Commercial Lease Agreement

A commercial lease agreement outlines a landlord’s and tenant’s rights and obligations when the landlord rents out commercial property to a tenant. Either party can be an individual or company. A tenant is also known as a renter or lessee.

Commercial lease agreements are used to create lease terms and bind parties to them. In exchange for payment to the landlord, it also grants the tenant the right to utilize the rented property for commercial purposes for the length of the lease.

You can download our Rent Receipt template to keep track of all your tenant’s rent payments.

Commercial real estate, in general, refers to any non-residential real estate, including complete buildings as well as individual units inside structures. Commercial property includes the following examples:

A commercial lease agreement is required if you own commercial property and rent it to a tenant. Similarly, if you are a business renter and the landlord does not begin a formal contract, try making one and bringing it to them.

A written contract protects landlords by ensuring that renters abide by the conditions of their lease. It is typical for landlords and renters to differ on issues such as who is liable for repair expenditures. It is difficult to show the agreed-upon terms of the tenancy without a contract.

A lease agreement can be incredibly useful if a landlord has to submit a legal claim to remove a business tenant. You can also download our Eviction Notice Letter from the landlord and send it to your tenant in the event of non-payment of rent or upcoming repairs for verifiable proof.

Furthermore, landlords must specify whether renters may sublease the rental property to another tenant or whether they must obtain permission from their landlord before subleasing. In case of subletting a property your Tenant will need a Sublease Agreement to transfer is rights and obligations to a new business tenant, only after you gave him your Consent to Sublease.

A written contract protects renters by establishing their legal right to utilize the rental property for commercial purposes. A business lease binds landlords to their duties as well.

Based on how the tenant pays base rent and operational expenditures, there are four primary types of commercial lease agreements:

The rental amount in a full service or gross lease covers all property operational expenditures. The rent already includes operating expenditures such as utilities, maintenance, and real estate taxes. The landlord, on the other hand, might include terms that retain the right to pass on any future increases in running expenditures to the tenant.

The rental value in a net lease does not include any operating expenditures. As a result, in addition to the basic rent, the tenant must pay a pro-rata share of the three “net” running expenditures — property taxes, insurance, and common area upkeep (CAM).
Common area utilities and operational expenditures are also included in CAM. Net leases are classified into the following types:

A modified gross lease (sometimes known as a modified net lease) is a combination of a gross lease and a net lease. The running expenditures are discussed and divided between the landlord and the tenant under a modified gross lease.
Typically, the tenant is liable for the basic rent and CAM, while the landlord is in charge of the property taxes and insurance. Occasionally, the tenant pays simply the basic rent at the start of the lease and then pays a share of the operational expenditures afterwards.

A percentage lease requires the tenant to pay the basic rent on the property as well as a monthly percentage of the gross income generated by the business operating in the rented space. This sort of lease is commonly utilized for retail establishments.

It’s critical to know how you want to distribute expenditures and obligations between the landlord and tenant when establishing a commercial lease agreement. The following fundamental aspects should be identified in a business leasing agreement form:

1. Landlord (also known as the lessor): the party who owns the commercial property and wishes to rent it out.

2. Tenant (also known as the lessee): the party who wishes to rent the commercial property in order to do business.

3. Term: the number of years or months for which the tenant will rent the space, which can range from an agreed-upon start and end date to an agreed-upon time period in months or even years (i.e., 5 years); a periodic rental agreement such as a month-to-month timeframe; or an automatic renewal in which the contract continues to renew until a party sends notification to terminate or end the tenancy agreement.

4. Demised Premises (also known as the leased premises): the physical space the tenant is renting (such as a retail store in a mall), including a property map indicating the size and whether the tenant has access to services such as parking, cleaning or security.

5. Real Property: the whole property held by the landlord (such as the shopping mall where the business is situated), including shared common spaces such as sidewalks and parking lots that the other tenants will utilize.

6. Base Rent: the initial cost of leasing the space on a monthly, yearly, or periodic basis. Managing Expenditures: landlords may require tenants to split the cost of operating the entire building and maintaining shared areas, such as real estate taxes, utilities, and collective advertising costs.

7. Security Deposit: a sum of money paid to the landlord to indicate the tenant’s good faith efforts not to terminate the lease agreement or damage the property.

8. Property Use and Occupancy Details: a detailed description of what the lessee can use the property for (for example, dining services) as well as what is not permitted in the rented space and common spaces, such as smoking, after-hours noise, or rubbish dumping.

9. Modifications and changes: the sorts of modifications and adjustments that can be done to the premises, as well as who is accountable for the expenditures. For example, if a tenant intends to operate a restaurant that would require modifications or construction, the contract should specify who will be responsible for paying and monitoring the construction project.

There are several sorts of terms available when making a commercial lease agreement. Commercial leases are often fixed or recurring.

A fixed-term lease has an end date. The lease conditions, including rent, cannot be amended unless specifically stated in the lease. In Singapore, the lease will most likely become a month-to-month lease when the period finishes. Make sure you complete a tenancy inspection report, also known as a property inventory checklist, before a new tenant arrives or after they leave, to keep your property in good condition.

A monthly or annual lease automatically renews until the tenant or landlord ends it. A monthly lease is sometimes known as a year-to-year lease. These leases provide both the renter and the landlord more freedom to break the contract, evict the tenant, amend the conditions, and increase the rent. A landlord can normally raise rent and amend the conditions of the lease if the tenant is given adequate notice.

For long-term leases, you can use our lease application form to select the best tenant before starting the lease.

Landlords may have a number of obligations to consider when leasing an office, retail space, restaurant, or industrial property, including:

1. Examining property specifications: It is the landlord’s responsibility to confirm that commercial use is authorized on the property and that the property will meet the tenant’s specific commercial use requirements.

2. Property use approval: The landlord must determine and approve how the tenant will utilize the premises for their business. If a landlord owns a multi-unit commercial building, they may have to guarantee that they are not renting out apartments to competing enterprises.

3. Choosing the kind and length of lease term: Often, landlords determine the type and duration of commercial leases. The renter may pay a portion of the utilities and operational costs, or a fixed amount in addition to their rent. It is up to the landlord to decide how the costs will be distributed and if the renter will pay the landlord or indeed the utility company directly.

4. Tax committments: Some owners demand tenants to pay a portion of the real estate taxes. The amount, whether a percent or a fixed amount, is entirely up to the landlord.

5. Making improvements: A tenant may request that specific modifications be made to the property to assist them in running their day-to-day operations. If these provisions are included in the lease, the landlord must pay for and finish the improvements.

6. Repairs and property maintenance: Depending on the conditions of the lease, landlords may be responsible for managing repairs and property maintenance. However, landlords may delegate certain tasks to renters and include them in the tenant’s lease agreement.