Understanding lease words and terms help you fully comprehend your lease agreement. Below are some commonly used words and terms in lease agreements and their definitions:
Common Lease Terms
Base Rent
The minimum rent payable by a tenant excluding all other charges and dues.
Breakpoint
The gross sales amount point after which a tenant is required to pay percentage rent of the excess.
Common Area
An area of a lease under the management and control of the landlord but commonly used by all tenants.
CAM (Common Area Maintenance)
CAM charge is a tenant’s appropriate share of the total CAM fees, where common area fees are reimbursable by tenants to the landlord.
Capital Expenditures
Money spent to improve the quality, functionality, production or the life of an asset and added to the overall cost of the asset.
Consumer Price Index
A computed value issued monthly by the Bureau of Labor Statistics (U.S. Department of Labor) used in measuring changes in the prices of a group of goods and services intending to indicating the improvement of or declining standard of living.
Depreciation
A reduction in the value of an asset over a period attributed to wear and tear or obsolesce computed by various methods.
Eminent Domain
Power to take over private property for public use by any person or entity authorized by law.
Estoppel Certificate
A certificate signed by a tenant or other party containing attestation to some facts as of a particular date with a view to preventing denial of such facts at a future date.
Fiscal Year
Twelve serial months defined by a tenant as his accounting period for the purpose of annual reports.
Holdover
Applies to the situation where a lease has expired or terminated but the tenant remains in the property without the Landlord’s authorization.
HVAC
An acronym for Heating, Ventilation and Air-Conditioning system.
Improvement
Extra-ordinary repairs and a replacement made to a property with the intent of improving its value, condition, beauty or position it for new or enhanced uses.
Indemnification
When Party A agrees not to hold Party B liable for claims arising from Party A.
Lease Year
The period of time defined as the starting and ending date of a lease.
Lien
Right or claim upon a debtor’s asset to ensure the payment of a debt or obligation.
Natural Breakpoint
That percentage rent breakpoint that is related to the minimum rent payable by a tenant to a landlord.
Option to Purchase
An option, granted by the landlord to a tenant, to buy a piece of a property within a specific period of time.
Percentage Rent
Percentage of gross retail sales paid to the landlord in excess of an agreed breakpoint.
Rent Bump
Date on which an increase in a tenant’s minimum rent becomes effective.
Right of First Refusal
A tenant’s right to satisfy the conditions of a proposed contract before the contract is offered to other parties.
Subordination
The ranking of a person’s claims or rights in comparison with others.
Subrogation
The process of substituting another person to receive the claims, debts and rights of another party.
Tenant Allowance
Some form of rent relief or grant given by a landlord to a tenant to fund a relocation or tenant’s improvements.
Tenancy at Sufferance
A situation arising wherein a tenant occupies a lease even after termination of the lease.
Tenancy at Will
When a tenant occupies a lease, after its expiration, with the authorization of the landlord but for no agreed period.
Triple Net Lease
A lease arrangement in which the tenants pays all expenses related to the lease.
These are common lease terms and expressions in lease agreements. Understanding them will help you execute your lease agreements appropriately.
