Recommended Clauses for Commercial Lease Agreements

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Before I discuss some of the common pitfalls to be aware of by a potential buyer when evaluating a property for purchase, I’ll review the clauses that at least should be included in a commercial lease. It’s not uncommon for a commercial lease to be 40 or even 50 pages long.

• Proper description and verifiable rentable square footage of the demised premises.
• Permitted uses of the premises.
• The initial term of the lease.
• Options to renew if applicable and the new base rent and term for each option period. .
• Rent Increases during the term of the lease or options.
• Tenants’ responsibility for the Landlord’s maintenance costs, real property taxes, insurance and operating expenses and any exclusion.
• Pass through caps or expense stops, if any.
• Security deposit and personal / corporate guarantees required.
• Detailed listing of tenant improvements (TIs), repairs and/or alterations, by whom, and the procedures that must be followed plus a timetable for completion.
• Detail of trade fixtures and who will own and pay for the same. Does the tenant and/or landlord install and who is responsible for removal at the end of the lease.
• Who will be responsible for maintenance, utilities, and code and zoning compliance? Who pays the bills? Does the landlord pay and tenant reimburse or the tenant direct pay?
• Right of access by tenant’s, hours of operation and HVAC Hours of operation.
• Landlord’s right of access – reasonable notice and at reasonable times?
• Signage.
• Tenant/landlord’s responsibility to carry Insurance and the amount of coverage.
• Business sale clause.
• Right to sublet and assign.
• Going dark rights if out parcel or shadow anchor.
• Exit clause and tenant’s right to terminate the lease.
• Breach of the Lease.
• Conclusion.

Next, I’ll discuss pass through caps and expense stops so until then, have a wonderful back to work monday evening.