Leases are a fundamental part of commercial real estate. Including important information such as the length of the contract, amount of lease payments, who is responsible for maintenance of the property, and more can make ownership of a leased commercial property run much more smoothly for both the lessor and lessee. Below we are sharing 11 important clauses to consider adding to a commercial lease.
1. Property and Liability Insurance. Every commercial lease should detail who is responsible for liability insurance and what each will cover. Generally speaking, Landlords maintain a policy on the building they own, and tenants maintain a policy on their contents.
2. Repairs and Maintenance. Spelling out who is responsible for repairs and maintenance can be a lifesaver for commercial leases. It's a good idea to spell out who is responsible for repairs and maintenance, and if there is a differentiation between major repairs, such as a new roof, and maintenance for responsibility. Be sure to be as specific as possible!
3. Property Improvements. Who will pay for improvements on the property? Will it be the tenant or the landlord? Will the landlord work out a deal where they pay for improvements at the time they are made, and then charge the tenant over time in their rent payments? Is the tenant allowed to renovate the space they occupy? To what extent? If they tenant is allowed to renovateor otherwise improve the space, do they need written permission from the landlord?
4. Renewal Term. At the end of the lease term, will the lease automatically renew? Will the lease convert to month-to-month until the next lease terms are figured out, or will the lease simply end and the tenant is to leave?
5. Security Deposits. Is a security deposit required? If so, how much? How will the security deposit be returned, and under what circumstances will it not be returned?
6. Common Area Maintenance Fees. Many commercial properties have common areas that need to be taken care of. How does this factor in to the lease for the landlord and tenant? Who takes up the slack for the common area maintenance fees?
7. Right to Sublease. Does the landlord want the tenant to be able to sublet the space? Will the landlord allow it under certain circumstances?
8. Tenant Care of the Property. The landlord likely has an idea of how they want the property to be maintained under the lease. The tenant should be on the same page with the landlord with their care of the property. Make sure this is detailed and understood!
9. Lease Termination. Can both the landlord and the tenant cancel the lease before the lease ends? If so, how much notice must be given by either to terminate? Are there ramifications or fees for this?
10. Landlord's Right to Enter Property. Does the landlord have the right to do maintenance, repairs, or simply check on their investment if notice is given to the tenant? If so, how much notice must be given?
11. Remedies. If the tenant or landlord breach the contract, what remedies do they have for reconciling the situation?
2. Repairs and Maintenance. Spelling out who is responsible for repairs and maintenance can be a lifesaver for commercial leases. It's a good idea to spell out who is responsible for repairs and maintenance, and if there is a differentiation between major repairs, such as a new roof, and maintenance for responsibility. Be sure to be as specific as possible!
3. Property Improvements. Who will pay for improvements on the property? Will it be the tenant or the landlord? Will the landlord work out a deal where they pay for improvements at the time they are made, and then charge the tenant over time in their rent payments? Is the tenant allowed to renovate the space they occupy? To what extent? If they tenant is allowed to renovateor otherwise improve the space, do they need written permission from the landlord?
4. Renewal Term. At the end of the lease term, will the lease automatically renew? Will the lease convert to month-to-month until the next lease terms are figured out, or will the lease simply end and the tenant is to leave?
5. Security Deposits. Is a security deposit required? If so, how much? How will the security deposit be returned, and under what circumstances will it not be returned?
6. Common Area Maintenance Fees. Many commercial properties have common areas that need to be taken care of. How does this factor in to the lease for the landlord and tenant? Who takes up the slack for the common area maintenance fees?
7. Right to Sublease. Does the landlord want the tenant to be able to sublet the space? Will the landlord allow it under certain circumstances?
8. Tenant Care of the Property. The landlord likely has an idea of how they want the property to be maintained under the lease. The tenant should be on the same page with the landlord with their care of the property. Make sure this is detailed and understood!
9. Lease Termination. Can both the landlord and the tenant cancel the lease before the lease ends? If so, how much notice must be given by either to terminate? Are there ramifications or fees for this?
10. Landlord's Right to Enter Property. Does the landlord have the right to do maintenance, repairs, or simply check on their investment if notice is given to the tenant? If so, how much notice must be given?
11. Remedies. If the tenant or landlord breach the contract, what remedies do they have for reconciling the situation?
