Your Comprehensive Glossary to NYC Office Leasing

Navigating the world of office space leasing can be complex, filled with specialized terms and legal intricacies. To aid in understanding and negotiating leases, we've created a concise glossary of office leasing terms. From "All-Inclusive" rents and "Build to Suit" projects to "Good-Guy Guarantee" and "Prorated Rent," this resource demystifies the jargon. It covers financial aspects, crucial clauses like "Recapture" and "Sublease," and procedural documents such as "Letters of Intent (LOI)" and "Term Sheets."

Whether you're a new entrepreneur or a seasoned tenant, this glossary will equip you with the clarity and insight needed to navigate your leasing journey with confidence.

A lease addendum is a legally binding document that is attached to a lease agreement. It is used to modify or add to the terms of the original lease. Addendums are often used to address changes that were not anticipated when the original lease was signed. 

An all-inclusive rent price is like a one-stop shop for your monthly expenses. It covers not only the rent but also most of the utilities you need. The exact utilities included can differ from one landlord or office space provider to another. Still, the main idea behind all-inclusive rent is to simplify your life with a single monthly payment that takes care of everything office-related. Typically, you can expect it to cover things like electricity, garbage pickup, internet, real estate taxes, and office furniture.

A lease assignment is a legally binding agreement through which a tenant, known as the assignor, relinquishes their rights and responsibilities as stipulated in a lease to another party, known as the assignee. The assignee assumes the role and responsibilities of the assignor within the landlord-tenant dynamic. In essence, the assignee takes the role of the new tenant and assumes full responsibility for rent payments, adherence to lease terms, and the upkeep of the property. The assignor, in turn, is absolved of any obligations previously outlined in the lease.

Companies that rent office space in a Business Improvement District (BID) pay a special tax to fund services and improvements in their neighborhood. Think of BIDs as neighborhood fixer-uppers, each with a local team deciding what'll make their area shine, whether sprucing up sidewalks, hosting events, or picking up trash.

"Build to suit" refers to an office construction project in which a landlord builds a brand new office space to meet a tenant's specific needs and requirements. This is ideal for tenants with unique office requirements or those keen on customizing their office space to their liking.

In lease negotiations, "business points" are the essential terms outlining the elements of the agreement. These building blocks include the rental price, lease term, security deposit, business use, utilities, space improvements, and rent escalations, among other things. Business points form the foundation of lease negotiations and are incorporated into the final office lease document.

In the context of a security deposit, a "burndown" refers to reducing the security deposit over time as a commercial tenant fulfills their lease obligations. As the tenant meets their commitments under the lease -- paying rent consistently and on time being paramount -- the landlord may agree to reduce the tenant's security deposit. A burndown often occurs when a company provides an initial security deposit that is larger than average, and the amount of the security deposit reduction is based on a predetermined schedule. 

Think of a company's burn rate as its financial heartbeat, showing how fast it's burning through cash to keep things running. It's pretty much like checking the fuel gauge in your car – it tells you how long you can keep going before you need to refuel. Landlords take a peek at this gauge to see if a business can stay on the road without going broke. Say a company's got $500,000 in the bank but is spending $50,000 a month. That means they've got about 10 months before their tank hits empty. For landlords, this number is super handy – it's like a crystal ball that helps them figure out if a company can keep up with the rent.

Carting refers to waste removal and recycling services. A carting company collects and disposes of garbage and recyclables. Typically, the office cleaner will bag the refuse, the superintendent will put it in a dumpster, and the carting company will haul it away in a garbage truck. If landlords do not include carting in the monthly office rent, office tenants must contract directly with a carting company for a separate charge.

A Certificate of Insurance or COI is a document that all landlords require before a tenant moves into an office space. The COI is issued by an insurance provider to the tenant, who then submits it to the landlord for approval. The coverage of insurance needed varies from building to building. Still, the document provides proof that the tenant has the required coverage and ensures the landlords are protected from potential liabilities.

A consent document is written permission granted by the landlord to the tenant to take specific actions, such as assigning or subleasing the office space or making significant alterations. The document outlines the terms and conditions for the landlord's approval and ensures compliance with the master lease agreement. Failure to obtain consent when necessary can lead to lease violations.

A co-terminus lease refers to two or more leases structured to end on the same date, even if their start dates differ. This approach is commonly favored by businesses with multiple locations, enabling them to synchronize lease expirations for easier negotiations. From the landlord's perspective, co-terminus leases can be advantageous when they want all leases on a particular floor to end simultaneously, providing the opportunity to rent the entire floor to a single tenant.

A concession package is a set of incentives a landlord offers potential tenants to entice them to sign a lease. Common office space leasing concessions include free rent, construction work, and tenant improvement allowance (TI).

The delivery date is the specific date when the landlord delivers the recently leased office space to the tenant in move-in-ready condition. If the landlord fails to deliver the leased space on this date - most often because the landlord's construction work is not finished - the tenant may have certain rights under the lease agreement, such as the right to delay rent payments, receive a rent reduction, or even terminate the lease. 

Direct electricity refers to how the office's electricity is billed and provided to the tenant. In this scenario, a tenant maintains a contract with the utility provider (Con Edison in NYC), pays for the exact amount of electricity the business consumes, and receives a bill "directly" from Con Edison.  

Egress refers to the occupants' ability to exit a building during an emergency. New York City mandates that office buildings have an adequate number of exits, clearly marked escape routes with signage, and are in compliance with various fire and safety codes. The required number of "means of egress" for a commercial building in NYC depends on occupancy type and building size. Typically, for standard office spaces, two means of egress are required.

Electrical distribution is the system of wiring that delivers electricity from the utility company -- ConEdison in NYC -- to the wall outlet where you plug in your computer. Adequate electrical distribution should be in place for any move-in-ready office space.

FF&E stands for fixtures, furniture, and equipment. In the context of office leasing, it refers to all non-permanent items used in an office space, such as desks, chairs, computers, printers, and copiers. FF&E is typically the tenant's responsibility; however, sublandlords often include some of these items in a sublease deal. This is a key benefit of office subleases, which is why many companies look for them.

A good-guy guarantee (GGG) is a provision in a commercial real estate lease that gives the landlord additional protection if the tenant defaults. The GGG is a limited personal guarantee signed by a principal of the tenant company. Unlike a traditional guarantee, the signatory's personal liability ends when the conditions of the GGG are met.

If a tenant is in "good standing," they're presently meeting all their lease obligations. The company pays rent on time, maintains the property or office space, and complies with all other terms of the lease.

A holdover in an office lease occurs when a company remains in possession of the premises after the lease term has expired. The repercussions of a holdover, which typically include a financial penalty, should be outlined in the lease documents.

Lease comments are annotations and modifications made to the lease agreement, often with the assistance of the tenant's attorney. These comments clarify or modify the lease terms to ensure that both parties have a clear understanding of their obligations. While the landlord's attorney typically drafts the lease document, the tenant's attorney plays a crucial role in reviewing and suggesting changes to safeguard the tenant's interests.

The lease expiration date is the specific end date of a lease agreement and dictates when the tenant's occupancy rights cease. Unless a renewal or extension is negotiated, the tenant must vacate the property on or before the lease expiration date. Clearly stating the lease expiration date in the lease agreement helps prevent potential conflicts or misunderstandings with your landlord.

When a real estate broker says a lease is pending, it means that the basic deal points have been accepted and the lease is currently in the review stage. However, it is not a binding contract until the landlord and tenant have finalized and signed the lease.

A Letter of Credit is a financial guarantee issued to the landlord by the tenant's bank. It is often given in place of a cash security deposit. A Letter of Credit offers the landlord financial security without requiring the tenant to deposit a large sum of cash. The tenant is responsible for paying fees to their bank for issuing and maintaining the Letter of Credit. 

Similar to an offer or proposal, a Letter of Intent (LOI) is a document that outlines a tenant's or buyer's interest in renting or purchasing a property. It serves as an initial negotiation framework, enabling both parties to articulate their requirements and expectations. Since an LOI is not legally binding, neither party is committed to the outlined terms until a formal lease or purchase agreement is executed.

Local Law 11 requires building owners to inspect and maintain their building facades to ensure safety. It applies to buildings with six or more stories; inspections are typically conducted every five years. Building owners must address any unsafe conditions identified during the inspection. The next time you walk under scaffolding in NYC, if it's not a new building, it's probably Local Law 11. 

New York City is taking big steps to go green. The legislature passed Local Law 97 in 2019, which is all about getting the large buildings in the city – those over 25,000 square feet – to cut down on their greenhouse gas emissions. The plan is pretty ambitious; they aim for a 40% reduction by 2030 and a whopping 80% by 2050. 

The MEP floor plan is the hidden roadmap of a building; it's an architectural drawing that illustrates the layout of building systems, specifically the Mechanical, Electrical, and Plumbing (MEP) systems. This technical blueprint assists architects, engineers, and construction workers in coordinating the placement of these systems and ensuring the systems are installed correctly.

A move-in-ready office is a vacant office space that is available for immediate occupancy and does not require any construction work. Bring your team, plug in your computers, and get down to business. Move-in-ready office spaces are ideal for companies that need to hit the ground running without time-consuming renovations or custom build-outs.

The net absorption rate of office space is a measure of market demand calculated by subtracting vacant space from leased or occupied space. A positive rate indicates a healthy market, while a negative rate indicates a struggling market.

In office space terminology, "NBI" refers to the setup of essential infrastructure and services in a newly constructed office space. This work includes electrical systems, HVAC, plumbing, data and telecommunications, and lighting to make the space fully functional for new occupants.

When you allocate resources to a particular office space, you forfeit the value of the next best option, which is the opportunity cost. Evaluating opportunity costs helps decision-makers consider the trade-offs of several office spaces and make rational choices by considering the benefits and drawbacks of various options.

A plug-and-play office space is a workspace that's all set up and ready to go. It's a fully furnished office with all the essential utilities, allowing tenants to move straight in and get cracking. Plug-and-play offices are common when looking at sublets and flexible office providers. It certainly makes life easier for businesses that want to get down to business right away rather than hassling with purchasing office furniture, coordinating cleaning services, scheduling coffee deliveries, and many, many other startup tasks.

A Porter's Wage Escalation (PWE) is a type of rent escalation clause in commercial leases. It links the operating increases in the tenant's rent to the wages of the building's porters, so any rise in porter wages results in a corresponding rent increase for the office tenant. The contract between the building services union and a coalition of NYC building owners determines Porter's wage escalation. 

When a landlord prorates the office rent, it ensures the tenants only pay for the time they actually occupy an office space. The proration is a partial rent payment that comes into play during the first or last month of a lease when a tenant occupies the office for only part of the month. Instead of paying the entire month's rent, the rental amount is calculated based on the exact number of days the tenant has access to the office. 

In a commercial office lease, a recapture clause allows the landlord to terminate a lease early and reclaim the premises. The clause is triggered by specific events outlined in the lease, such as the formal request by a tenant to sublease office space. The recapture clause benefits landlords by giving them the flexibility to retake possession of the office and rent it to a new tenant at a higher price or combine it with other offices on the same floor.

A relocation clause is a provision found in most office lease agreements. This clause gives the landlord the right to relocate a tenant to a similar office within the same building. Common reasons a landlord might use the relocation clause include accommodating a larger tenant or renovating the building.

Rent concessions are incentives office landlords offer to attract tenants. Common forms include free rent, reduced rent, and tenant improvement allowances. Negotiating these incentives is crucial for securing the most favorable terms.

An RFP, or Request for Proposals, is a formal invitation issued by a company seeking competitive bids to complete a specific project. It effectively generates a diverse pool of proposals, enabling the project's planners to evaluate and choose the most suitable solution based on varying approaches, costs, and expertise. This process ensures a thorough and competitive selection for project fulfillment.

In office leasing, a retrade or "retrading a deal" refers to renegotiating previously agreed-upon terms. This can involve revisiting any aspect of the initial proposal, such as rent, lease term, tenant improvements, or other provisions, with the goal of securing more favorable terms for one party. Retrading a deal can damage the relationship between the parties and create the impression that the party requesting the retrade is not negotiating in good faith. It is crucial to avoid retrading a deal if possible.

A riser is a vertical shaft in a multi-story building that carries utilities and services from floor to floor. It facilitates the distribution of essential systems such as electrical wiring, plumbing, HVAC ducts, and data cables, ensuring they reach every level of the building efficiently. 

A sublease is a legal agreement that allows tenants to rent their office space to another company, the subtenant. The sublessor, also known as the sublandlord, remains liable for the rent; however, they offset their liability with the proceeds from the sublease. The duration of a sublease varies according to the remaining term of the original lease. 

The sublease clause is a section of a lease agreement that outlines the tenant's right to sublease, procedures that must be followed, and costs associated with subleasing. Typically, a tenant must give the landlord written notice to sublease, and the landlord, in turn, has a certain amount of time to approve the sublease. You should review your sublease clause carefully if you are considering subleasing your office space. 

Real estate brokers often utilize the term "submarket" to differentiate various areas within a city. The name of a submarket sometimes coincides with a widely recognized neighborhood, like the case of Tribeca. In other instances, a submarket represents a more tightly defined and distinct area within a neighborhood, as exemplified by the Grand Central submarket nestled within Midtown.

In office spaces, particularly smaller suites within a floor shared by multiple tenants, it's common to have the electricity consumption submetered. These submeters measure the electricity used by individual tenants, and they are typically connected to the main utility meter. When a submeter is in place, it's common for the landlord to charge an administrative fee, typically around 10% of the bill, to cover the costs of meter reading and billing.

A Surrender Agreement is a legal document that allows the release of a tenant from their lease obligation before the lease's scheduled expiration date. This agreement outlines the terms and conditions under which the tenant can terminate the lease early and typically includes provisions related to any associated costs or responsibilities.

The term TAMI stands for Technology, Advertising, Media, and Information. Real estate brokers use this vague acronym to describe businesses like tech startups, digital marketing agencies, and entertainment companies, among others.

A somewhat cringy real estate term that means the landlord has received an offer and is negotiating with the potential tenant. In other words, they're sending counter-offers back and forth. 

A test-fit is a floor plan that shows a potential office layout and furniture arrangement within a given office space. Typically, architects create several test-fit options for a tenant to choose from. These floor plans provide a better understanding of the office's appearance before construction begins.

A turnkey office space is a fully furnished and equipped office that's all set up and ready to go. Flexible office providers and many office sublets offer turnkey office space solutions. 

Once a tenant and landlord have agreed on the business terms of a lease, the broker will draft a document to summarize the key points. This written term sheet helps the parties avoid any misunderstanding about what has been agreed upon. The tenant's and landlord's attorneys should receive a copy of the term sheet to ensure the key points are represented in the lease document.

The NYC Department of Buildings categorizes permitted uses into 14 groups. These groups fall within 3 permitted zoning districts: Residential, Commercial, and Manufacturing. Use group categories include R1-R10, C1-C8, and M1-M3.

VoIP phones allow users to make calls through the internet rather than through traditional phone lines, and they're currently a favored option for businesses. A distinctive quality of these phones is their capacity to work seamlessly when connected to any internet port, making the process of relocating or moving notably easier.

A white box space is a partially finished office space that is ready for a tenant to customize to their specific needs. If another tenant had previously leased the space, the landlord would demolish the old office installation, install drywall on the exterior walls, and paint everything white. A white box space usually does not have lights, electrical distribution, or finished flooring.