What Is a Commercial Lease Agreement?

Similar to a residential lease agreement, a commercial lease agreement is a contract through which a tenant agrees to certain terms in order to rent property from a landlord. The difference between a commercial lease and a residential lease is that a residential lease is leased specifically for residential purposes, and a commercial lease is obtained for business purposes. The terms of a lease agreement will vary depending on the type of lease negotiated between the tenant and the landlord, meaning that the responsibilities of each party will depend upon the specific terms of the lease.

How to negotiate a commercial lease

There are various types of commercial leases which apportion costs between the landlord and the tenant differently (aside from rent). Some leases require the tenant pay utilities and property tax, while the landlord remains responsible for maintenance, repairs and insurance. Others leave the tenant responsible for utilities, property taxes, and insurance premiums, while the landlord is responsible for maintenance and repairs. There are also leases which leave the tenant responsible for all building costs with the exception of structural repairs. Finally, and perhaps most commonly, some leases split the cost of structural repairs and operating expenses between the tenant and the landlord as “base rent”. These details are determinative of who is responsible in the event that damage occurs to the leased space, and the tenant should carefully consider the trade-offs of each type of lease during negotiation.

What is a Personal Guaranty

A personal guaranty, is a document that a landlord will try to make an Owner or officer of the business sign which put the individual personally on the hook if the business is not able to either cover the rent or if there is damage or another breach of the lease agreement.  It is important when considering your rights to determine whether you as a business owner are personally responsible for your rent to the landlord.

Sources:

Cambridge University Press, Commercial Lease, Cambridge Dictionary, 2020.

Clint Gharib, Negotiating a Commercial Lease: Here’s What You Need to Know, Forbes Magazine, June 2, 2015. Accessed July 14, 2020.

Whitmann Legal Solutions, LLC., Demystifying the Commercial Lease – Can you Get Out of Your Lease Due to the Coronavirus Pandemic?, JD. Supra, May 5, 2020, Accessed July 14, 2020.

Securities Exchange Commission, Lease Termination Agreement, Accessed July 14, 2020.

How to Get Out of a Commercial Lease

Ending a lease early is called “breaking” the lease and breaking a commercial lease can have expensive consequences. In some cases, a commercial lease contract includes a break clause, which allows for early termination without the payment of back rent (rent that would be owed if the tenant continued to lease the property). Break clauses often still require that the tenant maintain their lease of the property for a minimum amount of time prior to exercising their right to early termination under the break clause. When a commercial lease does not have an early termination right, it is often still possible to end a lease early for a variety of reasons: the landlord’s failure to provide required services, an unforeseeable event which triggers the force majeure clause of the contract (see our breach of contract landing page for more information of force majeure clauses), and subleases are all potential methods for breaking a lease. It is also possible for the landlord and the tenant to negotiate a lease termination agreement, in which both parties agree to terminate the lease early.

Lease agreements are unique and can include many specific terms negotiated by the landlord and the tenant. It is important to consult a lawyer not only to discuss what type of commercial lease is best for you and how to negotiate that lease successfully, but also in cases where a dispute arises with landlord. The property law attorneys at Freundlich and Littman, LLC., can help you ensure your lease is the best fit for your business, that you have the option to break your lease should it be necessary or if a dispute arises. Call us today at 215-545-8500 or email us at info@freundlichandlittman.com to schedule a free consultation.

Commercial Leasing

The terms of a lease matter a great deal. Small businesses, in particular, do not have the financial backing of a central headquarters if they have a bad month. If your lease requires you to pay an exorbitant amount of fees, that could affect whether you stay open. Commercial leasing is just like any other business. They want to maximize profits and minimize the work on their end.

At Freundlich & Littman, LLC, we understand the dynamic and important relationship that exists between a business and their landlord. Problems often arise between the two parties. We are here to help businesses navigate the challenges that come with commercial leasing.

Commercial Lease Attorneys

We routinely handle legal issues for businesses of all sizes and wealth. If you are experiencing difficulties with your commercial lease or landlord, let us help you fight for your legal rights.

We can help with commercial lease negotiations, commercial lease disputes, or any other legal issues surrounding your commercial lease or your business.

Contact us today for a free consultation and case evaluation.

Key Issues

No matter the commercial lease you decide to sign, include these key terms:

• Rent. This may seem silly, but never trust any lease without a specified rent amount. For commercial leases, the rent may fluctuate depending on a number of factors including the season. Make sure that you know how the landlord calculates the rent. Be to know what the rent includes.
• Length. Residential leases typically last one full calendar year. Commercial leases can be yearly or monthly. Make sure your lease specifies the length terms.
• Fees. Any extra fees should be in writing. If a landlord surprises you with extra fees, you’ll know it is outside the terms of the lease.
• Responsibilities. The lease should outline which party is responsible for repairs, snow removal, etc.
• The specific areas included in the lease. If someone slips in the hallway between two businesses, you’ll want to know who is responsible for it.

This list is not exhaustive. Contact legal advice to learn more.