How Do the Terms of a Commercial Lease Operate?

How Do the Terms of a Commercial Lease Operate?A commercial lease grants a tenant rights to use a commercial property. It is a legally binding contract that outlines the terms and conditions both the tenant and the landlord (often the property owner) must follow.

Given that not every state has a standard commercial lease form, it is crucial to ensure your lease includes all relevant clauses to inform you as a tenant. Below are some common clauses you might find in a commercial lease:

Basic Information

This section includes the names of the tenant and landlord, the property address, basic details about the property, and the type of zoning for the commercial building.

Late Payments

The lease should clearly state the conditions for late rent payments, including the amount of any late fees and/or interest on overdue payments. This clause provides the landlord an alternative to immediately evicting tenants for late rent.

Non-Waiver Provisions

A non-waiver clause protects the landlord’s right to enforce lease conditions that they may have previously overlooked. Tenants should ensure that this clause applies to both the landlord and the tenant.

Use Clauses

These clauses outline what the tenant can and cannot do with the rented space. They also resolve conflicts between business tenants if multiple tenants rent space in the same building. This could include a “limited use” condition that permits the tenant to use the space only for an approved business or to define specific purposes for the space.

Subletting

Unless otherwise specified in the lease, a commercial tenant may sublet the space according to the lease’s terms. This allows the tenant to lease the space to another business for the remainder of the lease term or for a specified period.

Security Deposits

Most commercial landlords require a security deposit, and in some states, landlords can demand any amount for a space. The landlord uses the security deposit to cover any repairs needed after the tenant vacates the property or to cover unpaid rent.

Repairs and Maintenance

Unlike residential properties, commercial landlords are often not obligated to make repairs or provide maintenance unless specifically stated in the lease. Tenants should negotiate a repair and maintenance clause in their lease to require the landlord to undertake repairs.

Insurance

The insurance provisions in a commercial lease specify the type of insurance required, the minimum coverage amount, and whether the landlord, tenant, or both must insure the space.

Changes to the Property

The lease should clearly state the rights and obligations of the landlord and tenant regarding alterations and upgrades to the commercial property, including who is responsible for the associated costs.

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