Commercial Leasing 101
September 9, 2014
Commercial leases come in all shapes and sizes. Some leases are short and only address key issues, while other leases are long and cover almost anything that can happen in the leased premises. Long or short, commercial leases can be confusing for both landlords and tenants. Below is a short list and short explanation of some of the most important commercial lease issues.
- The Premises
A commercial lease should clearly set out what space is being leased. This is usually done through some combination of the street address, square footage, legal description, and/or site plan. It is important to review all of these elements to ensure that the space described in the lease properly reflects the space the parties are expecting to be leased.
- Gross or Net Lease
A commercial lease needs to define what is included and what is not included in the basic rent paid by the tenant. At one end of the spectrum is a gross lease, which typically requires the tenant to only pay the amount set out as basic rent. At the other end of the spectrum is a net lease, which typically requires the tenant to pay the basic rent and its share of all other costs associated with the premises and the building. Although leases are often labeled as either a “Gross Lease” or a “Net Lease”, these leases often actually fall somewhere in between the two extremes. It is important for tenants to make sure they know what is included in the rental rate when comparing one lease to another.
- Permitted Use
What can the tenant do and what can the tenant not do in the leased premises? Commercial leases generally put a number of restrictions on the uses to which the leased premises can be used. Tenants need to ensure that their intended current, and future uses for the premises are both explicitly allowed in the lease and that there are no provisions which would restrict their intended use.
Commercial leases can grant exclusive rights to tenants. These would include rights for tenants to be the only convenience store, dry cleaner, etc… in a plaza. These rights can be important for tenants as often their businesses could not survive without these rights. These rights are also very important for the landlord, as granting these rights will impact what the landlord is able to do with their property moving forward.
If something breaks, who is responsible for fixing it? Tenants will want to ensure that both their premises, and the building in which they operate is well maintained. A commercial lease should set out clearly who is responsible for maintaining the various parts of the premises and the building. Tenants will want to carefully review their leases to ensure that they know what their maintenance obligations are.
The foregoing is meant only to be a brief overview of some of the important parts of a commercial lease. This article is not meant to be an exhaustive discussion of commercial leasing provisions. This article is intended only as a brief overview of the Anti-Spam Act and does not constitute legal advice or an opinion on any issue. For more information, please contact us.