Glossary of Commercial Lease Terms
Space Pocket: a portion of leased premises that is set aside to accommodate future growth on the part of the tenant. The space pocket is often fully improved at the commencement of the lease, but no rent is due on the pocketed area until the earlier of "actual use" or a specified future date.
Sublease: a lease, under which the lessor is the lessee of a prior lease of the same property. The sublease may be different in terms from the original lease, but cannot provide for a greater property interest.
Subordination: To make subject or junior to.
Substantial Completion: generally used in reference to the construction of tenant improvements. The tenant's premises is typically deemed to be substantially completed when all of the tenant improvements for the premises have been completed in accordance with plans and specifications previously approved by the tenant. Sometimes it is used to define the commencement date of a lease.
Tenant (Lessee): the holder of an interest in property for a specific term under a lease.
Tenant Improvements: improvements to buildings made to meet the needs of tenants. They may be paid for by the landlord, tenant or both.
Tenant Representative: an agent who exclusively represents the tenant.
Turnkey: refers to an owner making a property completely ready for a tenant to occupy. Turnkey tenant improvements are provided at the landlord's expense according to plans and specifications agreed upon by the parties. Unlike an allowance where the tenant pays for costs in excess of the allowance amount, the landlord bears the risk of construction in a turnkey situation.
Useable Area: the area (square footage) that can be occupied by a tenant within a tenant's leased space. Useable area can be measured in many ways, but the most common measurement for office buildings is according to BOMA standards.
Value Engineering: process by which costs can be decreased or benefits can be added to an undertaking or project through redesign, prioritization or other actions.
Work Letter: specifications for tenant improvements usually attached to a lease and/or letter of intent. The work letter provides the basis for working drawings and contractor pricing and may allocate costs between the parties. It also establishes the dates for approval of drawings, etc.
Working Drawings: drawings prepared by a licensed architect and used by contractors in the construction of the tenant improvements. They show all architectural details.
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