A commercial lease agreement is a document between a landlord and tenant for the use of space that is for any type of business or storage related use. The tenant, usually being an entity, should undergo an extensive credit check as the individuals are not usually responsible for the business liabilities. If the business is new or not credible to the landlord’s liking then a personal guaranty should be authorized which requires the tenant to individually guarantee the lease if rent is not paid.
Commercial Rental Application – Use to determine the credit-worthiness of a potential tenant before signing a lease.
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
Booth (Salon) Rental Agreement – Tenant pays the owner of a business, typically a salon, for the use of a booth or area for cutting/coloring hair, massage, cosmetic, or nails.
Garage (Parking) Rental Agreement – Space that is to be used by parking a vehicle.
Facility Event Space Rental Agreement – An agreement to rent a setting for an event.
Triple-Net (NNN) Lease Agreement – Tenant pays an agreed upon amount to the landlord in addition to all expenses apart of the property including but not limited to taxes, common area maintenance (CAM’s), and real estate taxes levied by the county and/or city/town.
Table of Contents
- Agreements: by State
- Agreements: by Type
- What is a Commercial Lease?
- How to Lease Commercial Property
- Other Lease Terms
- How to Use a Commercial Lease
- Types of Property
- How to Write
Most people think of a lease agreement in terms of apartments and single-family homes for rent. However, businesses also use leases to rent out buildings for themselves. This form of contract is called a commercial lease agreement. Most businesses like shopping centers, restaurants, downtown offices, and small mom-and-pop shops don’t actually own the property they conduct business from. They rent it!
Businesses do this because it’s often cheaper for them to rent than it is for them to buy the property. Commercial lease agreements allow companies to negotiate terms and responsibilities with the landlord, and it offers them a way out if they need to relocate or close shop. It makes sense for businesses to rent, especially for chain commercial outlets and retail centers.
The process of renting commercial space depends on the type of property such as office, retail, or industrial. All property types are usually marketed as a price per square foot ($/SF). Every property is unique and therefore coming up with a suitable price can be difficult. Therefore, it is useful to see what other properties have rented for in your area. Once a price is set you can list your property for rent, sign a lease, and begin collecting rent.
Step 1 – How Much Space is Available?
In order to figure out how much is available for use you will need to measure and calculate the square footage. This can be completed by multiplying the Length and Width of the interior usable space.
Step 2 – Set the Price per Square Foot ($/SF)
Select the monthly rent that you would like to charge the new tenant. Unlike residential property, commercial rent is described as a price per square foot ($/SF). When trying to figure the rental amount, it is a good idea to set the price that is close to what others are asking in your area.
Step 3 – Lease Type: Gross or Triple-Net (NNN)
When choosing what to charge the tenant a major question they will ask is if the rental amount includes the insurance, real estate taxes, and/or the maintenance on the property. This is very important and should be displayed when marketing the property.
Gross Lease – The tenant only pays the monthly amount written in their lease. The landlord will pay for the real estate taxes, insurance, and maintenance on the property.
Triple (NNN) Lease – The tenant pays the monthly amount written in their lease along with the real estate taxes, insurance, and maintenance of the property.
Step 4 – Hire an Agent or Market the Property Yourself
Now you will need to get the property listed. This lets other businesses and individuals who are looking for property aware of the availability. Therefore you will need to decide if you want to market the property yourself or to pay a real estate agent to market the property on your behalf.
Every real estate agent charges their own rates although it is the industry norm to charge between 4-6% total lease amount. 50% of the fee is paid upon lease execution and the other 50% is paid when the tenant takes occupancy. So if a lease is for 5 years at $1,000 per month the fee to the agent would be $2,500 ($50,000 multiplied by 5% = $2,500).
Popular Commercial Real Estate Companies
Step 5 – List the Property
If the property is being handled by an agent then you probably do not have to worry about the property being listed. If you choose to market the property yourself, then you will have to use the power of the internet as your sole source to getting the space occupied.
When adding your property it is best to have nice looking images of the interior and exterior along with any common areas. It is also important to write all the amenities, parking, water/sewer, and any other information that is necessary to the needs of a prospective tenant.
Popular Commercial Listing Websites
- – For office space only
Step 6 – Negotiating the Lease
When dealing with a prospective tenant it is best to understand their needs and come to an agreement. Therefore, it may be a good idea for you and your agent (if any) to get creative with the tenant in making a deal that works for both parties.
Example – Charge the tenant a percentage (%) rent of their sales rather than a higher monthly amount. Therefore, if the tenant makes money, you benefit as well.
Step 7 – Conduct a Credit Check (Business + Individual)
Unless you are dealing with an established company chances are that you will be dealing with an entrepreneur or small business. Therefore you will need to conduct a background and credit check to see their financial status.
Whether you’re checking a business or individual the best website to use is .
– This will show the credit history of the company with details like how fast they pay-back their vendors and annual sales. Cost is $39.95 to $49.95 depending on the selected plan. . The score will be between 0 and 100 with any score above 80 being credit-worthy.
– It is best to also conduct a credit check on the owner of the business to view income and if they have any financial liabilities that could be separate from the business. Cost is $14.95 to the prospective tenant. .
Step 8 – Approve or Disapprove the Tenant
It is now time for the landlord to make a decision on whether to approve or reject the tenant. If rejected, the tenant should be informed through a Tenant Rejection Letter.
Personal Guaranty – If the tenant’s business is not credible then the landlord should consider having the tenant sign a Personal Guaranty which binds the owner of the Company to the lease. So if the tenant defaults the individual’s assets would be liable, not just the business.
Step 9 – Determine the Security Deposit
Once the tenant has been approved by the landlord the Security Deposit should be made known to the tenant. In residential real estate, there are State Laws that limit how much a landlord may ask from the tenant. In commercial real estate, there are no limits to how much the landlord would like to charge the tenant.
The landlord will commonly ask between 2-3 months rent in case the tenant stops paying the monthly rent or to safeguard against any damage that the tenant may cause during their time on the property.
Step 10 – Write the Commercial Lease Agreement
Use an attorney or draft the lease yourself. Make sure to gather all the information about the property and the tenant and enter into the agreement. Once completed, the document should be signed with the tenant and landlord in the presence of a notary public. This way the signatures are proven and the agreement is much more likely to hold up in court if it’s legality is ever questioned.
Step 11 – Taking Occupancy
After the security deposit has cleared and the lease has been signed the tenant should take occupancy. This means that the tenant can begin using the space as directed for use in the lease. Both parties will be held accountable for their specified duties until the end of the lease term.
American’s with Disability Act () – Also known as the ‘ADA’, requires that any commercial tenants which offer “public accommodation” (such as a restaurant, retail store, etc.) or have at least fifteen (15) employees adhere to all handicap access rules. This rule is only grandfathered to properties that have not been built or had renovations since 1992.
Per 42 U.S. Code § 12183 if the Lessee is using the Premises as a public accommodation (e.g. restaurants, shopping centers, office buildings) or there are more than 15 employees the Premises must provide accommodations and access to persons with disabilities that is equal or similar to that available to the general public. Owners, operators, lessors, and lessees of commercial properties are all responsible for ADA compliance. If the Premises is not in compliance with the Americans with Disability Act any modifications or construction will be the responsibility of the Lessor.
Hazard Waste () – Forces the tenant to sign in writing that they will adhere to any federal, State, or local laws in regards to the disposal of hazardous wastes.
“Shall mean any and all federal, state, or local laws, ordinances, rules, decrees, orders, regulations, or court decisions relating to hazardous substances, hazardous materials, hazardous waste, toxic substances, environmental conditions on, under, or about the Premises, the Building, or the Property, or soil and ground water conditions, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Hazardous Materials Transportation Act, any other law or legal requirement concerning hazardous or toxic substances, and any amendments to the foregoing.”
In addition, there may be other areas of the lease, outside of the monthly rent, that the parties may want to negotiate such as:
Option to Renew – Use if the tenant would like to have the option to stay in the property for a longer time then they may request an ‘Option to Renew’ the lease. This gives them the right to extend the lease for a specified rental price if they want.
Option to Purchase – Use if the tenant would like the option to purchase the property for a specified price during the course of their lease.
First (1st) Right of Refusal – If the property is for sale and goes under contract with a buyer this allows the tenant the option to purchase the property for the same price. The tenant will usually be given 30 or 60 days to secure financing if they choose to purchase the property.
Commercial lease agreements are different from residential lease agreements. They provide many more provisions in the contract to protect both the landlord and the business. Essentially, the purpose of a commercial lease is to make sure there are no loose ends that can leave either party at risk.
The terms of commercial lease agreements will be different depending on the specific property and the business that owns the lease. Terms are often negotiated between the two parties to determine:
- The leasing period
- How utilities are paid
- Who is responsible for maintenance (or how the responsibility will be divided)
- Whether improvements and changes to the property are allowed (and to what extent)
- How the property will be used
- What’s allowed on the property (hazardous materials, chemicals, machinery and combustibles)
- Annual rent increases (for long-term leases to keep up with the market)
- Description of the property (including living spaces, appliances, number of rooms and types of rooms)
- Whether the business will have exclusive rights to the property
- Whether the company can sublease or assign sections within the property
- What parking is available and how it will be paid
- Compliance with ADA (Americans with Disabilities Act)
- And how property taxes will be split between the business and the landlord (if the owner does not agree to pay for it entirely themselves)
This list is not inclusive of everything that may need to be outlined in the commercial lease agreement. There may need to be more special provisions made depending on the property type or business.
There are a variety of different commercial properties out there, and it’s important for businesses and landlords to know the difference. For instance, it wouldn’t make sense for a landlord to advertise a property to retail outlets if the space was designed for a warehouse.
So to keep things straight, here are the most common types of commercial properties used today:
- Industrial – Industrial properties are the warehouses and factories often located outside of the cities. Prime industrial properties will be close to major transportation routes and will be up to code for manufacturing purposes. The most common types of industrial properties include heavy manufacturing, light assembly, flex warehouse, bulk warehouse and R&D facilities.
- Office – Office commercial properties include a large subset of buildings used for business operations. They can be in the heart of downtown or on the outskirts of towns and suburbs. These properties have three categories based on their quality of construction and location (Class A, Class B, and Class C).
- Retail – Retail properties are ideal for most shopping centers, restaurants and small shops. These properties can make the lease a bit more complicated depending on the size of the building. The bigger the building (like shopping malls for instance), the more likely that there will be multiple tenants renting out spaces for themselves. This will often include additional terms to negotiate how space will be blocked off for different tenants or if one business will have exclusive rights to the property.
As you can see, commercial lease agreements are very common and play a big role in how many businesses operate. Any business can—and often does—rent its property rather than own it. Hopefully you now have a better understanding of what a commercial lease is, why it’s important, and what types of commercial properties are available.
1 – Open The Agreement Template Through This Page
Locate the preview image of this file. Then, choose one of the buttons below it to open this form as the file type you prefer to work with. You may use software compatible with the file you Open and Download to edit this document and enter information on screen. If you do not have such software, you may open the PDF file using an up-to-date browser then, printing it.
2 – Furnish The Opening Declaration With Information
The introduction to this Lease will document the subject being discussed. It will solidify the Date, Parties, and Property involved with this paperwork’s application through some required language. This will require some information specific to the situation directly entered in the appropriate spaces.
The first three blank spaces will refer to the Date this Lease is made. Here, you will need to enter the Calendar Date on the first blank space, the Month on the second blank space, and the year on the third blank space. This Date will be the Date this Agreement was made.The next empty space, preceding the bracketed label “[Name Of Lessor]” requires the Full Legal Name of the Owner, Landlord, or Agent renting the Property in question to a Tenant.The third blank space, labeled “[Street Address]” must have the Physical Street Address where the Lessor lives entered. This should consist of the Building Number, Street Name, Apartment/Unit Number, and City/Town. This should be followed by the State where the Lessor lives.The other party whose information must be provided is the Lessee. This is the individual who will be renting the concerned Property, from the Lessor, through the proper execution of this paperwork. Enter the Full Legal Name of the Lessee just before the label “[Name Of Lessee]”The next blank space labeled “[Street Address]” will refer to the Lessee. Enter the Physical Street Address where the Lessee lives on this space.The last blank space in this statement must have the State where the Lessee lives entered on it.
3 – Attend To The Lease Items
The first item, labeled “Description Of Leased Premises,” will provide several blank lines. Here, you must present the Physical Address of the Property the Lessor is renting to the Lessee. This should be followed by the Legal Description of the Property being rented. You may add an attachment with this description if there is not enough room. If you are working onscreen, you may use a compatible editing program to add enough blank lines to accommodate this information.The next item, labeled “Use of Leased Premises,” will also provide several blank lines. Record the Purpose and Allowed Uses of the Rented Property that should apply to this Agreement. This should be a specific definition. It should be noted that if the Lessee uses the rented Property for any Purpose other than those defined, such an action may be considered a breach of this contract.The third item, or “Term of Lease,” will also require some specific information. This item will concern itself with precisely when the Lessee may begin renting the Property and when the Lessee may no longer rent the Property under this Agreement). We will begin by entering the number of Years and Months the Lessor intends to rent the Property to the Lessee. To report this time period, write out the Number of Years on the first blank space then, in the first set of brackets, display the Number of Years numerically. If the Lease Term contains a partial year, then write out the number of Months on the next blank space (following the word “years”). This should be followed by the Number of Months entered numerically in the second bracketed space. The Number of Years/Months entered here will be how long the Lease is meant to be active or the Lease Term. Now, we will need to enter the exact Start Date of this Agreement. The Date reported using the three blank spaces following the words “…commencing on the” will be the first day of the Lease Term recorded above. Finally, use the three blank spaces after the term “…expiring at Midnight on the” to record the last Date the Lease will be active. This will be when the Number of Years and/or Months recorded as the Lease Term have passed from the Start Date above.
The fourth item, “Option To Renew,” will provide the Lessor with the ability to define whether the Lessee will be allowed to renew the Term of this Lease. We will indicate whether the Lessor provides this option or not by marking a check box.
If the Lessee will have the option this Lease (with 60 Days prior written notice), then mark the first check box. If this option will be provided then, enter the number of Years and/or Months the renewal may be made for on the blank line provided. If the Lessor does not want to include this option on this Lease, then mark the second check box (labeled “Lessee May Not Renew The Lease.”The fifth item, “Rent And Expenses,” will have several options available after we have discussed the Base Rent Amount. First, write out the Net Monthly Base Rent amount on the first blank space in this section. Then, in the parentheses, report the Net Monthly Base Rent amount numerically.Now, we must indicate which one of three Lease Categories applies to this one. Only one of the three following choices may be selected to define this Lease.
If this Lease is a “Gross Lease,” then mark the check box labeled “Gross Lease.” The Tenant and Landlord will both have to initial this selection using the blank lines labeled “Tenant’s Initials” and “Landlord’s Initials.”If this is a “Modified Gross Lease,” then mark the check box labeled “Modified Gross Lease.” Make sure both Tenant and Landlord initial the blank lines once the required information is filled out. There will be a set of blank lines after the words “…Following Monthly Expenses” to report what Expenses associated with this Property rental the Tenant must pay in addition to the Base Rent above and a set of a set of blank lines, below the statement “Lessor Shall Pay The Following Monthly Expenses,” to document what Expenses the Lessor shall be responsible for paying for the duration of this Lease Term. Nothing may be added to these areas after the Lessor and Lessee have initialed this choice.If this Lease is a “Triple Net (NNN) Lease,” then mark the third check box. Both the Lessee and Lessor must record their initials on the blank spaces following the words “Tenant’s Initials” and “Landlord’s Initials” respectively. These parties should only place their initials on these lines once Section III has been tended to. The first two blank space will require the minimum Single Limit insurance coverage the Lessee is responsible for entered literally then numerically. The third and fourth blank lines will require the minimum coverage required to insure against a Death of Person(s) on the Property. while the fifth and sixth blank lines will require the minimum coverage required to cover Property Damage.The sixth item, “Security Deposit,” calls for the amount of Security the Lessee must surrender to the Lessor for the sake of this Agreement. The total Dollar Amount for the Security Deposit should be written out on the first blank space, then recorded numerically on the second blank space. The seventh item, “Leasehold Improvements,” will name the Lessee as responsible for any Improvements or Changes made to the Property. If there are any Improvements or Changes the Lessee would not be held responsible to pay for, then record these exceptions on the blank line provided at the end of this statement.Items 8 through 13 should be thoroughly reviewed by both parties. If either party entering this Agreement does not understand one or more terms listed, it is strongly recommended he or she seek a consultation with an appropriate professional before signing this document. Item 13 will be the next item requiring attention. Here we will need to provide two definitions. First, locate the blank space between the terms “…default for more than” and “days after due date….” Use this blank space to enter how many days must elapse (after an unpaid Rent’s Due Date) for the Lessee to be considered delinquent in Rent Payment, if left unpaid. Next, we will need to select one method to impose a Penalty for Nonpayment.If the Penalty for Nonpayment will be calculated as a per annum Interest Rate, then mark the first check box and enter the Interest Rate to be charged. Enter this literally then numerically using the blank spaces provided.If the Penalty for Nonpayment will be a Late Fee accrued daily, then mark the second box and enter the Late Fee using the two blank spaces provided.Section II of Item 17 requires the Name of the Municipality where the Property is located input.Present the Name of the State where this Property is located on the blank line in the twenty-first item. Item 22 must have the Official Address where a Lessor or Lessee must send correspondence or payments regarding this Lease and/or this Property. Enter the Complete Address where the Lessor agrees to receive such Notices/Payments from the Lessee on the blank lines under the word “Lessor.” Then, under the word “Lessee,” document the Address where the Lessee has agreed to receive such items from the Lessor.
4 – Execute This Agreement Through The Notarized Signatures Of Both Lessor And Lessee
Item 24, “Binding Effect,” will provide the structure necessary to execute this Agreement properly. Fist the Date when this Document is being Signed by the Lessee and Lessor should be recorded using the three blank spaces provided in the statement beginning with the term “In Witness Whereof…”The Lessee must sign his or her Name on the blank line under the words “Lessee’s Signature.” On the blank line adjacent to this signature, the Lessee must Print his or her Name.The Lessor will need to sign the line below the words “Lessor’s Signature.” This should be followed by the Lessor’s Printed Name presented on the next blank space.The next area will allow the attending Notary Public to provide all the items necessary to Notarize this signing. Only he or she will be able to provide this item and Notarization Seal. Both Party Signatures must be notarized, thus two “Acknowledgment of Notary Public” sections have been provided in case, the Party Signatures occur in separate areas.