Understanding Free Rent

Free rent

Free rent is a concession offered by landlords to tenants that allows them to occupy and utilize a space for a specified period without having to pay any rent. Unlike rent abatement, where only a portion of the rent is waived or discounted, with free rent, the tenant is not required to pay any rent at all during the agreed-upon period.

This concession is often used as an incentive to attract tenants, especially in competitive real estate markets or when leasing out new or renovated properties. Landlords may offer free rent for the initial months of a lease term to help tenants with the costs associated with moving in, setting up their business operations, or as a way to incentivize them to sign a lease.

For example:

• Tenant B rents 5000 square feet of space from the landlord at a rate of $4000 per month.
• The lease officially begins on October 1, 2005, but the tenant is not required to start paying rent until January 2006.
• The landlord offers three months of free rent as part of the lease agreement.

To calculate the value of the free rent period:

• Determine the monthly rent: $4000.
• Multiply the monthly rent by the number of free months: $4000 * 3 = $12,000.
• The total value of the free rent is $12,000.

The free rent period in this example spans from October 1st to December 31st. During this time, the tenant can occupy and use the premises without any financial obligation for rent.

Once the free rent period expires, typically starting from January 2006 in this example, the tenant would then be responsible for paying the agreed-upon monthly rent amount for the remainder of the lease term unless otherwise negotiated.