Language Review

Language

3.1 Commencement of Term. The covenants and undertakings of Landlord and Tenant under this Lease shall be effective as of the Effective Date set forth in Article 1 and shall continue thereafter for the period of the Lease Term set forth in Section 1.7, unless sooner terminated as hereinafter provided. The Lease Term shall be computed from the first day of the first full calendar month immediately following the Commencement Date or from the Commencement Date, if the Commencement Date occurs on the first day of the month. Except as otherwise specifically stated in this Lease, the “Lease Term” shall include the initial term and any extension, renewal or holdover thereof. The term “Lease Year” shall mean each consecutive twelve (12) month period from and after the Commencement Date until expiration of the Lease Term.  

What it means

Defines the date that the lease begins and the duration of the lease term.

Why it matters

The Lease Term, beginning upon the Commencement Date, is the period during which tenant has the right to occupy the premises (although some obligations of tenant may survive past the end of the term). In some leases, the obligation to pay rent begins on a later date ("Rent Commencement Date") than the term commencement.

Stories from the trenches.

Calculating the term dates is critical when it comes to leases. Failure to calculate the correct end date could have significant consequences like not timely exercising an option as one tenant found out. The tenant had the obligation to notify landlord they intended to exercise their option to extend the lease by another five years one hundred eighty (180) days prior to the end of the term. The tenant assumed the term ended at the end of the month but it actually ended in the middle of the month. The tenant's failure to confirm the term calculation in the lease resulted in the loss of the space as landlord leased it to a higher paying tenant.