Glossary / Lease terms and deal stages
Also known as: Lease signing, full execution, executed lease
Lease execution is the point at which the landlord and tenant have both signed the lease and delivered it, making it binding. Many commission agreements use execution as the trigger for all or part of the leasing commission.
Execution means signing. In most commercial leases, it also requires delivery, because the lease itself says it is not binding until both parties have signed and exchanged it. A sample clause collected by Law Insider reads: "this Lease shall become effective as a lease only upon execution and delivery thereof by Landlord and Tenant." Another states that the tenant's signature "shall not be binding on Landlord ... until Landlord has in fact signed and delivered this Lease to Tenant."
Execution is different from the Lease commencement date and the Rent commencement date, which can come weeks or months later.
Execution is often the first point at which a leasing commission is earned or paid. Wikipedia's leasing commission entry lists payment at execution, at rent commencement, or in installments across execution and occupancy. A U.S. General Services Administration lease amendment shows the installment pattern in practice: it states the commission "is earned upon lease execution," with one half payable when the lease is awarded and the other half tied to the tenant's occupancy.
Being earned at execution is not the same as being paid at execution. Some agreements, like the Oklahoma Real Estate Commission's listing form, add conditions after signing, such as the expiration of tenant cancellation rights and rent commencement. Your Commission agreement decides which applies.
Check whether your agreement says the commission is "earned" or "payable" at execution, because those words can point to different dates.
For example, on a hypothetical lease of 5,000 square feet at $30 per square foot per year for five years, total rent is $750,000. If a hypothetical commission of 5% of total rent applies, the fee is $37,500, and an agreement paying half at execution would pay $18,750 then and $18,750 at the later trigger.
