Commercial Lease

A Commercial Lease Agreement outlines the rights and responsibilities of a tenant and landlord during a commercial tenancy.

  • Perfect for office buildings, industrial property, restaurants, retail stores, warehouses, and more

A commercial lease is a contract between a landlord and a business for the rental of property. Most businesses will choose to rent property instead of buying it because it requires less capital. Commercial lease agreements are more complicated than residential leases because the terms are negotiable and vary greatly from lease to lease. Before signing a commercial lease, it is important to understand the lease terms that define the rights and responsibilities of each party.

Important Commercial Lease Agreement Terms

Before signing a commercial lease agreement, make sure that the terms will meet the needs of the business. The failure to determine requirements prior to committing to a lease can lead to unfortunate consequences. Commercial leases usually include the following terms:

Rent amount: A landlord will calculate the rent amount based on the square footage of the space. Be aware of what footage the landlord uses to calculate the rent. For example, does the footage include the elevator and interior walls? If possible, negotiate which party is responsible for other costs like utilities, property taxes, insurance, and repairs.

Rent increases: Commercial lease agreements will usually provide for an annual percentage-based rent increase. Negotiate with the landlord for a cap on the percentage increase in order to avoid unmanageable rental costs later.

Security deposit: The lease should verify the amount of the security deposit and the terms regarding its return.

Length of the lease: Most landlords prefer long-term lease agreements. This, however, may be unwise for a new business. Ask the landlord for a short-term lease with an option to renew. This may raise the rent amount, but it is a better alternative than agreeing to a lengthy term.

Improvements: A lease should address what improvements or modifications can be made to the property, which party will pay for the improvements, and whether the tenant is responsible for returning the unit to its original condition at the end of the tenancy.

Description of the property: The lease should clearly describe the property under lease. For instance, the lease should clarify whether it includes bathrooms, common areas, a kitchen area, and a parking facility.