Rent Types

1. NNN: Tenant is responsible for Property Tax, Insurance, Common Area, Maintenance, Utilities, and Janitorial
2. Industrial Gross: Tenant pays Utilities and Janitorial
3. Modified Gross: Tenant pays for Janitorial
4. Full Service: Tenant is only responsible for increases over the Base Year Expenses

Rent and Build out Issues

1. Escalations: The amount of your rent increases year to year. The most common increase types of CPI (Consumer Price Index) or a percentage (3-5%).
2. Tenant Improvements (TI’s): The interior improvements within the space that is spent prior to your occupancy, less Fixtures, Furniture, and Equipment.
3. Amortization: Any costs that a landlord pays for and then passes through to the tenant over the period of the lease. For example, a business might need 3 extra office constructed at a cost of $15,000. The landlord might offer to amortize the cost of these improvements into the rental payments a company make each month.
4. Plug and Play: The space will come furnished and wired.
5. Turnkey: Referring to an owner making a property ready for a tenant to begin business by having the tenant furnish only furniture, phone and inventory, if any. Turnkey tenant improvements are provided at the landlord’s expense according to plans and specifications previously agreed upon by the parties.
6. 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.

Space Issues

1. Load Factor: Load factor measures the common areas of your building that are built into your rent including the lobby, elevators, supply areas etc. For example, if the load factor is 10% and you are leasing 2,000 square feet space, your usable square footage is actually 1800 square feet.
2. Common Area: The common area is the area of the building that is allocated to each tenant but is not directly controlled by any one tenant. Some examples include the lobby, elevator, bathrooms, supply closets, and mechanical rooms.
3. Usable Square Footage: The amount of square feet measured within the confines of the tenant’s space, without a load factor.
4. Rentable Square Footage: The square footage that is advertised and listed in your lease. The Rentable Square Footage Includes a load factor or your percentage share of all building common areas.

Expenses

1. Common Area Maintenance: Amounts charged to tenants for expenses to maintain hallways, restrooms, parking lots, and other areas.
2. Base Year Expenses: A lease condition whereby the landlord agrees to pay an expense amount based on the expense for a base year (typically the first year) of the lease, and the tenant pays the increase in expense for subsequent years. For example, if the total building expenses are $100,000 in your Base Year, and the following year expenses are $105,000, the tenant would be responsible for their % share of that $5,000 expense.
3. Holdover: This is the situation where a tenant remains in the space after the lease term expires. Most holdover provision will be somewhere between 150-200% of the current monthly rent.
4. Sublease: Used to convey some or all of the property rights that a tenant has under a commercial lease to a third party for a portion of the tenant’s remaining term of the original lease.
5. Assignment: This is the concept of assigning your lease to a 3rd party with the landlord’s approval and removing the lease liability from your organization.
6. Nondisturbance: So long as lease is not in default, its rights to occupancy under the lease will not be disturbed by the lessor or its successors or assignees.
7. Right of First Offer or First Opportunity: A right, usually given by an owner to a tenant, which gives the tenant a first chance to buy the property or lease a portion of the property if the owner decides to sell or lease. Unlike under a Right of First Refusal, the owner is not required to have a legitimate offer which the tenant can then match or refuse. If the tenant refuses to make an offer or if the parties cannot agree on terms, the property can then be sold or leased to a third party.
8. Right of First Refusal: A right, usually given by an owner to a tenant, which gives the tenant a first chance to buy the property or lease a portion of the property if the owner decides to sell or lease. The owner must have a legitimate offer which the tenant can match or refuse. If the tenant refuses, the property can then be sold or leased to the offeror.
9. Renewal Option: The right of a tenant to renew (extend the term of) a lease for a stated period of time at a rent to be determined (i.e. 9.5% of “fair market rent”).
10. Relocation Clause: Any clause in the lease giving the landlord the right to move the tenant during the lease period.
11. Pro-Rata Share: Percentage of building occupied by the tenant, which is usually based on the rentable or leasable square footage measurement of your space compared to the rentable or leasable square footage of the building.