Commercial Lease Agreement
What is a Commercial Lease Agreement?
A Commercial Lease Agreement, also known as a business lease, is a contract between a landlord/property manager and a business, outlining the terms of a commercial tenancy, whereby the tenant is renting space from a landlord for the purpose of conducting business.
Types of Commercial Property
This Commercial Lease Agreement can be used for office spaces, industrial facilities or warehouses, retail stores or restaurants, as well as storage, hotel, or medical buildings.
When should I use a Commercial Lease?
Whenever you are leasing commercial property to a business tenant, a written Commercial Lease Agreement should be used to specify the terms of the tenancy. A Commercial Lease lists the landlord's and the tenant's obligations to ensure there is no misunderstanding or ambiguity between the parties.
Creating your Commercial Lease Agreement
A Commercial Lease Agreement differs from a Residential Rental Agreement in a few ways, most notably that the property is used for business activities.
Here are some of the important considerations to keep in mind when creating your Commercial Lease:
Tenant's Permitted Use of the Property: In a business lease, it should state what type of business the tenant is allowed to conduct on the premises, as per the landlord's consent. The landlord may also grant or choose not to grant exclusive rights to that business type (e.g. accounting services) in the building if there is more than one tenant. Any change in the type of business the tenant conducts needs to be approved by the landlord.
Lease Term: There are various lease terms available to use in your Commercial Lease:
- Fixed end date: A fixed end date lists a specific date when the tenancy will end.
- Fixed weeks/months/years: A fixed week/month/year specifies a certain period of time that the lease will continue. It ends on the date specified, whereby the landlord cannot change any lease terms unless agreed to by both parties.
- Periodic/Automatic Renewal: A periodic lease term automatically renews every week/month/year indefinitely until one of the parties gives notice and terminates the lease.
Rent, Operating, and Utility Payments: The landlord should consider how much rent to charge, when rent is due, if there is a fee for late payments, the security deposit amount, and if utility/operating costs are included in the rent price or paid in part by the tenant.
Tax: The landlord may choose to charge the tenant a portion of the property taxes.
Insurance: The landlord can specify who will cover the tenant's contents, the landlord's contents, the leased premises, and personal injury insurance for the property.
Improvements and Chattels: This term involves whether the tenant is able to make improvements to the property, and if improvements are required by the landlord. Also, if chattels (e.g. non-fixed furniture, curtains, etc.) are provided by the landlord or tenant.
Other: The landlord can make additional considerations in the lease, including notices for tenant defaults, sublease and assignment terms, other permissions (such as pets), parking, attorney fees, option to renew, and more.