A Sample Commercial Lease Agreement Examined

Although there is not a universal template for a commercial lease agreement, many agreements contain similar terms and provisions. Below are some of the more common provisions you will find in a commercial lease agreement.

Basic Information

As with any lease or contract, the commercial lease agreement should include the names of the lessor and tenant, the property address, the legal description of the building, and the required signatures.

Term

The term is the period during which the lease will run. The language will not only include the start and end dates, but might include language that the landlord or owner will use best efforts to give the tenant possession at the stated Begin Date or as near as possible to that date. The language might also indicate that rent will be abated for the delay period.

Additionally, this section might indicate terms of renewal. For example, the provision might state the tenant has a option to renew by written notice to the owner not less than a state period (usually 90 days).

Rental

This section provides the amount of rent during the full lease period, usually payable in monthly installments as well as the date when each payment is due. The rental provision may stipulate a daily proration for any partial calendar month. Payments may also include any security deposit due.

Use

The section will indicate proper usage of the leased property as well as prohibited uses. For instance, the terms may prohibit storage of any flammable or inherently dangerous substances.

Sublease and Assignment

This provision controls any subleases and assignments with or without the landlord's approval. Usually, the landlord will prohibit any sublease or assignment without consent. However, that consent must not be unreasonably withheld or delayed. In cases of a tenant who merges with another entity that remains under the control of the tenant, the original tenant may assign all of its assets under this provision.

Repairs, Alterations and Modifications

This section controls who will bear the costs of any repairs or required alterations or modifications of the property. A tenant at times will be given permission to make improvements as the tenant deems desired or necessary. Additionally, this provision will indicate retained ownership of items affixed to the property by the tenant but that any damage for removal accrues to the tenant.

Utilities

This section provides that the tenant (or landlord) is responsible for all or a portion of such utilities as heat, gas, water, electricity, phone and other services. If there are additional tenants, the tenant will pay its pro rata share within a specified period.

Insurance

This section delegates financial obligations in case of possible hazards. For example, a landlord is required to carry insurance for the entire commercial property. However, if the property is damaged by fire or some other destructive event due to the tenant's (or tenant's employee's) negligence, the tenant may be required to continue full rent without abatement during repairs and may be responsible for any expenses not covered by insurance.

Default

The section controls if a tenant defaults on rental payment. The provision usually stipulates a period of default after a certain time period of non-payment and indicates the type of notice required. After a prolonged period of non-payment, the landlord can then notify tenant that the tenant's lease has been terminated.

Other Provisions

Other common provisions might include language on condemnation, subordination and waivers. If the commercial property is a shopping area, the lease agreement may also include provisions on issues such as entry, signage and parking assignments.

Find an Attorney

A commercial lease agreement should contain all contingencies that may occur between a tenant and landlord. Consult with an attorney before signing an agreement to ensure that all issues are adequately covered.