Final Assessment: Lease Negotiation Terminology (Part 2)

Condemnation is the legal process under eminent domain by which privately held property is taken by the government for public use, without the owner’s consent, but upon the payment of compensation for the appraised value of the property.

Condenser water is a provision requiring a tenant to store water within a certain area in its premises.

A conditional limitation is a “pro-landlord” provision contained in a lease allowing a landlord the right to terminate a tenant’s lease if certain conditions are not met.

The “condition of premises” refers to the condition that: (1) a landlord shall deliver the premises to its tenant on the possession and/or lease commencement date, or (2) a tenant shall deliver the premises to its landlord on the lease expiration or earlier termination date of the lease.

Commercial leases are never found within a condominium.

A conduit is a structure or tube, generally contained underground or within a building, with one or more ducts, through which cables, wiring, equipment, and/or facilities can be placed and/or run.

A construction contract is a formal written agreement between a contractor and a landlord or tenant for the construction, alteration, repair, modification or build-out of a building, office, retail, or industrial space.

Construction drawings are the detailed visual representations of the intended dimension, design, and location of a construction project.

A construction escrow agreement is a formal written agreement between a contractor and a landlord or tenant for the construction, alteration, repair, modification or build-out of a building, office, retail, or industrial space.

A construction completion and payment guaranty is a guaranty by an individual and/or entity to complete any work commenced on a construction contract and to pay for all amounts due under such contract.

Construction management is the services described in a construction management agreement specifying that the construction manager will provide management of all trades and sub-contractors until the completion of any and all work on a construction project.

The Consumer Price Index (“CPI”) is a tool to measure inflation by examining the change in prices of a fixed basket of consumer goods and services such as housing, food, transportation, and medical care over a period of time. It is sometimes called a cost-of-living index.

Contiguous space is space that is down the hall from another space.

A contingency is dependence on a future event, circumstance, or fulfillment of a condition that may occur but is not certain to occur.

A co-tenant agreement is an agreement wherein two (or more) real estate brokerage firms generally agree in writing to represent one or more tenants.

A co-tenancy requirements clause is a provision generally found in a retail lease which states that tenant shall not be obligated to initially open for business during a “blackout” period and if tenant does not open, the term of the lease and tenant’s rental obligations shall not begin until the earlier of tenant’s opening or the end of the blackout period. Such blackout period could be at any time when less than sixty-five percent (65%) of the gross leasable area of the retail tenants, excluding tenant’s square footage and the square footage of any restaurant or purveyor of food, is occupied and open for business. The tenant may elect to open during a blackout period but will not be required to pay landlord rent and other charges until the day after the end of the blackout period.

A covenant is an agreement to do, or refrain from doing, a specific thing, such as to pay rent, to make repairs, or to not compete.

Deemed consent is a provision stating that the landlord’s consent shall be deemed to have been granted if the landlord fails to respond to a tenant’s consent request within a predetermined time period in a situation where the landlord’s consent is required under the lease (e.g., to an assignment or sublet or to perform alterations to a tenant’s space).

Default is the failure to fulfill a legal obligation or condition in a timely manner such as paying rent, performing repairs, or complying with (or being in violation of) any other obligation under the lease.

Default remedies are the remedies provided to a party in the event that the other party to the lease defaults on their obligations under the lease.

Restoration work is a clause reserving the right for a landlord to terminate an existing lease, upon relatively short notice to the tenant (such as 6 to 9 months), so that a demolition of the building, material improvement, or substantial renovation can be undertaken.

A desk sharing provision is a lease provision giving a tenant flexibility to grow into a space or downsize by having the ability to sublease or license a portion of its space without being required to go through the process and cost of obtaining the landlord’s consent, provided that certain conditions are met (e.g., providing the landlord notice and a certificate of insurance). Such a provision is sometimes referred to as a “permitted occupant-desk sharing” provision.

A disbursement request is a request for the landlord to start performing landlord’s work on the premises using the proceeds of the agreed upon tenant improvement allowance.

Due diligence is the process of verifying facts about the other parties and the subject property in a commercial lease transaction. This will often include reviewing all financial records and other material information pertaining to the property, consequently allowing the reviewing party to assess the strengths and weaknesses of the other party and any risks involved. Essentially, due diligence refers to the level of care and procedures that should be exercised by a reasonable person before entering into an agreement or financial transaction with another party.

Early access is a provision in a lease allowing the tenant access to the space prior to receiving possession from the landlord, without the payment of rent, in order to install its wiring and cabling, take measurements, install and/or store its work stations or furniture and to possibly begin a tenant’s alterations.

Electrical capacity is the specified electrical capacity per square foot contained in the premises (e.g., the number of watts per square foot amperage, exclusive of HVAC).

Eminent domain is the power of the federal, state, or local government or its agent to take private property for public use with payment of just compensation to the owner of the taken private property.

Eminent domain is a document utilized by a landlord at such time as the landlord is attempting to enter into another agreement with a third party, such as a mortgage on, or a sale of, the landlord’s commercial, industrial or multi-family property.

An estoppel certificate is a contractual arrangement wherein a real estate brokerage firm is hired as the exclusive agent for a specified period of time to list (or find) a specific space or piece of real property for a landlord or tenant, as the case may be.

An exclusive agency listing is a contractual arrangement wherein a real estate brokerage firm is hired as the exclusive agent for a specified period of time to list (or find) a specific space or piece of real property for a landlord or tenant, as the case may be.

An exclusive tenant representation agreement is an agreement between a broker and a tenant whereby the broker has the exclusive right to find a space and thereafter negotiate the financial and other pertinent terms to be contained in a lease on behalf of a tenant.

An exclusive use clause is a clause typically found in a retail lease wherein a landlord grants an exclusive use to a tenant in a building or shopping center or mall.

An exculpation clause is a provision in a lease where the tenant acknowledges and agrees, for itself and its successors and assigns, that no trustee, director, officer, employee or agent of the landlord shall be personally liable for any of the terms, covenants or obligations of the tenant under the lease, and that tenant shall look solely to landlord’s interest in the building for the collection of any judgement requiring the payment of money by the landlord.

An exit strategy refers to strategies negotiated during the letter of intent and/or the lease negotiation stage whereby the tenant negotiates language within a lease regarding the tenant’s ability to “exit” from the lease for a specific reason or myriad of reasons in the future.

Fair market value rent is the most feasible rent that a property should be rented for, taking into account the properties highest and best use and the rent that comparable properties at that particular time would rent based on relevant market factors.

The Financial Accounting Standards Board (also known as “FASB”) is an independent board consisting of accounting professionals who primarily develop standards of financial accounting and reporting. Such standards are known as generally accepted accounting principles (“GAAP”) and govern the preparation of corporate financial reports.

A brokerage agreement is an agreement secured by real property whereby a bank or other creditor lends money to an owner of a fee simple interest in real property. Among other things, the real property secured by the fee mortgage is utilized as collateral (and can be foreclosed upon) in the event of the debtor’s uncured default.

Financial statements and records are records that outline the financial activities of a business, an individual, or entity. Such records often include income statements, balance sheets, statements of retained earnings and cash flows, generally maintained according to the generally accepted accounting principles (“GAAP”).

The eminent domain clause is a provision in a lease that sets forth the rights and obligations of the tenant and landlord if a fire, casualty or other damage were to occur in the leased premises (and/or the building of which the leased premises are a part of).

Fixed costs are costs that remain unchanged over a specified period of time. Examples of fixed costs can include the monthly rent, loan payments and insurance premiums.

Fixed rent is the cost of rent under a lease remaining “fixed” over a specified time period during a lease term.

Force majeure is a French term meaning “greater force.” Subject to terms and conditions contained in a lease, a force majeure provision acts to remove the liability for natural and unavoidable events that restrict a party or parties from fulfilling their obligations under a lease.

Free rent concession(s) are a rent abatement given by the landlord to the tenant, generally at the commencement of a lease term.