Commercial Lease Agreement Template

Create a high quality document online now!

A commercial lease agreement allows a landlord to lease a space for retail, office, or industrial use. The tenant’s annual rent is based on the price per square foot ($/SF) plus any triple-net (NNN) expenses.

Commercial leases are commonly between 5-10 years with options for the tenant to renew at pre-determined rates.

Supplemental Forms

  • Commercial Rental Application – Allows a landlord to verify the income and credit of a business and its owner.
  • Personal Guaranty – Requires the tenant or 3rd party to be personally liable for the obligations under a commercial lease.

By State

Table of Contents

By Type (12)


Booth (Salon) Rental Agreement – Tenant pays the owner of a business, typically a salon, for the use of a booth or area for cutting/coloring hair, massage, cosmetics, or nails.

Download: Adobe PDF, MS Word, OpenDocument

 

 

 


Booth (Massage) Rental Agreement – For a therapist that is seeking to rent a room or share space within a spa.

Download: Adobe PDF, MS Word, OpenDocument

 

 

 


Co-Working Space Agreement – For office space that is shared amongst many tenants. Commonly no dedicated space.

Download: Adobe PDF, MS Word, OpenDocument

 

 

 


Garage (Parking) Rental Agreement – Space that is to be used by parking a vehicle.

Download: Adobe PDF, MS Word, OpenDocument

 

 

 


Gross Lease Agreement – The tenant pays only a base rent amount and the landlord is responsible for all property expenses.

Download: Adobe PDF, MS Word, OpenDocument

 

 


Facility Event Space Rental Agreement – An agreement to rent a setting for an event.

Download: Adobe PDF, MS Word, OpenDocument

 

 

 


Modified-Gross Lease Agreement – The tenant pays a base rent amount and the property expenses are shared between the landlord and tenant.

Download: Adobe PDF, MS Word, OpenDocument

 

 


Month-to-Month Lease – For commercial tenants renting for 30-day periods.

Download: Adobe PDF, MS Word, OpenDocument

 

 

 


Office Lease Agreement – For professional settings deemed non-retail.

Download: Adobe PDF, MS Word, OpenDocument

 

 

 


Percentage (%) Rent Lease Agreement – The tenant pays a base rent amount and a percentage (%) of their sales.

Download: Adobe PDF, MS Word, OpenDocument

 

 

 


Sublease Agreement – An agreement that allows a current tenant renting commercial property to release the premises to another tenant.

Download: Adobe PDF, MS Word, OpenDocument

 

 


Triple-Net (NNN) Lease Agreement – Tenant pays an agreed-upon amount to the landlord in addition to all expenses apart of the property including but not limited to taxes, common area maintenance (CAM’s), and real estate taxes levied by the county and/or city/town.

Download: Adobe PDF, MS Word, OpenDocument

 


What is a Commercial Lease?

A commercial lease is between a landlord and a tenant seeking to rent space for business purposes. The annual rent is calculated as a price per square foot ($/SF) of the usable space with 1/12th due each month.

Unlike residential leases, landlords will sometimes charge the tenant additional expenses such as common area maintenance (CAM’s), real estate taxes, and insurance (depending on the type of commercial lease).

(Video)

Types of Commercial Space (3)

There are a variety of different commercial properties out there, and it’s important for businesses and landlords to know the difference. For instance, it wouldn’t make sense for a landlord to advertise a property to retail outlets if the commercial space was designed for a warehouse.

So to keep things straight, here are the most common types of commercial properties used today:

Industrial Space

Industrial properties are the warehouses and factories often located outside of the cities. Prime industrial properties will be close to major transportation routes and will be up to code for manufacturing purposes. The most common types of industrial properties include heavy manufacturing, light assembly, flex warehouse, bulk warehouse, and R&D facilities.

Office

Office commercial properties include a large subset of buildings used for business operations. They can be in the heart of downtown or on the outskirts of towns and suburbs. These properties have three categories based on their quality of construction and location (Class A, Class B, and Class C).

Retail

Retail properties are ideal for most shopping centers, restaurants and small shops. These properties can make the lease a bit more complicated depending on the size of the building. The bigger the building (like shopping malls for instance), the more likely that there will be multiple tenants renting out spaces for themselves. This will often include additional terms to negotiate how space will be blocked off for different tenants or if one business will have exclusive rights to the property.

As you can see, commercial lease agreements are very common and play a big role in how many businesses operate. Any business can—and often does—rent its property rather than own it. Hopefully, you now have a better understanding of what a commercial lease is, why it’s important, and what types of commercial properties are available.

How to Lease Commercial Property (11 steps)

The process of renting commercial space depends on the type of property such as office, retail, or industrial. All property types are usually marketed as a price per square foot ($/SF). Every property is unique and therefore coming up with a suitable price can be difficult. Therefore, it is useful to see what other properties have rented for in your area. Once a price is set you can list your property for rent, sign a lease, and begin collecting rent.

Step 1 – How Much Space is Available?

In order to figure out how much is available for use, you will need to measure and calculate the square footage. This can be completed by multiplying the Length and Width of the interior usable space.

Step 2 – Set the Price per Square Foot ($/SF)

Select the monthly rent that you would like to charge the new tenant. Unlike residential property, commercial rent is described as a price per square foot ($/SF). When trying to figure the rental amount, it is a good idea to set the price that is close to what others are asking in your area.

Step 3 – Lease Type: Gross or Triple-Net (NNN)

When choosing what to charge the tenant a major question they will ask is if the rental amount includes the insurance, real estate taxes, and/or the maintenance of the property. This is very important and should be displayed when marketing the property.

Gross Lease – The tenant only pays the monthly amount written in their lease. The landlord will pay the real estate taxes, insurance, and maintenance on the property.

Triple (NNN) Lease – The tenant pays the monthly amount written in their lease along with the real estate taxes, insurance, and maintenance of the property.

Step 4 – Hire an Agent or Market the Property Yourself

Now you will need to get the property listed. This lets other businesses and individuals who are looking for property aware of the availability. Therefore you will need to decide if you want to market the property yourself or to pay a real estate agent to market the property on your behalf.

Every real estate agent charges their own rates although it is the industry norm to charge between 4-6% total lease amount. 50% of the fee is paid upon lease execution and the other 50% is paid when the tenant takes occupancy. So if a lease is for 5 years at $1,000 per month the fee to the agent would be $2,500 ($50,000 multiplied by 5% = $2,500).

Popular Commercial Real Estate Companies

Step 5 – List the Property

If the property is being handled by an agent then you probably do not have to worry about the property being listed. If you choose to market the property yourself, then you will have to use the power of the internet as your sole source to getting the space occupied.

When adding your property it is best to have nice looking images of the interior and exterior along with any common areas. It is also important to write all the amenities, parking, water/sewer, and any other information that is necessary to the needs of a prospective tenant.

Popular Commercial Listing Websites

Step 6 – Negotiating the Lease

When dealing with a prospective tenant it is best to understand their needs and come to an agreement. Therefore, it may be a good idea for you and your agent (if any) to get creative with the tenant in making a deal that works for both parties.

Example – Charge the tenant a percentage (%) rent of their sales rather than a higher monthly amount. Therefore, if the tenant makes money, you benefit as well.

Step 7 – Conduct a Credit Check (Business + Individual)

Unless you are dealing with an established company chances are that you will be dealing with an entrepreneur or small business. Therefore you will need to conduct a background and credit check to see their financial status.

Whether you’re checking a business or individual the best website to use is Experian.

Perform a Business Credit Check (Experian) – This will show the credit history of the company with details like how fast they pay-back their vendors and annual sales. Cost is $39.95 to $49.95 depending on the selected plan. View a Sample Business Report. The score will be between 0 and 100 with any score above 80 being credit-worthy.

Perform an Individual Credit Check (Experian) – It is best to also conduct a credit check on the owner of the business to view income and if they have any financial liabilities that could be separate from the business. Cost is $14.95 to the prospective tenant. View a Sample Individual Report.

Step 8 – Approve or Disapprove the Tenant

It is now time for the landlord to make a decision on whether to approve or reject the tenant. If rejected, the tenant should be informed through a Tenant Rejection Letter.

Personal Guaranty – If the tenant’s business is not credible then the landlord should consider having the tenant sign a Personal Guaranty which binds the owner of the Company to the lease. So if the tenant defaults the individual’s assets would be liable, not just the business.

Step 9 – Determine the Security Deposit

Once the tenant has been approved by the landlord the Security Deposit should be made known to the tenant. In residential real estate, there are State Laws that limit how much a landlord may ask from the tenant. In commercial real estate, there are no limits to how much the landlord would like to charge the tenant.

The landlord will commonly ask between 2-3 months’ rent in case the tenant stops paying the monthly rent or to safeguard against any damage that the tenant may cause during their time on the property.

Step 10 – Write the Commercial Lease Agreement

Use an attorney or draft the lease yourself. Make sure to gather all the information about the property and the tenant and enter into the agreement. Once completed, the document should be signed with the tenant and landlord in the presence of a notary public. This way the signatures are proven and the agreement is much more likely to hold up in court if its legality is ever questioned.

Step 11 – Taking Occupancy

After the security deposit has cleared and the lease has been signed the tenant should take occupancy. This means that the tenant can begin using the space as directed for use in the lease. Both parties will be held accountable for their specified duties until the end of the lease term.

Estoppel Certificate – May be requested by the landlord after lease signing to certify a lease exists between the tenant and landlord.

Required Clauses

American’s with Disability Act (42 U.S. Code § 12183) – Also known as the ‘ADA’, requires that any commercial tenants which offer “public accommodation” (such as a restaurant, retail store, etc.) or have at least fifteen (15) employees adhere to all handicap access rules. This rule is only grandfathered to properties that have not been built or had renovations since 1992.

Per 42 U.S. Code § 12183 if the Lessee is using the Premises as a public accommodation (e.g. restaurants, shopping centers, office buildings) or there are more than 15 employees the Premises must provide accommodations and access to persons with disabilities that is equal or similar to that available to the general public. Owners, operators, lessors, and lessees of commercial properties are all responsible for ADA compliance. If the Premises is not in compliance with the Americans with Disability Act any modifications or construction will be the responsibility of the Lessor.

Hazard Waste (42 U.S. Code § 6901) – Forces the tenant to sign in writing that they will adhere to any federal, State, or local laws in regards to the disposal of hazardous wastes.

“Shall mean any and all federal, state, or local laws, ordinances, rules, decrees, orders, regulations, or court decisions relating to hazardous substances, hazardous materials, hazardous waste, toxic substances, environmental conditions on, under, or about the Premises, the Building, or the Property, or soil and ground water conditions, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Hazardous Materials Transportation Act, any other law or legal requirement concerning hazardous or toxic substances, and any amendments to the foregoing.”

Other Lease Terms

In addition, there may be other areas of the lease, outside of the monthly rent, that the parties may want to negotiate such as:

Option to Renew – Use if the tenant would like to have the option to stay in the property for a longer time then they may request an ‘Option to Renew’ the lease. This gives them the right to extend the lease for a specified rental price if they want.

Option to Purchase – Use if the tenant would like the option to purchase the property for a specified price during the course of their lease.

First (1st) Right of Refusal – If the property is for sale and goes under contract with a buyer this allows the tenant the option to purchase the property for the same price. The tenant will usually be given 30 or 60 days to secure financing if they choose to purchase the property.

How to Use a Commercial Lease Agreement

Commercial lease agreements are different from residential lease agreements. They provide many more provisions in the contract to protect both the landlord and the business. Essentially, the purpose of a commercial lease is to make sure there are no loose ends that can leave either party at risk.

The terms of commercial lease agreements will be different depending on the specific property and the business that owns the lease. Terms are often negotiated between the two parties to determine:

  • The leasing period
  • How utilities are paid
  • Who is responsible for the maintenance (or how the responsibility will be divided)
  • Whether improvements and changes to the property are allowed (and to what extent)
  • How the property will be used
  • What’s allowed on the property (hazardous materials, chemicals, machinery, and combustibles)
  • Annual rent increases (for long-term leases to keep up with the market)
  • Description of the property (including living spaces, appliances, number and types of rooms)
  • Whether the business will have exclusive rights to the property
  • Whether the company can sublease or assign sections within the property
  • What parking is available and how it will be paid
  • Compliance with ADA (Americans with Disabilities Act)
  • And how property taxes will be split between the business and the landlord (if the owner does not agree to pay for it entirely themselves)

This list is not inclusive of everything that may need to be outlined in the commercial lease agreement. There may need to be more special provisions made depending on the property type or business.

Sample: Commercial Lease Agreement

Download: Adobe PDF, MS Word, OpenDocument

How to Write (instructions)

Download in Adobe PDF, Microsoft Word (.docx) or Open Document Text (.odt).

I. The Parties

(1) Date Of Party Agreement.  The calendar date by which both Parties formally agree to the content of this commercial lease should be reported in the first article.

(2) Name Of Lessor. The full name of the Person or Entity that has the legal right to rent the commercial space is required by the wording of the first article. Generally, this will be the Property Owner or Landlord but will be known as the Lessor for the duration of this paperwork.

(3) Address Of Lessor. The Lessor’s mailing address is needed for this statement. Present it where requested.

(4) Name Of Lessee. The Entity that shall pay the Lessor for the right to occupy and conduct business on the commercial property is the Lessee. Generally, this will be a Business Entity therefore make sure to identify this Party by its formal name. This means any descriptive suffix in the Lessee’s legal name should be included (i.e. Inc., Ltd., etc.).

(5) Address Of Lessee. After identifying the Lessee by name, provide his or her mailing address. This should be the formal address where the Lessee’s Business can be contacted reliably by the Lessor.

II. Description Of Leased Premises

(6) Street Address. The physical address where the commercial property is accessible is a necessary item for this contract’s effect. This information should include the building number, street, and unit number of the commercial space along with the city, state, and zip code. Once this contract is signed, this will be the premises the Lessee shall pay to occupy.

(7) Square Feet. The area the rented structure occupies should be defined in feet. This requires a physical measurement of the length of each wall and (if relevant) ceiling height.

(8) Type Of Space. Commercial space will often be structured for a purpose in mind. For instance, an office building will have quite a different interior layout than an industrial complex. Define the kind of space or premises being rented to the Lessee.

(9) Other Description. If additional content must be presented to fully describe the leased commercial space, then make sure this information is included by dispensing it to the “Other Description” line.

III. Use Of Leased Premises

(10) Defined As All Purpose. Some commercial spaces will be available for any purpose. If this is the case and the Lessor shall not require the Lessee to limit his or her business to any one purpose for the duration of the lease then select the first checkbox in the third article.

(11) Specific Purpose. If this agreement is meant to limit the Lessee’s on-site activity to a specific industry or purpose, then select the second checkbox statement. If selected, establish the purpose or business activity allowed on the premises by presenting each one in the space provided.

IV. Term Of Lease

(12) Leasing Period. Produce the number of years and/months this lease will be effective. This will be the lease term for the commercial space. Thus, the number of years and months reported here will define the length of time from its date of effect to the date of its termination.

(13) Term Commencement. The first calendar date that begins this agreement for the Lessor and Lessee should be dispensed where requested.

(14) Term Expiration. A record of the final date of this agreement should be dispensed to article IV. This shall mark the final day this agreement is in effect.

V. Security Deposit

(15) Waiving The Security Deposit. As a custom, the Lessor will expect to receive a certain amount based on the monthly rent to hold for the length of this agreement. This amount would be returned in full to the Lessee when the agreement terminates and the Lessee does not have an unpaid balance with the Lessor. In some states, this security deposit will need to be held by the Lessor in certain types of accounts. If the Lessor does not intend to collect a security deposit from the Lessee, then select the first checkbox statement.

(16) Required Deposit. If the Lessee must submit a security deposit for the commercial space, then pick the second checkbox statement. Additionally, document the dollar amount defining the security deposit.

VI. Rent

(17) Rent Amount. The amount of money the Lessor expects from the Lessee as a rent payment should be written out then numerically presented to the spaces in Article VI.

(18) Payment Deadline. It will be assumed that rent is owed and must be paid on a monthly basis. The two-digit calendar day when the Lessee must submit the monthly rent to the Lessor is needed to complete the statement made in the fifth article.

(19) Release Of Percentage Rent. If the Lessor does not expect the Lessee to supplement the rent amount reported above with additional funds from the Lessee’s sale, then mark the first checkbox in Item (A).

(20) Percentage Rent Requirement. If this lease is to require the Lessee to submit a percentage of his or her sales (made on-site) in addition to the rent amount then, select the “Required To Pay” checkbox and supply the exact percentage of the Lessee’s profits from the Business operating on-site to complete the statement.

(21) Owed Percent Of Revenue. Dispense the percentage of the Lessee’s revenue that should be paid to the Lessor.  This value should be written out then presented numerically along with the type of revenue (I.e. gross sales, etc.) that will be used for this calculation.

(22) Percentage Rent Deadline. Naturally, the percentage of profits from the onsite Business that must be paid will be expected to be submitted regularly. Select the checkbox appropriate to the period by which this additional amount must be submitted. For instance, it can be submitted “Monthly,” “Quarterly,” “or Annually.”

VII. Late Fee

(23) Penalty For Late Rent Payment. There may be times when the Lessee is unable to pay the rent on the two-digit calendar day of the month that it is due. If the rent remains unpaid for the number of days recorded in Article VII’s statement, then a late fee may be collected. Report the maximum number of days the rent may go unpaid before a late fee is charged to the space available in the seventh article.

(24) Predetermined Penalty Percentage. If the penalty for a late rent payment will be a percentage of the yearly rent for the commercial space, then select the first statement displayed in Article VII and present the exact percentage that will be used for this calculation.

(25) Dollar Amount Penalty. The Lessor can set a defined dollar amount as a penalty for late payment of rent. To do so, the second statement should be selected, and the penalty amount must be reported.

VIII. Expenses

(26) Gross Lease. If the above content can be considered the full amount of money the Lessor expects then, select the checkbox labeled “Gross” to properly categorize this agreement. This selection must be confirmed through the initials of the Tenant (Lessee) and the Landlord (Lessor).

(27) Modified Gross Lease. If the commercial space will require additional payment(s) from either the Commercial  Lessee or the Lessor will be responsible for certain payments, then select the “Modified Gross” lease option. The Lessee and Lessor will both be expected to provide initials of acknowledgment if this definition is selected.

(28) Modified Payments. Use the first area available for the “Modified Gross” lease definition to list every expense the Lessee must pay for in addition to the defined rent amount (i.e. waste disposal) and the second area in this item to list every monthly expense the Lessor must maintain for the duration of this lease (i.e. water).

(29) Triple Net (NNN). If the Lessee will be expected to take on certain responsibilities in addition to the rent amount such as the expenses needed to operate a Business on the leased premises the taxes owed for the property making up the leased premises, and insurance, then select the “Triple Net (NNN)” option. This selection must be acknowledged by both the Lessee’s initials (“Tenant”) and Lessor’s initials (“Landlord”).

(30) Injury Or Death Insurance. If the Lessee must obtain insurance coverage to protect the Lessor from an injury or death on the premises, then select the appropriate checkbox and make sure the amount of coverage that must be maintained is documented.

(31) Property Damage Insurance. Select the second option in Item C to indicate that the Lessee must obtain coverage to protect the Lessor from property damage.

(32) Casualty Insurance. To set a minimum amount of casualty insurance coverage the Lessee must maintain for the leased property during this agreement’s lifespan, select the third checkbox and input the minimum required coverage amount.

IX. Option To Renew

(33) Lessee May Not Renew. If the Lessor and Lessee agree that this agreement will not be renewed, then mark the first checkbox statement to include this provision.

(34) Lessee May Renew. It can be established that the Lessee will have the option to renew by selecting the second checkbox. This provision shall require additional information.

(35) Renewal Term. The number of times this lease may be renewed when its term completes should be recorded along with the number of years and months making up each renewable term.

(36) Same Rent Renewal. If this lease may be renewed by the Lessee and such a renewal will not cause an increase in the rent due, then mark the “Not Increase” checkbox.

(37) Increase Through Bureau Of Labor Statistics Standard. The third checkbox should be marked if the Lessee may renew the lease and be required to pay an increase that is the calculated product of the rent and the annual change of the CPI (Consumer Price Index).

(38) Percentage Rate Increase Renewal. If the Lessee will be allowed to renew this lease so long as he or she pays an additional sum calculated as a percentage of the current rent, then select the fourth statement.

(39) Increase As A Flat Dollar Amount. If the Lessee may renew this lease upon its termination and must pay a predetermined dollar amount in addition to the monthly rent as an increase, then select the final statement and record the dollar amount that will be added to the current rent.

X. Leasehold Improvements

(40) Exceptions To Lessee Improvement Responsibility. Sometimes improvement to a property may be required to remain compliant with any changes in local law, allow the Lessee’s business to remain competitive, or any number of reasons. The Lessor may be responsible for some of these improvements to the leased property or this cost can be covered by the Lessee. This must be settled and documented in Article X by presenting every property improvement that the Lessee will not be required to pay for.

XXIV. Governing Law

(41) State Law. This agreement can be used in any state so long as it remains compliant, and that state is named in Article XXIV. Review this paperwork, confirm that it obeys the laws of the state where the property is located then, document the name of this state where it is requested.

XXV Notices

(42) Lessor Information. The complete mailing address where notices regarding the commercial space and this agreement may be sent to the Lessor is required by this contract’s twenty-fifth article.

(43) Lessee Information. The mailing address where the Lessee can be said to reliably receive any officially mailed notice concerning this paperwork and the commercial property being rented must be furnished as requested.

XXVIII. Additional Terms & Conditions

(44) Provisions. This paperwork must contain every agreement regarding the leasing of the commercial space discussed above. If any agreement or provision has been unaddressed, then use the space in Article XXVIII to document it. Only the contents of this contract can use this paperwork to obligate the Lessor and Lessee to its effect.

(45) Lessee’s Signature. The Lessee, or the Tenant, can only enter this agreement by signature. He or she must sign this paperwork after reviewing it for accuracy. This signature along with the Lessee’s signature date and printed name should be provided as a Notary Public observes.

(46) Lessee’s Signature Date.

(47) Printed Name Of Lessee

(48) Lessor’s Signature. Both Parties must sign this document for its effect to be valid. Therefore, a signature area for the Lessor (Property Owner or Landlord) has been provided. He or she must sign this document either as the Owner or Landlord of the commercial space or an official Representative of the Business Entity that is the Owner or Landlord. This act of signing must be performed as Notary Public watches.

(49) Lessor’s Signature Date.

(50) Printed Name Of Lessor.

Lessor’s Acknowledgment Of Notary Public

(51) Notary Acknowledgment Of Lessee Signature. As mentioned earlier, the Lessee must sign this document as a Notary Public observes. The Notary will be supply proof of the notary process to verify the authenticity of the Lessee’s signature.

Lessee’s Acknowledgment Of Notary Public

(52) Notary Acknowledgement. The Lessor’s signature must also be notarized. This process will support the Lessor’s signature through the Notary Public’s testimony that he or she has watched the Lessor sign this document.