Some Useful Lease Terms
Over the years, commercial leases have developed a language of their own. Some common terms that you should know include:
The Lessor is simply the Landlord, the owner of the property to be leased. Landlord is more commonly used for residential leases.
The Lessee is the Tenant, the person leasing the property. Again, tenant is more often used for residential leases.
The property or premises to be leased. “Demise” is an old Common Law term taken from Norman French.
Right of First Refusal
An agreement by the Lessor to offer space to the Lessee before offering it to the general public.
Under Gross Lease, the Lessee pays a flat monthly amount, and the Lessor pays all operating costs, including property taxes, insurance and utilities.
Triple Net Lease
The Lessee agrees to pay base rent, taxes, insurance, repairs and maintenance.
The Lessee pays the base rent, operating expenses, common area maintenance or CAM, plus a percentage of the Lessee’s gross income. This is commonly used by retail tenants in shopping malls and bars or restaurants.
The Lessee rents all or part of the leased space to another business. The Lessee remains responsible to the Lessor for payment of all rent and costs under the master lease.
The Lessee turns over the lease to another business, which assumes all of the payments and obligations under the lease. Assignments are generally not allowed without the consent of the Lessor.
The anchor tenant is the major tenant in a shopping center.
Restricts the Lessor from leasing premises in a shopping center to another business providing the same product or service as the Lessee.
Charges for maintaining commons areas (“common area maintenance”) used by all lessees or their customers at the leased premises. CAM charges include property taxes, security, parking lot lighting and maintenance, and are generally calculated as a percentage based on the area leased by the Lessee.
Similar to the warranty of quite enjoyment, the Lessor cannot force the Lessee to move or sign a new lease if the leased premises are sold or foreclosed.