Recommended Clauses for Commercial Lease Agreements

 In Commercial, net lease, nnn, Retail

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.

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