Before signing anything, you should ensure that you understand all the terms and conditions of the property you are renting such as the length of the lease, an amount of rent and the configuration of the physical space. In order to successfully rent a property and get through the process of understanding terms and conditions, landlords use the commercial lease agreement templates in order to help them understand all about the rental property in detail.
Commercial Lease Agreement Templates
If you are also willing to rent a property and not buy it, then will require less capital. Also, you will need the commercial lease agreement template for that too. We have free commercial lease agreement templates on our main website. Check them out and download them for free and use it for the rental property.
Commercial lease agreements are much more complicated than the residential leases as the terms and conditions are negotiable and flexible. In order to understand more about the commercial lease and its responsibilities and rights over each party, keep reading as we explain it all.
Overview to the Commercial Lease Agreement
A commercial lease is a form of agreement that is formed between a business and a landlord in which terms and conditions are highlighted for the rental property. Additionally, this type of agreement is just limited towards the specific renters looking for business properties and commercial reasons. You should ensure to understand the terms and conditions of the rental property before you take the plunge to signing the lease document.
Also, those conditions should meet the current, as well as the future needs of the business. Unfortunately, if you fail to determine those requirements before committing to a lease would definitely lead to some adverse consequences. So, here are some generic and common terms and conditions included in the document.
The Amount of the Rent
This is the amount that will be put forward by the landlord at the first place. The landlord is responsible for calculating the amount of the rent on the basis of the square footage of the place. As a buyer, you should make sure about the footage used by the landlord in order to come to the amount of the rent. For instance, if the property footage involves interior walls and elevator too, then you should also decide upon as to why will be responsible for paying off the property taxes, utilities, repairs insurance etc.
The Increase in Amount of Rent
The commercial lease agreement will also highlight the increase in the amount of rent on the basis of the annual percentage. As a buyer, you should be negotiating the amount of the rent with the landlord while being clear about a cap so that there are no issues with the rental costs later. Make sure that the cap of the percentage increase is manageable. The amount should be decided and kept with mutual understanding.
Length of the Lease
Almost all business property sellers prefer long-term lease agreements. At times this can be imprudent for a new business or buyer. If your landlord is also doing the same, you should ask them to reduce the term of the lease agreement. Also, you should request them to renew. Though, this may raise the amount to some extent, but it is a sensible decision than agreeing over the lengthy term.
Amendments and Improvements
In addition to the length of the lease, the agreement would also address the modifications, changes, and improvements that can be made to the rental property. If you are planning to make changes in the property, then you also need to decide over which party will be responsible for paying for the improvements and amendments made in the property.
Also, you should confirm the original condition too. For instance, some landlords commit on making changes only if the buyers agree to provide the rental property the same as it was before at the end of the tenancy period. So, make sure that you discuss all these aspects in advance in order to avoid unfortunate future consequences.
Description of the Property
The agreement should also cover the description of the rental property under the lease. There may be several presents inside the rental property. At times, landlords do not really add descriptions when buyer who has already taken a look on the rental property, thinking there is no point of adding details. They should definitely add the details of the rental property under the lease agreement. Furthermore, the lease agreement should include descriptions about kitchen area, common area, bathroom, parking facility etc.
This is again an important clause for the buyers who want to own a rental property for the business. This clause will prevent the landlord from renting your property to any of your business competitors.
Signs and Symbols
At times, it is necessary to include information about the signs and symbols placed near the rental property. The lease agreement should contain symbols and signs that can be seen from the street. Additionally, you should also be checking the local zones as to where and which ones can be used for the residential and commercial purpose. You have to ensure about the zoning ordinances in order to determine the application of limitations.
This is the section present in the lease which permits the activities the tenant is allowed to engage inside the rental property and those from which they are limited to. Basically, the use clause helps in securing the rental property from potential damages, being beneficial for the landlord, limiting the liability for them in the long run. As a buyer, you should request a broad usage section if you have a business that can expand to next level and involve in other activities.
Subletting and Assigning
Another most important aspect that is discussed in the lease agreement is the assigning and subletting. This is the act of renting the rental property to a sub-tenant. This is a very important thing that needs to be carefully discussed between the tenant and the landlord so that there are no problems later.
The tenant is responsible for paying for the rental amount whether the business relocates or fails or whatsoever. But if the tenant is given permission to sublet the property under the assigning and subletting act, then they can surely locate someone else to cover the rental amount of the property. If not so, then the tenant would have to pay the rent themselves.
ADA – Americans with Disabilities Act
When you purchase the rental property for the business reasons, then it may be public and would surely have employees and workers too. The lease agreement would highlight the people or workers with disabilities (if any) and determine under this section as to who will be responsible for paying for the changes and making alterations to the property.
Difference Between Commercial Lease and Residential Lease
While many people get confused between the residential and commercial lease, it is crucial to understand both of them as they are different from one and another. This is a commercial lease agreement between a landlord and a tenant outlining the terms and conditions of a rental property.
On the other hand, the residential lease agreement is also known as residential rental contract formed by the landlords to rent out real estate for the purpose of living. The basic difference between both of the agreements is that the commercial lease is for the business rental properties while the residential lease agreement is for the purpose of residence. If we compare both of them, the commercial leases are complex and more complicated than the residential ones.
Check out some more differences between both of them.
Less Consumer Protection Laws
The commercial lease agreements are not really subjected to consumer protection laws, governing the residential leases. For instance, there are neither any rules for protecting the tenant’s privacy nor are there caps on the security deposits.
Long-term and Binding
The commercial lease agreement is a long-term one which makes it difficult for you to break or changes the agreement. Also, it is a legally binding contract involving money. While the residential lease agreement may be both, short-term and long-term.
No Standard Format
In addition to the above point, most of the commercial leases are also not based on a standard agreement or form as each commercial lease is modified on the basis of the landlord’s needs. This is why you need to see to each and every commercial agreement you get customized and that is offered to you. On the contrary, the residential agreement likely has a standard format. But at times, it also requires customization in rare cases, depending upon the buyer.
Negotiability and Flexibility
Now that we have discussed enough about the commercial leases, you may have got to know that the commercial lease agreement is negotiable and is flexible. They are subjected to much more negotiation between the landlord and business owners. This likely happens because the business does need some special features in the rental property and spaces. On the contrary, the residential leases are mostly in one standard format and are also flexible but only when need be.
Things You Need to Consider About the Commercial Lease Agreement
So, if you are planning to buy a rental property for your business, then you may be looking for the commercial lease agreement. But you should make sure that you investigate over all the terms and conditions to ensure if the leasing meets your business needs. Check out what you need to consider for your commercial lease agreement.
Amount of Rent
You must see the amount of the rent to see whether or not you can afford it. Also, you should be seeing the length of the lease. Of course, you would not want to tie yourself on a long-term lease such as for 5 or 10 years. Hopefully, your business would grow faster than you expect this is why you should make sure that you go for the short-term lease with renewal options as it is a safer choice. This will also help to keep a lower amount of rent.
This is the second most important thing that you need to consider for your commercial lease agreement. The physical space of the rental property entirely depends on your type of business and activities you follow there. If your business requires amendments and modifications in the rental space such as raising a loading dock, adding cubicles, or re-wiring for better communications, you should ensure that you write it down in the agreement and also mention who will be responsible for these modifications and changes.
Mistakes to Avoid in the Lease Agreement
Normally, the commercial lease agreement is a very long, complicated and detailed document. Also, it is new and complex to those who do not regularly sign new leases. Understanding the terms and condition of lease agreement is really very essential hence you need to avoid some common mistakes done by people.
- When you do not understand the entire lease contract properly.
- When you do not understand the leasing process.
- When you do not focus on the amount of rent.
- When you do not plan for the future growth or downsizing.
- When you do not negotiate on the assignment and subletting provisions.
- When you do not understand tenant’s improvement provisions.
- When you do not understand the rules behind signage.
If you are looking for a rental property, you would require a lease agreement too. You should make sure that you do check out all the terms and conditions properly. We have free lease agreement templates for you. Simply download them and take help from them for renting the property. Good luck!
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