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Knowing some commercial lease vocabulary helps with negotiations

When it comes to renting property for a business here in Orange County or elsewhere, tenants have more freedom to negotiate terms with the owner of the property than in residential situations. This provides more flexibility and the opportunity to receive better terms. Before sitting down to talk terms with a potential landlord, it would be useful to understand the vocabulary associated with a commercial lease.

It is not difficult to figure out terminology such as lessor and lessee, but not as many first time commercial tenants understand the different types of leases a property owner could present to them. For example, CAMs are commonly included in commercial leases. CAM stands for "common area maintenance" needed in order to keep the whole building running smoothly, clean and in good working order. Commercial tenants usually pay a portion of these costs, which are often negotiable.

Will an Orange County business be responsible for any improvements to the space needed in order to occupy it? This depends on whether the property is leased as "turnkey" or requires leasehold improvements by the tenant. If the property is turnkey, the landlord paid for the improvements to the space. If improvements are required, then the tenant will more than likely pay for them.

These are just some examples of the vocabulary that a potential tenant needs to understand before negotiating a commercial lease. It is often the definitions in the fine print that trips people up, so understanding what those terms mean before sitting down with a prospective landlord could make the talks more fruitful. The landlord will want the terms most favorable to him or her, so it is up to the business owner wanting to rent the space to identify any potential pitfalls that could be costly, and this usually begins with understanding what he or she is reading.

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