shops or industrial space.  The surveyor has two roles to fulfil:

  • a regulated activity as a sworn valuer as designated by a court
  • a free activity as a valuer in a conventional situation or where there is no conflict.

Warehouse : A building that is principally used to accommodate a distribution activity, storage and/or dispatch of goods activity. The main characteristics of a warehouse are a floor-to-ceiling height of at least 5.50 metres, homogeneous space and volumes, regular shapes and heights, multiple loading bays, perhaps some office space, a manoeuvring area at least 20 metres deep, and load bearing of at least 3 tons per square metre. ORIE Classification: Class A: 13 compulsory criteria (12 for warehouses with docks on 2 ends) and 9/12 optional criteria. Class B: 10 compulsory criteria (9 for warehouses with docks on 2 ends) and 8/13 optional criteria.

Zoning : This consists of determining then positioning all the services in a company by zones, following a given ratio, on the plan of the premises. These zones must respect communication needs between the services that were defined in the preceding phase (functional diagram) so that the company can operate smoothly. Graphics are used to help organise the services on a plan. This zoning is then used to help prepare the final layout plan. Partitions and doors are added later on more detailed layout plans. Zoning has to consider personnel safety (fire), property protection (intruders, access), regulations (health and safety), standards in force and ergonomics.