Liability Insurance

Landlords will require that you obtain an insurance policy covering your liability in renting your office space. This policy must be in place and insurance certificates must be delivered to the landlord between the time in which you sign leases and take possession of the space. You should begin obtaining insurance quotes once you receive your draft copy leases. Insurance brokers will request a copy of the insurance clause as stated in the lease. Premiums depend on many factors and vary on a case-by-case basis.

Loss Factor - Rentable SF vs. Useable SF

The NYC Commercial Real Estate market is very different from residential real estate. Commercial buildings incorporate a loss factor into all available office spaces. This loss factor generally encompasses common areas, such as lobbies, elevator banks, bathrooms, corridors, etc. Each tenant's space absorbs a proportional percentage of these commons areas, resulting in the rentable square footage being larger than the actual useable square footage. The average loss factor in NYC ranges from 15% up to 30% or higher in some extreme cases. Rentable square footage is a non-negotiable point with landlords.

Good Guy Guaranty

Most landlords in NYC require a Good Guy Clause with their leases. A Good Guy Clause, if written correctly, should be no more than a limited personal guaranty. Basically, the Good Guy Clause holds the signer personally liable for any time in which the space is possessed but rent was not paid. Once the landlord gains possession of the space, the signer is no longer personally liable for uncollected rent. This allows the landlord to re-let the space in the meantime. This does not absolve the corporation of its liability.

Rent Abatement

Typically, in the tri-state area, landlords will offer a rent concession to offset your moving costs or simply as a way to close a deal. The amount of rent abatement (free rent) usually depends on several factors, most importantly the length of lease you are signing. Other factors that will determine the amount of free rent issued will be rental rate and the amount of construction necessary. Landlords may offer a rent abatement in lieu of a contribution for work that needs to be done to ready a space for occupancy. Generally, landlords offer 1-2 months of free rent on a 3 year lease, 2-3 months free rent on a 5 year lease, and rent abatement varies on longer leases. Keep in mind that not all landlords offer rent abatements and that rent abatements are subject to the current market conditions.

Escalations

Your rent will escalate by a set percentage per year, either a set number, a number based on that year's CPI (consumer price index) or by the percentage of the porter's wage increase over the prior year. 99% of all leases have some sort of set escalation.

Proportional Real Estate Tax Increases

Each year, you will be responsible for real estate tax increases proportional to the amount of space you rent in relation to the total rentable building area. For example, if you rent 2000 SF in a 180,000 SF building, you rent 1.1% of the total building. If the real estate taxes increase $127,000 from the prior year, you are responsible for $1397, usually paid over two payments (there are two tax due dates, January 31 and July 31.).

Pre-built

How a space is going to be built or how it may have recently been built.

Work letter

The amount of work the landlord is going to offer or compensate you for.

Lease Term

The length of lease you are signing.

Broom-Clean Condition

A space is delivered clean, emptied out of all furniture, and basically in the condition in which it was delivered.

Turnkey

A space that is 100% ready to be inhabited; wired, HVAC in place, where you can get right to work.   Gross Lease A lease that includes utilities, repairs, taxes or insurance in the monthly payment.   Net Lease A lease that does not include utilities, repairs, taxes and insurance in the monthly payment. Percentage Lease A lease that has a set rent amount with an additional amount that is determined by your business's sales. Tenant Improvement Allowance Landlords typically offer tenants some finish out to make the space they lease suit their needs. On three-year leases this usually means new carpet and paint, at least, if not more. Five-year leases, or longer terms, offer even more finish out. Those seeking short-term deals can expect to take a space “as is” without any finish out being offered by the landlord. Building Standard The project specifications set out by the owner, usually in conjunction with the project architect. Details the type, quality, and color selection available with respect to carpet, paint, light fixtures, wall coverings, and other project finishes.   Assignment The transfer in writing of an interest in a Lease, mortgage or other instrument. The assignor, or lessee, transfers the entire remainder of the term created by the Lease, and the assignee becomes liable to the original Lessor for rent. Assignor may or may not retain secondary liability for performance under the Lease, depending upon the terms of the Lease pertaining to assignment.