Commercial Lease Agreement Forms
It’s important to use a Commercial Lease Agreement whenever you want to rent out a commercial property in the United States. This document details the financial aspects of the lease, and can act as a legal record if disputes arise in the future. It also sets expectations for both the landlord and the tenant.
Read on to learn more about the Commercial Leasing process and get the answers to some of the most commonly asked questions.
Commercial Lease Agreements by State
What Are Commercial Lease Agreements?
A Commercial Lease Agreement is a legally binding contract between a tenant and a landlord. It’s used when renting a property for commercial uses. Office space, industrial space or premises for a restaurant or retail business.
This document outlines the terms of the lease that both tenant and landlord must abide by. It typically includes the rent that is due each month, the duration of the lease and other important details regarding the agreement.
Commercial Lease Agreements are important to prevent any disputes or misunderstandings at any point throughout the lease. They can be used as a legal record in the case of any such disputes.
How Does the Commercial Leasing Process Work?
If you want to rent a commercial property, you need to screen tenants through an application process. The laws can vary by state, but the process is similar nationwide. Here’s what you should do if you’re planning on leasing out commercial property.
1. Run a Background and Credit Check
Landlords should always use the tenant’s rental application to review their financial and background information. This process generally includes:
- Business financials – The business’s bank statements, profit and loss reports, and tax returns can prove that they’re financially stable. This helps show that they’ll be able to pay rent.
- Rental history – The tenant should include the contact information of landlords from whom they’ve previously rented. They can confirm that the tenant paid rent on time and took care of the property.
2. Choose the Lease Type
Once a tenant passes the screening process, the landlord and tenant must decide on the lease structure. Apart from the generic Commercial Lease Agreement, there are many different variants of this document that include specific clauses. These include:
- Net Lease – The tenant pays certain operating costs, in addition to the base rent.
- Modified Gross Lease – The landlord and tenant agree on a division of operating expenses. They share certain costs that can fluctuate, such as maintenance or utility bills. The base rent remains a fixed amount.
- Percentage Lease – In addition to the base rent, the tenant must also pay a percentage of the business’s monthly income to the landlord. This type of lease is often used when the tenant operates a retail space.
- Full-Service Lease – The rental rate includes all property expenses. This includes utilities, maintenance, and real estate taxes. This means that the landlord is responsible for all upkeep and operating costs, not the tenant.
If you’re just beginning the process of renting out your commercial space, you can use the free Commercial Lease Agreement templates from our site.
3. Negotiate the Terms of the Lease
Next, you need to decide on the terms of the lease. You need to consider the following points:
- Security deposit – Tenants are typically required to pay one to two months’ rent to cover any unexpected damage to the property, or missed rent payments.
- Monthly rent and payment terms – State how much the tenant needs to pay each month. You should also include how it should be paid.
- Maintenance and repairs – Decide whether the tenant or landlord is responsible for repairs and maintenance of the property.
- Subletting – Your lease should mention whether the business can sublease any part of the space. You should also determine if they can transfer the lease to another party.
- Late payment penalties – Include penalties for late rent payments and bounced checks.
- Permitted use – Clearly state what uses are permitted for the property. This should be based on the local zoning laws.
You can find various state-specific Commercial Lease Agreement templates on this website. These can serve as a guide when you’re drafting your own document.
4. Both Parties Sign the Commercial Lease Agreement
Both parties must sign the document once they have agreed on the terms. Tenants need to carefully read and fully understand the document before they sign. They may want to have a lawyer review the document before signing.
The tenant, landlord, and any guarantors or co-signers should sign the document.
5. The Tenant Takes Possession
The tenant must pay the first month’s rent, security deposit, and the other fees stated in the lease. The tenant can move in and begin their business operations once the landlord receives these payments.
