What is Commercial Lease?
Commercial lease is agreement done between landlord or owner and the business tenants, that the tenant pay price for the stated period of time, the agreement could be anything both the owner and tenant should agree for it. Commercial real estate brokers may also negotiate the terms of commercial lease on behalf of a property owner. Within the lease, the “LESSEE” is the landlord, while the “LESSOR” is the tenant. Mainly commercial properties includes office space, retail shops will give for Commercial leases.
Different Commercial Lease Agreements
There are some different common Commercial Leases available, which are necessary to know to make a agreement.
A net lease is when you are responsible for paying the base rent. You also need to pay for all of the utilities, maintenance, and insurance. This popular commercial lease is broken up into even more distinct categories:
- Single net lease: Although not very common, single net leases are the most straightforward net lease. As a tenant, you are responsible for paying the rent and property taxes of the space.
- Double net lease: You are responsible for paying the rent, property taxes, and building insurance. The landlord must pay the costs of utilities, maintenance, and any other expenses that may arise. This type of lease is common for multi-tenanted buildings since the property owner is financially responsible for structural issues. The amount you pay will vary based on how much square footage you are leasing.
- Triple net lease: With this kind of lease, property owners make out the best. As a tenant, you are responsible for most of the costs relating to your occupation of a commercial space. You pay for rent, maintenance, insurance, taxes, utilities, and standard property repairs. Proceed with caution when deciding if you want a triple net lease, as you could be responsible for high expenses, like a broken HVAC or leaky roof. The advantage is that the base rent for these properties tends to be lower.
These are the two types of gross leases you may see as a commercial property tenant:
- Full-service gross lease: You pay a fixed rent payment every month. As a business owner, this is the easiest rent to budget for since you can expect to pay the same flat rate each month. Your landlord is responsible for all other expenses, including insurance, utilities, taxes, and property management fees.
- Modified gross lease: With this lease, the landlord is still responsible for insurance, utilities, taxes, and property management fees. Along with paying your fixed rent each month, you are also responsible for any incremental increases in operating costs. For instance, if the property taxes of the building suddenly increase, you may have to pay for a portion of that increase.
Restaurants and retailers most commonly sign percentage leases. These are when you pay the base rent and a percentage of your business’s gross income. Before signing the lease, you and the landlord will agree upon a set percentage. The more your business makes, the more you will pay to your landlord (although the percentage will stay the same). This type of lease helps the business owner and property owner work together to increase the business’s profits. This is a smart lease to choose if you want help with promotion efforts.
Requirements to make Commercial Lease Agreement
Documents are required from both “LESSOR” and “LESSEE” to make a agreement and both are responsible for the making of agreement and both should follow the rules and regulation of agreement. Here are some terms and conditions of Commercial lease agreement.
- Both of your names and information
- The address and basic information about the property
- The type of commercial building you’re leasing
- The square footage of the space
- The length of the lease and the terms of renewing the lease
- The cost of rent and when you must pay it
- The cost of the security deposit.
- An outline of how you may use the leased space
- An outline of what changes or renovations you may make. It may also explain whether the business owner or property owner is responsible for these changes
- Fixtures or appliances the lease provides
Basic terms that the LESSOR should know about the commercial lease
- Lease term – How long is the lease? Will it end on a fixed date or subject to conditions? Does either the landlord or tenant have an option to extend it or cancel early?
- Rent – How much is the base rent? Does it increase at set time periods? What other charges are included in addition to rent?
- Other costs – Who pays for items such as building insurance, property taxes, and routine maintenance?
- Security deposit – How much is it, and when may the landlord withhold it?
- Permitted use – The lease is only for specified commercial activities. The tenant may not engage in other types of business activities without permission of the landlord.
- Exclusive use – The tenant gets the exclusive rights to perform certain activities within a larger property with many tenants. For example, a coffee shop in a strip mall or a tax accountant in an office park may negotiate for exclusive use to avoid competitors moving in next door
Commercial properties are available at all the cities, but choosing the right property is the main task. As like agreement, there are so many different commercial agreement procedure available with different types of agreement choosing the right one is the task. To get a expert advise contact real estate agent Bangalore.