Lease Administration & Finance Flashcards

In a typical commercial 'triple net' (NNN) lease, what costs does the tenant pay in addition to base rent?

Answer: Property taxes, insurance, and maintenance/operating expenses

In a triple net lease, tenants pay base rent plus their pro-rata share of property taxes, building insurance, and operating/maintenance expenses.

What is a 'base year' in a commercial office lease?

Answer: The year whose operating expense level is used as the baseline for future expense pass-throughs

The base year establishes the operating expense level the landlord absorbs; tenants pay their pro-rata share of expenses that exceed the base year amount.

What does 'expense stop' mean in a commercial lease?

Answer: A fixed dollar amount per square foot above which the tenant pays operating expenses

An expense stop is a fixed dollar amount per rentable square foot; the landlord pays expenses up to that amount, and the tenant pays any excess.

What is a 'tenant improvement allowance' (TIA) in commercial leasing?

Answer: Money provided by the landlord to fund build-out of the tenant's space

A Tenant Improvement Allowance is a landlord-provided sum used to fund construction and improvements customizing the space to the tenant's requirements.

In commercial real estate, what is a 'gross lease'?

Answer: A lease where the landlord pays all operating expenses and the tenant pays only a fixed base rent

In a gross lease, the tenant pays a single fixed rent amount and the landlord is responsible for paying all operating expenses out of that rent.

What is 'rent abatement' in a commercial lease negotiation?

Answer: A period during which the tenant pays no or reduced rent, typically at lease commencement

Rent abatement is a concession where the tenant pays no rent (or reduced rent) for a specified period, usually at the start of the lease while fitting out the space.