Building Better Leases Series – Base Rent and Other Money Paid Upon Execution

Building Better Leases

Base Rent refers to the minimum amount of rent that is due each month. Depending on the lease provisions, this amount may change over the term of the lease. Most Lessors require the Base Rent to be paid on the first of the month, however there are some tenants, government agencies for example, that need to have a different day of the month specified. This means that the Commencement Date and the date that the obligation to begin paying Base Rent may be different.

Base Rent is typically calculated according to the amount of square feet that is being renting. It’s crucial to any lease negotiation, and it’s important to review with a broker and lawyer. Since the base is designed to favor landlords and protect them from excessive annual increases in operating expenses, when overlooked, it can cause considerable harm to a tenant’s bottom line. Fortunately, with a little extra preparation and education, a tenant can protect themselves against unexpected increases in their rent.

Other money paid refers to the money due to the Lessor upon execution of the lease.

Note that the Security Deposit falls under this section. Often times, the Security Deposit is equal to the last month of Base Rent. Sometimes the Lessee neglects to pay the last month’s Rent because they have the impression that he or she has prepaid the first and last month’s Rent. This leaves the Lessor without a Security Deposit at the end of the Lease. In other words, there is no money that can be used to repair any damages to the Premises. One way to avoid this is to insert an amount for the Security Deposit which is slightly higher than the Rent payable for the last month of the Term. Keep in mind that the Security Deposit can be used for securing payments due under the Lease, but it can also be used to cover costs for repairs and/or maintenance required as a result of the Lessee’s tenancy, so it’s important to have at the beginning.