Sep 12, 2013

Critical Dates that Every Corporate Tenant Should Be Aware Of

By Don Catalano


describe the imageThere's a reason that the phrase critical date management gets used to refer to tracking the timing requirements under commercial real estate leases. In a commercial lease, missing a single date could invalidate a renewal option or put you in default. Tracking the critical dates within your lease is a business imperative.


Commencement and Termination Dates

With a commercial lease, commencement and termination dates aren't always straightforward. Frequently, you end up with multiple commencement dates that all mean different things. Here are the ones that you should be watching:

  • Delivery date: The date on which the landlord has to have the space ready for you or suffer the sanction spelled out in the lease.

  • Lease commencement date: The date on which the lease officially starts. Frequently other dates in in your lease are tied to this one, so it's an important one to track in your critical date management system.

  • Rent commencement date: Frequently, you don't start paying rent when you move in, and the rent commencement date takes free rent and other concessions into account to let you know when to start sending rent checks.

  • Termination date: The termination date is the date when your lease ends. Usually, you need to have completely vacated the space and removed your property by then. Read your lease carefully to see if there is a holdover clause that will let you stay longer, albeit a higher rent.

  • Early termination date: Some leases allow you to buy them out after a set period of time. Sometimes also called a kick-out clause, these options usually require you to pay a lump sum, which can be sizable, and have a limited time in which they're available.


Rent, Increase and Adjustment Dates

  • Due date: This is another key date, which usually falls on the same day of the month as the lease commencement date.

  • Rent increase dates: If your lease has increases, these are the dates on which they'll occur. They're frequently tied to your lease commencement date as well.

  • CAM reconciliation dates: Every year, most landlords issue CAM reconciliation statements that adjust the CAM budget for the next year and either refund CAM over-collections from the previous year or require payment of any under-collections.


Option and Right Dates

Some leases allow you to expand your space or even buy the building. Others give you the ability to renew your lease at pre-negotiated rates or terms. When these options and rights are valuable to you, most landlords become sticklers about the dates, so they're important to track as a part of your critical date management strategy.

  • Right of first refusal/negotiation dates: Some leases give you a first shot at buying your space or let you match another offer, but they typically give you a short time window.

  • Renewal option date: Many options carry two dates - the date on which you can first notify your landlord of your intent to renew, and the date on which the option expires. For instance, you may have a five year option that is valid from six to three months before your lease's expiration date.

  • Purchase option date: These typically give you until a set date to buy the building.


Critical Date Management

Dedicated commercial real estate software is an excellent tool for handling all key dates together in one place. Managing your critical dates in the sample place where you manage all aspects of your commercial real estate portfolio takes the stress out of critical date management.


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Topics: Critical Date Management

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Don Catalano

Don Catalano