Commercial Lease Glossary: 50 Terms Tenants Should Know

Leases often define their own terms, and the same word can carry different meanings from one landlord’s form to another. When a word matters in your deal, these steps will keep you on firm footing.

1. Look for a capitalized term and find its definition in your lease. That definition usually governs over any general meaning.
2. Use the entry below to understand the general idea and what questions to ask.
3. Open the related guide if you need more detail on a term.
4. Ask your attorney about anything with legal consequences, since the rules vary by state.

Tenant Advisory Group represents tenants and buyers, and we find a shared vocabulary makes a lease negotiation move faster for everyone involved.

• Premises: The specific space you are leasing, usually shown on a floor plan attached to the lease.
• Usable area: The space your company actually occupies, generally within your suite.
• Rentable area: The area used to calculate rent, which adds a share of common space. BOMA’s office standard is commonly used for this measurement, though a lease may use another method.
• Load factor: The relationship between rentable and usable area, which shows how much shared space you are paying for.
• Pro rata share: Your percentage of the building, used to allocate shared costs.
• Building class: An informal A, B or C label describing a building’s quality and position in its market. It is not a legal standard.
• Second-generation space: Space previously built out for another occupant.
• Spec suite: A space the landlord builds before a specific tenant is signed, ready for quick occupancy.

• Base rent: The scheduled rent before any additional charges.
• Additional rent: Other amounts the lease treats as rent, such as operating expenses and taxes.
• Escalation: A scheduled or formula increase in rent during the term.
• Gross lease: A lease in which the rent includes many building costs. Check the lease for exactly which ones.
• Modified gross lease: A lease in which rent covers some costs and the tenant pays others.
• Net lease: A lease where the tenant pays some or all property costs on top of base rent. A triple net lease generally passes through taxes, insurance and maintenance.
• Operating expenses: The costs of running a building that a landlord may pass through to tenants.
• Common area maintenance (CAM): The charges for maintaining shared areas, often part of operating expenses.
• Base year: A year whose operating costs serve as a baseline. The tenant typically pays its share of increases above that level.
• Expense stop: A set dollar amount of expenses the landlord covers, with the tenant paying above it.
• Gross-up: An adjustment that estimates what variable costs would have been with the building more fully occupied.
• Reconciliation: The annual process of comparing estimated expense payments with actual costs.
• Rent abatement: A period when some or all rent is waived or reduced, often called free rent.
• Clawback: A term requiring repayment of concessions, such as abated rent, if the tenant defaults.
• Security deposit: Money or another form of security the landlord can hold against tenant obligations.

• Letter of intent: A summary of proposed business terms, usually signed before the lease is drafted. Check with your attorney whether it is binding in any respect.
• Commencement date: When the lease term begins, as the lease defines it.
• Rent commencement date: When rent payments begin, which may be later than commencement.
• Commencement date agreement: A short follow-up document that records the actual dates.
• Holdover: Remaining in the space after the lease expires, often at a higher rent.
• Tenant improvements (TI): Construction work done to prepare a space for its occupant.
• Tenant improvement allowance: The money a landlord contributes toward improvements.
• Work letter: The exhibit or agreement that governs how the space gets built out.
• Turnkey: A deal in which the landlord delivers a defined finished space and generally takes the cost overrun risk for that scope.
• Substantial completion: The point at which work is complete enough under the lease’s definition, which may allow for minor remaining items.

• Renewal option: A right to extend the term on terms set by the lease, often at a defined rent such as fair market rent.
• Right of first offer: A right to be offered space before the landlord markets it to others.
• Right of first refusal: A right to match a deal the landlord is ready to make with someone else.
• Termination option: A right to end the lease early, generally at a stated date, with notice and usually a fee.
• Assignment: A transfer of your whole interest in the lease to another party. The original tenant usually remains liable unless released.
• Sublease: A transfer of less than your whole interest, in which you remain the tenant and rent space to someone else.
• Recapture: A landlord’s right to take back space rather than approve a transfer.

• Default: A failure to meet a lease obligation, usually after any notice and cure period has passed.
• Cure period: The time you have after notice to correct a default before remedies apply.
• Personal guarantee: A promise by an individual to answer for the tenant’s obligations. Full, limited and good guy forms exist.
• Good guy guaranty: A limited guaranty that generally ends when the tenant properly surrenders the space.
• Burn-off: A term that reduces or ends a guaranty, deposit or letter of credit over time, usually after good performance.
• Estoppel certificate: A tenant’s signed statement of lease facts, usually given for a buyer or lender.
• SNDA: An agreement between tenant and lender, sometimes also signed by the landlord, covering subordination, non-disturbance and attornment.
• Subordination: Agreeing that your lease ranks below a lender’s mortgage or deed of trust.
• Non-disturbance: A lender’s promise that a tenant performing under its lease may stay after foreclosure.
• Attornment: Agreeing to recognize a lender or foreclosure buyer as your new landlord.

Where the same concept has more than one name, such as guarantee and guaranty, or free rent and abatement, treat the words as signals to read the clause. The label alone does not tell you the scope.