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:

Gross/full-service lease
Net lease
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 Agreements	Key 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:

Open DoNotPay in a web browser
Enter the name of the legal document you need
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 Generate	Legal Documents You Can Learn About
Bill of sale Prenuptial agreement Non-disclosure agreement Non-compete agreement Independent contractor agreement LLC operating agreement Parenting plan (child custody agreement) Estoppel certificate Quitclaim deed Promissory note General affidavit Intent to purchase real estate Residential lease agreement General business contract	Postnuptial agreement Settlement agreement Purchase agreement Partnership agreement Forbearance agreement Hold harmless agreement IRS installment agreement Confidentiality agreement Construction documents Business requirements document

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