Leasing commercial property is substantially different from leasing residential property. One of the main differences is that commercial leases spell out far fewer protections than residential ones.
From a legal standpoint, it's assumed that the contracting parties in a Commercial Lease Agreement are entering the agreement on equal footing. Commercial leasing is also often done on a longer time scale than residential, making it especially important to have an airtight lease agreement. It's crucial that your Commercial Lease Agreement contains all the necessary clauses to protect yourself and your property.
A Commercial Lease Agreement is a legally-binding document used to establish a tenant-landlord relationship in regard to a business property. It gives the tenant access to the property for business purposes for the duration of the agreement in exchange for agreed-upon rent payments to the landlord.
The nature of the property doesn't matter. The property can consist of an office space or an entire strip mall. The important factor is that it be used in conducting some form of commercial enterprise.
In broad terms, there are four types of Commercial Lease Agreements.
A full-service or gross lease includes all the operating expenses of the business property. This also encompasses real estate taxes and, sometimes, utilities.
A net lease includes no operating expenses. The tenant is responsible for a pro-rata portion of the full property taxes, common area maintenance, etc.
A modified gross lease falls somewhere in between the previous two. A portion of the operating expenses is negotiated into the lease agreement.
A percent lease requires that the tenant pay a monthly percentage of gross revenue as part of their monthly rent.
Depending on your state, a Commercial Lease Agreement may also be known as:
Office Space Lease
Commercial Property Lease
Commercial Real Estate Lease
Anyone leasing a commercial property will need a Commercial Lease Agreement. Typical users of Commercial Lease Agreements may include:
Office building owners
Warehouse or industrial space owners
Anyone looking to settle their business in a commercial space
Create your own documents with our easy-to-understand questionnaires to get exactly what you need from your Commercial Lease Agreement.
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Commercial Lease Agreements can be sensitive documents. They can lock you into a years-long lease relationship. Let 360 Legal Forms help with our extensive library of attorney-vetted legal forms.
All you have to do is fill out our easy-to-understand questionnaire. Once complete, simply download your form as a PDF or Word document from your secure online account.
To create your document, please provide:
Landlord: The full name and address of the person who owns the property.
Tenant: The full name and address of the person leasing the property.
Real Property: A description of the entire property owned by the landlord.
Demised Property: The specific property or portion of property leased by the tenant. This should include a map of the property and any other amenities the tenant has access to, such as parking spaces, security, etc.
Term: The length of time the property is leased, usually expressed as a start and end date. This includes the renewal and the timeframe of a periodic tenancy if it exists.
Base Rent: The initial rent cost on a monthly or yearly basis.
Operating Costs: Expenses tenants contribute to managing and operating the property.
Property Use and Occupancy Details: This clause explains, in detail, what is and isn't allowed as fair use of the property, restrictions for the common areas, and which business activities can and cannot occur.
Assessed Value: The total value of the real property as determined by a tax assessor.
Breakpoint: In a percent lease, this is the sales point when percent rent comes into effect.
Common Areas: All the areas of a building that are available for non-exclusive use by tenants.
Flex Space: Business space that can be used for different commercial purposes. For instance, a property that can be used as offices or for industrial purposes.
Highest and Best Use: Use of a property or piece of land that leads to the highest value return.
To be valid, a Commercial Lease Agreement needs to be signed by the business tenant and the landlord.
In most cases, a Commercial Lease Agreement doesn't need to be notarized. However, some states will find a Commercial Lease Agreement invalid if it is of insufficient duration and not notarized. A notarized agreement also removes the risk of someone successfully challenging the signatures in the future.
Check your state and local laws for more specific signing requirements if you have a complex agreement.
Tenants should keep a signed, accessible copy of the Commercial Lease Agreement in their personal records until vacating the commercial property.
As a landlord, go through the lease agreement thoroughly with your tenant and make sure they understand all the critical points and provisions. After it's signed and dated, provide a copy to your tenant and retain a copy for your records. You can file a copy with the County Recorder's office where the leased property resides if you want added protection.
Technically speaking, you can rent a property with only an oral agreement. However, doing so is asking for trouble as verbal agreements are difficult, if not impossible, to enforce. If a dispute were to arise, a court would decide whose version of events to accept.
In the context of real estate, fixtures are any features that are sufficiently attached to the property that their removal would damage the property. For example, a commercial kitchen would fall under the category of fixtures in a business property setting.
The current tenant of a property can, if allowed, sublease the use of the property to a third party. The property's usage rights are transferred to the subletting tenant for a portion of the original lease term.
As a tenant, not only can you negotiate a lease agreement, but you absolutely should. Many landlords use a standard Commercial Lease Agreement with most of their tenants. But that agreement may not be beneficial for you or address your specific needs. Creating your own Commercial Lease Agreement with 360 Legal Forms gives you more control over what is and isn't part of the lease.
A Commercial Lease Agreement is legally enforceable, and, as such, usually cannot be changed after it is signed. If any changes are possible, they will be listed in the lease itself. This applies to both the tenant and the landlord.
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