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A commercial lease grants you tenants’ rights to a commercial property. It’s a legally binding agreement made between a landlord (often the owner of the property) and a business tenant that outlines any terms and conditions you both must follow. Commercial real estate brokers may also negotiate the terms of the lease on behalf of a property owner. Within the lease, the “LESSEE” is the landlord, while the “LESSOR” is the tenant.
What Is Included in a Commercial Lease Agreement?
A commercial lease agreement outlines the rights and responsibilities of a “LESSEE” and “LESSOR.” It includes the following terms and conditions:
- Both of your names and information
- The address and basic information about the property
- The type of commercial building you’re leasing
- The square footage of the space
- The length of the lease and the terms of renewing the lease
- The cost of rent and when you must pay it
- The cost of the security deposit.
- An outline of how you may use the leased space
- An outline of what changes or renovations you may make. It may also explain whether the business owner or property owner is responsible for these changes
- Fixtures or appliances the lease provides
Common Commercial Lease Agreements
The type of commercial lease agreement you will sign is based on your business’s needs and preferences. Get to know common commercial lease agreements you may come across:
- Single net lease: Although not very common, single net leases are the most straightforward net lease. As a tenant, you are responsible for paying the rent and property taxes of the space.
- Double net lease: You are responsible for paying the rent, property taxes, and building insurance. The landlord must pay the costs of utilities, maintenance, and any other expenses that may arise. This type of lease is common for multi-tenanted buildings since the property owner is financially responsible for structural issues. The amount you pay will vary based on how much square footage you are leasing.
- Triple net lease: With this kind of lease, property owners make out the best. As a tenant, you are responsible for most of the costs relating to your occupation of commercial space. You pay for rent, maintenance, insurance, taxes, utilities, and standard property repairs. Proceed with caution when deciding if you want a triple net lease, as you could be responsible for high expenses, like a broken HVAC or leaky roof. The advantage is that the base rent for these properties tends to be lower.
- Bondable net leases: This lease is close to a triple net lease, but you have even more stakes in your rental space. You are responsible for any risks associated with the commercial space, such as natural disasters or fires. These types of leases are quite rare, although the benefit for tenants is that the landlord has fewer termination rights.
- Full-service gross lease: You pay a fixed rent payment every month. As a business owner, this is the easiest rent to budget for since you can expect to pay the same flat rate each month. Your landlord is responsible for all other expenses, including insurance, utilities, taxes, and property management fees.
- Modified gross lease: With this lease, the landlord is still responsible for insurance, utilities, taxes, and property management fees. Along with paying your fixed rent each month, you are also responsible for any incremental increases in operating costs. For instance, if the property taxes of the building suddenly increase, you may have to pay for a portion of that increase.
How Do Commercial Leases Work?
Commercial leases can help commercial landlords manage tenant relationships while protecting their business. It is critical to understand commercial leases before renting space to a small business. The type of commercial lease, terms, and termination requirements are vital elements of your contracts and affect how you negotiate the outcome.
There are generally three types of commercial leases, in general, including:
- Gross or full-service lease.
- Modified gross lease
- Net lease
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If you or someone you know is in the market for Commercial Leasing, then understand that it’s never good to go at it alone. Save yourself from time, money, and headaches by calling a professional property manager. If you have any questions, please don’t hesitate to call Rentomatic Property Management, today!