If you have a business and you need to rent space, you will more than likely enter into a commercial lease. A commercial lease is a legal document that usually gives the Landlord advantages while placing limitations on the Tenant. Before signing a commercial lease, the Tenant should be aware that some of the terms within a commercial lease are negotiable. It is possible to negotiate lease terms that benefit both the Landlord and the Tenant.
Types of commercial leases:
1. Full-Service Commercial Lease: In this type of lease, the Tenant pays the same rent amount each month throughout the lease term. A monthly payment that remains the same for the duration of the commercial lease may be attractive to a Tenant; however, the Tenant should review the commercial lease carefully to determine what services are, or are not, included in the rent amount. For example, the monthly rent may exclude utilities, maintenance of the property, or costs for pest control. Therefore, the Tenant would be responsible for those additional expenses.
2. Net Lease: In this type of lease, the Tenant and Landlord share the costs of the property depending on the net lease type.
In a Single Net Lease, the Tenant pays the monthly rent as well as the property taxes while the Landlord pays for the utilities, maintenance, and other costs for the property.
In a Double Net Lease, the Tenant pays the monthly rent, taxes, and insurance.
In a Triple Net Lease, the Tenant pays the rent, taxes, insurance, and building maintenance.
3. Gross Lease: In this type of lease, the Tenant is responsible for the rent and for any other expenses that the Tenant and Landlord may agree on, such as minor repairs and maintenance services. Then the Landlord will be responsible for the remaining costs.
How long are commercial leases? Commercial landlords typically prefer long-term leases such as five or ten-year leases. Long-term leases can be beneficial because the Tenant reduces the need to move often. However, the same lease can become a burden if the Tenant’s business is unsuccessful or if the Tenant outgrows the property.
Can the Tenant terminate the lease early? If, for whatever reason, the Tenant needs to terminate the lease early, provisions should be included in the lease agreement so the Tenant can do so without being penalized. The commercial lease should allow the Tenant to sublet the property if the Tenant is unable to pay the rent or if the Tenant outgrows the property and wants to relocate to another location.
If you are a Tenant or a Landlord and have questions regarding commercial leases, please contact Kimberly M. Soto at 321.972.2279 so she can further advise you of your specific legal issue.