1. What is a commercial lease? A commercial lease is a legally binding agreement between a landlord and a tenant for the rental of a property used for business purposes. It outlines the terms and conditions of the rental, including rent, lease duration, and responsibilities of both parties.

2. What is the difference between a gross lease and a net lease? In a gross lease, the tenant pays a fixed rent, and the landlord covers most expenses, such as taxes, insurance, and maintenance. In a net lease, the tenant pays a lower base rent but is responsible for additional costs, such as property taxes, insurance, and maintenance.

3. What is a triple net (NNN) lease? A triple net lease requires the tenant to pay the base rent plus their share of property taxes, insurance, and maintenance costs. It is common in retail and industrial properties.

4. How long is a typical commercial lease term? Lease terms vary but are commonly 3 to 5 years. Some leases may be shorter (1-2 years) or longer (10+ years), depending on the tenant’s needs and the type of property.

5. What is CAM (Common Area Maintenance)? CAM refers to the costs associated with maintaining shared spaces in a commercial property, such as lobbies, parking lots, and hallways. These costs are typically divided among tenants based on their lease terms.

6. What is a percentage lease? In a percentage lease, the tenant pays a base rent plus a percentage of their gross sales. This type of lease is often used in retail spaces.

7. Can I negotiate the terms of a commercial lease? Yes, most commercial leases are negotiable. Commonly negotiated terms include rent, lease duration, renewal options, and tenant improvements.

8. What are tenant improvements (TIs)? Tenant improvements are modifications or customizations made to a leased space to suit the tenant's needs. These can include changes to the layout, lighting, or finishes. The cost is often negotiated between the tenant and landlord.

9. What is a lease renewal option? A lease renewal option gives the tenant the right to extend the lease term for an additional period, usually under pre-determined conditions. This option is typically negotiated at the start of the lease.

10. What happens if I need to break my lease early? Breaking a lease early can result in penalties, such as paying the remaining rent or losing your security deposit. Some leases include a termination clause that outlines the terms for early exit.

11. How is commercial rent typically calculated? Commercial rent is usually calculated on a per square foot basis, annually or monthly. The exact method depends on the lease type and the property location.

12. What is a sublease? A sublease occurs when the original tenant rents out the leased space to a third party. The original tenant remains responsible for the lease terms with the landlord.

13. What is a lease escalation clause? A lease escalation clause allows for periodic increases in rent, typically tied to inflation, property taxes, or operating costs. It ensures the rent remains aligned with market conditions.

14. Are there different types of commercial leases for different property types? Yes, the lease structure can vary depending on the property type, such as office, retail, industrial, or medical spaces. Each type may have specific terms and conditions relevant to that use.

15. What is a security deposit, and how much is it typically? A security deposit is a sum of money paid upfront by the tenant to protect the landlord against potential damages or unpaid rent. It usually equals one to three months’ rent, depending on the lease terms.

16. Who is responsible for property maintenance and repairs? Responsibility for maintenance and repairs varies by lease type. In a gross lease, the landlord usually handles these expenses, while in a net lease, the tenant may be responsible for some or all maintenance and repair costs.

17. What is the difference between rentable and usable square footage? Usable square footage refers to the actual space the tenant can use within the leased premises. Rentable square footage includes usable space plus a proportionate share of common areas like lobbies and restrooms.

18. What is a build-out in commercial leasing? A build-out refers to the construction or renovation work required to make the leased space suitable for the tenant’s business. The costs and responsibilities for a build-out are usually negotiated in the lease.

19. Can I make changes to the leased space during my tenancy? Yes, but changes typically require landlord approval. The lease should outline the process for requesting modifications and who bears the cost.

20. What should I consider before signing a commercial lease? Before signing, consider the lease terms, rent, location, lease duration, tenant improvement allowances, renewal options, and your long-term business needs. It's advisable to consult with a real estate professional or attorney to ensure you understand all aspects of the lease.

Commercial Real Estate Terms

• ADA - Americans With Disabilities Act U.S. civil-rights law, enacted 1990, that forbids discrimination of various sorts against persons with physical or mental handicaps. Its primary emphasis is on enabling these persons to enter the job market and remain employed, but it also outlaws most physical barriers in public buildings, transportation, telecommunications, and government services.
• Allowance - A set dollar amount provided by the Landlord under a lease to be used by the Tenant for a specific purpose. Examples include allowances for tenant improvements, moving expenses design fees, etc.
• Amortization - The process of paying off a debt together with interest, usually with equal payments at regular intervals over the term of the lease.
• Base Year - The year of a lease term that is used as the standard when implementing an escalator clause. Operating costs are judged higher or lower during the next year when compared to the base year.
• CAM Charges - Common Area Maintenance charges. This is the amount of additional rent charged to the tenant, in addition to the base rent, to maintain the common areas of the property shared by the tenants and from which all tenants benefit. Examples include: snow removal, outdoor lighting, parking lot sweeping, insurance, property taxes, etc. Most often, this does not include any capital improvements that are made to the property.
• Commencement Date - The date on which a lease begins. This is typically but not always the day on which the tenant takes possession of the leased space.
• Certificate of Occupancy (CO) - The government / township issues this official form, which states that the building is legally ready to be occupied.
• Demised Area - The walled off and secured area of a leased space, separated from spaces leased to others (by a "demising" wall). Also measured as useable area.
• Expense Stop - A ceiling or limit ( typically per Sq Ft.) on the dollar amount one party, typically the landlord, will pay in an expense category. This is determined by adding some percentage or dollar amount to the base year costs.
• Extension Option – A agreement of continuation of occupancy under the same conditions, as opposed to a renewal, which implies new terms or conditions. In a lease, it is a right granted by the landlord to the tenant whereby the tenant has the option to extend the lease for a longer term.
• Gross Lease - A lease of property whereby the landlord pays for all property charges typically included in ownership. Some of These charges can include utilities, taxes, and maintenance,etc.
• HVAC - Heating, Ventilation, Air Conditioning. A general term encompassing any system designed to heat and cool a building.
• Landlord (Lessor) - The party (usually the owner) who gives the right to possession in return for a rent.
• Lease Term - The length of term that the tenant has the right to possess a specific piece of real estate.
• Lessee (Tenant) - The party to whom a lease  is given in return for rent.
• Open Listing - Any property that is leased directly by the owner. Useually, these are called open listings, in which the owner will pay a full commission to any broker who brings a tenant to the property.
• Rentable Area - The square footage for which rent can be charged.  Including all walls interior and exterior.
• Request For Proposal (RFP) - A document typically issued by a tenant's agent to an owner(s), inviting the owner to submit a proposal to lease vacant space. The RFP is intended to outline specifics of th lease and identify and concerns that the lessee may have with the space.
• 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.
• Sublease - A lease, under which the lessor is the lessee of a prior lease of the same property. The sublease may be different in terms from the original lease, but cannot contain a greater property interest.
• Tenant Improvements(TI's) - Work done on the interior of a space, can be paid for by landlord, tenant, or some combination of both, depending on the terms of the lease.
• Triple Net Lease- A lease requiring the tenant to pay in addition to a fixed rental, the expenses of the property leases, such as taxes, insurance, maintenance, utilities, cleaning etc.
• Useable Area - The square footage occupied exclusively by tenant within a tenant's leased space. The useable area times the load factor for common area results in rentable area on which rent is charged.
• Work Letter - An amount of money that a landlord agrees to spend on the construction of the interior of a space per the lease, usually negotiated.