A commercial building lease agreement formalizes the leasing relationship between a landlord and a tenant to rent business property in order to conduct business operations thereon. When operating a business, a formal legal agreement that recognizes and codifies the relationship between the landlord and tenant is necessary and will prevent confusion and unnecessary costs at a later time.
In commercial real estate, a building lease is used for business purposes, not residential. The premises is the location the tenant is leasing. If the premises part of a larger building or project, and there are additional tenants in the building, then there are additional rights to consider. Everyone in the building will need to have access to common areas and parking lots, for example.
The tenants will typically sign a triple net lease form which will include information about maintaining the common areas. If the tenant’s business has explicit needs such as climate control or special delivery times, these restrictions will also need to be negotiated and specified in the building lease agreement.
When creating or signing the commercial real estate lease, these items should be explicitly stated:
- Who is the landlord
- Who is the tenant
- Term (the amount of time the tenant will possess the premises)
- Start and end dates
- Automatic renewal
A commercial real estate lease tries to anticipate problems and address them before they happen. The tenant and the landlord will know who is responsible for what, and the associated costs. It’s important to be aware of what is in the building lease. What’s even more important is what might be left out of the lease, so it’s important to know what to look for before you sign.
A prepared tenant will ask these questions and make sure the building lease answers them:
- Who pays for utilities?
- Who handles maintenance and repairs?
- Who pays for substantial or partial damage to the premises?
- How are disputes resolved between landlord and tenant? Between tenants?
- What’s the jurisdiction and laws governing the resolution to the dispute?
- How are problems handled? Arbitration, mediation (ADR) or in court?
- When can the landlord enter and inspect the premises? When can other people enter?
When you’re working with your commercial real estate attorney to negotiate your building lease, you want as much clarity as possible regarding the obligations and liabilities of each part; who has to do what, and who has to pay for what? A savvy tenant will understand the rights and responsibilities of each party to the building agreement, and will make sure that the building lease gives the tenant the ability to enter the space and operate the business.
An important thing to note is that a lease agreement triumphs over default laws. It’s vital to ensure your signed lease goes into great detail to protect you. If it’s not in writing, it doesn’t exist. If the landlord breaks a promise (accidentally or deliberately) or simply changes his/her mind, your lease will enforce your agreement.
If you want to make sure your building lease has all of the rights and responsibilities, obligations and liabilities set forth, then make sure you get an experienced commercial real estate attorney to review your lease before you sign it. Schedule a time to speak with me today to protect yourself!
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