Lease Terminology Glossary
Key terms every commercial real estate professional encounters during lease abstraction.
Lease Abstraction
The process of extracting key business terms, dates, financial obligations, and legal provisions from a commercial lease document and organizing them into a structured summary format for portfolio management and analysis.
Tenant Improvement Allowance (TI Allowance)
A sum of money provided by the landlord to the tenant, typically expressed as a per-square-foot amount, to fund improvements or build-out of the leased space to meet the tenant's operational needs.
Estoppel Certificate
A signed statement by a tenant (or landlord) confirming the current status of a lease, including rent amounts, commencement dates, and whether any defaults exist. Commonly required during property sales or refinancing.
Right of First Refusal (ROFR)
A contractual right granting a tenant the opportunity to match any third-party offer to lease or purchase a space before the landlord can accept that third-party offer.
Right of First Offer (ROFO)
A contractual right requiring the landlord to offer space to the existing tenant before marketing it to third parties. Less restrictive than a Right of First Refusal because the tenant does not need to match a competing offer.
Recapture Clause
A provision allowing the landlord to reclaim all or part of the leased premises under certain conditions, such as when a tenant seeks to sublease or assign the space.
Co-Tenancy Clause
A provision in a retail lease that conditions the tenant's obligations (such as rent or operating requirements) on the presence or operation of specified anchor tenants or a minimum occupancy threshold in the property.
Operating Expense Exclusions
Specific cost categories excluded from the pool of operating expenses that can be passed through to tenants. Common exclusions include capital expenditures, leasing commissions, and costs arising from landlord negligence.
Subordination, Non-Disturbance & Attornment (SNDA)
A three-part agreement between tenant, landlord, and lender: the tenant subordinates its lease to the lender's mortgage, the lender agrees not to disturb the tenant's possession if it forecloses, and the tenant agrees to attorn (recognize) the new owner.
CAM (Common Area Maintenance)
Charges passed through to tenants for the upkeep and operation of shared areas in a commercial property, such as lobbies, parking lots, landscaping, and building systems.
Triple Net Lease (NNN)
A lease structure in which the tenant pays base rent plus all three major expense categories: property taxes, insurance, and maintenance/operating expenses, in addition to their own utilities and janitorial costs.
Commencement Date
The date on which the lease term officially begins and the tenant's obligations (including rent) commence. May differ from the date the tenant takes physical possession, particularly when a rent-free period is provided.
Gross-Up Clause
A provision allowing the landlord to calculate operating expenses as if the building were fully occupied (typically 95%), preventing tenants in partially-occupied buildings from bearing a disproportionate share of variable costs.
Holdover Provision
A clause specifying the terms and rental rate (often 150% of the final month's rent) that apply if a tenant remains in possession after the lease term expires without executing a renewal.
Base Year / Expense Stop
Methods for allocating operating expenses between landlord and tenant. A base year establishes operating expenses in a reference year; the tenant pays increases above that baseline. An expense stop sets a fixed dollar threshold above which the tenant pays.
Percentage Rent
Additional rent paid by a retail tenant calculated as a percentage of gross sales revenue exceeding a specified breakpoint. Typically structured as the greater of base rent or a percentage of sales.
Renewal Option
A provision giving the tenant the right to extend the lease term for one or more additional periods at predetermined or fair-market-value rent, usually requiring advance written notice.
Assignment and Subletting
Lease provisions governing a tenant's ability to transfer its lease obligations to another party (assignment) or to lease all or part of the space to a subtenant while remaining liable under the original lease (subletting).