What is a Lease Commencement Date And How To Implement It

When it comes to real estate in commercial space, you might notice several important dates mentioned in the lease contract. Those are critical dates with significant consequences on your lease agreement, both structurally and financially. 

A lease commencement date is one such date that refers to the official beginning of the lease term. It’s the day each party’s (lessor and lessee) official rights and obligations under the lease agreement begin. 

This article aims to dive deep into the concept of lease commencement dates and discusses what they are, their importance, why you need to document them, and how to implement lease commencement dates in general.

What is a Lease Commencement Date?

The lease commencement date is an important concept in commercial leases. It typically refers to the start or beginning date of the lease term.

However, it's essential to remember that the lease commencement date is not always the date the tenant starts paying rent due to rent abatement or early occupancy negotiations.

Several dates seem similar but are different from the lease commencement dates. Among these are:

• Commencement Date: This is when the lease begins, specifically, the date on which possession is given on paper from the landlord to the tenant.
• Rent Commencement Date: Rent commencement is when the tenant is officially obligated to start paying rent.
• Early Occupancy Date: This is when the tenant is offered access to the leased premises before the beginning of the lease.
• Lease Move-In Date: This is the date on which the tenant takes physical possession of the leased premises.
• Lease Execution Date: This is when any kind of commercial lease is executed on paper between the tenant and landlord.

They look similar but they have legal differences that affect both parties involved in the agreement.

Why Do You Need to Document Lease Commencement Dates?

Lease commencement dates need to be documented for the simple reason that, over the period, the dates might be forgotten.

Documenting the lease commencement date is also important for the below reasons:

• While it might seem obvious when the lease begins at the time of drawing up the lease papers, you will probably forget about it a year or two down the line if the same is not documented. 
• Once documented, you’ll have the exact commencement date on paper, marking the official beginning of the agreement.
• In the absence of a documented lease commencement date, there could be various problems related to leasing escalations, lease expiration dates, and other similar important term dates.

How to Implement a Lease Commencement Date?

Implementing a lease commencement date for a commercial lease agreement is one of the most crucial aspects of lease deals. Still, it is often neglected or not given enough importance by both parties involved.

However, it is important to keep in mind that there are several things, such as the tenant’s obligation to pay timely rent, the expiration date of the lease agreement, and more, that depend on when the lease begins.

This makes it crucial to make an informed decision about how you should implement or set a lease commencement date.

There are several different methods to implement the lease commencement date. But the final method you pick for the same should take into consideration various factors such as the status of the leased space-new or existing building, shopping complex, or office building.

The Process to Set the Lease Commencement Date

Here is one of the most popular methods you can use to set up the lease commencement date.

• You decide the exact date, say, July 1, 2023, as the lease commencement date.
• This method is the simplest way to implement a lease commencement date because all it needs here is entering the right date into the lease agreement.
• It is also the most transparent way to set the lease commencement date, as there is no confusion or dispute over when the lease begins. 
• The disadvantage of choosing the exact date method, however, is that picking a date that works for you is not easy. There can be several obstacles that can arise that can delay giving possession to the tenant on an exact date.
• Additionally, a tenant will also ask for some concession in the lease if the space is not delivered by the lease commencement date. 
• Therefore, it is best to leverage this least-setting method only to set up a lease commencement date in an existing property where you’re sure about delivering the space to the tenant on the given date.

An example of a lease commencement date mentioned in a lease agreement could be as follows:

The Lease Commencement Date for the abovementioned lease agreement will be the earliest of (a) the date on which the Tenant occupies the entire/any portion of the Premises, (b) the date on which the Work on the Premises is Substantially Completed, or (c) 90 days after the date on which Landlord of the property tenders possession of the Premises to Tenant.

So stick to the definitions mentioned in the lease and properly record the actual commencement date so that you have it with you for later use.

Need Help Keeping Track of Important Lease Dates?

The lease commencement date in commercial leases is an important concept that impacts both landlord and tenant. In simple words, the lease commencement date is when the lease term and benefits commence officially for the parties involved in the agreement.

When it comes to managing critical dates, such as lease commencement in spreadsheets, there is always a risk. It can get especially complicated when you have to manage multiple properties at once.

Lease management software is an excellent solution designed specifically to streamline and automate your commercial real estate operations and lease commencement dates.

There are several advantages to be gained from such software, using no-code platforms like LeasO, as it can help you easily track the status and updates regarding all the active leases and their commencement dates at your company.