Setting up Commercial Lease Agreements
WHAT IS A COMMERCIAL LEASE AGREEMENT?
A commercial lease is a legally binding contract that allows the tenant to use the commercial premises for business activity for a certain period of time by promising to pay the landlord an agreed-upon rate.
Unlike normal dwelling rental, one of the biggest differences of a commercial lease is that it allows negotiation between the tenant and landlord.
It is extremely important for tenants to negotiate before signing the paper because business tenants are usually not offered the same legal protection that personal dwelling tenants are entitled to.
Signing a commercial lease agreement without a thorough negotiation means tenants might have to pay more, and that their best interests are unprotected.
The trick here is to start low, leaving the landlord’s room to move downward.
MOST COMMON ELEMENTS OF A COMMERCIAL LEASE AGREEMENT
Although there is no standard commercial lease agreement, there are typically common terms and points covered by most commercial leases. This includes but not is not limited to rent, term, space and services.
Commercial leases involve different types of rent calculation.
- Percentage rent – Requires tenants to pay a base rent plus a percentage based on sales.
- Gross rent – consists of a flat rate, also known as a base rent, and other specific expenses. In this case, the landlord is responsible for other operating costs.
- Net lease – tenants pay a base rent and some of the taxes as a part of the rent. The rent for a net-net lease includes a base rent, taxes and insurances, whereas a triple net lease requires tenants to pay taxes and maintenance costs on top of a base rent.
This section is relatively straightforward.
It stipulates the time period tenants will occupy the premises, which can be month-to-month, or for a longer term. The clause may also include renewal options upon the end of the lease.
Space and services
It is important that tenants understand how the landlord calculate the unit space.
Some questions that tenants should ask:
- Is the price is based on the actual square footage?
- Are services such as parking, heating, ventilation, cleaning services and air conditioning included?
- Whether the space measured is accurate.
Inquire about smaller spaces first then move on to bigger ones.
There are also some other items for tenants to consider before signing a commercial lease agreement:
- Insurance details
PATROLA LAW’S GOT YOUR BACK
Due to the complex nature of commercial leases, we recommend that tenants consult an expert, such as a business lawyer, before jotting down their signatures.
Surrey BC business lawyers at Patrola Law will be able to help tenants avoid deals that may potentially cause their businesses to incur unexpected or unnecessary costs, and thereby protect their best interests.
We’ll help you negotiate the best possible lease deal.