Commencement Date

The commencement date is the day a commercial lease term legally begins, when the tenant's right to possession and the parties' core obligations start. It anchors the lease term and every date measured from it, including expiration and renewal windows. It often differs from the execution date, when the lease is signed, and from the rent commencement date, when rent starts.

What Is the Commencement Date in a Lease?

The commencement date is the date the lease term starts and the clock on the lease begins to run. It is usually the date the tenant takes possession of the premises, and it sets the point from which the term length, the expiration date, and renewal and option deadlines are measured. Get it wrong in an abstract and every date derived from it is wrong too.

Three dates get confused and must be kept separate. The execution date is when all parties sign, which establishes the legal commitment and usually precedes the term. The commencement date is when the term legally begins. The rent commencement date is when rent payments start, which is typically the same as the commencement date but can fall later after a free-rent or build-out period.

Under the lease accounting standard ASC 842, the accounting commencement date is defined by Deloitte's DART guidance as "the date on which an underlying asset is available for use by the lessee." That accounting date, which turns on possession, can differ from the contractual commencement date stated in the lease, so an abstractor should capture the date the lease names and note when possession actually occurred.

Why the Commencement Date Matters

The commencement date matters because it is the anchor for every other lease date, so an error propagates through the entire abstract. If the term is measured from the wrong day, the expiration date, the renewal-notice window, and any option deadlines all shift. A single miscaptured commencement date can cause a tenant to miss a strict renewal deadline or a landlord to misstate a lease's remaining term.

The date also drives accounting and underwriting. Under ASC 842 the commencement date is the point at which a lessee first recognizes the right-of-use asset and lease liability on the balance sheet, so it determines when the lease hits the books. The quotable point for an operator: the commencement date is the single most consequential date in a lease abstract, because term length, expiration, critical-date reminders, and balance-sheet recognition all flow from it.

Example

A lease is signed on March 1, 2026, gives the tenant a 90-day build-out period, and states a 10-year term. The table separates the three dates and shows how each is derived from the commencement date.

The term runs 10 years from the June 1, 2026 commencement date, expiring May 31, 2036. An abstractor who mistakenly used the March 1 execution date as the commencement would compute an expiration of February 28, 2036, three months early, and would shift every renewal and option deadline measured from the term by the same three months.

Variations and Edge Cases

The commencement date is defined differently across leases, so an abstractor must read the definition rather than assume it. The table lists common ways the date is set and the risk each creates.

The common mistake is treating the signing date as the start of the term. Because the commencement date often floats to possession or substantial completion, and is sometimes confirmed only later in a separate agreement, an abstract that assumes the term begins at signing can misstate expiration and every critical date that follows.

Commencement Date vs Rent Commencement Date

The commencement date is often confused with the rent commencement date, but they mark different events. The commencement date is when the lease term legally begins and the tenant gains possession. The rent commencement date is when the tenant's obligation to pay rent starts. The two are frequently the same day, but a free-rent or build-out period pushes the rent commencement date later.

The distinction changes the numbers in an abstract. The commencement date sets the term length and expiration, while the rent commencement date sets when income begins. In a lease with two months of free rent, the term still runs from the commencement date, but the landlord collects nothing until the rent commencement date, so an abstract must record both to state the term and the income stream correctly.

Frequently Asked Questions

What is the difference between the commencement date and the execution date?The execution date is when all parties sign the lease, establishing the legal commitment, and it usually precedes the term. The commencement date is when the lease term legally begins, typically on possession. Measuring the term from the signing date instead of the commencement date miscalculates the expiration and every date derived from it.

Is the commencement date the same as the rent commencement date?The commencement date and the rent commencement date are often the same day, but not always. The commencement date starts the lease term and possession, while the rent commencement date starts the obligation to pay rent. A free-rent or build-out period commonly pushes the rent commencement date later than the commencement date.

Why does the commencement date matter for lease accounting?Under ASC 842, the commencement date is the date the underlying asset is available for use by the lessee, and it is when the lessee first recognizes the right-of-use asset and lease liability. It can differ from the contractual date in the lease because the accounting standard turns on possession.

Related Terms

• Rent Commencement Date

• Lease Critical Dates

• Commercial Lease Agreement

• Lease Abstract

• Renewal Option