Typical Commercial Lease Terms
Space Size: The exact square footage and configuration of the premises often measured per Building Owners and Managers Association (BOMA) International's "Standard Method for Measuring Floor Area in Office Buildings", ANSI Z65.1-1980 (Reaffirmed 1989). There is typically a rentable and useable square footage calculation and a loss or add-on factor utilized to derive the rentable square footage.
Lease Term: Although the length of a lease is negotiable, the typical lease term is 3, 5, or 10 years depending on the size of the space, the term of the lease, the Tenant Improvement dollars provided by the Landlord (if any), and various other factors.
Delivery of Premises: The date that the Landlord provides Tenant access to the space prior to commencement, typically when there is construction required for the purpose of preparing the space for occupancy.
Commencement Date: Date Tenant takes possession of the premises, which is typically the same day that the Tenant begins paying rent for the space.
Rental Rate: The dollar amount that Tenant agrees to pay for possession and use of the premises. The rental rate is typically calculated on a per square foot basis by month or year and is typically quoted as a gross amount or as an amount net of operating expenses such as common area maintenance (CAM), taxes and insurance. For example, rent may be quoted at $20 per square foot triple net (NNN) per year with operating expenses totaling another $10 per square foot per year. Rent could also be quoted at $30 per square foot gross per year with no additional charges for operating expenses.
Moving Allowance: Depending on the size, term, and cost of a new Tenant, a Landlord may choose to offer a Tenant a concession such as a moving allowance to further entice the Tenant to take the Landlord's space.
Operating Expenses and Taxes: Landlords typically treat operating expenses and real estate taxes either as an inclusion in the gross rental rate or as an additional cost to Tenant to be determined by the Tenant's proportionate share of the building they occupy. If Landlord charges Tenant for operating expenses and taxes as an additional cost to Tenant, these costs may increase annually due to tax and other price increases for the Landlord to operate the building.
Tenant Improvements: This is an allowance provided by Landlord to Tenant to be used by Tenant to construct the space to meet Tenant's space requirements.
Space Planning: Landlords sometimes provide a cash allowance for Tenant to hire an architect to prepare a space plan to help Tenant determine if the space will meet Tenant's space requirements.
Renewal Option: This is an agreement by Landlord to provide Tenant the exclusive right to lease space beyond the original lease term for a pre-arranged term and amount.
Termination Option: This is an agreement by Landlord to provide Tenant the right to terminate the lease early on a predetermined date and price.
Right of First Refusal: This is an agreement by Landlord to provide Tenant the first right to lease space that becomes available in their building.
Security Deposit: A cash deposit required by Landlord as security against any default by Tenant. The deposit is typically refundable at the end of the lease term.
Relocation Clause: Landlord's sometimes requires the right to relocate Tenant within the premises in order to accommodate the space needs of other Tenant's.
Holdover: This is when Tenant remains in possession of the leased premises beyond their lease term. Landlord typically charges a penalty fee to Tenant in addition to the regular rent rate until Tenant releases possession of premises.
Parking Ratio: This is the number of parking spaces available to Tenant as compared to the rentable square feet leased. The numbers of spaces are often calculated as the number of spaces available per 1,000 rentable square feet leased.
Exclusive Use: This is an agreement by Landlord to not lease or rent space in the building to another business engaged in the same business as Tenant.
Sublease and Assignment: This is an agreement by Landlord to allow Tenant the right to lease or assign all or a portion of their space to another tenant.
Regent Property Group and its officers, agents and affiliates are not attorneys and do not provide legal counsel or advice. Regent Property Group provides real estate brokerage and agency services to our clients. The information above is subject to errors, omissions and changes without notice. Please seek legal counsel or guidance with any questions regarding the above materials.
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