Recommended Clauses for Commercial Lease Agreements
Before I discuss some of the common pitfalls to be aware of by a potential buyer when evaluating a property for purchase, I’ll review the clauses that at least should be included in a commercial lease. It’s not uncommon for a commercial lease to be 40 or even 50 pages long.
- Proper description and verifiable rentable square footage of the demised premises.
- Permitted uses of the premises.
- The initial term of the lease.
- Options to renew if applicable and the new base rent and term for each option period.
- Rent Increases during the term of the lease or options.
- Tenants’ responsibility for the Landlord’s maintenance costs, real property taxes, insurance, and operating expenses and any exclusion.
- Pass through caps or expense stops if any.
- Security deposit and personal / corporate guarantees required.
- A detailed listing of tenant improvements (TIs), repairs and/or alterations, by whom, and the procedures that must be followed plus a timetable for completion.
- Detail of trade fixtures and who will own and pay for the same. Does the tenant and/or landlord install and who is responsible for removal at the end of the lease.
- Who will be responsible for maintenance, utilities, and code and zoning compliance? Who pays the bills? Does the landlord pay and tenant reimburse or the tenant direct pay?
- Right of access by tenants, hours of operation and HVAC Hours of operation.
- Landlord’s right of access – reasonable notice and at reasonable times?
- Tenant/landlord’s responsibility to carry insurance and the amount of coverage.
- Business sale clause.
- Right to sublet and assign.
- Going dark rights if out parcel or shadow anchor.
- Exit clause and tenant’s right to terminate the lease.
- Breach of the Lease.
Next, I’ll discuss pass-through caps and expense stops so until then, have a wonderful back to work Monday evening.