What is a Commercial Lease Agreement?
Owners and landlords use commercial lease agreements to lease their property for business purposes. The property they rent can range from vehicles and real estate to undeveloped land and equipment. This document will define the agreement terms between the owner and the Lessee. It details how the Lessee can use the property and what they pay for it.
Types of Commercial Leases
There are multiple types of commercial leases, and which you use depends on the property you’re leasing and the purpose of the lease.
Commercial lease-to-own agreement template
A lease-to-own agreement is one where the owner leases property to the Lessee, with built-in clauses that allow the Lessee to buy the property.
Commercial Lease Agreement Template
Used 5,282 times
This is your standard commercial lease agreement template, with all the important legal clauses you need. All you have to do is drag-and-drop your PandaDoc contacts and send them to sign.Use Commercial Lease Agreement Template
Commercial equipment lease agreement template
Use it when a construction company leases construction equipment to another party or in any similar situation.
Commercial land lease agreement template
A land lease can be for undeveloped land or land with development. Usually, you’re leasing undeveloped land, allowing the Lessee more rights in developing that land at their own cost.
Land Lease Agreement Template
Used 4,887 times
You can construct a written Land Lease Agreement Template between a lessor landlord and a lessee tenant using a land lease agreement template. In return for regular rental payments, the landlord gives the lessee permission to use the property for a predetermined time.Use Land Lease Agreement Template
Commercial vehicle lease agreement template
This contract leases a truck or any vehicle to another party for business purposes. You use this document to approve the Lessee’s right to use the truck for businesses and how they’ll compensate you.
Car Lease Agreement Template
Used 7,649 times
Your customers can decide to lease a car from anywhere and you want them to sign it from anywhere. Use this car lease agreement template to let them.Use Car Lease Agreement Template
Commercial space lease agreement template
This leasing agreement is one where you rent a specific space or building to another party. However, you only use it if the party plans to use the premises for business purposes.
Parking Space Lease Agreement
Used 4,958 times
A parking Space Lease Agreement for the rental of a parking space is made between the landlord and the tenant who wants to rent the area so that it can be rented by another person or business.Use Parking Space Lease Agreement
Commercial Lease Agreements By State
States have different legal requirements and clauses you must add. For example, the Uniform Commercial Code: Negotiable Instruments covers commercial leases in Florida. Using our state-specific templates, you can create a comprehensive commercial lease agreement between you and the other party.
Creating Your Commercial Lease Agreement with PandaDoc
PandaDoc creates the ideal templates for you, from the standard one you can customize to fit any situation to the state-specific ones. Find free templates that suit every possible situation. Further, you can customize all the templates to reflect your brand and policies.
Our step-by-step guide on customizing templates will ensure they fit any specific project requirements:
- Complete the Parties’ Required Information – Fill in the information in the [brackets] or anywhere the document requires your specifics. It includes the agreement’s terms, names of parties, and parties’ addresses, among other information.
- Describe the Property – Enter a legal description of the property to ensure there’s no misunderstanding about what premises the lessee can use.
- Define the Lease Payments – Explain how much it costs to lease the property and what the monthly rental amount includes. Also, add terms on any late fees or security deposits the lessee should pay.
- Detail Eviction Procedures – Clearly describe what‘ll happen if the lessee defaults on any terms and you initiate the eviction procedure. Some states have specific laws surrounding eviction, so ensure you comply with these laws.
- List Required Disclosures and Applicable Laws – Each state has specific laws surrounding commercial leases, so ensure the agreement complies with these laws and contains all the required disclosures. An example of a required disclosure would be the federally required lead-paint disclosure.
- Adjust the Template to Reflect Your Policies – Add any specific company terms and policies to ensure the agreement is appropriate for your company.
- Sign and Date the Agreement – The last step is to add the date of the agreement and have both parties sign it. You can send the completed agreement to the other party to sign electronically before you download it as a PDF.
Key Clauses and Terms
Some of the critical clauses included in your commercial lease agreement are the following:
- Names of both parties
- Contact details and addresses of both parties
- Description of the leased property
- Duration of the contract
- Compensation for the lease and payment terms
- Obligations of the Lessee
- Obligations of the Lessor
- Renewal and termination terms and conditions
- Legal requirements and clauses
Legal Considerations and Dispute Resolution
While states can have specific legal considerations, some are universal. While some specifics might differ, the terms below are always critical in a commercial lease agreement.
Understanding Tenant Improvements and Alterations
Generally, this term only applies if you lease real estate or vehicles to customers. Some equipment, especially heavy machinery, might also fall under it. This clause will discuss what improvements or alterations the tenant can make to the property.
Overall, you want to ensure that if the Lessee alters or makes improvements to your property, that:
- You know about it and approved their specific plans;
- You’re not liable for any of the costs of these improvements or alterations;
- You regain sole ownership of the property at the end of the agreement, despite any alterations or modifications.
Responsibilities of Landlord and Tenant
This section in commercial lease agreements is critical as it defines what you’re responsible for and what the tenant is responsible for during the contract. If the tenant’s negligence or malicious actions cause damage or property loss, you want to ensure they’re responsible for the repairs or replacement costs. However, the state requirements on this can vary, so always ensure you know the legal considerations of your state.
Some of the responsibilities you should clearly define are the following:
- Tax obligations
Subleasing and Assignment in Commercial Leases
Assignment is when one of the parties assigns another party to take over the lease from them. It often happens if the owner sells the property during the lease’s term. However, terms are always involved, such as that the owner must notify the Lessee in writing should they assign the lease to another.
Subletting is when the Lessee leases the property to another party. With subletting, the Lessee must ensure that their Lessee follows the terms and conditions of the original agreement. As such, the Master Lease is often part of the Sublease, generally as an appendix.
As this leasing agreement is for commercial purposes, owners might be more likely to allow subletting for business purposes. However, as an owner, ensure:
- You’re aware of and approve when the Lessee subleases your property
- That the Sublease follows the Master Lease’s terms
- That you give due notification is you assign the lease to another party
Options for Renewal and Termination
A business often wants to establish itself in a specific area, so there’s a good chance the lease will be active for more than three years, though it depends on what you and the tenant are after. As such, ensure that explicit renewal and termination terms are in place to help smooth any lease changes.
- For renewals, you can have various ways to approach it. One is that the lease has an automatic renewal at the end of its term to continue for a specified amount of time. Generally, the automatic renewal only stops when either party sends a notice of termination. However, it could also be that the lease will require renegotiated terms and a new contract to be renewed at the end of the period.
For termination clauses, ensure you clearly define the notice period and termination method. As the owner, you want an adequate warning if the Lessee intends to terminate the lease to find another. Set in place a process that happens when the lease is terminated. This process must contain information such as the notice period, when the Lessee relinquishes control of the property back to you, and the return of any security deposit.
Key Federal Laws and Regulations Related to Commercial Leasing
There aren’t many federal laws surrounding commercial lease agreements, as most of it is left up to the states. However, there are two you should consider:
- Americans with Disability Act: This law states that commercial businesses with public accommodation or over 15 employees must adhere to all handicap access rules. While it’s not active on buildings built before 1992 or ones that haven’t had renovations since 1992, any other commercial property open to the public must adhere to this.
As an owner, if you’re renting real estate to a tenant who plans on using it for public accommodations, like a restaurant, hotel, retail store, etc., you must be aware of this. If the premises don’t comply with that law, the tenant must be able to improve or alter it to fit, and sometimes it might be your responsibility if you don’t clearly define that it’s the Lessee’s.
- Hazard Waste: You must always dispose of hazardous waste according to federal, state, and local laws. As the premises are in your name, should the tenant not dispose of this waste properly, it can bring legal repercussions to your door.
That’s why you must add a clause that the tenant must dispose of all waste following federal, state, and local laws. If they don’t, you’ve done your due diligence, and all responsibility for the oversight rests solely on the Lessee’s shoulders.