Jul 15, 2020

7 Terms You Want in Your Next Office Lease

By Don Catalano


7 Terms You Want in Your Next Office Lease

It is important to understand that commercial leases and residential leases are quite different. Legally, commercial leases can be extremely complex to figure out, especially for busy business owners. This article helps you understand the terms you want in your next office lease while negotiating with your landlord.


1. Subleasing and Assignment

The subleasing and assignment clause is particularly crucial for tenants who have long-term leases. By taking advantage of the rights in this term, you can lease all or a part of your extra space to another tenant or move the lease over to a new tenant.


2. Net Lease

Net Lease allows you to pay for one unforeseen expense directly. It is mostly the rent you pay after applying concessions or discounts.


In a net lease, apart from the rent, you are expected to pay the property tax too. The landlord takes care of the bill of other expenses.


3. Renewal Clause

A renewal clause provides you the assured right to renew your lease at its expiration. Finally, you may choose not to exert that right and instead discuss new terms with your landlord; All the same, this clause offers a safe landing just in case negotiation hit the rocks.


4. Triple Net Lease (NNN)

Triple net lease, also referred to as an NNN or net-net-net lease, implies that you pay the base rent and three additional expenses, which generally entail property taxes, building insurance, utilities, and other operating and maintenance costs.


Also, you'll be responsible for maintaining and fixing your roof, exterior walls, plumbing, and electricity.


5. Releases, Indemnities, and Insurance

Almost all commercial leases have a clause that clearly define who is responsible for third-party claims made against the landlord. While it is normal for tenants to take action if these damages are due to their actions, you do not have to be responsible for all payments.


6. Common Maintenance Area (CAM)

Common area maintenance is also known as CAM and explains the extra money paid above the standard rent. You don’t want to be caught by surprise after paying your rent and discovering you need to pay more. Thus, it is vital to make inquiries from your landlord about all the common area maintenance charges. Generally, CAM charges include snow removal, landscaping, and repaving.


7. Notice and Opportunity to Cure

If you find it difficult to pay your rent at the appropriate time, this clause compels the landlord to notify you and grant you the grace of a few days before starting the eviction process. Ensure the time frame is good enough before you sign the lease agreement.


Getting commercial lease terms that offers the desired flexibility is complex and takes time. Hence, it is generally advisable to work with a tenant rep that will help you understand the terms in your next office lease. Tenant reps are commercial real estate professions that focus on working with users of office, retail or industrial space to help them find the best spaces and negotiate the best deals.


Here are a few other articles you might enjoy:

6 Ways to Increase Connectivity in the Office

The Beginner’s Guide to Commercial Real Estate Terms

Roadmap to Returning to Your Office Post-COVID-19


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Topics: office lease

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Don Catalano

Don Catalano