Commercial Lease Glossary

A temporary reduction or elimination of rent, typically granted at the start of a lease as a tenant concession. "Free re…

A lease provision allowing the landlord to demand all remaining rent for the entire lease term immediately upon a tenant…

The transfer of a tenant's entire interest in a lease to a third party (the assignee). The assignee becomes the primary …

The tenant's agreement to recognize a new landlord (such as a lender who has foreclosed) as their landlord and continue …

The fixed minimum amount of rent due each period under the lease, before any additional charges such as CAM, property ta…

In a gross or modified gross lease, the base year is the initial year whose operating expenses are used as the benchmark…

Building Owners and Managers Association measurement standards for calculating rentable and usable square footage. The B…

A development arrangement where a landlord constructs a building specifically to a tenant's requirements on land the lan…

Common Area Maintenance charges — the tenant's pro rata share of operating costs for maintaining shared building areas s…

A negotiated limit on annual increases in a tenant's CAM charges. A 3% controllable expense cap means a tenant's share o…

A document issued by a local government authority certifying that a building or space complies with applicable building …

A clause specifying what corporate transactions (merger, acquisition, sale of majority ownership) constitute an "assignm…

A lease provision allowing a tenant to pay reduced rent or terminate the lease if specified anchor tenants close or if o…

Incentives offered by a landlord to attract or retain a tenant. Common concessions include free rent periods, tenant imp…

The taking of private property by a government authority for public use (eminent domain). Lease provisions address what …

A lease requirement that the tenant continuously operate their business in the leased premises during all required busin…

Operating expenses the landlord can directly control, such as management fees, janitorial, landscaping, and routine main…

The time period specified in a lease during which a defaulting party may correct a lease violation after receiving a not…

A failure by either party to fulfill a material obligation under the lease. Common tenant defaults: non-payment of rent,…

The agreed-upon physical state of the leased space when the landlord turns it over to the tenant. Delivery conditions ra…

The specific space leased to a tenant, as defined and described in the lease. The demised premises are distinguished fro…

Debt Service Coverage Ratio — the ratio of a property's net operating income to its annual debt service payments. Lender…

A signed statement by a tenant (or landlord) certifying the current status of a lease — rent amount, term, options, and …

A lease provision preventing the landlord from leasing to competitors of the tenant within the same building or shopping…

A contractual right giving the tenant the option to lease additional space in the building at a specified or market-dete…

In a modified gross lease, the expense stop is the maximum amount of operating expenses the landlord will pay. The tenan…

A clause excusing a party from performance due to extraordinary events beyond their control — natural disasters, war, go…

A landlord concession providing a period at the beginning of the lease during which no rent (or reduced rent) is due. Fr…

A lease structure where the base rent includes all operating expenses — utilities, janitorial, maintenance, insurance, a…

When a tenant ceases operations in the leased space but continues to pay rent. In retail leases with continuous operatio…

A personal guarantee modification allowing the guarantor to be released from ongoing liability upon proper notice and su…

The hypothetical increase of variable operating expenses to what they would be at full (typically 95%) building occupanc…

A long-term lease of land only (not the building). The tenant constructs a building on the leased land and typically own…

Occupancy by a tenant after the lease expiration without a new lease agreement. Most commercial leases impose holdover r…

Heating, Ventilation, and Air Conditioning systems in the leased space. One of the most commonly disputed maintenance ob…

A contractual obligation to compensate another party for losses, liabilities, or damages they incur. Commercial leases i…

The specific insurance coverages a tenant must maintain as a lease condition. Typically includes commercial general liab…

Construction or improvements the landlord agrees to complete at the landlord's expense before delivering the space to th…

A summarized document extracting key business terms from a commercial lease — rent, term, options, TI allowance, CAM str…

Permanent improvements made to the leased space by the tenant (or landlord on behalf of the tenant). Also called tenant …

A financial instrument issued by a bank guaranteeing payment to the beneficiary (landlord) upon presentation of specifie…

A preliminary non-binding agreement outlining the basic terms of a proposed lease before a formal lease is drafted. The …

The ratio by which usable square feet are increased to arrive at rentable square feet, expressed as a percentage. A 15% …

A legal claim filed against a property by a contractor or subcontractor who performed work but was not paid. A mechanic'…

A lease structure between a full gross and a triple net lease. The landlord and tenant split operating expenses — tenant…

The actual average rent per square foot over the full lease term after accounting for concessions (free rent, TI allowan…

A lender's agreement that if they foreclose on the property, they will honor the tenant's lease and not evict the tenant…

A lease structure where the tenant pays base rent plus all three "nets" — property taxes, building insurance, and operat…

Contractual rules specifying how and when either party must send formal notices (of default, exercise of options, termin…

The costs of operating, maintaining, and managing a commercial property. In NNN and modified gross leases, operating exp…

A contractual right giving the tenant the option to extend the lease for a specified additional period, typically at a r…

Rent calculated as a percentage of the tenant's gross sales above a specified "breakpoint." Common in retail leases — th…

The clause specifying what business activities the tenant is authorized to conduct in the leased space. Operating outsid…

An agreement by an individual (often a business owner) to be personally liable for the tenant's lease obligations. A per…

A tenant's proportionate share of building-wide operating expenses, calculated as the tenant's rentable square footage d…

A landlord's covenant that the tenant will have peaceful, uninterrupted possession of the leased premises for the full l…

The square footage upon which rent is calculated, including the tenant's usable area plus a proportionate share of commo…

Lease provisions requiring the tenant to return the space to its original (or specified) condition at lease expiration. …

A tenant's right to match any third-party offer to lease adjacent space before the landlord can accept that offer. Requi…

A tenant's right to receive the first offer on adjacent space before the landlord markets it to third parties. The landl…

A transaction where a property owner sells their building to an investor and simultaneously signs a long-term lease to r…

Cash or equivalent held by the landlord as security against the tenant's lease obligations. Upon lease expiration, the d…

Subordination, Non-Disturbance, and Attornment Agreement — a three-party agreement between the landlord, tenant, and len…

A transaction where the primary tenant leases all or part of their space to a third party (subtenant), while remaining d…

The tenant's agreement that their lease rights are subordinate (junior) to the rights of the landlord's mortgage lender.…

The return of the leased premises to the landlord at lease expiration in the condition required by the lease (typically …

A sum of money provided by the landlord toward the cost of building out the tenant's space. Expressed in dollars per ren…

Construction, alterations, or improvements performed by the tenant to customize the space for their specific use. May be…

A contractual right allowing one party to end the lease before its scheduled expiration. May be triggered by events (co-…

The actual floor area a tenant occupies within the four walls of their leased space, excluding common areas. USF is alwa…

A provision where each party's insurer agrees not to pursue the other party for damages the insurer has already paid. Pr…

A lease exhibit specifying each party's construction obligations, the TI allowance amount and disbursement method, the p…

Municipal land use regulations controlling what activities are permitted at a given location. Before signing a commercia…