Glossary / Lease terms and deal stages
Also known as: Tenant occupancy, possession, move-in
Occupancy is when a tenant actually takes possession of and uses the leased space. In commission agreements it is a common payment trigger, and it often depends on build-out being finished and, for many spaces, a certificate of occupancy being issued.
In leasing, occupancy usually means the tenant has moved in or taken possession, which may be a different date from the Lease commencement date or the Rent commencement date. Realogic notes that the commencement date often differs from when the tenant physically occupies the space.
Occupancy often depends on a government approval. LegalZoom describes a certificate of occupancy as "an official document from the local government certifying a building is safe, code-compliant, and approved for its intended use," and notes that operating a commercial space without a valid one is unlawful in most jurisdictions.
Many commission agreements pay part of the fee at occupancy. A U.S. General Services Administration lease amendment, for example, states that 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. Wikipedia's leasing commission entry lists installments across execution and occupancy as a common structure.
If part of your commission is tied to occupancy, everything that delays move-in delays your money: design, permits, construction under the Work letter, and the certificate of occupancy inspection. How occupancy is defined (move-in, possession, or opening for business) depends on your Commission agreement and the lease. If the agreement is silent or vague, the landlord and broker may read the trigger differently, and that disagreement itself can hold up payment.
If your agreement pays at occupancy, ask how occupancy is defined and get the expected move-in date in writing from the tenant or landlord.
