Leasing a Commercial Property

• Basic Rent – (or Base Rent) this portion of the monthly payment is the landlord’s income which they use to pay for financing and/or make a profit. This rent is expressed as a cost per square foot per year.
• Additional Rent – (sometimes referred to as NNN or CAM or Operating Costs) this portion of the monthly payment is used to pay the tenant’s proportionate share of the expenses such as: taxes, building insurance, utilities, management fees, snow removal and the like.

This provides security for the landlord in case a tenant defaults on their lease or leaves the property in a damaged condition.

This is a request by a landlord that the tenant, and/or another person, is willing to take personal responsibility if the tenant defaults on payments owed to the landlord. It is the same as a guarantee or co-signer on a mortgage or leasing a car.

These are the changes that need to be made prior to the subject space being ready for the tenant to conduct business. The calculation and assignment of the costs and the apportioning of the work to be done to complete the TI’s are negotiated by the landlord and the tenant in the offer to lease. Frequently the landlord will attempt to recover its costs of improvements by amortizing the costs of the TI’s into the basic rent, or the TI’s may be paid for by the landlord and used as an incentive to bring in a new tenant.

An escape clause provides a tenant who is unsure about their business the option to escape or break the lease at a given time or with a given amount of notice, this option may also kill any incentive that the tenant may want to negotiate. The relocation allows the landlord to move a business within the complex in order to accommodate another larger tenant. The issue here becomes who pays for the moving expenses.

These are some of the most common subjects included in offers to lease that protect the landlord and tenant and are performed as part of their due diligence before completing their transaction: personal credit check, approval of a city business license, approval of the landlord’s standard blank lease, nature of the tenant’s business, approval of the board of directors, and approval of the franchisor.

The short answer is everything, the longer answer is you need to learn what is happening in the market and find out what is negotiable. In a hot market with a low vacancy rate, there may be little or nothing a tenant can get in the way of incentives, however in a slow market with high vacancy, there may be more on the table. Knowing what is being offered in the market will help the negotiations start off at a realistic point.

The only part of the contract that is enforceable by either the tenant or the landlord is what has been written down and agreed to by both parties. It would be very difficult for a judge to determine the accuracy of a verbal agreement between two parties, so be sure to write down everything that has been agreed to and sign or initial every page that forms part of the contract to prove both parties have agreed to the statements on that page.