Jargon fills every specialized field. No matter how practical the terminology or the ideas behind it, if you don’t have a grasp of the words being used in your commercial real estate experience, you’re likely to miss something or fall victim to miscommunication.
We’ve compiled a list of important real estate lease terms for you to reference so that when you come across them you’ll not only understand what they mean, but be able to ascertain if the concepts behind them are being properly applied.
Commercial Real Estate Leasing Terms
Commercial real estate leasing terms will differ from leasing company to leasing company, but there are certain terms and conditions that most leases will contain, including:
Lessor
Simply put this is the landlord. But more specifically, this is the person who is granting the terms of the lease and who will be legally responsible for fulfilling those terms.
Lessee
This is the tenant. This is the party that agrees to the terms of the lease and occupies the property. Although a person signs the lease, the business entity occupying the space should be listed on all the related documents.
Gross Lease
This lease is common for multi-tenant industrial buildings. The landlord typically pays the base year taxes and the tenants handle the costs for maintaining common areas and common utilities. While the general characteristics of this type of lease are consistent, the details of the terms differ from lease to lease. This type of lease is also generally known as a Fully-Serviced Lease. They are interchangeable depending on the part of the country you’re in.
Triple Net Lease (represented as “NNN”)
This type of lease requires that the tenant pay a significant amount of operational costs, including all taxes and insurance applicable to the rental. In areas with rent control, this type of lease helps landlords fix their costs. This is generally not a good tenant option, especially for older properties.
Modified Net Lease
When neither the landlord nor the tenant can agree to the terms of the gross or triple net lease, the modified net lease offers a compromise. This is a solid legal solution to address the needs of both parties.
Expansion Option
This is a provision in the lease agreement that allows the tenant to build out and expand the rental space.
Non-Compete Clause
This clause gives the tenant exclusivity in the rental space. It bars the landlord from renting out another space in the same building to a business of the same or similar type.
Rental Rate
The square footage of your commercial space usually determines your per-month rental rate. In most cases, more space means less money per square foot. The job of your real estate agent is to work with the property manager to find a lease rate and term that works for everyone involved.
Rent Escalations
There are times when a property manager will ask that a rent escalation be included in long-term real estate lease terms. The reasons for this vary, including property value increase, or an increase in maintenance costs. Rent escalations will increase the rate of your rent at a fixed percentage each year.
Other Terms to Consider
Another cost that may find its way into your lease terms is common area maintenance for things like stairways and elevators. You may also need to negotiate terms for any repairs or improvements you are planning for your new space.
Help Navigating Real Estate Lease Terms
Whether you are looking for business space, retail space, medical office or medical storage space, NM Medical Real Estate can help you find a space best suited to your needs. We have almost twenty years of experience in the field and thoroughly understand the ins-and-outs of commercial real estate leases. NM Medical Real Estate will work closely with you every step of the way to secure the lease terms to represent your interests and budget concerns. Contact us if you are considering leasing a commercial office space in Albuquerque.
