You need to understand all the terms and conditions of the property you plan on renting, such as duration of the rent, rental cost and the configuration of the renting space. Landlords usually use the commercial lease agreement templates to help them understand the terms and conditions of rental policies.
Commercial Lease Agreement Templates
If you want to rent a property and not buy it, you will need a form of the commercial lease agreement, we have them on our main website, so you can use it for free and use it for the rental property.
Compare to residential leases, commercial lease agreements are much more complicated since the terms and conditions are negotiable and more flexible. We will explain in further details below so you can be clear of what need to be done.
Overview to the Commercial Lease Agreement
A commercial lease is a contract form between a business and a landlord in which terms and conditions are emphasized for the rental property. This type of agreement is limited towards renters whose looking for business properties and commercial reasons. You should be sure to understand the terms and conditions of the contract clearly before signing the lease document.
Next, the listed conditions should meet the current and the future needs of the business, if you failed to determine those requirements, you might face some adverse consequences in the future of the business. We will list out some general and common terms, conditions included in the contract.
The Renting Cost
This is the cost that the landlord will ask for in the first place. The landlord will calculate the renting cost by using the square footage of the place. As a customer, you should be mindful about the total area calculated by the landlord in order to be sure about the renting cost. For example, if the landlord included interior walls and elevators too, then you should decide who will be responsible for paying off the property taxes, utilities, repairs insurance…
The Increase in Renting Cost
The commercial lease agreement will mention about the increase in renting cost, usually as annual percentage. As a customer, you should negotiate to get the lowest increase cost per year, as well as be clear a about a cap so there are no financial issues in the long run. The cap of the percentage increase should be manageable, acceptable between both parties.
Length of the Lease
Business property sellers usually prefer to rent long-term lease rather than short-time to secure a more stable income. If your landlord is offering you the same deal, ask them to reduce the renting duration because there are many variable can affect your business that you might not know, by renting a short amount of time and testing the new place, you can be more flexible in the long run and you also can ask them to renew the contract in the future.
Amendments and Improvements
The contract will address the modifications, changes and improvements that may be made during the rental time. If you are planning on making changes to the property, you need to be clear with the landlord on who will be responsible for the improvements and amendments made in the property.
You also need to confirm the original condition with the landlord. Some landlord will only agree to make changes if you agree to change the property back to its original condition after the rental period is over. So, make sure you discuss with your landlord in advance before making any decisions to avoid unfortunate consequences.
Description of the Property
The contract need to cover the description of the rental property under the lease. Sometimes, landlords won’t add descriptions when buyer who already look at the property, thinking that’s extra work and won’t fill in the details. They need to add the details of the property under the contract. In the contract, details about kitchen area, common area such as bedroom, bathroom, parking space need to be included.
This clause is very important to the customer since it prevent the landlord from renting your property to any other customers. Make sure that exclusivity clause is mentioned in the contract.
Signs and Symbols
It is essential to contain information about the signs and symbols placed near the rental property. The lease agreement need to contain symbols and signs that can be seen in the public streets. Furthermore, buyer should check the local zones to know which ones can be used for residential and commercial purpose. Buyer have to guarantee about the zoning regulations to be clear of the limitations from the contracts.
Use clause is the section where landlords permit which activities the buyer is allowed to engage inside the hired space and which activities is forbidden. In simple term, the use clause prevents the rented place from potential damages, which is good for the landlords. You should request a wide range of usage options from rental property as your business will expand in the future and require more activities.
Subletting and Assigning
One of the most important aspect in the lease agreement is the assigning and subletting. That is the act of renting the property to a sub-tenant. This transaction is very important and need to be discuss in detail within the landlord, tenant and sub-tenant so there won’t be any problem in the future.
The tenant is responsible for paying the bill on-time, regardless whether the business is relocated, fail, etc. But if the tenant is given permission to lease the property under the subletting and assigning act, they can ask someone else to pay the rental cost. If not so, the tenant will have to pay the cost themselves.
ADA – Americans with Disabilities Act
When you rent a property for business reasons, then there will be employees and workers working within your business. The lease agreement will highlight the employees with disabilities (if any) and determine under this section which one need to pay for the changes and making alterations to the property.
Difference Between Commercial Lease and Residential Lease
Differences Between Commercial Lease and Residential Lease
It’s important to understand both commercial lease and residential lease due to their nature differences. The basic difference between commercial lease and residential lease is that commercial lease is a for business property only while residential lease is for the purpose of residence. If we go into further detail, the commercial leases are complex and more complicated than residential lease.
We will talk about some differences between the two.
Less Consumer Protection Laws
Consumer protection laws are not really support in commercial lease agreements. For example, there’s no rule to protect the tenant’s privacy and there’s no caps on the security deposits.
Long-term and Binding
The commercial lease agreement is a long-term rental agreement thus make it very hard to break or change the agreement. It’s also a legal binding contract involving money. On the other hand, the residential lease agreement can be both short or long-term.
No Standard Format
There’s no standard format for commercial leases, they are all customized base on the needs and requirements of the landlord. You will have to see and read them in detail before making any decision. On the other hand, the residential agreement will have a simpler, standard format. But on some rare occasions, the landlord may want some specific requirement or condition that the buyer need to follow.
Negotiability and Flexibility
For negotiability and flexibility, the commercial lease agreement is more flexible due to the nature of the business; your business might have special features and requirements that need to be done to the property. On the contrary, the residential leases are simpler since it’s for residence so there won’t be as much of flexibility from the landlords.