Commercial lease key terms are the recurring rent, recovery, option, and clause provisions that determine how much a tenant pays, what they can do with the space, and how risk is shared between landlord and tenant. Understanding terms like base rent, NNN, gross, escalations, CAM, TI, percentage rent, co-tenancy, SNDA, and holdover is what lets a CRE team read a lease quickly and know where the money and the risk actually sit. This glossary defines each in plain language.
Rent and money terms
- Base rent. The fixed rent for the space, usually quoted per rentable square foot per year. It is the starting figure before recoveries and escalations. See the rent schedule.
- Escalations. The scheduled increases to base rent over the term: fixed-dollar steps, a fixed percentage (commonly 3 percent a year), or an index such as CPI. See escalations.
- Percentage rent. Common in retail: additional rent equal to a percentage of the tenant's gross sales above a defined breakpoint, on top of base rent. See retail.
- Free rent / abatement. A period, often early in the term, when rent is reduced or waived as a concession.
- Tenant improvement allowance (TI). A dollar amount the landlord contributes toward building out the space, usually quoted per square foot. See the full tenant improvement allowance breakdown, including who pays and the ASC 842 treatment.
Lease structure and recovery terms
- Triple net (NNN). A lease where the tenant pays base rent plus its pro-rata share of property taxes, insurance, and common-area maintenance. See how a triple net lease works and who pays what.
- Gross / full-service lease. A lease where the landlord pays operating costs out of the rent, so the tenant's payment is largely all-in.
- Modified gross. A middle ground where some costs are bundled into rent and others are passed through, often with a base year.
- CAM (common-area maintenance). The shared operating costs tenants reimburse in a net lease, reconciled annually against actuals. See CAM charges.
- Base year. In a modified gross lease, the reference year of operating expenses; the tenant pays only increases above it.
- Gross-up. Adjusting variable operating costs to what they would be at full occupancy, so cost shares are fair in a partially leased building.
- Pro-rata share. The tenant's percentage of recoverable costs, typically its area divided by the property's leasable area.
Option and flexibility terms
- Renewal option. A tenant's right to extend the term, exercised within a defined notice window, often at fair market or a fixed rent. See renewal options.
- Termination / break right. A right to end the lease early, usually with notice and a fee. See termination options.
- Expansion and contraction rights. Options to add or give back space on set terms.
- ROFR / ROFO. Right of first refusal and right of first offer give a tenant priority on adjacent or available space before it goes to the market.
Clause and risk terms
- Use clause. What the tenant is permitted to do in the space; a narrow use clause limits flexibility and subletting.
- Exclusive use. A tenant's right to be the only one in the property offering a defined product or service.
- Co-tenancy. A retail provision tying a tenant's rent or continued occupancy to the presence of anchor tenants or a minimum occupancy level. See key clauses.
- Assignment and subletting. The terms under which a tenant may transfer the lease or sublet space, usually subject to landlord consent.
- SNDA. Subordination, non-disturbance, and attornment: an agreement that keeps a tenant's lease in place if the landlord's lender forecloses. Our SNDA agreement guide covers all three promises and where the obligation hides in the lease.
- Estoppel certificate. A signed statement confirming the lease terms and status, usually required for a sale or financing. See the estoppel certificate template for the standard fields and an example.
- Holdover. What happens if a tenant stays past expiration, typically at 150 to 200 percent of base rent.
- Security deposit. Cash or a letter of credit held against default, sometimes with a burn-down schedule. See security deposit.
Quick-reference glossary
| Term | In one line |
|---|---|
| NNN | Base rent plus tenant's share of taxes, insurance, and CAM |
| Gross | Landlord covers operating costs out of rent |
| CAM | Shared operating costs reconciled to actuals each year |
| TI | Landlord allowance toward building out the space |
| Co-tenancy | Rent tied to anchor presence or occupancy level |
| SNDA | Keeps the lease alive through a lender foreclosure |
| Holdover | Penalty rent for staying past expiration |
The bottom line
These terms are the vocabulary of every commercial lease, and they are exactly the fields a good abstract captures so a team does not have to re-read the document to find them. To see how each one is pulled from a lease and traced to its source, browse the features, start from a structured lease abstract template, or walk through how it works.