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Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Commercial lease agreements provide essential protection for tenants and landlords alike, yet many businesses lack a comprehensive understanding of the legal implications of such agreements. The tiktok���˰� team are here to explain why commercial lease agreements are so important, what types of terms and rights they can cover, and how understanding them can help both tenants and landlords protect their rights.

When it comes to commercial lease agreements, it’s important to bear in mind that these documents are legally binding. This means that both parties must uphold their end of the agreement or face legal repercussions; a particularly key consideration for business owners taking on longer-term leases. A well-drafted agreement should have all the necessary terms clearly outlined to ensure that neither tenant nor landlord is taken advantage of or at risk of dispute.

Commercial lease agreements also set out detailed expectations regarding rent payments, security deposits, repairs & maintenance obligations, and more – knowledge which can be invaluable during negotiations. Furthermore, they specify everyone’s rights should either party fail to uphold their part of the contract - giving tenants the right to terminate if their landlord fails to meet expectations and similarly protecting landlords against tenancy breaches by outlining potential legal action they may take in response.

In short, having an understanding of commercial lease agreements is absolutely essential for those entering into them – whether you’re a tenant or landlord – as it helps keep everyone’s interests secure within the context of law-binding documentation. Thankfully there is no need for costly lawyers or untenable paperwork thanks to tiktok���˰�’s free open source legal template library; allowing users access millions of datapoints about market-standard commercial leases as well as community contributed templates with just one click! So if you’re considering signing a new commercial lease agreement – browse our detailed step-by-step guidance below or start creating your own customised agreement with our library today!

Definitions

Tenant - A tenant is a person who rents a space from a landlord in exchange for regular payments.
Covenant - A covenant is a promise made by one party in a contract to another, legally binding them to its terms.
Remedies - Remedies are the solutions for violation of a contract, such as financial damages, revoking the agreement, or other forms of compensation.
Indemnify - To indemnify is to agree to bear the legal responsibility for any claims or losses that may arise from a situation.
Default - Default is the failure to fulfill the terms of a contract or agreement.

Contents

1. The Basics: An Overview of the Commercial Leasing Process
2. Understanding the Legal Requirements of a Commercial Lease Agreement
3. Familiarizing yourself with federal, state, and local laws
4. Investigating zoning regulations
5. Verifying the tenant’s credit score
6. Drafting a Legally Binding Document
7. Identifying the parties involved
8. Establishing the terms of the agreement
9. Specifying the length of the lease
10. Setting the rent amount
11. Defining the tenant’s rights and responsibilities
12. Establishing a security deposit
13. Describing the property in detail
14. Negotiating Terms and Conditions
15. Narrowing down common areas of negotiation
16. Crafting a fair and balanced agreement
17. Understanding the Rights and Responsibilities of Landlords and Tenants
18. Clarifying who is responsible for maintenance and repairs
19. Determining who is responsible for utilities
20. Outlining the tenant’s rights with regards to subleasing
21. Including Necessary Clauses and Provisions
22. Considering the inclusion of a non-compete clause
23. Determining the conditions of early termination
24. Specifying the consequences of late rent payments
25. Utilizing Available Resources and Support
26. Consulting with legal counsel
27. Utilizing online legal resources
28. Seeking advice from real estate professionals
29. Ensuring Compliance with Local Laws and Regulations
30. Obtaining necessary permits and licenses
31. Investigating any applicable taxes
32. Understanding tenant-landlord laws
33. Finalizing the Commercial Lease Agreement
34. Reviewing the agreement
35. Executing the agreement
36. Making copies of the agreement
37. Advice for Real Estate Agents and Lawyers
38. Knowing the applicable laws
39. Properly explaining terms and conditions to clients
40. Keeping up-to-date with industry trends

Get started

The Basics: An Overview of the Commercial Leasing Process

• Review the commercial lease agreement you are considering and make sure it meets all of your needs
• Become familiar with the different types of leases, such as a gross lease, net lease, triple net lease, and modified gross lease
• Gather the necessary information to complete the lease agreement, such as the tenant’s and landlord’s contact information, the length of the lease, the rent amount, and any additional terms
• Discuss the lease agreement with the landlord and negotiate the terms
• Sign and date the lease agreement

You’ll know this step is complete when you have a signed and dated lease agreement, and you are ready to move on to the next step in the process.

Understanding the Legal Requirements of a Commercial Lease Agreement

• Become familiar with the legal requirements for commercial lease agreements in your state, including any applicable federal, state, and local laws
• Make sure to understand the type of lease agreement that is required in your particular jurisdiction
• Research common lease agreement clauses and ensure that they are included in your commercial lease agreement
• Consult a lawyer to ensure that your commercial lease agreement is legally binding
• Once you have a thorough understanding of the legal requirements of a commercial lease agreement, you can move on to the next step.

Familiarizing yourself with federal, state, and local laws

• Research applicable federal, state, and local laws related to commercial leasing
• Familiarize yourself with the landlord-tenant laws in your area
• Familiarize yourself with any regulations or restrictions related to zoning
• Make sure you understand any restrictions related to leasing a commercial space
• Check if there is any special paperwork you need to fill out according to the laws in your area
• Read any relevant case law that exists between landlords and tenants
• When you have a good understanding of applicable laws and regulations, you can check this off your list and move on to investigating zoning regulations.

Investigating zoning regulations

• Research the local zoning regulations in the area where the property is located
• Check to see if the proposed use of the property is allowed by the local zoning regulations
• Make sure the property is compliant with local zoning regulations, including any existing building codes
• Contact the local zoning commission and request any additional information needed
• When you are satisfied that the property is compliant with local zoning regulations, move on to verifying the tenant’s credit score.

Verifying the tenant’s credit score

• Contact the tenant’s current and previous landlords to inquire about their payment history
• Contact the tenant’s current and previous employers to get an idea of their financial situation
• Obtain a credit report from a credit reporting agency to see the tenant’s financial history
• Evaluate the tenant’s credit score to determine if it is satisfactory for you.
• Once you have checked all of the above, you can be sure that you have verified the tenant’s credit score and can move on to the next step.

Drafting a Legally Binding Document

• Draft the lease agreement based on the terms of the lease, including the rent amount, payment due dates, security deposit, lease duration, and other agreed upon terms
• Include any applicable state statutes, such as a statute regarding the return of a security deposit, in the lease agreement
• Make sure the lease agreement is signed by both the landlord and tenant
• Have any witnesses to the signing of the lease agreement sign the agreement as well
• Make sure to keep a copy of the lease agreement for your own records

You’ll know you completed this step when the lease agreement is signed by both parties, any witnesses, and you have a copy of the agreement for your own records.

Identifying the parties involved

• Obtain the full names and addresses of the landlord and the tenant
• Research the landlord and the tenant’s legal status to ensure they are capable of entering into a legal agreement
• List the full names of the landlord and the tenant in the lease agreement
• You will know you have successfully identified the parties involved when you have completed the research and have listed the full names of the landlord and the tenant in the lease agreement.

Establishing the terms of the agreement

• Decide on the details of the agreement such as the rent, security deposit, and any additional fees
• Determine how long the tenant has to pay the rent, how it will be paid, and any late fees
• Specify who is responsible for maintenance and repairs
• Agree on the amount of notice required for the tenant to vacate the property
• Include any additional terms and conditions

When you have determined the terms of the agreement, you can proceed to the next step of specifying the length of the lease.

Specifying the length of the lease

• Determine the length of the lease and include it in the agreement.
• Consider the amount of time necessary to complete the intended purpose of the lease.
• Determine if the lease should be month-to-month or for a fixed period of time, such as one year.
• Specify the dates (including the start date and end date) when the lease will begin and end.
• Include a clause that allows the tenant to renew or extend the lease for additional periods of time.
• Make sure to include the length of the lease in the agreement and provide a copy to both parties, ensuring that it is signed and dated by both parties.

You will know you can check this off your list and move on to the next step once the length of the lease has been specified and included in the agreement, and both parties have signed and dated the agreement.

Setting the rent amount

• Discuss with the landlord and tenant the amount of rent to be paid and the date the rent is due.
• Agree on the amount and due date of rent and include it in the lease agreement.
• Note any late fees associated with the rent and how they will be calculated.
• Ensure the rent amount is included in the lease agreement in both words and numbers.
• Once the rent is agreed upon and included in the lease agreement, this step can be checked off the list.

Defining the tenant’s rights and responsibilities

• Outline the tenant’s rights and responsibilities for the leased property
• Specify if the tenant has the right to sublet and what the process for doing so is
• Include any restrictions that the tenant must adhere to when occupying the property
• State any restrictions on what the tenant can and cannot do on the property
• Set any rules for the tenant related to any shared amenities
• Include any additional rules or restrictions that the tenant must abide by
• When finished, review the agreement and make sure that the tenant’s rights and responsibilities are clearly outlined

You’ll know when you can check this off your list and move on to the next step when you have clearly outlined the tenant’s rights and responsibilities for the leased property in the commercial lease agreement.

Establishing a security deposit

• Decide on an amount for the security deposit
• Make sure the amount complies with your local rent control laws
• Specify when the tenant must provide the security deposit
• Detail the conditions under which the security deposit will be refunded
• Clearly state that the security deposit is not to be used as rent
• Include information on how the security deposit will be held and managed
• Include a signature line for both the tenant and the landlord

Once you have completed these items, you will know that you have established the security deposit and can move on to the next step of describing the property in detail.

Describing the property in detail

• List the address of the property in the lease agreement
• Explain the size and layout of the property in the agreement
• Include any additional features of the property in the agreement, such as appliances, parking spots, storage areas, etc.
• Make sure to note any amenities or services that are included with the property or that are available in the area
• Check off this step when you have included all relevant information about the property in the lease agreement

Negotiating Terms and Conditions

• Gather the terms and conditions you wish to negotiate and discuss with the tenant
• Consider the length of the lease, the amount of rent, and the tenant’s responsibilities
• Agree on the terms and conditions by both signing the lease agreement
• Ensure that any additional terms or conditions are included in the lease agreement
• Once the agreement is finalized and signed, you can move on to the next step in creating a commercial lease agreement.

Narrowing down common areas of negotiation

• Research the common areas of negotiation in commercial leases
• Identify which areas of negotiation are applicable to your situation
• Take note of the applicable areas of negotiation and create a list
• Discuss the applicable areas of negotiation with your tenant
• Reach an agreement on the applicable areas of negotiation
• Once you have reached an agreement, you can move on to crafting a fair and balanced agreement.

Crafting a fair and balanced agreement

• Understand the local laws and regulations that may apply to the agreement
• Establish the type of tenancy that will be in place, including the length of the tenancy
• Include the services and utilities that will be provided
• Establish the rent amount and any other costs that may apply
• Specify the rules of the tenancy
• Outline the maintenance responsibilities of the landlord and the tenant
• Create a clause for addressing violations of the agreement
• Create a clause for addressing disputes between the landlord and the tenant
• Include a clause for ending the agreement

Once you have clarified all of the above points, you can be sure that the agreement is fair and balanced. You can then move on to the next step of understanding the rights and responsibilities of landlords and tenants.

Understanding the Rights and Responsibilities of Landlords and Tenants

• Research state and local laws that define the rights and responsibilities of landlords and tenants
• Understand the differences between residential and commercial lease agreements
• Make sure that both parties are aware of the applicable legal requirements
• Clarify who will be responsible for property taxes, insurance and utilities
• Draft a clause that explains the tenant’s legal obligation to maintain the property
• Make sure that both parties are aware of their right to terminate the lease
• Draft a clause that explains the tenant’s right to sublease the property
• Include any other rights and responsibilities that are applicable to the particular property

Once you’ve completed the above steps, you can move on to the next step: Clarifying who is responsible for maintenance and repairs.

Clarifying who is responsible for maintenance and repairs

• Review the terms of the lease agreement, and make sure that both parties agree to the terms relating to maintenance and repairs.
• Establish who pays for the cost of any maintenance and repairs, and include this information in the lease agreement.
• Specify who is responsible for any tenant-caused damage, and include any agreed-upon fees in the lease agreement.
• Determine who will handle the day-to-day maintenance of the property.
• Include a clause in the lease agreement that requires the tenant to alert the landlord of any necessary repairs as soon as they occur.

Once you have clarified who is responsible for maintenance and repairs and added the relevant information to the lease agreement, you can check this step off your list and move on to the next step.

Determining who is responsible for utilities

• Research the local laws to determine who is typically responsible for utilities.
• Consider reaching out to the local utility companies to get an estimate of the cost for the tenant.
• Decide who will be responsible for paying for utilities in the lease agreement.
• Include the agreement in the lease.
• Check off the task as completed.

Outlining the tenant’s rights with regards to subleasing

• Include a clause in the lease agreement that outlines whether or not the tenant has the right to sublease or assign the leased premises
• If the tenant has the right to sublease or assign, specify the conditions and limitations in the lease
• Specify in the lease agreement whether the landlord can approve or disapprove of any proposed sublease
• Determine the amount of notice that the tenant must provide to the landlord if they intend to sublease or assign the premises
• Decide whether the tenant will be held financially liable for any costs or damages that arise from a sublessee
• Outline who is responsible for finding any potential sublessee
• Include the terms and conditions for any subleases in the lease agreement
• Once all the terms and conditions have been established, the landlord and tenant should sign the lease agreement

How you’ll know when you can check this off your list and move on to the next step:
You will know that you have completed this step when you have included all the necessary information in the lease agreement, and both the landlord and tenant have signed the agreement.

Including Necessary Clauses and Provisions

• Review the applicable state and local laws to ensure you are including all the necessary clauses and provisions in the lease agreement
• Ensure that all the details related to the tenant’s rights and obligations are included in the agreement
• Include a clause that defines the tenant’s rights with regards to subleasing
• Include a clause detailing the tenant’s responsibilities in terms of maintenance and repairs
• Include a clause outlining the tenant’s rent payments and payment schedule
• Include a clause outlining the security deposit and return conditions
• Include a clause outlining the landlord’s right to inspect the premises
• Include a clause detailing the tenant’s right to privacy
• Include a clause that outlines the tenant’s right to terminate the lease agreement

When you have completed this step, you will have reviewed the applicable laws, included all the necessary clauses and provisions in the lease agreement, and provided all the details related to the tenant’s rights and obligations.

Considering the inclusion of a non-compete clause

• Research the laws in your state regarding non-compete clauses and ensure that you are legally allowed to include them in the lease agreement
• Take into consideration the terms of the non-compete clause, such as the duration and geographic area it applies to
• Decide if a non-compete clause should be included in the lease agreement and if so, draft the clause and include it in the agreement
• Once all the clauses have been written and included in the agreement, you can check off this step and move on to determining the conditions of early termination.

Determining the conditions of early termination

• Consider if you want to include an early termination clause in the lease agreement and what conditions that clause would include.
• Determine if you want to include a ““cure period”” for the tenant to remedy any issues that would cause them to terminate the lease.
• Include the conditions for early termination in the lease agreement.
• When you have included the conditions of early termination in the lease agreement, you can check this off your list and move on to the next step.

Specifying the consequences of late rent payments

• Determine the amount of late fees to be charged for rent payments made after the due date.
• Specify the total amount of late fees the tenant is responsible for in a calendar year.
• Consider if the tenant will be subject to additional penalties, such as an increase in rent or legal action.
• Include a clause that states the landlord is not responsible for any fees incurred by the tenant due to late payments.
• Include a clause that states any late fees paid are nonrefundable.
• Include a clause that states any returned check fees will be the responsibility of the tenant.

Once you have determined the consequences of late rent payments, you can check this off your list and move on to the next step.

Utilizing Available Resources and Support

• Research resources, such as reliable websites and legal documents available for free, that offer information about commercial leases
• Consider consulting with a real estate lawyer to get an understanding of the nuances of commercial leases in your state or jurisdiction
• Utilize resources from local, state, and federal government websites, such as the Small Business Administration or the U.S. Department of Housing and Urban Development
• Utilize online databases, such as the National Lease Agreement Database, to compare various lease agreements
• Utilize the advice and support of commercial real estate brokers or agents

You’ll know you can check this off your list and move on to the next step when you have thoroughly investigated and utilized all available resources and support.

Consulting with legal counsel

• Contact a lawyer or other legal counsel to review and discuss the commercial lease agreement
• Discuss all terms, conditions, and obligations of the agreement to ensure they are fair and legally sound
• Ask questions to make sure you have a full understanding of the agreement and its implications
• Have the lawyer or legal counsel review the agreement and make any necessary changes or additions
• Get a signed copy of the agreement from both parties

Once you have gone through this process and your lawyer or legal counsel has reviewed and given approval for the agreement, you can move on to the next step.

Utilizing online legal resources

• Research and read through online legal resources to create a basic commercial lease agreement
• Utilize online legal resources for specific terms and clauses to include in the agreement
• Consider consulting with legal counsel to review the agreement before signing
• Ensure the agreement is legally binding and meets all state and local laws
• When you have a complete lease agreement ready, you can move on to seeking advice from real estate professionals.

Seeking advice from real estate professionals

• Research and contact local real estate professionals, such as attorneys, property managers, and brokers for advice and assistance
• Meet with the professionals to discuss the specifics of the lease agreement and take notes on their advice
• Ask questions and address any concerns, as well as confirm the details of the lease agreement
• When you have all the necessary advice and assistance and feel confident in the lease agreement, you can move on to the next step of ensuring compliance with local laws and regulations.

Ensuring Compliance with Local Laws and Regulations

• Check applicable local zoning laws and regulations to ensure that the space can be legally used by the tenant for commercial purposes.
• Reach out to the local government if you need help understanding the laws.
• Read the state laws, particularly those that relate to landlord-tenant obligations.
• Make sure you are aware of any state-specific requirements that must be included in the lease agreement.
• When you are confident that the tenant’s use of the space is compliant with all applicable local laws, you can check this step off your list and move on to obtaining necessary permits and licenses.

Obtaining necessary permits and licenses

• Contact your local government offices to determine what type of permits and licenses are required for business activities in your area.
• Once you have a list of the required permits and licenses, obtain copies of the necessary forms and applications.
• Complete and submit the forms and applications, along with the required fees, to the appropriate government offices.
• Once you have received confirmation that the applications have been accepted and all the required fees have been paid, you can check this step off your list.

Investigating any applicable taxes

• Check local state and county regulations to determine if taxes apply to your commercial lease agreement.
• Look into the rules and regulations of the municipality you are in to see if they have specific taxes or fees associated with commercial leases.
• Research the rules and regulations of the state you are in to see if they have any taxes or fees associated with commercial leases.
• Calculate the amount of taxes or fees that are due if any apply.

You can check this off your list when you have a clear understanding of any applicable taxes and have calculated the amount that is due.

Understanding tenant-landlord laws

• Research your local and state laws regarding landlord-tenant regulations
• Take note of any restrictions or requirements for commercial leases in your area
• Familiarize yourself with the terms of a commercial lease agreement
• Understand your legal obligations as a landlord and tenant
• Know the applicable laws and regulations in your state
• When you feel confident in your understanding of tenant-landlord laws, you can check this off your list and move on to the next step.

Finalizing the Commercial Lease Agreement

• Read the entire lease agreement to ensure that it accurately reflects your understanding of the tenant-landlord laws
• Have both parties sign the agreement and exchange copies
• Make sure that the agreement is notarized if necessary