Brushing up on your real estate terminology knowledge can give you an edge in negotiating commercial real estate leases. Here are some terms to help you fully understand what is going on in your lease negotiations:
- Common Area: Any space in a building that is for the common use of all tenants, with the exception of vertical penetrations such as stairwells, elevator shafts, vertical ducting, or flues. These might include lobbies, restrooms, corridors, building break rooms, a building conference room, janitorial closets, storage rooms, and health facilities.
- Cost/SF: A common way to price space for a lease. In most lease offerings, rental properties and their corresponding operating expenses are priced using a yearly cost per square footage basis. In order to determine actual annual and monthly rent costs, multiply the “Rentable SF” of the property by the cost/SF that is being quoted, which will come out to be the annual rent. Divide this by 12 to determine monthly rent.
- Demising Wall: A common wall separating two tenants, which often requires fire rating standards determined by states and/or local municipalities.
- Escalation Clause: The clause in a lease that provides for the increases in rent that a tenant might pay to account for increased landlord expenses such as operating costs, real estate tax, etc.
- Estoppel Certificate: A document that the tenant signs articulating the current condition of the lease and any other agreements between the tenant and landlord.
Keep in mind these terms as you enter into negotiations with landlords, and be prepared to do some research on any more terms with which you are unfamiliar.