Leasing The Right Commercial Space
The Smart Tenant’s Guide to Commercial Leasing Vocabulary
Common Area Maintenance (CAM): a percentage of the rent paid by tenants in addition to the base rent to maintain the common areas of the property. Examples include snow removal, outdoor lighting, parking lot sweeping, insurance and property taxes.
Escalation Clause: a clause which allows for rent increases to pay for expenses such as real estate taxes, operating costs, etc. Increases may be implemented at fixed time periods or tied to changes in certain economic factors determined by the landlord.
Lease Agreement: a legal, written document between a landlord and a tenant stating the lease terms which have been negotiated and agreed upon between them. It constitutes the agreement between the parties and states their basic legal rights.
Letter Of Intent: a preliminary agreement stating the proposed terms for a final contract which can be binding or non-binding. Tenants should always consult an experienced real estate attorney before signing a letter of intent.
Net Lease: a lease in which the tenant pays for specific office space as well as part or all of designated expenses associated with operating, maintenance and use of the property. These expenses may include taxes, utilities, janitorial services, property insurance, property management fees, sewer, water and trash collection.
Percentage Lease: a lease, generally for retail establishments, in which the tenant pays the landlord a percentage of the tenant’s gross sales as a part of the rent. There is usually a set base rent amount to which percentage rent is then added.
Right Of First Refusal: a clause in the lease giving a tenant the first opportunity to lease a property at the same price and on the same terms and conditions which a third party has offered to the landlord.