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Commercial Lease Agreement

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Commercial Lease Agreement

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Learn more about Commercial Lease Agreement

Commercial Lease Agreements are legally binding agreements between a commercial property owner and a business tenant. The agreement outlines terms such as rent amount, deposits, renewal options and acceptable use of the property agreements.

  • You own commercial property that you want to lease.
  • You are a property manager who needs to make a commercial lease contract.
  • You want to lease commercial property from a property owner who doesn't have a lease form.
  • You want to lease restaurant, retail, warehouse or office space to a commercial tenant.

Our Commercial Lease document is suitable for: offices space, restaurants, retail space, industrial leases, warehouses, entire buildings and other business space. The Commercial Lease Agreements can be made, edited and shared online and can be made suitable for any state.

Commercial Real Estate Lease Agreement, Commercial Lease Contract, Commercial Property Lease, Business Lease, Office Space Lease

A Commercial Lease is simply a lease agreement for business rather than residential space. It is a legally binding contract between a landlord and commercial tenant. Usually, the agreement can include details such as what kind of business is allowed to operate on the premises and even hours of operation if applicable. Unlike residential leases, the terms are usually more than one year and there may not be limitations on how large the deposit may be.

A Commercial Lease Agreement includes information such as the terms of the lease, the monthly rental rate and down payment amount. When you use our document builder you can choose which provisions you want to be included in your document such as liability insurance requirements, arbitration considerations, landlord access protocols, sublease restrictions and more. All legal language is automatically generated for you as you fill in the lease information.

Making this commercial real estate agreement is simple using our document builder, you need to submit the following information:

  • Address and description of the property to be leased
  • First and last day of lease agreement
  • Contract information for property manager and renter
  • Terms of payment such as due dates, how payments will be made and late fees
  • Deposit amount
  • Permitted use of the property and whether they will have exclusive rights
  • Descriptions of furnishing provided, if any
  • Parking and storage information
  • Insurance requirements (type and amount)
  • Whether the lease will automatically renew
  • Maintenance responsibilities of each party
  • Who pays which utilities
  • Tax responsibilities
  • Days' notice required if the property is sold
  • Provisions to include such as remodeling restrictions, indemnification, dispute resolution, subleasing and more

Landlords usually want the lease to be long and the rent high whereas the tenant will benefit from negotiable terms and reasonable rent. Most property managers are going to ask for a lease longer than three years. Considering that about two-thirds of businesses do not survive the first few years it doesn't make financial sense for small businesses, especially a new business, to sign a long-term lease. If your business is already established, a longer lease may offer benefits such as building improvements paid by the owner and locked-in rent rates.

Here are some questions to ask yourself before signing a long-term commercial lease:

  • How long can I manage to pay rent if business doesn't go well?
  • Do I plan to expand and hire more employees, if so, when?
  • Does "location" matter to my business and is it worth paying more for?
  • What kind of alterations or improvements to the property are required? How much will the property owner pay for and how much will I be responsible for?
  • What are the terms of renewal or what happens if I need to move from the property before the end of the lease?
  • Will I benefit from being able to sublease to another business?
  • If I must pay the property taxes, what is the most recent amount and how often does it increase?
  • Will I be sharing common spaces with other tenants and if so, what are my responsibilities?

Deposit amounts for commercial properties vary. Most property managers will ask for the equivalent of about one to two months of the rent amount. The amount charged often varies by the market, tenant's credit and the cost of improvements (or custom alterations) before occupying. For the most part, the owner of the property will want to be able to cover potential losses if you default or damage the property. Some may even choose to charge as much as six times the rent for the deposit in certain markets. Unlike residential leases, there are often no legal limitations on what can be charged for the deposit.

"Free rent" is just that. It is a period of time that you do not have to pay rent or pay a reduced rent. Some businesses, especially restaurants or retail spaces, may benefit from having a few months of free rent while they set up the space and seek customers. The longer the lease, the more likely free rent can be negotiated. In a competitive market you may not be able to benefit from free or reduced rent, but in an area with vacancies, you may be able to negotiate. Some suggest that you aim for one free month for every year of the lease, so five months for a five-year lease. Most property managers understand that your business succeeding means a better chance of them being paid in the future and some are willing to take a bit of an upfront loss to improve the chances of you completing your lease.

While there may be benefits from working with a commercial broker, you do not need to work with a broker. If you do not have a lot of properties to manage, you can likely handle them yourselves. If you have a lot of properties to manage you'll benefit from hiring a broker to help you find tenants and conduct negotiations. As a renter, you may benefit from working with a broker that can help you find suitable properties you may not be able to find on your own.

If you own property that you lease, you may benefit from the other Essential Documents for Landlords that we provide such as Eviction Notices, Triple Net Lease Agreements, Commercial Sublease Agreements and more. If you are just starting out and have not yet formed a business entity, we can help you with that too.

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