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Commercial Lease Agreement: What Should You Know Before Signing It?

HomeBusinessCommercial Lease Agreement: What Should You Know Before Signing It?

When the business grows, you may scramble for space, and find it challenging to service the customers properly. It’s when you start search commercial space to house your business activities together.

Even before signing the commercial lease agreement, you need to find a suitable space to run the business. It should be meet all the business needs. The location should be easily accessible and be within your budget. Once you have decided on a property with all the features needed for your business to grow, then you can go for commercial lease and negotiate the terms.

What is a Commercial Lease?

It is a legal contract between the landlord and tenant for business purposes. It signifies the transfer or right to use the commercial space from a landlord to a tenant for a specific duration and specified rent amount. The lease also details the responsibility of the landlord and the tenant during the lease term.

How Is It Different From Residential Lease?

The tenants of residential spaces get more care and protection from the government as they hardly have all the information about the leases and the lease agreements, and they can be taken advantage of quickly.

But the parties entering the commercial lease agreements are more aware of the issues with leases. They can easily access legal help and professional advice to tackle any problems. The commercial leases are more negotiable than the residential leases. The price of these leases depends on the type and the terms. So before signing the lease it is crucial to review all the terms to ensure that all the needs are met.

Key Terms That You Must Pay Attention To

The commercial lease agreement must have all the details of the premise that you are going to lease.

  • Confirm the city or county for the business that you want to run.
  • Get the dimensions of the space you are going to lease.
  • Get the details of space and the ownership details.

Lease Duration

It is the length of the lease and can be fixed, periodic, short-term or long-term. When you are negotiating the terms of the lease, it is crucial to check whether it is sustainable when the future is uncertain.

  • Lease with Fixed End Date – In this, the lease termination date is known from the start. It means neither the tenant nor the landlord has to notify the other for the lease termination. In this lease, the landlord may not increase the rent or even change the terms of the agreement. They should reserve the right in the lease only with the consent of the tenant.
  • Lease for Fixed Period – It is the most common type of lease and is renewed automatically. The lease can be ended by serving a termination notice. This notice should be made within a time period specified by the law.

    Then there are short-term or long-term leases. You can choose one over the other, and it entirely depends on the level of growth as the stability of the business.

New businesses prefer to go for short-term leases, and while the established ones prefer long-term leases. But it is always better to negotiate the lease term first along with the option to renegotiate it.

Lease Rent

In every commercial lease, the tenant will have to pay the minimal rent. Here are the main types:

  • Gross leases in which the tenant pay a fixed amount of rent.
  • Net Lease in which the tenant pays the base rent and the property expenses. It is tax, insurance and the common area maintenance.
  • Percentage Lease in which the tenant has to pay the base rent, and a percentage of gross income.

Finally,

These are a few essential things that one should know before signing the commercial lease agreement. Check the details before signing it.

pearls of wisdom
Carlos Davis
Carlos Davis
You need to have an electronic, digital or physical copy of the essential documents to present as and when required. Forms Legal LLC makes this process easy for you as you can create, print and download customized legal documents, contracts and forms on the cloud by signing up on its site free of charge. You can view and interact with PDFs as well as store and access your documents anytime, anywhere.

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