February 06, 2023 4:38 pm back to news

What to Know Before You Lease

Looking for office space isn’t always easy. The process can be overwhelming, the jargon confusing, and you’ll need to do plenty of research before you put pen to paper.

To help you, we’ve assembled ten commercial real estate terms that every business should know before looking for space.

1. Common Area Maintenance (CAM): This is an additional fee paid by tenants in addition to their rent payments. It covers the cost of maintaining common areas such as lobbies, hallways and parking lots. CAM fees vary from building to building and are typically negotiated into the lease agreement between tenant and landlord.

2. Gross Lease: A gross lease is one in which the tenant pays a fixed monthly rent rate with no additional charges or fees added on top of that amount. In this case, the landlord will generally cover all expenses related to maintaining the property, such as taxes, insurance and utilities.

3. Net Lease: Unlike a gross lease, a net lease requires tenants to pay the base rent plus additional costs associated with occupying the space, such as taxes, insurance or utilities. These extra costs can add up quickly, so tenants must understand these charges before signing any leases or agreements. 

4. Triple Net Lease (NNN): A triple net lease is similar to a net lease but requires tenants to pay for all expenses associated with occupying their space. This includes taxes, insurance and utilities, and their base rent payment each month. As a result, this leasing arrangement offers landlords greater protection against potential risks associated with owning commercial real estate properties. 

5. Letter Of Intent (LOI): A letter of intent is an informal document outlining both parties’ intent when leasing commercial real estate space. It serves as an initial agreement between landlord and tenant before they draft a more formalized contract or lease agreement with specific details regarding their transaction(s).

6 . Zoning Laws: Zoning laws dictate how the land can be used within certain geographic areas. This is done according to local regulations set forth by municipalities or other governing bodies that oversee land use planning within their jurisdiction(s).

7 . Escalation Clause: An escalation clause provides landlords and tenants with some protection against inflation. This is done by allowing rental rates on leased properties to increase over time based on set criteria outlined in the lease agreement, such as CPI or market trends within a given geographic region over a predetermined period.

 8 . Option To Renew: This clause gives landlords and tenants the option to renew tenancy upon the expiration of their current lease. Doing this allows for renewal without having to renegotiate terms & conditions again from scratch while saving time and money for both sides.

9 . Tenant Improvement Allowance (TIA): TIA provides businesses with funds to help cover the costs of improving their space to remain competitive. TIA typically occurs during lengthy tenancy periods and is covered by funds set aside by the landlord when crafting the initial agreement.

10 . Assignment Of Lease: Assignment of lease refers to the process in which a current tenant legally transfers the rights and obligations from their lease over to another party. This is usually done when the tenant has to leave, typically due to financial reasons, before the end date agreed upon signing the initial contract.

Understanding these critical commercial real estate terms are essential if you’re considering leasing out space for your business venture. Whether you’re looking at renting out ground-level retail units or high-rise office buildings, knowledge about these terms will help ensure your success moving forward!

If you’re interested in leasing space within 201 Portage or are looking for more information, please visit here: 201 Portage