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.