Real estate

What Is Rent Abatement - Ultimate Guide 2023

Written By Urban Real Estate Center
Last Updated: Jan 03, 2023 •


Rent abatement is important for those who rent or lease commercial property. It is a situation in which payment of rent is partially or fully suspended for a certain period of time. Generally due to forcing Majeure circumstances such as natural disasters, war, labor strikes, or other events beyond the tenant's control. Rent abatement can be negotiated between the tenant and landlord before entering into a commercial lease agreement, either at the start of the lease term or during its duration.

In such cases, landlords may agree to certain conditions, including rent reduction, extended payment terms, and other concessions that may benefit both parties. When tenants enter into a lease without negotiating their rent abatement options, they should understand their rights and obligations under the terms of their contract.

This Ultimate Guide 2023 explains what rent abatement is when it should be considered as an option by tenants and landlords alike, key considerations when negotiating rent abatement arrangements with a landlord, and tips on how to negotiate such agreements successfully.


What Is Rent Abatement?

Rent abatement is a popular negotiation tool used in commercial real estate transactions. It allows tenants to receive free rent for some time, usually between the start and end of their lease. The duration of this abatement is typically negotiated between a landlord and tenant.

This can benefit both parties, as tenants may use the time to improve their space without worrying about paying rent, and landlords may use the period to collect more favorable terms from tenants in exchange for the free rent.

Rent abatements have several advantages. Tenants can save money on rent payments during the abatement period, giving them more flexibility. Landlords also benefit from rent abatements by receiving more attractive terms from tenants that are willing to pay back some of the free rent in exchange for better terms. Also, landlords can reduce their business liability insurance costs while maintaining a positive cash flow during the abatement period.

Although rent abatements are beneficial, some potential downsides should be considered when negotiating such agreements. For instance, if a tenant fails to pay any portion of their back-rent following an abatement period, then a landlord could be left with unpaid bills or even legal fees if they need to pursue collection action.

Also, suppose a tenant moves out early or fails to meet other lease obligations during or after an abatement period. In that case, any outstanding rent waiver could cost the landlord money in lost rental income or other damages. So landlords need to ensure proper tenant screening before granting any rent reduction.

There is always a risk that an agreement on an extended rent waiver could lead to disputes later on down the line due to misunderstandings over what was actually agreed upon by both parties at the time of negotiation.

Overall, understanding all aspects associated with rent abatement will help landlords and tenants agree on favorable terms that meet both parties' needs while also staying within legal boundaries making it important for landlords and tenants alike to consider all potential implications before signing off on such arrangements.


When Is Rent Abatement Applied To A Property?

Rent abatement is a term used to describe a temporary rent reduction for a particular property. This type of reduction usually applies when the tenant experiences a problem that makes the property less habitable or usable than it would normally be.

Abated rent is sometimes referred to as "base rent" and is subject to negotiation between the landlord and tenant. In most cases, the landlord will offer reduced or abated rent to keep the tenant in their rental agreement. This can be especially important if the tenant has the option to break their lease due to any repair issues or other factors that make a living in the unit difficult. 

In other cases, landlords may offer higher rent in exchange for making repairs or fixing issues related to the property. This can help ensure that tenants are willing to stay despite any problems they may face with their current rental situation. Alternatively, some landlords may choose to use business interruption insurance to cover any lost income associated with abating rent during times of crisis or disaster-related losses. 

Rent abatement can also take different forms over time depending on certain conditions, such as how long it lasts and whether there are limits on how much money is returned at each interval. The specific terms of a rental agreement determine what types of rent abatement could apply, including its definition, duration, and amount.

Additionally, tenants and landlords need to understand all potential implications before signing an agreement with an abated rent clause so that everyone involved knows what their rights are during this period of reduced payments.


Rent Abatement Guidelines For Landlords & Tenants

Rent abatement is a relief available to landlords and tenants when one party cannot meet their obligations under their lease agreement. This type of assistance, also known as reduced rent, can help tenants struggling to pay their rent due to an inability to use the premises or landlords who have paid for repairs that were needed due to damage caused by the tenant's misuse. 

When it comes to a rental agreement, any tenant looking to qualify for rent abatement must first meet certain criteria in order to be eligible. Firstly, they must be able to demonstrate that they cannot use the premises due to an issue beyond their control or through no fault of their own.

It could be anything from a plumbing issue, mechanical malfunction, or natural disasters such as flooding or earthquakes that render the property uninhabitable. In these circumstances, it would be reasonable for the tenant not to have to pay full rent during this period until the landlord resolves the issue. 

The second requirement is that a rent abatement period must be agreed upon between both parties at the beginning of the lease before any issues arise. This period should also be specified in writing, so both parties know exactly how long such an arrangement will last and the expectations regarding payments made during that time. 

In commercial leases, there are additional considerations surrounding rent abatements, particularly down payment periods, taxes, fees, and more. Business owners may need additional insurance coverage such as business liability insurance or business interruption insurance for a landlord-tenant arrangement involving reduced rents (or any other arrangement with waived rental payments)to come into effect legally, something which needs factoring into negotiations from an early stage. 

If both parties agree on reduced rents or some other form of 'rent abatement' due to unforeseen circumstances, they should make sure that all terms are clearly outlined in writing as part of their lease agreement. This includes specifying when regular payments will resume after the agreed upon 'rent abatement' period ends, ensuring that neither party can later dispute over missed payments after this time has elapsed.


What Is The Difference Between Rent Abatement & Deferral?

Rent abatement and deferral are two different ways of addressing rental payments. Rent abatement is a temporary stoppage or reduction of rental payments, usually applied in cases where the property has been rendered unusable by a fire or natural disaster and is typically seen as a complete forgiveness of some portion of the total lease cost.

On the other hand, rent deferral is a temporary rent reduction that has to be repaid later, meaning that the total least cost remains the same. Understanding both abatement and deferral is essential for any tenant looking to negotiate their lease agreement. In contrast, an abatement may be more attractive to tenants, but it can be harder to get from landlords than a deferral. 

Regarding abatements in commercial real estate leases, this typically refers to an "abatement clause," which states what would constitute an event that leads to rent being reduced or stopped. It should go without saying, but any landlord will require that the tenant fulfill all obligations in terms of maintenance and upkeep before they will consider granting an abatement.

Further, the amount of rent that can be forgiven in percentage terms will depend on how severe or disruptive the event was. For instance, if a natural disaster affected only some parts of a building, then a partial rent abatement may be granted as opposed to complete rent forgiveness. 

When dealing with deferred rental costs, a few options are available depending on what both parties agree upon and how much flexibility there is within the specific agreement regarding repayment terms.

For example, one option could involve splitting the difference between deferred payments over several months, so it's easier for tenants to manage their cash flow; another possibility involves temporarily lowering monthly amounts until everything has been paid off in full, at which point normal monthly payment amounts would resume in subsequent months after that. 

Whether you decide upon rent abatement or rent deferral for your next commercial real estate lease should be based on careful consideration of both parties needs and goals. Also, understanding each option's pros and cons is key, so you have all the necessary information at hand before making any decisions.


Is Rent Abatement The Same As Free Rent?

No, rent abatement and free rent are not the same. Rent abatement is an agreement between a tenant and landlord in which the tenant pays no or reduced rent for a certain period. This means the tenant does not have to pay the full rental fees for the time frame specified by their lease agreement. The abated amount is usually spread out throughout the duration of the lease, allowing tenants to reduce their monthly payments while still paying close to the market rate

Rent abatement can be used as a business incentive when negotiating a commercial lease. Landlords may offer rent abatement in order to attract tenants who will bring long-term value and stability to their property. In some cases, landlords may provide longer periods of free rent in order to encourage higher-quality tenants or help cover costs associated with fit-outs or other renovations required before occupancy.

When negotiating a commercial lease, it's important to understand how much rent abatement you can expect during your tenancy, how long it will last, and what terms are included in its application. Most commercial leases include clauses that outline if and when a tenant can receive an abatement of rent, so it pays to read through them carefully before signing on the dotted line.

Additionally, there may be restrictions around how much can be requested and what factors must be present for an abatement request to be considered. It's also important to consider other aspects associated with receiving free rent.

Such as any additional fees that may arise from late payment or lack of notice before the end date. These could affect your overall budgeting plan for occupancy expenses over time. Ultimately, understanding all of your options around rent abatement is key in ensuring you make informed decisions about entering into any long-term agreements with landlords who offer this form of rental relief as part of their contractual terms.


How Long Does Rent Abatement Last?

Rent abatement is a lease agreement between the landlord and tenant in which the tenant agrees to suspend rent payments for a specific period. This practice can benefit both parties, allowing tenants with difficulty making rent payments to continue living in their residences without fear of eviction or late fees. At the same time, landlords can maintain income from the property.

Eligibility for rent abatement varies depending on the state a rental property is located within; some states have laws that require landlords to provide tenants with abated rent if certain conditions are met. For instance, many states have rules that require landlords to provide tenants with rent abatement if the rental unit has been uninhabitable due to necessary repairs or unsafe living conditions.

In such cases, tenants may receive a partial refund of their rent payments during this period. The amount of money saved during this period will depend on several factors, such as the length of time needed for repairs, how much damage was done to the unit, and what portion of the fair market value was diminished by these issues. 

In some cases, rent abatement may last for weeks or months, depending on how long it takes to resolve any issues that make the living space uninhabitable. Tenants who are receiving a rent abatement should also consider temporary housing costs as they may need to cover expenses associated with staying in a hotel or short-term rental property during this period. 

Landlords also use rent abatement when calculating diminished value rental rates for properties affected by repairs or other factors. For example, if an apartment's fair market value is $2,000 per month, but its condition has been reduced due to maintenance needs or other factors. Tenants may receive 50% off their regular monthly rate until these issues are resolved.



Rent abatement is a term used in leases to describe a reduction in rent. It can be used as an incentive for tenants to sign a lease, or it may be given if repairs need to be made to the property. There are many different rent abatements, but they all have one thing in common: they save money for the tenant. If you're looking for ways to reduce your expenses, rent abatement may be something you want to consider. We hope this guide has helped you better understand rent abatement and how it works.

Urban Real Estate Center

Discover everything you need to know about rent abatement, including how it works and the benefits for tenants and landlords.