In the first edition of our Key Terminology booklet, the Denham Wolf team has compiled terms that relate to key aspects of a real estate project in New York City, such as OPTIONALITY.
Recognizing that an organization's real estate needs can change, either through planned shifts or because of unexpected circumstances, many nonprofits benefit from retaining some level of flexibility in their real estate. For nonprofits that lease, the level of flexibility can vary significantly depending on the unique terms of the lease agreement.
- ALTERATIONS // In a commercial lease, an Alterations clause specifies how and when a tenant must alert the landlord if the tenant is planning any renovations to the space. It also details the steps that a tenant must take in order to ensure that all design and construction work is done to acceptable standards.
- SWING SPACE // Swing Space is a temporary space that a tenant occupies during a renovation or new construction project, or during other times of transition.
- SUBLET // An arrangement through which a tenant rents part or all of a space to another tenant, known as a subtenant, typically for a limited term. Unlike an Assignment (see below), a sublet preserves the original tenant’s direct rights and obligations the landlord. In other words, the tenant continues to pay rent to the landlord while also receiving rent payments from the subtenant. The inclusion of strong, tenant-friendly language related to assignments and subletting within a lease is key to ensuring flexibility for a tenant.
- ASSIGNMENT // The transfer of one party’s entire interest in and obligations under a lease to another party. The original party can either be a tenant, whose lease is effectively taken over by a new tenant, or a landlord who has sold property to a new landlord. In an Assignment, a direct relationship is created between the assignee and the landlord. By contrast, in a Sublet (see above), the tenant stays in a relationship with the landlord, remains in the role of tenant, and collects rent from a subtenant. The inclusion of strong, tenant-friendly language related to assignments and subletting within a lease is key to ensuring flexibility for a tenant.
- RECAPTURE // The process by which a property owner reclaims control and/or occupancy of a property. Recapture clauses cover a wide range of transactions, triggered by an equally diverse array of circumstances. For example, if a tenant wishes to Sublet a portion of its space, the landlord may have the right to reject the proposed sublet, depending on the specifics of the lease. Instead, the landlord may have the right to recapture the space that the tenant wished to sublet, and then relet it at any terms desired by the landlord. When landlords have the right to recapture, they will typically exercise this right if it is possible to relet the portion of the space to a new tenant at a higher rent.
Please note that, in some cases, the definitions included in our Key Terminology booklet are specific to Denham Wolf's approach to real estate and may not reflect the industry at large. In all cases, we welcome the opportunity to discuss the terms and their nuances with you.