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Commercial lease vocabulary: Base rent

On Behalf of | Sep 4, 2018 | Commercial Real Estate |

Deciding to open a business here in Orange County may require an individual to find a space to rent. If this is his or her first foray into the commercial lease world, a person may find it much different than when renting a first apartment in college. There are numerous differences between residential leases and commercial leases, and understanding the vocabulary involved may help. One of the most important concepts that differentiate between these two leases is “base rent.”

The majority of commercial leases begin with a base rent. It represents the basic amount of rent a tenant pays for a commercial space. Ordinarily, this amount is generated based on the square footage of the space that the prospective tenant wishes to occupy. The amount the property owner wants to charge for per square foot may be up for negotiation depending on the circumstances.

More than likely, the lease will also include other amounts that are added to the base rent, which after their inclusion will result in a final amount that a tenant pays each month. The amounts above the minimum rent may include taxes, insurance and CAMs, which are a percentage of the common area maintenance costs that property owners often pass on to tenants. These are not the only additional costs that could come up in a particular lease.

Once a prospective tenant understands the basic vocabulary in a commercial lease, it may be easier to understand just how much rent will be paid each month. This often has a significant impact on budgeting. If an Orange County tenant fails to understand that a number quoted for the cost of the square footage of a space is merely the beginning of the monthly rent, he or she could end up with a costly surprise later that could adversely affect the success of the business venture.