Legal Definitions - primary lease

A primary lease, also commonly referred to as a headlease, is the initial and foundational agreement between the original property owner (the landlord or lessor) and the first tenant (the lessee) for the use and occupancy of a property. This lease grants the primary tenant the right to possess and use the entire property for a specified period. It is called "primary" because any subsequent leases for portions or the entirety of that property, known as subleases, derive their authority and existence from this original agreement.

Here are some examples to illustrate this concept:

• Commercial Office Building: Imagine a large real estate investment firm that owns an entire skyscraper in a major city. They enter into a 20-year lease agreement with a multinational corporation to occupy and manage the entire building. This agreement between the real estate firm (owner) and the multinational corporation (first tenant) is the primary lease. The multinational corporation then decides to lease individual floors or suites within the building to smaller businesses and startups. These agreements with the smaller businesses are subleases, as they are subordinate to and dependent on the primary lease.

• Shopping Center Development: A municipal government owns a large tract of land designated for commercial development. They enter into a 75-year agreement with a property developer, granting the developer the right to build and operate a large shopping center on that land. This long-term agreement between the city (owner) and the property developer (first tenant) is the primary lease. Once the shopping center is constructed, the developer then leases individual retail units, restaurants, and entertainment spaces to various businesses. Each of these individual business leases is a sublease, stemming from the original primary lease with the city.

• Residential Apartment Complex: A private landowner owns a parcel of land on which an apartment complex is built. Instead of managing individual tenants for each apartment, the landowner enters into a single, comprehensive 10-year lease agreement with a property management company for the entire apartment complex. This agreement between the landowner (owner) and the property management company (first tenant) is the primary lease. The property management company then finds individual residents for each apartment unit and creates separate lease agreements with them. These individual resident leases are subleases, as their validity and terms are tied to the overarching primary lease with the landowner.