Office leases use a vocabulary that most founders and operators meet only once every few years. This glossary covers the terms that come up most often in New York office proposals and leases, explained in practical terms. It is a starting point for conversations with your broker and attorney, not a substitute for either.
Space and measurement
| Term | What it means | What to ask |
|---|---|---|
| Rentable square feet (RSF) | The area rent is charged on. It includes your space plus a share of common areas such as lobbies, corridors and mechanical rooms. | How was it measured, and what loss factor does it imply? |
| Usable square feet (USF) | The area your team actually occupies. | How many people and rooms fit in the usable area? |
| Loss factor / load factor | The difference between rentable and usable area. A loss factor expresses it as a share of rentable area; a load factor is usually a markup on usable area. It varies by building and floor. | Compare spaces on usable area and layout, not only RSF. |
Measurement practices vary between buildings. A test fit shows what actually fits.
Rent and additional rent
| Term | What it means | What to ask |
|---|---|---|
| Base rent | The fixed rent, usually quoted per RSF per year, before escalations and other charges. | How and when does it increase? |
| Fixed escalations | Scheduled increases in base rent, often annual or at set intervals. | What is the increase and when does it apply? |
| Additional rent | Charges on top of base rent that the lease treats as rent, such as operating expense and tax escalations, electricity and other charges. | Which charges are included, and how are they calculated? |
| Operating expense escalation | Your share of increases in the building’s operating costs over a base year or base amount. | What is the base year, your percentage share and any cap on controllable costs? |
| Real estate tax escalation | Your share of increases in the building’s real estate taxes over a base year. | What is the base year, and how are abatements or reassessments treated? |
| Electricity | Charged by submeter, by survey, or included in rent at a set rate per square foot, depending on the building. | What is the method, the current rate and how can it change? |
| Free rent | A period when some or all rent is abated, usually at the start of the term. | Does it cover base rent only, or electricity and escalations too? |
For the full cost picture, see what office rent usually includes.
For how these charges show up on a bill, see are utilities and maintenance included? Many leases in Manhattan south of 96th Street are also subject to the City’s Commercial Rent Tax once annualized base rent reaches $250,000, although a small-business credit can reduce or eliminate it for some companies. Ask your accountant how it applies to you.
Dates and delivery
| Term | What it means | What to ask |
|---|---|---|
| Commencement date | When the lease term begins. It may be tied to signing, delivery or substantial completion of work. | What triggers it? |
| Rent commencement date | When rent starts being paid, often after a free-rent period. | Is it a fixed date or tied to delivery? |
| Possession / delivery | When the landlord hands over the space, and in what condition. | What happens if delivery is late? |
| Delivery condition | The state of the space at handover: as-is, white box, prebuilt or a landlord-built installation. | Exactly what will be there on day one? |
| Holdover | Staying in the space after the lease expires without a new agreement. Leases typically charge a significantly higher rent for holdover and may add further liability. | What is the holdover rate and liability? |
Build-out
| Term | What it means | What to ask |
|---|---|---|
| Landlord work | Work the landlord agrees to perform before delivery, at its cost. | Is the scope specific, with drawings and finishes? |
| Tenant improvement allowance (TI) | A landlord contribution toward work the tenant performs. | What does it cover, and when is it paid? |
| Work letter | The lease exhibit that sets out who does what work, to what standard, on what schedule and who pays. | Does it match the plan you have priced? |
| Restoration | An obligation to remove improvements or return the space to a set condition at the end of the lease. | What must be removed, and can it be limited at signing? |
General definitions. Work letters vary widely by building.
For how allowances are structured and paid, see how tenant improvement allowances work. For how a sublease differs from a direct lease in practice, see direct lease vs. sublease vs. flex.
Security and credit
| Term | What it means | What to ask |
|---|---|---|
| Security deposit | Cash or a letter of credit held against default. The amount usually reflects the tenant’s credit. | Cash or letter of credit, and can it burn down over time? |
| Letter of credit | A bank instrument the landlord can draw on instead of holding cash. | What does your bank require to issue it? |
| Guaranty | A promise by a parent company or individual to cover the tenant’s obligations. | Who is guaranteeing, and for how much? |
| Good guy guaranty | A limited guaranty common in New York office leases. It generally limits the guarantor’s liability to obligations accruing through the date the tenant vacates, if the tenant gives agreed notice, pays through that date and returns the space as required. Terms vary. | How much notice, and what must be paid or delivered to be released? |
Rights to grow, change or leave
| Term | What it means | What to ask |
|---|---|---|
| Renewal option | The right to extend the lease on stated terms, often at a defined share of fair market rent. | How is the rent set, and what is the notice window? |
| Expansion option / ROFO / ROFR | Rights to take additional space: a firm option, a right of first offer, or a right of first refusal to match another tenant’s offer. | Which space, for how long, and on what terms? |
| Assignment | Transferring the lease to another party, such as a buyer of the business. | Can you assign to an affiliate or successor without consent? |
| Sublease | Renting some or all of your space to another company while you remain on the lease. | What consent standard applies, and is there profit sharing or recapture? |
| Recapture | The landlord’s right to take back space you propose to sublease or assign. | Can you withdraw your request if the landlord elects to recapture? |
LOI vs. lease
A letter of intent (LOI) summarizes the business terms both sides expect the lease to contain: premises, term, rent, concessions, work, security and key rights. Most office LOIs state that they are not binding, except for specific provisions such as confidentiality. Whether any document creates obligations depends on its language and how the parties act, so do not assume.
The lease is the binding contract. It is much longer than the LOI and covers everything the LOI leaves out: default, insurance, repairs, alterations, access, casualty and more. Business terms should be settled at the LOI stage so the lease negotiation can focus on the document.
The terms that matter most to a growing company
Read these first
- Sublease and assignment rights, including affiliate and change-of-control transfers
- Renewal and expansion options
- Security deposit amount, form and burn-down
- Guaranty type, cap and release
- Delivery condition, work letter and outside delivery dates
- Operating expense and tax base years, and any caps
- Restoration obligations at the end of the term