Glossary of lease terms


The specific space within a building that a Tenant occupies and has rights for use of.

Gross Lease

A Gross Lease is a type of commercial lease where the Landlord pays all the “usual costs” that are associated with owning and maintaining the rented Premise.  These costs may include base rent, property taxes, common area maintenance (or operating expenses), and can include utilities.

Modified Gross Lease

Same as a gross lease except that the Tenant is given a “Base Year” stop for property taxes and operating expenses, and will pay their pro-rata share of any increases in property taxes and operating expenses over and above their “Base Year” amounts.

NNN Lease

Tenant pays Net Rent, as well as their pro-rata share of property taxes, operating expenses (CAM), and insurance for the building.

Tenant Improvement Allowance or Work Letter

The amount of money that the Landlord will contribute to tenant toward construction of their leased Premises (usually stated in terms of $/square feet).  The tenant pays costs that exceed this amount.


Often and commonly referred to as free rent or early occupancy and may occur outside or within the primary term of the lease.

Common Area Maintenance (CAM or Operating Expenses)

This is the amount of Additional Rent charged to the Tenant, in addition to Base Rent, to maintain the common areas of the property shared by tenant from which all tenants benefit (i.e. lobbies, corridors, restrooms, etc.)

Core Factor

Represents the percentage of Net Rentable Square Feet devoted to the building’s common areas (lobbies corridors, restrooms, etc.).  Also known as the Loss Factor, it is calculated by dividing the rentable square footage by the usable square footage.

Estoppel Certificate

A signed statement regarding the lease certifying that certain statements of fact are correct as of the date of the statement, and can be relied upon by a third party such as a prospective lender or purchaser.  In the context of a Tenant, this is a statement by a tenant confirming that the lease is in effect, that no rent has been prepaid and that there are no known uncured defaults by the Landlord.

Right of First Refusal (ROFR)

A lease clause giving a tenant the first opportunity to lease additional space that might become available in a property at the same price and on the same terms and conditions as those contained in a third party offer the owner has expressed a willingness to accept.

Right of First Offer (ROFO)

A right held by the tenant meaning that if space becomes available or vacant, the landlord must first advise the tenant of the available space, the holder of the ROFO (tenant) then has the right to make the first offer to lease the available space.  A ROFO contains no specific terms as to rent or concessions, so the Landlord is not obligated to accept an offer from the holder of the ROFO.

Security Deposit

A deposit of money (or other security) by a tenant with a landlord to secure the tenant’s performance of a lease.  This can take the form of a Letter of Credit or other financial instrument in lieu of cash.

Space Plan

A graphic representation of a tenant’s space requirements, showing wall and door locations, room sizes, and sometimes including furniture layout.  The final agreed to space plan should be an exhibit to the lease.

Request for Proposal (RFP)

The formal and often customized compilation of many considerations that a tenant might seek to reflect the tenant’s specific needs.  The RFP represents a tenant’s “wish list” for a space for occupancy.  A standardized RFP issued to multiple prospective landlords gives the tenant the opportunity to compare various landlord proposals on the same criteria.

Renewal Option

A clause giving a tenant the right to extend or renew the term of the lease, usually for a stated period of time and at a rent amount as provided for in the lease option clause.


Right of Recapture may refer to the right of the landlord when a tenant elects to sublease or assign, and the landlord elects to terminate the lease and recapture the leased space rather than approve a proposed sublease or assignment.


Where a tenant subleases Premises to a sublessee but does not relieve the tenant from their leasehold obligation.


A transfer by tenant of tenant’s entire leasehold estate in the property ending tenant’s legal duties and obligations to the landlord, which are then assumed by the assignee.


The space improvements put in place per the tenant’s specifications.  Takes into consideration the amount of Tenant Improvement Allowance provided for in the lease agreement.

Certificate of Occupancy

A document presented by a local government agency or building department certifying that a building and/or leased premises (tenant’s space), has been satisfactorily inspected and is/are in a condition suitable for occupancy.