Commercial Property Contract

A commercial lease agreement is typically used for the rental of improved property such as office space.  However, commercial leases may also be used for the lease of unimproved property. 

Unimproved Property - The most common unimproved property lease is the ground lease.  A ground lease allows a tenant to lease the land and erect a structure on it.  Ground leases usually comes into play where the land is so unique that the tenant does not wish to purchase it or when he cannot afford to purchase it.  A ground lease is attractive to a landlord because it provides a source of income while passing the expenses of the land, such as taxes and insurance, to the tenant.
Improved Property - In addition to office space, commercial lease agreements are used for shopping center, mall, and other retail space.  Commercial leases for improved property often give the tenant the right to build-out the space to suit the needs of his business.

Common Terms of Commercial Lease Agrements

Commercial leases may contain a wide array of provisions.  However, there are some provisions which are common to almost all commercial lease agreements.  They include:

• Term;
• Rent, including escalations and how they will be calculated;
• Whether the lease is a gross lease or a net ;
• The amount of the security deposit and conditions for its return;
• Acceptable uses of the premises;
• The size of the premises being leased;
• The nature of any build-outs and who will be responsible for paying for them;
• Whether the landlord or the tenant will be responsible for repairs;
• Whether subletting or assigning the lease is permitted;
• Specifications for signage, including size and placement;
• Remedies in the event of default by either the landlord or the tenant; and
• Whether the tenant has the right of first refusal to renew the lease at the end of the lease term.

Getting Legal Help

Commercial property coverage forms are available online and at office supply stores.  However, these forms may not meet all of your needs.  Therefore, if you are a landlord, you should have a commercial real estate attorney draft the lease.

Commercial lease agreements are drafted to favor the landlord.  Once a tenant enters into a commercial lease, it is very difficult to get out of it.  Therefore, if you are a tenant, you should have the lease reviewed by a commercial real estate attorney before you sign it.  The attorney may also be able to negotiate with the landlord for terms which are more favorable to you.