FAQ- List of Lease Terms and Industry Terminology
Activity Settings
A term used to define alternative space uses such as, lounge areas, training rooms, libraries, group meeting areas, and quiet rooms.
Assignment of Lease
A Tenant may subject to the Landlords approval assign the lease of the space to another tenant.
Base Amount or Base Year
The Year or amount upon which an increase in outgoings is based.
Base Rent
A set amount used as a minimum rent in a lease, which also may reflect a percentage or other method of increasing rent.
Building Grades
Australian CBD Office buildings are graded according to the standard of improvements from Prime or Premium, Grade A, B, C, to D Grade. C and D Grades are usually grouped as other. The allocation is dependent on the quality of the premises and types of facilities provided.
Car Bays
Car Bays are usually licenced separately to the premises under a car parking licence agreement ( the licence does not form part of the office space lease ) with the rental generally reviewable to market annually or in line and method for net rent. Car Bays vary in cost dependent on the building location, whether they are single bays, jockey bays ( one bay located behind another ) covered or open bays, secured or unsecured bays.
Cap and Collar
A cap sets a maximum amount the rent can be increased and a collar sets a maximum amount the rent can decrease on a nominated rent review date.
Cleaning Charges
Cleaning charges are usually quoted separately to the rental and outgoings charges on an annual rate per square metre basis. The annual cost for CBD and West Perth office buildings is $8 to $10 per square metre. In most circumstances the whole of the building cleaning is contracted to one cleaning company by the landlord.
CO WORKING
The use of an office or other working environment by people who are self-employed or working for different employers, typically so as to share equipment, ideas, and knowledge in a collaborative manner, .
Guarantors
Landlords usually require a Bank Guarantee equal to three to six months gross rental. If a private company then Directors personal guarantees will likely be required.
Hot Desking
This situation refers to where two or more persons share one workspace at different time intervals.
Incentives
Incentives or Landlord Contributions are offered by Landlords to induce tenants to lease premises. Incentives include rent free periods, contribution to fit outs, cash incentives, favourable structured rental increases, capped rental reviews etc. Taxation issues should be considered when determining the type of lease incentive sought.
Lettable Area
Lettable Area is normally termed “Net Lettable Area” ( NLA) The industry standard for measuring NLA is defined by the Property Council of Australia method of measurement. The NLA reflects the actual floor area that is suitable for occupancy however there is no deduction made for columns and projections that are necessary for the structural integrity of the building. Note: Different methods are applicable for office, retail and industrial space.
Gross Lettable Area
Gross Lettable Area is the entire floor area measured from the outside face of external walls to the centre line of internal tenancy walls.
Make Good or Reinstatement of Premises
At the expiry of a lease the tenant is generally required to renew the tenancy to the condition it was in at the commencement date of the lease.
Option
An Option is a right to extend the lease for a further term/s and usually has defined time periods in which the option may be exercised, normally between six and three months prior to the option date.
Outgoings
Outgoings include Statutory Outgoings which refer to Council, Water and Land Tax Rates plus usage charges and car bay levies. Variable Outgoings refer to all other costs and charges associated with the maintenance, upkeep and management of the building eg. Air Conditioning, Property Management, Electricity etc. Outgoings vary according to the location of a building and the efficient management of the outgoings expenses.
Ratchet Clause
This clause is included in leases where the rent cannot fall below a predetermined level at a Rent Review.
Rents
Gross Effective Rents
The total of rent payable under a lease actually achieved by the Landlord after deducting all incentives or concessions from the base rent. Net Effective Rent exclude all outgoings.
Gross Face Rents
The total of rent payable under a lease including building outgoings. Face rents reflect the market rental achievable. Net Face Rents exclude all outgoings.
Gross Rent
Total gross rent is the total rent including all outgoings.
Net Rent
Net rent is the total rent excluding all outgoings.
Rent Review
Rent Reviews are activated at set periods during the lease term according to predetermined methods. The methods include an increase in line with the CPI ( Cost of living index ), fixed increases, to market, set graduated increases or a combination of methods. Many other methods are also applicable including the greater of, etc.
Sub Lease
A Tenant may subject to the Landlords approval sub lease part or all of the space to another tenant.
Telecommuting
A term used to describe employees who maintain a home office where persons mainly operate from rather than the employers offices.
Work Space Ratios
The work space ratio is calculated by dividing the number of persons occupying the space into the total net lettable area. The ratios generally vary between one person per 10 square metres up to one person per 15 square metres but can be higher (or lower). The allocation of space varies depending on the type of business and their individual needs such as the image of the company, large conference rooms, training facilities equipment rooms etc. The trend is towards lower workspace ratios per square metre.