What is a "free rent" period in a commercial lease — and is it really free?
The short answer
A 'free rent' or rent abatement period allows the tenant to occupy the space without paying base rent for a defined period — commonly one to six months at the start of the lease. In a triple net lease, however, 'free rent' typically means only base rent is waived; CAM charges, property taxes, and insurance contributions commonly continue to accrue and must be paid during the abatement period. The result is that the abatement is partial, not total. Additionally, many leases include a recapture provision: if the tenant defaults and the lease terminates early, the abated rent must be repaid. Scan your lease to confirm what the abatement covers, what it excludes, and whether a recapture clause applies before treating the free-rent period as unconditional.
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What a rent abatement clause usually does
A rent abatement provision waives the tenant's obligation to pay base rent for a stated period, typically at the commencement of the lease while the tenant is fitting out the space or ramping up operations. The waived amount is a landlord concession — the economic equivalent of a TI allowance embedded in the rent structure rather than paid as cash. The lease's economics reflect the abatement: base rent over the full term, excluding the abatement period, delivers the landlord's target return.
In a NNN or modified gross lease, the abatement usually applies only to the base rent line. Operating expenses — CAM, property taxes, and insurance — are passthroughs that reflect the landlord's real costs, and most leases do not waive them during the abatement period. A tenant in an NNN lease with a three-month free-rent period still owes three months of CAM, taxes, and insurance. The abatement's true value is the base rent waiver only.
Why people worry
First-time commercial tenants commonly report expecting zero occupancy costs during a free-rent period, then receiving invoices for CAM estimates and tax passthroughs during those months. The recapture clause is a second source of surprise: tenants who default before a defined period (often the first two to three years) commonly find that the abated rent becomes immediately due as a lump sum. A business that closes in year two after a six-month abatement may owe the full abatement amount back on top of remaining lease obligations.
What to look for in your lease
- Whether the abatement applies to base rent only or also to NNN/CAM passthroughs.
- Whether a recapture provision requires repayment of abated rent upon early default or termination.
- The length of the abatement period and whether it runs from lease commencement or from the rent commencement date.
- Whether rent escalations begin from the lease commencement date (including the abatement period) or from when rent payments actually start.
- Whether the abatement is conditional on any performance milestone or fully unconditional.
Questions to ask before signing
- Ask the landlord to confirm which specific charges are waived during the abatement period — base rent only or all occupancy charges.
- Ask the other party to clarify whether a recapture provision applies and under what conditions abated rent must be repaid.
- Confirm what NNN charges will actually be owed during the free-rent period and budget for them.
- Consider having the lease reviewed to verify that the abatement and recapture language are clearly understood before signing.
Why scan instead of guess
The general rule tells you the baseline. Your lease tells you what you’re actually being asked to sign — and the wording is what binds. Dang reads the document and flags the clauses worth reviewing, in plain English.
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Common questions
Does a free-rent period mean I pay nothing?
In a NNN or modified gross lease, typically no — base rent is waived, but operating expense passthroughs (CAM, taxes, insurance) continue to run. In a gross lease where operating costs are bundled into rent, an abatement may cover the full rent amount. What 'free rent' covers is determined by the specific lease language.
What is an abatement recapture clause?
A provision making the tenant liable to repay all or part of the abated rent if the lease is terminated early due to a tenant default. It is a commonly seen structure — the free-rent period is essentially conditional on completing the full lease term. A default during the early years can trigger repayment of the entire abated amount as additional damages.
Is a free-rent period better than a TI allowance?
They serve different purposes. A TI allowance funds the physical build-out; a rent abatement reduces occupancy costs during the ramp-up period. Both are landlord concessions with economic value. A tenant doing significant build-out may need both; one is not a substitute for the other. The lease's overall economics, including both forms of concession, should be modeled together.
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