Critical Clause Descriptions | Leasecake Help Center
Critical Clause Descriptions
Leasecake University
October 14, 2024
Understanding the critical clauses in a lease is essential for managing your real estate portfolio effectively. Each clause outlines specific rights, obligations, or restrictions that can impact your business operations and financial responsibilities. Below is a comprehensive list of the 40 key lease clauses that we support for abstraction.
| # Lease Clause | # Description |
|---|---|
| Alterations Clause | Outlines rules for tenant changes or improvements to the space, typically requiring landlord approval and potentially restoration at lease end. |
| Assignment/Subletting Clause | Governs tenant's ability to assign or sublet the lease, usually requiring landlord approval. |
| CAP on CAM Clause | Limits how much CAM charges can increase annually, protecting tenants from significant, unexpected cost hikes. |
| Co-Tenancy Clause | Allows tenants to reduce rent or terminate the lease if key tenants leave or occupancy falls below a certain level, protecting against reduced foot traffic. |
| Common Area Maintenance (CAM) Clause | Tenants contribute to shared area maintenance costs (e.g., parking lots, landscaping) based on leased space size relative to the total leasable area. |
| Common Area Restrictions Clause | Outlines rules on how tenants can use shared spaces (e.g., lobbies, parking), often prohibiting blocking hallways or storing personal items. |
| Default – Landlord Clause | Defines what constitutes a default by the landlord, outlining tenant remedies like rent reduction or lease termination. |
| Default – Tenant Clause | Specifies tenant actions that constitute default (e.g., late rent payments), detailing landlord remedies such as late fees or eviction. |
| Estoppel Certificate Clause | Tenant may be required to confirm the lease’s current status, used when landlords sell or refinance the property to assure third parties. |
| Exclusive Use Clause | Prevents the landlord from leasing space to a direct competitor, protecting the tenant's business from competition. |
| Financial/Sales Report Clause | Requires tenants to provide financial or sales reports, common in percentage rent agreements, to verify rent payments and tenant's financial stability. |
| Force Majeure Clause | Relieves parties from liability if they can't fulfill lease obligations due to extraordinary events (e.g., natural disasters, pandemics). |
| Franchisor Rights Clause | In franchise leases, grants franchisor the right to assume the lease if the franchisee defaults. |
| Go Dark / Abandonment Clause | Addresses tenant obligations if they cease operations or abandon the premises before lease end, often requiring continuous operations. |
| Guaranty Clause | Requires a third party to guarantee the tenant’s lease obligations, providing extra security for the landlord. |
| Holdover Clause | Outlines terms if tenant stays after lease expiration, often specifying month-to-month tenancy with increased rent. |
| HVAC Clause | Defines who is responsible for maintaining, repairing, and replacing HVAC systems. Tenant may handle routine maintenance; landlord covers major repairs or replacements. |
| Insurance Clause | Specifies types and amounts of insurance the tenant must carry, often including general liability and property insurance. |
| Late Fees Clause | Outlines penalties for late rent payments, often calculated as a percentage of the overdue amount or a flat fee. |
| Landlord Maintenance Clause | Specifies areas the landlord must maintain, such as the building structure, roof, foundation, and common areas. |
| Miscellaneous Clause | Includes various provisions (e.g., governing law, severability) to clarify how the lease operates legally and what remains valid if parts are invalidated. |
| Notices Clause | Specifies how formal communications between landlord and tenant should be delivered, including for lease renewals or terminations. |
| Parking Clause | Details tenant rights to parking, including the number of spaces, fees, and restrictions on use (e.g., no overnight parking). |
| Patio / Outdoor Area Clause | Outlines permissions and guidelines for using outdoor spaces, including maintenance responsibilities and any restrictions. |
| Percentage Rent Clause | Tenant pays base rent plus a percentage of gross sales once sales exceed a certain threshold, allowing landlords to share in tenant's success. |
| Prohibited Uses Clause | Lists activities or businesses that are not allowed on the premises, protecting property integrity. |
| Radius Restriction Clause | Prevents the tenant from opening a similar business within a certain distance, protecting landlord interests. |
| Real Estate Taxes Clause | Specifies if the tenant is responsible for a portion of the property’s real estate taxes, common in triple net (NNN) leases. |
| Relocation Rights Clause | Gives the landlord the right to relocate the tenant within the property, specifying who bears moving costs and relocation conditions. |
| Renewal Option Clause | Gives the tenant the right to extend the lease, detailing notification time frames and terms for the extension. |
| Right of First Refusal/Right of First Offer (ROFR/ROFO) Clause | ROFR: Tenant can match any lease/purchase offer the landlord receives. ROFO: Tenant must be offered lease/purchase opportunities before others. |
| Signage Clause | Controls signage size, design, and location, requiring landlord approval to maintain a consistent property appearance. |
| Subordination, Non-Disturbance, and Attornment (SNDA) Clause | SNDA addresses tenant’s lease relationship with the landlord’s lender, protecting tenant rights if the landlord defaults or sells the property. |
| Surrender of Premises Clause | Outlines tenant responsibilities at lease end, including returning the space in a specified condition and removing personal property. |
| Tenant Improvement (TI) Allowance Clause | Specifies the amount the landlord provides for tenant improvements (e.g., renovations) and details how the money can be used and the completion timeline. |
| Tenant Maintenance Clause | Outlines the tenant’s responsibility for maintaining their leased space, including repairs to fixtures, plumbing, and electrical systems. |
| Termination Right Clause | Allows either party to terminate the lease early under specific conditions, such as property damage, outlining penalties or fees for early termination. |
| Use Clause | Defines how the tenant can use the leased space and restricts certain activities to maintain property character or prevent competition. |
| Utilities Clause | Defines how utility costs are handled, specifying if tenants pay directly or reimburse the landlord for shared utility costs. |