Glossary / Lease terms and deal stages
Also known as: RCD, rent start date
The rent commencement date is the date a tenant must start paying rent. It often falls weeks or months after the lease commencement date because of free rent, build-out time, or other concessions, and some commission agreements tie payment to it.
Realogic defines the rent commencement date as "the date upon which the tenant's responsibility to pay the landlord for use of the space begins." Barnes Walker notes that it "often occurs weeks or months after lease commencement" in commercial leases, to allow for build-out, rent abatement, or graduated payments.
Leases often tie rent commencement to construction. Husch Blackwell advises tenants that rent should begin only after "substantial completion and delivery of the space in the agreed-upon condition," which it describes as the space being legally occupiable with a certificate of occupancy and only minor punchlist items left.
When your commission depends on rent starting, the rent commencement date is your payday, and every delay in it delays you. The Oklahoma Real Estate Commission's commercial listing agreement form, for example, makes compensation earned only after the lease is executed, any tenant cancellation right has expired or been waived, and "rent has commenced under the lease." Wikipedia's leasing commission entry also lists rent commencement as one common payment point.
Free rent and a long Tenant improvement allowance (TI) build-out can push this date well past signing. Depending on the commission agreement, free rent months may also reduce the rent counted toward the commission.
If your fee is tied to rent commencement, track the build-out schedule as closely as the tenant does, because construction delays become payment delays.
For example, on a hypothetical lease signed March 1 with a commencement date of May 1 and four months of free rent, rent would commence September 1. A commission payable at rent commencement would not be due until then, six months after signing.
