What is a Commercial Lease Abstract & What Should You Know?

What is a Commercial Lease Abstract & What Should You Know?
Commercial lease agreements can be lengthy and complex documents. Extracting key information from a lease can be time-intensive and extremely difficult. A lease abstract is a concise, easy-to-understand summary of a lengthy lease agreement. It also provides the structure for easy referencing in the original lengthy lease document. A lease abstract summarizes key points in a commercial lease, including legal, financial, and business information about tenants, landlords, and investors. Lease abstracts can also highlight errors, inconsistencies, and missing information that can be vital to an informed decision.

The Information in a Lease Abstract

While the format and style of a lease abstract can vary from one investor to another, they generally contain the same general information, as described below:

Tenant Name: The name of the tenant, as stated in the lease agreement.
Rent Amount: The amount of rent that the tenant is required to pay as well as any escalations.
Square Footage: A description of the size of the leased premises.
Dates: These include the date the lease is signed; when the lease term begins, the date that the tenant is required to start paying rent; and the date the lease term expires.
Lease Term: Identification of the defined lease term. For example, it could say, January 1st, 2020 to December 31st, 2030.
Leased Premises: This is a legal definition of the exact space the tenant is permitted to occupy by signing the lease.
Permitted Uses: This indicates what activities can be conducted on the premise. For example, it is common for leases to contain language stating that the tenant is not permitted to engage in any illegal business.
Parking Requirements: A description of the number of parking spaces provided to the tenant as part of the lease agreement.
Repairs: The abstract indicates who is responsible for making – and paying for – the repairs.
Co-Tenancy: If the lease has co-tenancy, it should be highlighted in the abstract.
Subleasing: If a tenant is allowed to lease all or some of their space to another party, this is called subleasing. If this is allowed, it should be highlighted in the lease abstract.
Expansion Rights: If a new space becomes available in the same building, the tenant may want to lease it. If their lease contains “expansion rights” they may have the first chance to do so. This information should be included in the abstract.
Assignability and Exclusivity: The abstract should highlight whether the lease is assignable – meaning it can be transferred to another party.
Estoppel: An estoppel is a legal document that shows all of an association’s outstanding fees and/or fines.

A good lease abstract will also include:

security deposit information
additional rent provisions, including recoveries, maintenance, CAM, taxes, and caps
information about whether tenants have the first right of refusal in the event of a sale or leasing additional space
exclusive use clauses
hidden termination clauses.

Lease abstracts can be targeted to specific audiences. For example, lease abstracts can be targeted towards investors, owners, and property managers. Property managers need accurate facts and information to properly manage the building.