Glossary of Commercial Lease Terms
Absolute Triple Net Lease: lease requiring the tenant to pay a base rent plus all costs associated with the operation, repair and maintenance of the building, all real estate taxes and utilities. Not all landlords and lessees define triple net in the same way.
ADA: Americans with Disabilities Act passed by Congress in 1994. Its intent was to provide persons with disabilities accommodations and access equal to or similar to that of the general public.
Additional Rent: any rent due under a lease that is in addition to the base rent. The most common form of additional rent is operating expense increases.
Agency: any relationship in which one party (agent) acts for or represents another (principal). Agency agreements involving real property should always be in writing.
Allowance: set dollar amount provided by the landlord under a lease to be used by the tenant for a specific purpose. Examples include allowances for tenant improvements, moving expenses, and design fees. If the expense exceeds the allowance amount, the excess will be the tenant's responsibility. If the expense is less than the allowance, the savings are usually retained by the landlord unless the lease specifies otherwise.
Amortization: payment of debt in periodic installments of principal and interest, as opposed to interest only payments. Commonly used in a lease where the landlord incurs costs for additional tenant improvements which are treated as a debt and repaid by the tenant over the term of the lease.
Assignment: a transfer to another of real or personal property or any rights in property. Common assignments are of leases, mortgages, and deeds of trust. However, the term encompasses all transfers of title.
Base Building: the existing shell of a building prior to the completion of tenant improvements. This condition varies from building to building, and landlord to landlord.
Base Rent: the minimum rent in a lease to which additional rent is added. The additional rent may be based on a percentage of sales or otherwise.
Base Year: the twelve month period of time upon which a direct expense escalation of rent is based. Generally, it is the calendar year in which the lease commences.
BOMA: Building Owners and Managers Association. BOMA publishes the definition of rentable and useable area, which is used to determine the square footage leased in most commercial office buildings.
Building Class: Building Class is usually used to describe an office property and refers to the quality of the property. Class definitions fall with the following guidelines. Class A+: Landmark quality, highrise building with prime central business district location (the best of the Class A buildings). Class A: Generally 100,000 sf or larger (five or more floors), concrete and steel construction, built since 1980, business/support amenities, strong identifiable location/access. Class B: Renovated and in good location, newer building that are wood frame construction, and/or in non-prime locations. Class C: Older, unrenovated of any size in average to fair condition.
CAM Charges: Common Area Maintenance charges. Those charges levied on or the expenses incurred in maintaining the common areas of a commercial building.
Commencement Date: the date on which a lease begins. This is usually, but not always, the day on which the tenant takes possession of the leased premises, which usually occurs upon substantial completion of the tenant improvements.
Certificate of Occupancy (COO): a certification issued in writing by a local government agency verifying that a newly constructed building is in compliance with all building codes and may be occupied.
Demised Area: the walled off area of a leased space, separated from spaces leased to others (by a "demising" wall) or common area. Also measured as useable area.
Effective Rent: the average per square foot rent paid by a tenant over the term of a lease. It takes into account free rent and rent increases. It generally does not include tenant allowances and free parking.
Effective Useable Area: excludes the areas within the useable space that the tenant pays rent on but effectively cannot use such as columns and inaccessible spaces.