A Commercial Lease Agreement is a financial and legally-binding contract between a landlord and a business for the rental of property. It gives the renter the right to use the property for business purposes. A Commercial Lease Agreement should be used whenever commercial property is being rented.
Why Use a Commercial Lease?
You should use a commercial lease if you:
- Own an office building and wish to rent work space to other businesses and individuals;
- Own a warehouse or industrial space that you would like to lease to another business; or
- You are leasing commercial space from a landlord
Commercial leases are often more complicated than residential leases because the terms vary for each lease. If you are looking to rent commercial property, it is crucial to understand the differences between commercial and residential lease agreements. Firstly, there are fewer consumer protection laws. State laws provide less consumer protection against deceitful landlord practices when it comes to leasing commercial property. Because of this, it is very important you carefully read every commercial lease agreement offered to you before signing. Next, there are no standard forms. The terms in a Commercial Lease Agreement are negotiable and change from lease to lease because each business and landlord has different needs. The next important thing to keep in mind is that unlike residential leases, which are generally no longer than a term of one year, a commercial lease agreement is long-term and binding. You cannot easily break or change a commercial lease.
Because a lot of money is usually at stake when renting a commercial property it is important to read the lease carefully and pay special attention to these crucial elements that must be addressed in the lease:
Elements of a Commercial Lease
- The length of lease (also called the lease term)
- Price of rent, including increases (also called escalations) and how they will be calculated
- Whether the rent you pay includes insurance, property taxes, utilities, and maintenance costs (called a gross lease); or whether you will be charged for these items separately (called a net lease)
- The security deposit and conditions for its return
- What space you are renting (including common areas such as hallways, rest rooms, and elevators) and how the landlord measures the space
- Whether there will be improvements, modifications or fixtures added to the space; who will pay for them, and who will own them after the lease ends
- Specifications for signs, including where you may put them
- Who will maintain and repair the property, including the heating and air conditioning systems
- Whether the lease may be assigned or subleased to another tenant. This is especially important in case your business fails.
- If there’s an option to renew the lease or expand the space you are renting
- If and how the lease can be terminated and whether there are penalties for early termination
Another thing to keep in mind is The Americans with Disabilities Act. The Americans with Disabilities Act (ADA) requires all businesses that are open to the public or that employ more than 15 people to have premises that are accessible to disabled people. You and your Landlord need to be in agreement about who will pay for any needed modifications to the commercial space.
Free State Specific Commercial Lease Agreements