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Effective Date: The date on which a lease clause, typically an option, becomes operative.

Eminent Domain: The right of a governmental agency to take private property for public use via condemnation in return for adequate compensation.

EXAMPLE: See example for Condemnation.

Encumbered Space: Space in a building which is subject to a right or interest of a tenant.

EXAMPLE: ABC Tenant signs a lease at Ellipsis Tower which grants them a Right of First Offer on any adjacent space. Such adjacent space would constitute Encumbered Space, as the Landlord would have to consider the rights of ABC Tenant to such space prior to leasing the space to a third party tenant.

Escalations: A lease clause which provides for an increase in rent at a specified future date(s). The most common types of escalations are (a) fixed increases in Base Rent; and (b) Consumer Price Index Adjustments.

EXAMPLE: ABC Tenant signs a five-year lease with Base Rent set at $15.00/sq. ft. for the first year, increasing by $1.00/sq. ft. annually thereafter. The $1.00/sq. ft. Base Rent increases are Escalations.

Estoppel: Legally, the act of preventing (estopping) a party from claiming a different state of facts at a later date. When associated with leases, the statement of facts includes that the lease is in existence, that there are no defaults and that rent has been paid and is current as of a specified date. Estoppels are memorialized via an estoppel certificate, which is an agreement that may be relied upon by a third party such as a potential lender or purchaser. Leases often grant the landlord the right to obtain an estoppel certificate from a tenant; however, certain leases (often for larger tenants) also provide the tenant with the right to obtain an estoppel certificate from the landlord.

EXAMPLE: The Landlord of Ellipsis Tower is in the process of selling the building. As part of their due diligence, the prospective buyer requires the Landlord to obtain Estoppel Certificates from all tenants currently occupying space within the building. ABC Tenant executes the Estoppel Certificate as drafted by the Landlord. After the sale closes, ABC makes a claim to the new Landlord that is in conflict with information contained on the Estoppel Certificate. ABC would be legally 'estopped' from making such claim because they executed the Estoppel Certificate.

Exclusivity: The right granted to a tenant to be the only tenant in a property who may engage in a specified business use at that property.

EXAMPLE: ABC Tenant is a national provider of accounting services. In their lease at Ellipsis Tower, they require the Landlord to include a clause that they can be the only tenant in the building to provide accounting services throughout their lease term. This clause would grant ABC Tenant Exclusivity.

Exculpation: The sheltering of a party from liability arising out of negligence. In leases, an exculpation clause operates to limit the liability of an owner or landlord from lawsuits by a tenant for breach of contract or nonperformance to the assets of the particular property in which the tenant is in occupancy. Exculpation clauses often limit the tenant from claiming rights to other properties owned by the landlord or personal liability of the landlord or any of its employees.

EXAMPLE: ABC Tenant's lease at Ellipsis Tower includes an Exculpation clause. The Landlord commits a serious default and ABC attempts to sue the Landlord for their interest in Ellipsis Tower, 10 other buildings owned by the Landlord and all or the senior employees of the Landlord's organization personally. Because the lease with ABC contained an Exculpation clause, ABC may only file a lawsuit against the assets of Ellipsis Tower.

Expansion Option: An option granted to a tenant allowing the tenant to increase the amount of leased premises at a future date. In an expansion option, the expansion premises, notification date, effective date and rent are typically clearly defined. In addition, the right of the tenant to expand via such an option is not contingent upon the occurrence of any event related to the expansion premises (i.e., availability for lease, offer from third party).  An Auto-Expansion option is a form of Expansion Option whereby the premises are expanded automatically on the effective date without any notification requirement.

EXAMPLE: ABC Tenant signs a five-year lease for 10,000 square feet in Suite 500 at Ellipsis Tower, but is concerned that more space will be needed prior to the expiration of the term to accommodate the growth in their business. ABC negotiates an option with the Landlord to lease an additional 5,000 square feet of adjacent space in Suite 525 effective on the third lease anniversary, upon 180 days prior notice to the Landlord. This is an example of an Expansion Option, whereby no contingencies exist regarding ABC's right to expand into such space.

Expense Recovery: A reimbursement by the tenant to the landlord for expenses of a property which are originally paid by the landlord. The mechanics for calculation of the Expense Recovery will depend upon whether the lease is a Gross Lease or a Net Lease. Also called a 'Pass Through'.

EXAMPLE: ABC Tenant signs a five-year lease which requires ABC to pay Base Rent plus its proportionate share of recoverable expenses in excess of the actual expenses incurred for the year 2000. The proportionate share of recoverable expenses is an Expense Recovery.

Expense Stop: For gross leases, the amount which recoverable expenses must exceed before a tenant is required to begin paying Expense Recoveries. Stated differently, the Expense Stop is the amount of recoverable expenses which will be borne by the landlord before a tenant is required to pay their proportionate share of such expenses. The Expense Stop may be stated as an absolute dollar amount, a dollar amount per square foot or a Base Year (the recoverable expenses incurred in a defined calendar or fiscal year).

EXAMPLE: ABC Tenant signs a five-year lease which requires ABC to pay Base Rent plus its proportionate share of recoverable expenses in excess of $9.00/sq. ft. The Expense Stop is equal to $9.00/sq. ft.

Expiration Date: The date upon which the landlord and tenant's rights and obligations pursuant to a lease end.

Extension Option: An option granted to tenant allowing the tenant to lengthen the lease term at a pre-defined rental rate. The rate may be a specified dollar amount or may be quoted as a specified percentage of the market rental for the geographical market in which the property is located. An Extension Option must typically be exercised by the provision of notice from tenant to landlord within a pre-defined time period prior to the expiration of the lease term.

EXAMPLE: ABC Tenant signs a five-year lease at Ellipsis Tower, but would like the comfort of knowing that they may remain in the building for an additional five years if they so desire at the expiration of the original five-year term. ABC negotiates an Extension Option into their lease which allows them to extend the lease term for an additional five years upon 6 months notice to Landlord at the then current Market Rent.