Resources
Commercial lease glossary
The terms you'll meet in a letter of intent and a lease, in plain language.
B
- Base rent
- The fixed rent for the space, before operating expenses, taxes or other charges.
- Base year
- In a gross lease, the year whose operating expenses are included in rent; the tenant pays its share of increases after it.
- Build-out
- The construction that turns a space into the tenant's finished premises.
C
- CAM (common-area maintenance)
- Costs of running the shared parts of a property, such as landscaping, parking lots, lobbies and snow removal, shared among tenants.
- Clear height
- The usable height in an industrial building, measured to the lowest overhead obstruction.
- Commencement date
- The date the lease term, and usually rent, begins.
- Co-tenancy clause
- A retail lease protection that adjusts rent or lets the tenant leave if named anchors or occupancy levels are lost.
E
- Escalation
- A scheduled increase in rent, as a fixed percentage, fixed amount or index-based change.
- Estoppel certificate
- A tenant's signed statement of the lease's current terms and status, often requested when a property is sold or financed.
- Exclusive use
- A clause stopping the landlord from leasing other space in the property to a competing use.
G
- Gross lease
- A lease in which the landlord pays most operating expenses out of the rent.
- Guaranty
- A promise by a parent company or individual to meet the tenant's lease obligations if the tenant does not.
H
- Holdover
- Staying in the space after the lease ends, usually at a higher rent set by the lease.
L
- Letter of intent (LOI)
- A non-binding summary of the main business terms, agreed before the lease is drafted.
- Load factor
- The ratio of rentable to usable area: how much shared building area is added to the tenant's space.
N
- Net lease
- A lease in which the tenant pays some or all of the property's taxes, insurance and maintenance in addition to base rent.
O
- Operating expenses
- The costs of operating a property: utilities, repairs, cleaning, management, insurance and taxes.
- Option to renew
- The tenant's right to extend the lease for a further term on terms set in the lease.
P
- Pro rata share
- The tenant's percentage of the property, used to divide shared costs.
R
- Rentable square feet (RSF)
- The tenant's usable area plus its share of common areas; the area rent is calculated on.
- Right of first refusal (ROFR)
- The tenant's right to match an offer another party has made for nearby space.
S
- Security deposit
- Money or a letter of credit held by the landlord as security for the tenant's obligations.
- Sublease
- A lease of all or part of a space from the tenant to another business, usually requiring landlord consent.
T
- Tenant improvement allowance (TI)
- Money the landlord contributes toward the tenant's build-out.
U
- Usable square feet (USF)
- The area a tenant actually occupies, not including shared building areas.
This glossary is general information, not legal advice. Your lease's own definitions govern.
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