Continuing from the commercial real estate terms blog, here are an additional 16 common commercial real estate terms, along with their definitions.
Lease Extension Option
A lease extension option allows the tenant to extend its lease past the current lease expiration date. The tenant is not obligated to extend, but the landlord is.
Lessee
A lessee is a person who is leasing property. Also known as a tenant.
Lessor
A lessor is an entity or person who leases property to another entity or individual. Also known as a landlord.
Letter of Intent (LOI)
A letter of intent (LOI) is a written document that declares one party’s commitment to do business with another party. The LOI is used to state one’s full intentions to work with another entity. Typically, LOIs are not legally binding.
NNN (Triple Net) Lease
A NNN lease, also called Triple Net lease, is a type of lease agreement in which the lessee agrees to pay for the three net expenses: (1) real estate taxes, (2) property maintenance, and (3) insurance. In this type of lease, the lessee is responsible for paying these fees in addition to their base rent fee.
Option to Buy Clause
The Option-to-Buy lease clause allows the tenant or lessee to purchase the property it is currently leasing. If this clause is added to the lease, terms of the sale typically are included.
Rent Concessions
A rental concession is an act of rebate made by a landlord or property owner to adjust lease terms to attract tenants. Typically, a landlord may reduce the rent, including a tenant improvement allowance, or offer free amenities.
RSF (Rentable Square Footage)
Rentable Square Footage refers to the usable square feet of a property plus a percentage of the building’s shared common areas such as bathrooms, hallways, and lobbies.
Tenant
A tenant is an entity or individual that occupies a property that they rent from a landlord.
Tenant Improvements
A tenant improvement is a modification made to a space that makes it more operable for the tenant. For example, if a space has three offices, but the tenant needs four, building the fourth office is considered a tenant improvement.
TI Allowance (Tenant Improvement Allowance)
A TI allowance is a set amount of money allocated by a landlord to be used to make tenant improvements on their property. The TI allowance will be negotiated between the landlord and tenant, and the agreed-upon amount is included in the lease contract.
Triple Net Expenses
The Triple Net expenses include property taxes, property insurance, and CAM (common area maintenance) fees.
Usable Square Footage
Usable Square Footage refers to the area that a single tenant will occupy. This number should only reflect the wall-to-wall square footage of the space that is reserved for the tenant.
Vacancy Rate
The vacancy rate determines the percentage of physically vacant space in a building or market. It compares the amount of available square feet to leased square feet.
Evan Meyer is an experienced commercial broker that can assist with any real estate transaction! See how he can help you today.
A lease is a legally binding contract that grants tenant-specific rights relating to a piece of land or building. If you are in search of a Reno commercial space for lease, know that there are numerous types of commercial leases. However, most transactions in Northern Nevada are completed using one of the following lease types.
A full-service lease is the most simplistic lease type. In this situation, a landlord will charge the tenant one monthly payment which covers renting the space along with all other expenses related to the building, including but not limited to utilities, maintenance, property taxes, and insurance premiums. Janitorial expenses may also be included.
Pro Tip: Watch out for excess expense clauses. This type of clause protects landlords in the event building expenses exceed a predetermined amount and allows the landlord to bill the tenant for the increase. Consider removing this clause or cap it at a certain percentage.
A triple-net lease or “NNN” lease is essentially the opposite of a full-service lease. For this lease type, a landlord will bill the tenant not only for monthly rent but also for all other property expenses. These expenses commonly include maintenance, property taxes, and property insurance and are billed based on the tenant’s suite size. Lastly, the tenant is normally responsible for its own utilities as well.
Pro Tip: Thoroughly review tenant obligation and maintenance clauses. It is common for tenants to responsible for mechanical systems. To reduce the risk of replacing said systems on your dime, have these systems inspected by a specialist before signing your lease.
A modified gross lease is a hybrid between full-service and triple-net. The terms of this lease type change from landlord to landlord. Typically, modified gross leases in Northern Nevada require the tenant to pay rent and utilities and the landlord to cover all other expenses.
No matter the lease type, it is still a contract and thus negotiable. After all, both parties want an amicable relationship.
If you need commercial space and would like help negotiating your deal, Evan Meyer is an experienced and qualified broker. Ensure that you are properly represented by contacting him today. It is always recommended to have legal counsel review any document you sign.
