NNN is a type of lease that requires the tenant to pay—in addition to the base rent—all costs associated with operating the space (cleaning, utilities, etc.), real estate taxes, and insurance.

A full service (FS) lease includes all the costs associated with your tenancy: utilities, cleaning, real estate taxes, and management fees. If the landlord is advertising a full service rental rate then you will have no other monthly charges. However, in many cases the tenant will be responsible for a prorated share of any increases after the first year of tenancy.

Landlords need some financial assurance that the tenant will hold up their end of the deal by opening for business and then paying the rent.

A letter of intent is a document in which two parties can negotiate the basic terms of a real estate transaction, be it a sale or a lease. Once both parties reach an agreement on terms, the document can be executed by both parties. An LOI is non-binding and is usually the first step before signing a lease agreement.

The “rentable” number is the total square feet used to calculate the rental rate and may include the tenant’s proportionate share of the lobby, hallways, and other common areas in the building available to and used by all the building’s tenants. The “useable” number is the actual amount of square feet within the walls of the space being leased—in other words, the space available for the tenant’s exclusive use.

Escalation is a clause in a lease that provides for an increase in the rental rate at a future time, usually on an annual basis. This increase can be a variable amount (tied to a government cost-of-living index, for example) or a fixed percentage agreed to with the landlord in the lease agreement.

Lease commencement is generally the date when the lease has been fully executed and goes into effect. The tenant may take possession of the building or space at that time, but not always. On occasion, the owner may continue to have possession, for example, if they wish to make landlord improvements.

Rent commencement is the date that the tenant is scheduled to begin paying rent. This can be several months after lease commencement. Why? Many deals include a rent abatement period—essentially rent-free time in the space—for the tenant to complete a build-out before actually moving in or opening their business.

No, proposals and LOI’s are not binding by design. The LOI’s purpose is to spell out the main points of a deal before moving on to a formal contract. We compare the negotiation of the LOI to the early stage of dating: you are just trying to sort out if the relationship has any long-term potential!

A TI or tenant improvement allowance is an agreed-upon budget provided by the landlord for the tenant to make improvements to the leased space. Any costs for the improvements that exceed the allowance are the responsibility of the tenant to pay.

Turnkey tenant improvements are provided at the landlord’s expense according to the plan previously agreed upon by both parties. In a turnkey situation, the landlord bears all the financial risk of construction.

Rental Rate x Square Footage = Annual Rent Annual Rent ÷ 12 = Monthly Rent Payment. (Here’s an example: $35/sf x 5,000sf = $ 175,000/year annual rent. That annual rent ÷ 12 months = $14,583/month rent payment.)

The standard lease length is three to five years. Typically, a landlord’s deal costs are between one and two years’ worth of rent payments. Therefore, the landlord needs a longer term to gain a sufficient return on their investment.

Common area is the area used in common by the tenants of an office building. Common area includes building and elevator lobbies, restrooms, stairwells and hallways.

A tenant’s occupancy cost is the total cost incurred pursuant to a lease. This includes such items as rent, operating expense increases, utilities, parking charges, remodeling costs, etc.

A tenant representative is a broker or agent who helps the tenant find space and negotiate leases. The represntative advocates for their client int he negotiation process. The relationship is required by law to be memorialized in a signed representation agreement.