Commercial Lease Agreement in a Nutshell

Standardized Legal Documents Commercial Lease Agreement in a Nutshell

The Ins and Outs of a Commercial Lease Agreement

When you want to rent a business space or a commercial property, you need a commercial lease agreement. This agreement has many types and can be tricky compared to a basic rental agreement. Not to worry—we’ll show you the ropes and provide answers to your questions.

What Is a Commercial Lease Agreement?

A commercial lease agreement is a legal document between a property owner (the lessor) and a business owner (the lessee). Regardless of which side you’re on, a commercial lease is a serious business venture and is typically long-term. You should familiarize yourself with the potential types and terms so that you’re satisfied with the agreement you’re entering into.

Business Lease Agreement Types Explained

Commercial leases have different types. The three most common ones are:

  1. Gross/full-service lease
  2. Net lease
  3. Modified gross/modified net lease

The types differ in the person who bears certain expenses, such as taxes. Check out an overview of all business lease agreement types in the table below:

Types of Commercial Lease AgreementsKey Features

Gross/full-service lease

  • Lessee pays a fixed monthly rent
  • Lessor covers the operating expenses, including insurance, maintenance, and property taxes
  • An expense cap may exist to limit the amount of money the landlord should pay
  • Landlord may negotiate a higher rent since they need to cover other expenses

Modified gross/modified net lease

  • Tenant pays rent
  • Both the tenant and the landlord cover parts of the operating expenses

Net lease—single net lease

  • Lessee pays for one of the operating costs

Net lease—double net lease

  • Lessee bears the cost of two operating costs

Net lease—triple net lease

  • Tenant must pay rent as well as all three major operating expenses

Net lease—absolute (triple net) lease

  • Tenant covers the rent, operating costs, and repairs

Percentage lease

  • Retail commercial properties typically have this agreement
  • Lessee pays base rent and an agreed percentage of the monthly income

How Is a Commercial Real Estate Lease Agreement Different From a Residential One?

Aside from the basic difference between commercial and residential lease agreements—the former referring to business and the latter to private rentals—there are a few more important distinctions:

  • Term variety—Most landlords use a standard residential lease agreement, but commercial agreements vary greatly depending on the tenants and their businesses
  • Duration of leases—The majority of residential leases last for one year, whereas the commercial ones can last for several years
  • Negotiability—Commercial lease terms are more negotiable and are subject to change
  • Legal protection—Commercial lessors and lessees have less legal protection than the residential ones because the state and consumer laws typically apply to residential leases only

What You Should Know Before Entering Into a Commercial Rental Agreement

Research is key when it comes to commercial rental agreements. Since the agreement is customizable, the more you know, the more it can benefit you. Here are some details you should look into before you negotiate and sign anything:

  • Zoning laws
  • Environmental laws
  • Location of the property
  • Landlord and the building owner
  • Potential terms of your agreement

What Should a Simple Commercial Lease Agreement Cover?

Check out what most commercial lease agreements should include:

  • Full names of the parties
  • Description of the property
  • Use of the property
  • Lease term—usually expressed in months
  • Subleasing
  • Security deposit
  • Rent—the amount, base rent, adjustments, and increases
  • Other expenses (e.g., insurance, maintenance, and repairs)
  • Landlord access
  • Improvements and alterations to the property
  • Dispute resolution
  • Termination
  • Compliance with the Americans with Disabilities Act (ADA)—The property must be accessible to people with disabilities if the business is open to the public and operates with 15 or more employees

DoNotPay Can Draw Up Various Legal Documents for You

Whether you’re the business owner or the property owner, you may need to draft other legal documents besides the commercial lease agreement. Using DoNotPay is the best way to write a contract. No need to Google search different contract templates because we’ll do all the work.

Follow these instructions to create a legal document like a pro:

  1. Open DoNotPay in a web browser
  2. Enter the name of the legal document you need
  3. Provide relevant info by answering a few questions

Our AI-powered app will get down to business and draw up an agreement of your choice in a few minutes. Remember to review your document carefully before signing or notarizing it.

Turn to DoNotPay for More Help With Legal Documents

Our app is a vast database helping you understand and draw up numerous legal documents. The table below shows which documents we can draft for you and which we can break down. DoNotPay’s knowledge base grows every day, so feel free to browse our learning center.

Legal Documents You Can GenerateLegal Documents You Can Learn About

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