Commercial Lease 

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WHAT IS A COMMERCIAL LEASE?

A commercial lease is a legally binding written contract that gives you as the tenant the right of exclusive possession of a property for a business or commercial activity for an agreed period of time. The lease outlines the contractual rights and responsibilities of both the landlord and you (as the tenant) during the lease term.

 

A lease is not to be confused with a license. It is similar, as it allows the right of an occupier to trade from the premises for a business or commercial activity. But, importantly, there is no exclusive possession, you cannot transfer the license to a third party, and often there is no set agreed period of time

ORAL LEASE AGREEMENT 

The problem with an oral lease agreement is it can be difficult to enforce. If disputes arise, a court judge would need to hear evidence from yourself and the landlord (or owner), and decide whose version of the story to accept. In contact, a written agreement is enforceable, courts will generally be obligated to uphold the terms of the written agreement.

WHAT FORMS OF LEASES ARE AVAILABLE? 

Percentage Lease

 

This is a type of lease that mainly applies to retail businesses (e.g., shopping centers). You will pay a fixed rate of rent, plus a percentage of your gross income (Base rate plus % of gross profits). Percentage leases can be beneficial for retail companies because they only have to pay an increased amount of rent when they can afford to do so.

 

Gross Lease

 

With a gross commercial lease, you will pay rent to the landlord as a gross amount on a monthly basis, and will also be responsible for all additional expenses to the business property - payment of property tax, insurance, maintenance, and utilities. 

 

Often there can be a: ‘Modified Gross Lease’, where the terms have been adjusted to suit the needs of the landlord and tenant. The landlord is still responsible for property tax, insurance, and some maintenance, but the tenant will be responsible for additional fees such as utilities and maintenance works.

 

Gross leases can often be expensive as costs can be overestimated but provide security for a tenant. 

 

Single Net Lease

 

In a single net lease, you will become in charge of paying a portion of the property taxes, but the landlord must still pay for any other building costs, including maintenance, utilities, and insurance.

 

Double Net Lease

 

In a double net lease, there is slightly more responsibility on your shoulders. You will have to pay your share of the property tax plus a share of the insurance premiums. The landlord is still responsible for any maintenance costs and utilities. All of the payments are made directly to the landlord, as payments separate from the rent.

 

Triple Net Lease

 

With a triple net lease agreement, you will be held responsible for all property costs, as well as the rent.

 

They will be required to pay for the following things:

 

  • Property taxes;

  • Building insurance;

  • Maintenance Fees; 

  • Utilities