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A commercial lease agreement is a legally binding agreement negotiated between a landlord, often also a commercial landlord and a business, where the property will be used for business purposes.

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Commercial Lease Information

Alternate Names:

  • Commercial Lease
  • Business Lease
  • Industrial Lease

What is a Commercial Lease?

A Commercial Lease is a legally binding agreement negotiated between a landlord, often also a commercial landlord and a business, where the property will be used for business purposes. The Lease includes address of the property, business tenant and landlord contact details, an inventory of fixtures and fittings, terms of the lease, generally as per a residential agreement, with some additions.

Additional clauses may include, for instance, guarantor contact details. These agreements may be more or less inclusive of terms of the lease.

The Lease can cover a wide range of issues including:

  • the period of the lease: fixed term or periodic
  • the rental fee, frequency payable and possibly options for payment
  • general or specific terms and conditions for rental increase
  • general obligations of the tenant, such as:
    • business purpose i.e. the type of product or service offered by the business tenant
    • exclusivity: exclusive use means that the business tenant would be the only company in that building or area of their kind; this minimises competition and local market saturation.
    • Legal compliance e.g. waste pollution management, appropriate building use in accordance with byelaws. The landlord is responsible for ensuring that the business usage is permissible.
    • rights to make alterations and improvements; the landlord or the business may make appropriate alterations to ensure property suitability for the business purpose.
    • exclusions to business activities e.g. out of business hours
    • sub-letting e.g. chain stores that offer other brands use of space
    • other detail
  • additional fees payable by the lessee, such as:
    • deposit payable as security against loss or damage
    • charges applicable for late payment of rent
    • grounds maintenance, common area cleaning charges, parking space allocation, other
    • utilities: while the company may pay these directly to the utility company, alternatively, they may pay either a percentage of the bills to the landlord, or a fixed rate
  • the landlord’s obligations:
    • good repair maintenance
    • professional indemnity
    • rights of access
  • incentives
  • tenancy renewal terms and conditions
  • other detail negotiated
  • date and signature of both landlord and commercial tenant

Both parties should keep a copy of the signed agreement for their records.

Frequently Asked Questions

  1. What is the difference between a deed of trust and a mortgage?

    • For general purposes of understanding, the legal terminology differs, but ostensibly the two arrangements are similar in function. For instance, the lender (creditor), is known as a mortgagee in a mortgage arrangement and a beneficiary in a deed of trust. Similarly, a borrower (debtor) is defined as the mortgagor in a mortgage arrangement and obligor in any deed of trust arrangement.

    • There are, however technical differences between them. A deed of trust involves a third party trustee, who holds the property ownership in trust for the creditor. This differs from a mortgage where title to the collateral remains with the debtor; but there is a ‘lien’ on the real estate which favors the creditor

    • The state laws in which the property is being sold dictates whether a mortgage or deed of trust is applicable and there may be differences in arrangements e.g. A deed of trust may enable a trustee to obtain possession of the property without a foreclosure and sale. In some jurisdictions, a deed of trust might be treated as if it were a mortgage. Here, deeds of trust are governed by the laws applying to mortgages. The deed of trust requires a trustee to convey the property back to the debtor upon full payment of the debt.

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Commercial Lease Agreement

A Commercial Lease Agreement is a legally binding agreement negotiated between a landlord, often also a commercial landlord and a business, where the property will be used for business purposes. The Lease includes address of the property, business tenant and landlord contact details, an inventory of fixtures and fittings, terms of the lease, generally as per a residential agreement, with some additions.

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