Commercial Lease Agreement Form

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A commercial lease agreement is a written agreement between a landlord and a potential tenant for a commercial space. The lease agreement outlines the duties and responsibilities of each party. It usually lists the amount of rent, when rent must be paid, how and where rent must be paid, and the amount of time that the tenant is leasing the space. It should also include whether the tenant is responsible for any utilities or maintenance for the premises.

What is a commercial lease agreement?

A Commercial Lease may be 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. Generally, 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 lease 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.  Commercial leases are generally longer than residential leases, typically between 3-5 years. They commonly have options for a tenant to renew the lease at a predetermined rate.

Other names

  • Commercial Lease
  • Commercial Property Lease
  • Business Lease
  • Industrial Lease
  • Office Space Lease

What is commercial real estate?

Commercial real estate is property that is used for business purposes.  A landlord leases a property to a tenant in exchange for rent. Commercial real estate includes: office space, buildings, warehouses, medical centers, shopping malls, and restaurants.

What can a commercial lease agreement be used for?

This Commercial Lease Contract is applicable when renting any commercial property, including:

  • Office space
  • Industrial / warehouse space
  • Retail area property
  • Residential space conversion
  • Building section, rooms or space
  • Other potential commercial spaces or residential conversions

Who needs one?

Anyone wishing to rent out space for commercial use, or any business seeking to rent commercial space needs a contract to detail the rights and responsibilities of both lessor and lessee.

People who may find this information useful include:

  • Property owners seeking business tenants
  • Companies seeking business premises
  • Commercial landlords, property developers and managers

Types of commercial leases:

  • Gross Lease - tenant is responsible for rent payments only, landlord is responsible for all other payments
  • Net lease/Triple Net (NNN) Lease - tenant is responsible for rent payments, and expenses that can include: property tax, property insurance, property maintenance
  • Booth (Salon) Rental Agreement - tenant pays owner of a business for use of a booth or area to provide salon services
  • Garage Rental Agreement - tenant leases space for parking a vehicle
  • Facility Event Space Rental Agreement - tenant leases space to hold an event

Types of commercial property

  • Industrial - Industrial properties include warehouses and factories.  The best industrial properties are compliant with all applicable laws and close to major transportation routes. Common industrial properties include heavy manufacturing, light assembly, flex warehouse, bulk warehouse, and research and development (R&D) facilities.
  • Office - Office properties are categorized into three different qualities based on their location and quality of construction: Class A, Class B, and Class C.
  • Retail - Retail properties are commonly used for shopping centers, restaurants and shops.  When multiple tenants are renting out space in the same area, the leases will have to include additional terms that specify how common spaces will be used.

Components of a commercial lease agreement

The Lease agreement should include:

  • Location of property
  • Period of the lease
  • Rent
  • Security deposit
  • Taxes
  • Property Insurance
  • Utilities and Amenities
  • Remodeling and Improvements
  • Repairs and Maintenance
  • Termination and Renewal
  • Illegal Activity
  • Subletting

How to write a commercial lease agreement

If you choose to draft your own commercial lease, you should make sure to include all of the important lease information, including:

  • Property location and description (including square footage)
  • Period of the lease: fixed term or periodic
  • Tenancy renewal terms and conditions
  • Financial details: rental fee, frequency payable, options for payment, general or specific terms and conditions for rental increase
  • Tenant obligations, 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 minimizes competition and local market saturation.
    • Legal compliance e.g. waste pollution management, appropriate building use in accordance with bylaws. 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 details
  • Additional fees payable by tenant, 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
  • Landlord obligations:
    • Good repair maintenance
    • Professional indemnity
    • Rights of access
  • Incentives
  • Date and signature of both landlord and commercial tenant

If you would like to save time and money in creating your agreement, you can work with a commercial lease template.  No matter how you choose to create your agreement, it is a good idea to have it reviewed by legal counsel to be sure that it is legally valid and abides by all the applicable laws.

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

Legal Considerations

A commercial lease is a binding legal contract.  All terms that the parties agree to be bound by must be included in the lease.  Commercial leases do not contain the implied protections that are included in cases involving residential leases.

Landlord responsibilities with commercial property

A landlord must take additional factors into consideration:

  • Property Use - The landlord must decide what types of business will be allowed on the property
  • Property Specifications - The landlord must ensure that the property is being used in a way that meets the applicable building codes and bylaws.
  • Exclusive Use - The landlord must decide if a tenant will be the only tenant in the building who is allowed to operate a certain type of business.
  • Lease Terms - The landlord must determine whether the lease will run on a weekly, monthly, or yearly term and whether it is will be a fixed term, periodic tenancy, or automatic renewal.
  • Operating Costs and Utilities - The landlord must determine whether a tenant will be responsible for a portion of the utilities and operating costs.  The landlord must also determine whether a tenant’s potion is a fixed rate or a percentage of the total costs, and whether a tenant will pay the landlord or the utility companies directly.
  • Taxes - The landlord must decide whether a tenant is responsible for paying a portion of the taxes and how that amount is determined.
  • Parking - The landlord must decide whether a tenant must pay for any parking or whether it is included within the rental price.
  • Improvements - A tenant may require that a landlord add specific improvements to the property in order to operate their business.  The landlord must approve these changes and the parties must agree who will pay for them and whether the tenant will take these improvements with them at the end of the lease.

How is rent calculated?

A landlord can choose to calculate rent using a few different methods:

  • Gross lease - tenant pays fixed monthly amount only
  • Base rent plus specified operating costs - tenant pays fixed monthly rent plus an addition amount for expenses related to the entire property, such as the cost of a janitor to clean the common areas
  • Triple net lease - tenant pays fixed monthly rent plus a portion of operating costs for the entire building, property taxes, insurance, and maintenance.

How long does a commercial lease agreement last?

The length of a commercial lease depends on whether it is a fixed term or periodic lease.  The fixed term lease ends on a specific date is stated in the lease. The periodic lease renews every lease term until the tenant or landlord gives notice to terminate.

Required Clauses

Americans with Disability Act (ADA) 42 U.S. Code § 12183 – The ADA requires that any commercial tenants which offer “public accommodation” (such as a restaurant, retail store, etc.) or have at least fifteen (15) employees adhere to all handicap access rules. This rule does not apply to properties that have not been built or had renovations since 1992.

“If the Lessee is using the premises as a public accommodation (e.g. restaurants, shopping centers, office buildings) or there are more than 15 employees, they must provide accommodations and access to persons with disabilities that is equal or similar to that available to the general public. Owners, operators, lessors, and lessees of commercial properties are all responsible for ADA compliance. If the premises is not in compliance with the Americans with Disability Act, any modifications or construction will be the responsibility of the Lessor.”

Resource Conservation and Recovery Act (RCRA) 42 U.S. Code § 6901 – Requires the tenant to sign an agreement stating that they will adhere to any federal, state, or local laws regarding the disposal of hazardous wastes.

“Tenant shall adhere to any and all federal, state, or local laws, ordinances, rules, decrees, orders, regulations, or court decisions relating to hazardous substances, hazardous materials, hazardous waste, toxic substances, environmental conditions on, under, or about the Premises, the Building, or the Property, or soil and ground water conditions, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Hazardous Materials Transportation Act, any other law or legal requirement concerning hazardous or toxic substances, and any amendments to the foregoing.”

Download a PDF or Word Template

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Sample Commercial Lease Agreement

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Sample Commercial Lease Agreement

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