back-to-back lease

back-to-back lease

One type of rental concession in commercial leases; encountered in markets with large amounts of vacant space on the market and no real prospect of filling the space with new entrants.As a result,landlords must resort to “stealing”tenants from each other. They will offer a back-to-back lease,agreeing to pay the tenant's rent at their old space until the expiration of the term, if the tenant will immediately vacate and move to the new space. In a strong rental market, a landlord may wish to attract a particularly desirable tenant from another building even though the landlord's vacant space could easily be filled from current market demand. In such a situation, the landlord will offer to buy out the entire current lease, paying a lump sum to the owner of the other building.The other building owner is generally motivated to accept the lump-sum payment, because he or she anticipates renting the vacant space to a new tenant fairly quickly and thereby gaining a cash windfall in the form of the buyout price.