Commercial Real Estate Lease Terms You Must Know

Learning the fundamentals of commercial real estate lease agreements can assist you in expanding your knowledge of the industry. Before signing a commercial lease, be sure you understand the following clauses.

Common Area Maintenance (CAM)

This is an essential commercial real estate lease word to understand. When you have a multi-tenant facility, you almost always figure in CAM expenses. Many of the concerns that arise in business leasing do not exist in home leasing. You can also buy or sell the commercial property via

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You should know the typical CAM for your type of property before you start renting or buying such types of amenities. Because the landlord pays the CAM in certain smaller properties, there is no CAM.

All of this is included in the costs of becoming a landlord in this type of property. It's not a pass-through since you can't legally pass on CAM expenses to your tenants if no one else in the neighborhood with a similar home is doing so.

Percentage Leases

A percentage lease is one in which you pay a certain rent plus a percentage of sales over and above the fixed rate. As a landlord, you're unlikely to encounter percentage rent circumstances very often. Percentage rents are commonly employed in retail establishments located in major shopping malls and other similar regions.

Ground/Land Leases

The renter rents the land and constructs it in this type of arrangement. When your lease expires, whatever improvements you make to the grounds, including any buildings, normally become the landlord's property. This is, in fact, a type of funding.


When you lease the entire property and then sublease a section of it to someone else, this is known as a sublease. A landlord might rent you 10,000 square feet, for example. If you don't require all of the space, you have the option of subleasing the property to another person.

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