Overview of Commercial Lease

 

What is this document?

A Commercial Lease is an agreement where a commercial tenant agrees to rent property from a commercial landlord for a specified fee, purpose, and duration of time.

 

When would I use this document?

A Commercial Lease is used by parties who wish to lease commercial property, i.e. property from which to conduct a business. This is in contrast to an agreement to lease residential property, which requires a different type of lease.  A Commercial Lease will often be signed after the landlord has provided an “Offer to Lease” the premises to the tenant.

 

Who signs this Agreement?

A Commercial Lease is signed by the party leasing the premises, the “Landlord” or “Lessor”, and the party paying for and using the leased premises, the “Tenant” or “Lessee”.

 

More details about this document?

A Commercial Lease can be a complex agreement, depending on the size and cost of the leased premises and the legal sophistication of the parties. Because of these factors, there can be varying degrees of room for negotiation by the parties. As with any negotiation, the outcome will depend on the bargaining power of each party. For small business tenants, commercial leases tend to strongly favour the landlord.

The landlord will rent out the property to the tenant for a specified period of time for a specified, usually monthly, payment. The tenant is often restricted by clauses that limit the purposes for which the property may be used, as well as rules about maintenance, parking, signs, garbage removal etc.

If the lease is a ‘net lease’, the tenant will pay a base rent, its own utilities and fixtures, plus its share of all other costs of the property including taxes, insurance, maintenance, and administration expenses.

The Landlord may also have obligations, such as repairs and improvements that must be completed before the tenant occupies the premises.

 

What are the core elements of this document?

The core elements of a Commercial Lease include: the Leased Premises; Rent; Security Deposit, Permitted Use of Premises; Maintenance Obligations; Default; Term, Termination, Expenses, and Insurance.

Some examples of additional clauses may include: Taxes; Net Lease; Assignment; Subordination and Liens.

 

Related Documents

Sublease – an agreement between a tenant, a subtenant and for commercial leases, the landlord, subletting the leased premises to a subtenant. The original tenant is responsible to the landlord and the subtenant is responsible to the original tenant for the performance of the lease.

Offer to Lease – an offer to lease a property between landlord and potential tenant, usually used for commercial leases. This will outline the material points of the lease.

Consent to Assignment of Lease and Amendment to Lease – Agreement requiring consent from the landlord to assign the lease to a different tenant, and to amend the lease accordingly.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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