Real Estate: Commercial Leasing Basics

By Larry Eliason

A commercial lease can be a large expense for any business. Commercial leases are a lot different from residential leases as they have provisions that could impact your business from an economic standpoint to the practical use of the space.

Whether it is for a small office, retail, warehouse, commercial garage or a ground lease, a Tenant should perform some due diligence to assure that the space and the site are properly zoned for the proposed use. In many towns, Building and Life Safety Codes will certainly be part of the discussion for occupancy.

Below you will see some highlights of what to expect in a commercial lease agreement.

AGREEMENT of Lease made this 22nd day of October 2021, by and between ABC, LLC (hereinafter “Landlord”) and XYZ, LLC (Hereinafter “Tenant”).

WITNESSETH That Landlord for and in consideration of the rent reserved, covenants and agreements hereinafter set forth to be kept, observed, and performed by Tenant…

Description Leased Premises. Landlord does hereby lease and rent unto Tenant, one commercial building…

Terms. The term of this Lease shall be for a period of Five (5) years commencing on November 1, 2021…

Rental. Tenant agrees to pay to Landlord as rent, the sums as set forth in Schedule “A”…

Renewal. At the expiration of the term of this Lease, said Lease may be renewed at the option of the Tenant for two (5) year options.

Specific Use. The Tenant may use the Premises for Commercial Uses allowed by Local and State Laws.

Personal Property Taxes. Tenant will pay all personal property taxes levied or assessed on personal property used by the Tenant.

Real Estate Taxes. Tenant shall pay all real estate taxes assessed against the Demised Premises.
Insurance by Landlord. Tenant shall, at his expense, maintain extended fire insurance protection for the Demised Premises.

Insurance by Tenant. Tenant shall maintain, at his/her expense, insurance protection for his/her own personal property and his/her leasehold improvements…

Utilities - Refuse. Tenant shall, at his/her expense, provide for reasonable electricity used of consumed at the Demised Premises…

Assignment - Sublease. Tenant shall have the right to sublet the Demised Premises with Landlord’s express written consent.

Signs. Tenant may not place any signs on the building or in or on windows or doors without Landlord’s express written consent…

Alterations and Improvements. Tenant will not make any interior or exterior improvements, modifications, or alterations without the prior written approval of the Landlord…

Trade Fixtures. All trade fixtures including shelving, light fixtures, and other equipment shall be installed at the expense of Tenant.

Repairs and Maintenance. Tenant shall repair, renovate, and maintain at their own expense.

Indemnity - Security. Tenant agrees to indemnify and hold harmless the Landlord from and against all claims and demands
arising from negligence of Tenant.

Maintenance of Common Areas - Contribution. Landlord shall maintain all common areas in the building including the walkways and parking lot in good repair and condition.

Access. Landlord shall have access to the Demised Premises during reasonable hours for the purpose of insuring compliance with this Lease…

Requirements of Law - Insurance Rates. Tenant shall comply with all laws of Federal, State, County and Municipal authorities.

Insurance. Landlord and Tenant mutually agree that with respect to any loss which is covered by insurance then being carried by them respectively…

Fire Clause. If the Demised Premises are destroyed or damaged by fire or other unavoidable casualty, then the rent herein before is reserved.

Condemnation. If any portion of the Demised Premises shall be condemned for any public use by any legally constituted authority, then this Lease shall terminate.

Default and Landlord’s Remedies. If the Tenant shall neglect or fail to perform or observe any of the conditions contained in the Lease, the estate hereby created shall be taken on execution or by other process of law.

Subordination. This Lease is and shall be subordinate to the lien of any mortgage or mortgages.

Waiver. Failure of Landlord to complain of any act or omission on the part of the other shall not be deemed to be a waiver by Landlord of any of his rights.

Quiet Enjoyment. So long as Tenant pays the rent and performs the covenants required Tenant may peacefully hold and enjoy the premises during the term.

Late Fee. All rent payments received after the 10th of each month will be subject to a 5 percent late fee of the total rent.

Tenants today should consider engaging a Commercial Real Estate Agent Broker assist them with the leasing process including market conditions so expectations can be met.

And in most cases, a Real Estate Attorney should also be engaged to review and negotiate some of the terms of the lease agreement depending on the size, scope, and complexity of the lease. <

This article was brought to you by Larry Eliason, Commercial Broker with Butts Commercial Brokers in Raymond. You can reach him at 207-415-2112.