A BRIEF ON THE COMMERCIAL LEASE AGREEMENT
- Isha Sharma
- Jul 24, 2023
- 3 min read
Written by Isha Sharma, B.A.LL.B 9th Semester
Meaning
A commercial lease is a documented contract signed between both the owner of the property, generally known as the landlord, and the tenant, also known as the lessee. The tenant has been permitted exclusive use of a particular plot of commercial property for a specified period by accepting this legally binding contract.
A residential lease contract is very different from a commercial lease agreement in that the leased premises can be solely utilized for residential purposes. The rules regulating commercially leased premises forbid the lessee from using the commercial area for household purposes. The only permissible uses in the common areas of the Commercial Property shall be offices, warehousing, industrial, and other commercial activities.
Other names for a commercial lease:
A comprehensive commercial lease is much more inclusive and enables specified standards of the lease terms. Standard leases are more broad-based and only contain necessary clauses.
Other names for a commercial lease include:
o Lease of commercial real estate
o Commercial leasing contract
o Leasing a company
o Lease for industry
o Leasing commercial property
o Leasing an office
Essentials of the commercial lease agreement
The following crucial lease provisions should be understood before you sign a commercial leasing agreement:
A. How long the lease will last
The length of the lease is established by the landlord and tenant based on the lessee's needs. Landlords normally favor long-term leases because of the guaranteed payment; nevertheless, new businesses may select short-term leases.
The duration of a typical commercial leasing agreement could range from 1 year to 100 years for successful firm structures.
B. Rent goes up
For leases of commercial real estate, the annual rent increase is typically predetermined at a fixed percentage. The landlord and tenant can agree on how long should pass between escalations. The Commercial Lease Agreement shall set forth the percentage increment, the period between rent increases, and any exemptions from such increments.
C. Leasing it out again
Landlords and tenants might mutually agree before signing the lease that the business tenant may enter into sublease arrangements with third parties to avoid corresponding losses. This indicates that the tenant has the option to absolve the original tenant of responsibility by subletting the leased space to a different business that will adhere to the same terms of the lease as the original arrangement and pay the monthly rent and any other expenses.
D. The signage for the rented commercial space
Some lessors are uncomfortable with signing on their property. If the tenant's business requests signs, the terms of the lease must be altered and this must be stipulated in the commercial leasing agreement.
E. Public place usage and utility expenses
All of the building's tenants will have access to a common area that will be located around the commercial space. The agreement must specify how this space is going to be utilized as well as any utility costs. The landlord may offer to contribute to the upkeep of shared facilities or the lease may specifically indicate that the tenant is liable for every expense. The use of this common area for displaying signage, setting up seats, etc. must be specified and included in the business lease agreement for all parties to comprehend the usage.
F. Recurring and basic rent
A lessee can make a fixed monthly payment known as the "basic rent" for the whole term of the lease. If the tenant and the landlord opt to pay the rent on a monthly, the amount must be specified in the business lease agreement with two decimal places.
Can an early termination of a commercial rental agreement be made?
Indeed, under certain conditions, a commercial rental agreement may be ended early.
If the tenant violates the terms and conditions of the commercial lease, the landlord may terminate the lease. Although it is typically ideal that the two parties seek a resolution to the issue jointly, the landlord is not required to do so. A lease can also be terminated if both parties agree to do so.
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