The Complete BC Brokerage Glossary 2026

Add-Backs

Expenses added back to the net income of a business to calculate Seller's Discretionary Earnings (SDE). These typically include owner's salary, personal vehicle expenses, and one-time non-recurring costs.

Amortization

The schedule of paying off a debt over time through regular payments that cover both principal and interest.

Asset Sale

A transaction where the buyer purchases the individual assets of a business (equipment, goodwill, inventory) rather than the corporate entity itself. Typically preferred by buyers to avoid hidden liabilities.

Assignment of Lease

The transfer of a tenant's entire interest in a commercial lease to a new tenant (the assignee), common during a business sale.

Base Rent

The minimum rent due under a commercial lease, excluding additional costs like property taxes, insurance, and maintenance (CAM).

BCFSA

British Columbia Financial Services Authority. The regulatory body that oversees real estate professionals, mortgage brokers, and credit unions in BC.

Bill of Sale

A legal document that transfers ownership of business assets from the seller to the buyer.

Business Valuation

The process of determining the economic value of a whole business or company unit, often using multiples of SDE or EBITDA.

CAM (Common Area Maintenance)

Fees paid by tenants in a commercial building to cover the upkeep of shared spaces (parking lots, lobbies, snow removal).

Cap Rate (Capitalization Rate)

A metric used to evaluate the profitability of an income-generating property. Calculated by dividing the Net Operating Income (NOI) by the current market value.

Chattels

Movable personal property included in a business sale, such as furniture, freestanding equipment, and inventory (as opposed to fixtures).

CMHC

Canada Mortgage and Housing Corporation. Often provides loan insurance for multi-family commercial real estate investments.

Conditional Offer

An Offer to Purchase that relies on specific conditions (e.g., financing, due diligence, lease approval) being met before it becomes legally binding.

Debt Service Coverage Ratio (DSCR)

A measure of the cash flow available to pay current debt obligations. Lenders typically look for a DSCR of 1.25x or higher for commercial loans.

Deposit

Earnest money provided by the buyer to a brokerage in trust, showing good faith when an offer is accepted.

Due Diligence

The critical period where a buyer investigates the financials, legal standing, physical condition, and operations of a business or property before closing.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization. A standard measure of a company's financial performance and cash flow, typically used for mid-market to large business valuations.

Encumbrance

Any claim, lien, charge, or liability attached to and binding real property or business assets.

Escrow

The holding of funds or documents by a neutral third party (like a lawyer or notary) prior to closing the transaction.

Exclusive Listing

A contract where the seller grants a single brokerage the sole right to market and sell their business or property.

Fixtures

Items that are permanently attached to the real estate (like built-in shelving or commercial exhaust hoods) and typically transfer with the property or lease.

Franchise Agreement

A legal contract binding the franchisor and franchisee, outlining the rules, fees, and operational standards of the franchise.

Freehold

Absolute ownership of real property and the land it sits on, for an indefinite period.

Goodwill

An intangible asset representing the premium value of a business due to its brand reputation, customer loyalty, and established operations.

Gross Lease

A commercial lease where the landlord pays all property expenses (taxes, insurance, maintenance) out of the tenant's single rent payment.

Highest and Best Use

A valuation concept determining the most profitable, legally permissible, and physically possible use of a property.

Income Approach

A valuation method for commercial real estate and businesses based on the income the asset is expected to generate.

Intangible Assets

Non-physical assets such as patents, trademarks, brand recognition, and goodwill.

Leasehold Improvements

Alterations or upgrades made to a rental commercial space by the tenant to configure the space for their business needs.

Letter of Intent (LOI)

A non-binding document outlining the preliminary understanding and basic terms between a buyer and seller before a formal purchase agreement is drafted.

Lien

A legal claim against assets or property to secure the payment of a debt or obligation.

Multiples

A valuation metric where a business's value is determined by multiplying its SDE or EBITDA by a specific number based on industry standards, risk, and growth potential.

Net Operating Income (NOI)

A property's total income minus all operating expenses. Used to calculate Cap Rates.

Non-Compete Agreement

A restrictive covenant preventing the seller of a business from opening a competing business within a certain geographic area for a specified time.

Non-Disclosure Agreement (NDA)

A binding legal contract strictly prohibiting the buyer from sharing sensitive financial or operational information about a business for sale.

Operating Expenses

The day-to-day costs of running a business or maintaining a commercial property.

Owner Financing

See Vendor Take-Back Mortgage (VTB).

Percentage Lease

A commercial lease (common in retail) where the tenant pays a base rent plus a percentage of their gross sales.

Pro Forma

Projected financial statements predicting the future performance of a business or property based on assumed changes or improvements.

Return on Investment (ROI)

A performance measure used to evaluate the efficiency or profitability of an investment.

Right of First Refusal (ROFR)

A contractual right giving a party (often a tenant or franchisor) the option to enter a business transaction with the owner before the owner can accept an offer from a third party.

Seller's Discretionary Earnings (SDE)

The total financial benefit a single full-time owner-operator derives from a business. Calculated as Net Profit + Owner's Salary + Add-Backs. The primary metric for valuing small businesses.

Share Sale

A transaction where the buyer purchases the shares of the corporation that owns the business. The buyer assumes all assets and historical liabilities.

Subject Clauses

Conditions in a contract of purchase and sale (e.g., 'Subject to Financing') that must be removed for the contract to become firm and binding.

Tenant Improvements (TI)

See Leasehold Improvements.

Triple Net Lease (NNN)

A highly common commercial lease structure where the tenant is responsible for paying Base Rent plus their proportionate share of Property Taxes, Insurance, and Maintenance (CAM).

Turnkey Business

A business that is fully operational and ready for a new owner to immediately take over and run without needing major renovations or setup.

Valuation

The analytical process of determining the current worth of an asset or business.

Vendor Take-Back Mortgage (VTB)

A financing arrangement where the seller of a business or property acts as the lender for the buyer, holding a mortgage for a portion of the purchase price.

Working Capital

The difference between a company's current assets and current liabilities.

Working Capital Adjustment

A mechanism in a business purchase agreement ensuring the business is delivered with enough working capital to operate smoothly post-closing.

Zoning

Municipal laws dictating how real property can and cannot be used in certain geographic areas.