Commercial Lease Glossary

Assignment

A complete transfer of a tenant's lease rights and obligations to a new party, who steps into the original tenant's shoes for the remainder of the term. Unlike a sublease, the original tenant may or may not remain liable after assignment depending on whether the landlord grants a formal release. Most leases require landlord consent — typically "not to be unreasonably withheld."

→ Subletting and Assignment Rights Explained

Base Rent

The fixed monthly rent stated in the lease, before adding CAM charges, property taxes, insurance, or other pass-through expenses. In a NNN lease, base rent is just one component of what a tenant actually pays each month — the true monthly cost is base rent plus all operating expense pass-throughs.

→ NNN Lease Explained

Base Year

In a gross or modified gross lease, the base year is the reference year whose operating expense total becomes the landlord's baseline obligation. In subsequent lease years, the tenant pays any operating expenses that exceed the base year amount. A landlord-favorable base year (one with unusually low costs) can expose tenants to significant expense increases.

→ CAM Charges Explained

Build-Out

The construction work done to prepare a commercial space for a specific tenant — installing interior walls, flooring, lighting, HVAC connections, plumbing, electrical, and other improvements. Build-out can be controlled by the landlord (turnkey delivery) or by the tenant using TIA funds. The scope, budget, and cost-overrun responsibility must be clearly defined in the lease.

→ Tenant Improvement Allowance Explained

Burn-Off Provision

A clause in a personal guarantee that reduces or eliminates the guarantor's liability over time, conditioned on the tenant's good performance. For example, a $600,000 guarantee might reduce by $200,000 per year over three years, reaching $0 if the tenant has paid rent on time throughout. Burn-off provisions dramatically limit long-term personal exposure.

→ Personal Guarantee Explained

CAM Charges

Common Area Maintenance charges are the tenant's pro-rata share of costs to operate and maintain shared building areas — parking lots, lobbies, landscaping, elevators, building systems, security, and management fees. In NNN leases, CAM can add 20–50% on top of base rent. Tenants have the right to audit CAM charges annually, and 60–80% of audits result in a refund.

→ CAM Charges Explained (Full Guide)

CAM Cap

A negotiated annual limit on how much controllable CAM charges can increase year-over-year, typically 3–5% annually. Caps only apply to controllable expenses — property taxes and insurance are usually uncapped. Watch for cumulative caps: a "5% cumulative cap" compounds each year from the first year, providing less protection than a 5% non-cumulative cap.

→ CAM Charges Explained

Co-Tenancy Clause

A retail lease provision that gives a tenant the right to reduce rent or terminate early if a key anchor tenant (like a major grocery store or department store) closes, or if building occupancy falls below a minimum threshold. Co-tenancy clauses protect tenants whose business depends on foot traffic generated by neighboring anchor stores.

→ Co-Tenancy Clause Explained (Full Guide)

Commencement Date

The date the lease term officially begins — which may differ from the date the tenant takes physical possession or the date rent starts. The commencement date is often tied to completion of landlord build-out or delivery of the space in the agreed condition. If delivery is delayed, the commencement date typically shifts accordingly.

Controllable vs. Non-Controllable Expenses

CAM expenses are divided into two categories. Controllable expenses — management fees, maintenance, landscaping, cleaning — are costs the landlord can manage efficiently and are typically subject to annual caps. Non-controllable expenses — property taxes, insurance, utilities in common areas — are driven by external factors and are usually excluded from caps.

→ CAM Charges Explained

Default

A tenant is in default when they breach a material lease obligation — most commonly by failing to pay rent. Leases specify cure periods before the landlord can exercise remedies: typically 5–10 days for monetary defaults and 30 days for non-monetary defaults. A tenant who cures within the cure period is generally restored to good standing.

Delivery Condition

The physical state in which the landlord delivers the space to the tenant. Common conditions: cold dark shell (concrete slab, exposed structure, no finishes), warm vanilla shell (HVAC connections, basic plumbing, possibly ceiling grid), or turnkey (fully built to tenant's specifications). The delivery condition determines how much TIA is needed and who bears construction risk.

→ Tenant Improvement Allowance Explained

Demised Premises

The exact physical space being leased — the specific suite or floor, storage areas, parking spaces, and any exclusive-use outdoor areas included in the lease. The legal description of the demised premises determines the tenant's pro-rata CAM share and defines the boundaries of the tenant's alteration rights.

Early Termination Clause

A lease provision allowing a tenant (or landlord) to end the lease before its natural expiration date, typically upon paying a termination fee and providing advance written notice (often 6–12 months). Without an early termination clause, a tenant who must exit the space remains liable for all remaining rent — which can be catastrophic in a long-term lease.

→ Early Termination Clause Explained (Full Guide)

Escalation Clause

A provision that automatically increases rent over the lease term. Common structures: fixed percentage annually (e.g., 3% per year), CPI-based increases tied to the Consumer Price Index, or stepped fixed increases at specified dates (e.g., $10,000/year in years 1–3, $11,000/year in years 4–5). Escalation type significantly affects total occupancy cost.

→ What to Look for in a Commercial Lease

Estoppel Certificate

A signed document in which the tenant certifies key facts about the lease status — start and end dates, rent amount, security deposit, absence of landlord defaults, and no undisclosed amendments. Landlords typically request estoppels when selling or refinancing the property. Estoppels are legally binding: incorrect or incomplete responses can waive important tenant claims.

Exclusivity Clause

A provision prohibiting the landlord from leasing other space in the building or development to a direct competitor of the tenant. Exclusivity clauses are standard for anchor retail tenants but must be carefully scoped — defining "competitor," what happens if the landlord violates it, and whether it covers affiliated properties.

→ Exclusivity Clause Explained (Full Guide)

Force Majeure

A clause that excuses a party from performing lease obligations when prevented by extraordinary events outside their control — natural disasters, acts of war, government orders, or pandemics. Critically: most commercial leases exclude rent payment from force majeure protection, meaning tenants typically owe rent even when they cannot access or use the space.

Free Rent Period (Rent Abatement)

A negotiated period at the start of a lease during which the tenant pays no rent (or reduced rent) — typically while the space is being built out or while the tenant is ramping up operations. Free rent is one of the most common tenant concessions in negotiation. Three months of free rent on a $15,000/month lease saves $45,000 — equivalent to a $7,500/year rent reduction over a 6-year term.

Full-Service Gross Lease

A lease structure where the landlord pays all building operating expenses — property taxes, building insurance, CAM, and utilities — and the tenant pays a single all-inclusive monthly rent. Full-service leases are common in Class A office buildings and offer the most cost predictability. The tradeoff: base rent is higher than equivalent NNN leases because landlord costs are baked in.

Good Guy Clause

A personal guarantee provision that terminates the guarantor's liability on the date the tenant vacates the space, surrenders the keys, and pays all rent through the exit date — even if months or years remain on the lease. Good guy clauses dramatically cap maximum personal exposure and are one of the most valuable personal guarantee negotiations.

→ Personal Guarantee Explained

Gross Lease

A lease structure where the tenant pays one monthly rent amount and the landlord is responsible for all operating expenses — taxes, insurance, CAM, and building maintenance. This is the simplest lease structure for tenants, offering full cost predictability. Contrasted with NNN leases, where tenants pay their share of operating expenses on top of base rent.

Gross-Up Provision

A CAM clause allowing the landlord to calculate operating expenses as if the building were 90–95% occupied, even when it is partially vacant. This prevents occupied tenants from receiving a windfall reduction in their CAM share during periods of high vacancy — but it also means tenants effectively pay a portion of the costs attributable to vacant suites.

→ CAM Charges Explained

Holdover Clause

A provision that governs what happens when a tenant remains in the space after the lease expires without executing a renewal or new lease. Most commercial leases charge holdover rent at 125–200% of the last month's base rent. Many leases also expose the holdover tenant to consequential damages — such as costs the landlord incurs from losing an incoming tenant.

→ Holdover Provisions Explained (Full Guide)

HVAC

Heating, Ventilation, and Air Conditioning — the systems controlling temperature and air quality in the space. Commercial leases must specify who is responsible for HVAC maintenance and repair (tenant or landlord), standard hours of operation, and whether after-hours HVAC is available at an additional charge. HVAC replacement (not just maintenance) is often excluded from TIA.

Joint and Several Liability

A legal concept meaning that when multiple parties (co-tenants or co-guarantors) are liable under a lease, each is independently responsible for 100% of the total obligation — not just their proportional share. A landlord can sue any single guarantor for the full amount owed, leaving that guarantor to seek contribution from the others.

→ Personal Guarantee Explained

Key Dates Calendar

A compiled summary of every critical deadline in the lease — renewal option notice dates, lease expiration, rent escalation trigger dates, CAM reconciliation deadlines, TIA disbursement windows, and audit periods. Missing a key date can permanently forfeit lease rights. A LeaseLens report flags every date by severity: critical, important, or note.

Landlord Default

When a landlord fails to perform their lease obligations — such as providing agreed services, maintaining the building, or completing build-out on time. Most leases give landlords a longer cure period than tenants (30–60 days, sometimes with an additional 30 days if curing in good faith). Tenants should specify remedies for landlord default in the lease, not just rely on implied rights.

Letter of Intent (LOI)

A non-binding document summarizing the key deal terms agreed upon before the formal lease is drafted — rent, lease term, TIA, renewal options, permitted use, and other major provisions. While not legally binding on final lease terms, LOIs set expectations and frame the negotiation. Terms conceded in the LOI are difficult to recover in the lease.

Modified Gross Lease

A hybrid lease structure where the tenant pays base rent plus some operating expenses — most commonly utilities and janitorial — while the landlord covers property taxes, insurance, and structural maintenance. The specific expense split is negotiated. Modified gross leases are common in multi-tenant office and flex-industrial buildings.

Month-to-Month Tenancy

A lease arrangement (often arising after expiration of a fixed-term lease) where the tenant continues occupying the space without a defined end date. Either party can typically terminate with 30 days' notice. Month-to-month tenancy offers flexibility but also instability — the landlord can terminate or propose a significant rent increase at any renewal cycle.

→ Holdover Provisions Explained

NNN Lease (Triple Net Lease)

A lease structure where the tenant pays base rent plus three net charges: property taxes, building insurance, and CAM/operating expenses. NNN leases are standard in freestanding retail and industrial properties. The true monthly occupancy cost — base rent + taxes + insurance + CAM — is typically 20–40% higher than the advertised base rent.

→ NNN Lease Explained: What Every Tenant Needs to Know

Notice Period

The minimum advance written notice required to exercise a lease right — most critically, the deadline to notify the landlord of an intent to renew. Commercial lease notice requirements are strictly construed: missing a renewal notice deadline by even one day can permanently void the option, forcing the tenant to renegotiate at market rates.

→ Renewal Options Explained

Operating Expenses (OpEx)

All costs associated with operating and maintaining a commercial property — property taxes, building insurance, CAM, management fees, common area utilities, landscaping, security, and repairs. In net and NNN leases, tenants pay their pro-rata share of operating expenses. What qualifies as an includable operating expense is one of the most negotiated items in commercial lease review.

→ CAM Charges Explained

Personal Guarantee

A clause requiring a business owner or principal to personally guarantee the company's lease obligations. A personal guarantee pierces the corporate veil — if the LLC defaults on the lease, the landlord can pursue the guarantor's personal bank accounts, real estate, and other assets. Negotiating burn-off provisions, good guy clauses, and dollar caps is essential.

→ Personal Guarantee Explained (Full Guide)

Permitted Use

The clause defining what business activities a tenant may conduct in the leased space. Narrow permitted use language (e.g., "for the sale of Italian food only") limits the tenant's ability to adapt — changing the menu, adding a delivery service, or pivoting the business concept may technically require landlord consent. Tenants should negotiate broad, future-proof permitted use language.

→ Permitted Use Clause Explained (Full Guide)

Pro-Rata Share

A tenant's proportional share of building operating expenses, calculated as the tenant's rentable square footage divided by the building's total rentable area. Example: a 3,000 sqft tenant in a 30,000 sqft building has a 10% pro-rata share — meaning they pay 10% of all property taxes, insurance, and CAM costs.

→ CAM Charges Explained

Quiet Enjoyment

A landlord covenant — sometimes explicit in the lease, sometimes implied by law — guaranteeing that the tenant will not be disturbed in their use of the space by the landlord or anyone with a superior legal claim to the property. This covenant protects tenants if the building is foreclosed or sold mid-lease: the new owner must honor the existing lease.

Recapture Clause

A landlord right to take back the leased space instead of consenting to a proposed sublease or assignment. If the tenant requests permission to sublease at a rent higher than what they pay, the landlord may recapture the space, sign a direct lease with the proposed subtenant at the higher rate, and the original tenant loses their space.

→ Subletting and Assignment Rights Explained

Relocation Clause

A provision giving the landlord the right to move the tenant to a comparable space in the building — typically to accommodate a larger expansion tenant or redevelopment plans. Relocation clauses should specify minimum notice (usually 90–180 days), comparability requirements for size and finish quality, and that the landlord pays all moving costs.

→ Relocation Clause Explained (Full Guide)

Renewal Option

A contractual right (not an obligation) allowing the tenant to extend the lease for one or more additional terms at pre-agreed conditions. Renewal rent is typically set by one of four methods: fair market value, CPI-indexed increase, fixed percentage increase, or a stated dollar amount. The option must be exercised with timely written notice — typically 6–12 months before expiration.

→ Renewal Options Explained (Full Guide)

Right of First Offer (ROFO)

A tenant right requiring the landlord to give the tenant an opportunity to make an offer on adjacent space or on the building before marketing it to others. If the landlord rejects the tenant's offer, they can lease to a third party. ROFO is initiated by the landlord's intent to deal — it is less protective than ROFR but easier for landlords to accept.

→ Renewal Options Explained

Right of First Refusal (ROFR)

A tenant right requiring the landlord to offer the tenant the chance to match a third-party offer before signing with anyone else. ROFR triggers after the landlord has negotiated a deal — the tenant has a short window (typically 5–10 days) to match it exactly or lose the right. More protective for tenants, but more disruptive for landlords who must disclose negotiated terms.

→ Renewal Options Explained

Security Deposit

An amount held by the landlord as collateral against tenant default — typically 1–3 months of base rent, sometimes higher for early-stage or credit-challenged tenants. Security deposits must be returned within a specified number of days after lease expiration (often 30–60 days), minus documented deductions for unpaid rent or physical damage beyond normal wear and tear.

→ Security Deposit Explained (Full Guide)

Signage Rights

Lease provisions governing where, how large, and in what style a tenant can display their name or branding — on the building exterior, lobby directory, parking garage, monument sign, or suite entry. Signage rights must be negotiated explicitly and should specify approval rights, maintenance obligations, removal requirements at lease end, and exclusivity on the building facade if desired.

SNDA (Subordination, Non-Disturbance, and Attornment)

A three-part agreement between tenant, landlord, and lender. Subordination: the tenant's lease interest is junior to the mortgage. Non-disturbance: the lender won't terminate the tenant's lease if the landlord defaults on the mortgage (this is what tenants need). Attornment: the tenant agrees to recognize the lender as the new landlord in a foreclosure. Always request non-disturbance protection — without it, a lender could terminate your lease.

Square Footage (Rentable vs. Usable)

Usable square footage is the actual floor area a tenant occupies and can use. Rentable square footage adds a proportionate share of common areas (lobbies, hallways, restrooms, mechanical rooms) — which is typically what tenants pay rent on. The "load factor" or "add-on factor" is the difference, usually 10–20%. A 10,000 usable sqft space with a 15% load factor is billed as 11,500 rentable sqft.

Sublease

An arrangement where a tenant (the sublandlord) leases part or all of their space to a new occupant (the subtenant) while the original lease remains in place. Unlike assignment, the original tenant remains on the hook to the landlord — if the subtenant doesn't pay, the original tenant still owes rent. Most leases require landlord consent to sublease.

→ Subletting and Assignment Rights Explained

Tenant Improvement Allowance (TIA)

A landlord contribution toward the cost of building out a commercial space for a specific tenant, expressed as a dollar amount per square foot (e.g., $50/sqft on a 5,000 sqft space = $250,000 TIA). TIA typically covers hard construction costs. If the build-out costs more than the TIA, the tenant pays the difference. Unused TIA is often forfeited unless the tenant negotiates a rent credit.

→ Tenant Improvement Allowance Explained (Full Guide)

Tenant Rep Broker

A commercial real estate broker who represents tenants — not landlords — in lease negotiations. Tenant rep brokers are typically paid by the landlord as a commission split, so their services cost tenants nothing directly. A skilled tenant rep broker negotiates TIA, rent abatement, CAM caps, renewal options, and other material terms that are difficult for tenants to optimize alone.

Turnkey Build-Out

A delivery arrangement where the landlord constructs the space to the tenant's approved specifications before the tenant takes possession. The landlord manages contractors, bears construction cost risk, and delivers a finished space. Contrasted with a tenant-managed build-out where the tenant hires contractors directly using TIA funds.

→ Tenant Improvement Allowance Explained

Vanilla Shell

A delivery condition providing basic building infrastructure — HVAC stub-outs, electrical service to the space, concrete floors, drywall on the perimeter, and sometimes ceiling grid — without interior partitions or finished flooring. Vanilla shell gives tenants flexibility to lay out the space as needed while avoiding the cost of a full cold dark shell build-out.

→ Tenant Improvement Allowance Explained