Read on to understand what common leasing terms are and what they mean for you when leasing medical office space.
Base Rent: Also referred to as net rent, base rent refers to the minimum amount of rent payable under the lease. The base rent is typically calculated as a per square foot dollar amount, and accounts for inducements but does not include operating costs and realty taxes.
Additional Rent: Also referred to as Common Area Maintenance (CAM) or Taxes, Maintenance, Insurance (TMI), additional rent accounts for the tenant’s proportionate share of the landlord’s common area maintenance and operating costs related to the running of the building, typically including insurance and property taxes.
Inducements: An incentive offered by the landlord to attract tenants to the building. Inducements may be offered in a variety of formats, including, but not limited to, free base rent periods, free gross rent periods, and tenant improvement allowances.
Lessee: More commonly referred to as the tenant, the lessee is the legal entity, company, or person whose name appears as the occupant or user of space on the lease document. The lessee is bound by the terms and conditions stated in the lease.
Lessor: More commonly referred to as the landlord, the lessor is the legal entity, company, or person whose name appears as the owner or manager with authority to lease space in the building.
Useable Area: Also referred to as net leasable area, useable area is measured in square feet and encompasses the floor space contained within the premises, between the internal finished surfaces of permanent internal walls and the internal finished surfaces of dominant portions of the permanent outer building walls. It generally includes window frames and structural columns, toilets, kitchens, cupboards, and excludes plant/motor rooms. It excludes areas dedicated as public spaces or thoroughfares such as building service areas.
Rentable Area: Also referred to as gross leasable area, rentable area is measured in square feet and encompasses the floor space contained within the premises at each floor level, measured from the dominant portion of the outside faces of walls, to the centre line of the internal common area or inter-tenancy walls.
Special Provisions: Clauses that fall outside the general terms and conditions of the lease document, typically negotiated to address unique concerns or conditions required by the lessee. This may include options to renew, landlord’s work or tenant allowances, parking provisions, etc.
Sublease/Assignment/Transfer: The mechanism under the provisions of the lease allowing the lessee to find a suitable replacement tenant. This is subject to lessor approval and, unless specifically stated otherwise, does not limit the lessee’s legal responsibilities during the term of the lease.
Proportionate Share: The portion of a building occupied by the tenant expressed as a percentage, calculated by dividing the area of the tenant’s premises by the total area of the building.