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Obsolescence
An impairment of desirability and usefulness caused by new inventions, changes in design, improved processes for production, or other external factors that make a property less desirable and valuable for a continued use. A cause of depreciation.

Occupation
Physical occupation of the property. Occupation can be ‘vacant’, meaning that the buyer can move in or put a tenant in; or ‘subject to tenancies’ meaning that the current tenant has a right to occupy the property until the lease agreement expires. Occupation is not ‘possession’ - only an owner can possess, but anyone, including a tenant, can occupy a property.
Related Topic: Basic Rental, Escalation Rate, Gross Lease, Huur Gaat Voor Koop, Lease, Lease with Option to Purchase, Leasehold, Long Lease, Natural Vacancy Rate, Net Lease, Notarial Deed of Lease, Percentage Lease, Renewal Option, Rental Types, Rent-Free Period, Resolutive Condition, Right of Pre-Emption, Sale & Leaseback, Triple Net Lease, Turnover Rental.

Occupation Date
The date on which the buyer can occupy or move into the property.

Occupation Declaration
A declaration that the borrower will personally occupy the property being so purchased or that a third party will do so with the owner’s consent. The banks require such a declaration to be signed with the aim of reducing the risk of illegal occupiers, who are difficult to evict, from taking possession of the property.

Occupational Consideration
Also referred to as ‘occupational interest’ or ‘occupational rent’. If the registration of transfer does not coincide with the occupation date, occupational consideration is paid for occupation of the premises, either by the buyer to the seller or vice versa. It is payable monthly in advance and is refundable on a pro-rata basis once the registration occurs. For example, a purchaser, who has taken occupation of a property before it is registered in his/her name, is usually required by the seller to pay a monthly amount for such occupation. Rental should be considered a fair rental rate.

Occupational Interest
A document usually drawn up by an estate agent, in which the buyer offers to purchase the property from the seller subject to certain conditions. The Offer to Purchase will detail the address, the names of the parties, the sale price and how it is payable, the estate agent’s commission, the arrangement for the bond to be taken out by the buyer, and the periods in which things may happen - the most important of which is the presentation of guarantees, which provide certainty to the seller that he/she will be paid. The Offer to Purchase will often include suspensive conditions or ‘subject to’ clauses. These specify events that must take place before the Offer to Purchase becomes enforceable, for example, a common suspensive condition is that the buyer can obtain a bond, or can sell his/her existing property. Once signed by all parties, it becomes a legal and binding contract between the buyer and the seller.

Offeree
The person to whom an offer is made. In sale transactions, a purchaser usually makes an offer to a seller of a property. The seller is then the offeree, and the purchaser the offeror.
Related Topic: Offeror.

Offeror
The person who makes an offer. In sale transactions, the purchaser is usually the offeror, i.e. the person who makes an offer to the seller of a property (the offeree) to buy the property.
Related Topic: Offeree.

Office Building Grades

P-Grade
Premium office space. P-Grade office space is top-quality, generally modern space which is a pacesetter in establishing rentals and which includes the latest or a recent generation of building services, ample parking, a prestige lobby and good views, or a good environment.

Grade-A
Generally not older than 10 years, unless renovated; prime location; high-quality finishes; adequate on-site parking; air-conditioning. Commands a gross market rental as indicated in the accompanying table.

Grade-B
Generally 10 to 20 years old, unless renovated; accommodation to modern standards; prime location; air-conditioning; on-site parking. Commands a gross market rental as indicated in the accompanying table.

Grade-C
Generally 20 to 30 years old, unless renovated; in fairly good condition, although finishes are not up to modern standards; good location; may have onsite parking; unlikely to be centrally air-conditioned; commands a gross market rental as indicated in the accompanying table.

Grade-D
A building reaching the end of its functional life; old and in poor condition; near the bottom of the rental rate range; typically no air-conditioning and no on-site parking; may have good location. These grades might be further sub-divided into sub-grades A+, A-, B+, B-, C+ or C-.

Office Demand
Office stock less office space vacant (space on the market for renting irrespective of whether there is still a valid lease over the space). In other words, demand is office space occupied.

Office Stock
Total rentable office space.

Office Take-Up
Change in office demand. Where take-up is positive, it can also be called the growth in demand.

Office Vacancies
This is the floor area available for leasing at any given time, irrespective of whether there is still a valid lease over the space. Often expressed as a percentage of the stock in rentable m².

Operating Costs
Often referred to as ‘op costs’, ‘operational expenses’ or ‘outgoings’. Usually include property management fees, security and cleaning services, insurance and municipal charges. This periodic expenditure is necessary to maintain a property and continued production of the effective gross income, assuming prudent and competent management. Relative to occupancy, cost can be fixed (security, non-recoverable rates and taxes, insurance, audit fees) or variable (cleaning, repairs and maintenance, management, leasing expenses) in nature.
Related Topic: Outgoings.

Opportunity Cash Flow (OCF)
A valuation term introduced by Rode. The OCF quantifies the amount gained or foregone by the landlord in that the property is either over rented or under rented. More precisely, for each lease and the space that such a tenant occupies, it is, until expiry of such a lease, the present value (PV) of the contractual rental less the open-market rental (as at the valuation date) escalating at the open market escalation rate (as at the valuation date).

Option
An offer including an undertaking by the person making the offer (the offeror) not to revoke the offer for a specified period. The person to whom the offer is made (the offeree) is then said to have an option. The option is exercised when the offer is accepted timeously. An option falls away if the offer is not accepted by the offeree before the expiry date.

Outgoings (Operating Costs)

In the case of office buildings, the following items are included under total gross outgoings, irrespective of who pays for these:
Cleaning Repairs & maintenance Common-area electricity & water (not tenant’s own) Security Management (excluding head office overheads) All leasing expenses: broker’s commission and in-house payroll, advertising, tenant installations & relocations (unless recovered), buy-outs, etc Municipal tax Insurance (fire & SASRIA) In the case of self-insurance, the landlord’s provision should be included Refuse & sewerage less recoverable amount External & common area repairs & maintenance Audit fees

The following items are excluded:
VAT Head office overheads Tenant’s own electricity and water Tenant installations/relocations recovered Internal maintenance, Recoverable refuse & sewerage

Owner–Occupier
The owner of the property is also the main occupier.

 
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