Renting commercial space is a big responsibility. A commercial real estate lease is a rental agreement that allows a business to rent commercial space from a landlord. It is essential to understand the differences between commercial and residential leases, and agree to the amount of rent, the configuration of space, and length of the contract before signing on the dotted line.
Types of Leases
A full-service lease is the most common type of commercial leases. This type of lease is advantageous to the tenant because there are no hidden costs. The landlord is responsible for paying all taxes, insurance, repairs, utilities, maintenance, and janitorial services.
A net lease is one in which the landlord charges a lower annual rent compared to a full-service lease. However, the tenant will be responsible for individual monthly costs; such as property taxes, insurance, utilities, and maintenance.
While the base cost may seem lower, the tenant will be responsible for additional monthly costs. Net leases can be single, double or triple net leases.
With a single net lease, a tenant pays rent plus a pro-rata share of the building’s property taxes. With a double net lease, the tenant pays a portion of the property insurance in addition to rent and property taxes. With a triple net lease, the tenant pays the pro-rata share of property taxes, property insurance, and CAMS.
Triple net leases are the most landlord-friendly and most common for restaurants and retail locations. If a tenant chooses a triple net lease, they are still responsible for purchasing a property insurance policy.
Modified Gross Lease
A modified gross lease is a compromise of a full-service and net lease. Tenants will pay their property taxes and maintenance, in a lump sum along with their rent. The landlord will cover utilities and janitorial services.
Commercial Leases vs. Residential Leases
- Residential leases are subject to more consumer protections than their commercial counterparts. Commercial leases have no security deposit caps or rules protecting the tenant’s privacy.
- Commercial leases are customized to the needs of the landlord, and each lease must be individually reviewed to ensure it suits your needs.
- Commercial leases are legally binding contracts that are not easily changed or broken.
- Commercial leases offer negotiation and landlords are often willing to extend special offers to secure a tenant.
- The Amercans with Disabilities Act requires commercial properties open to the public or that employ 15 or more people to have premises accessible to disabled people. It is important to ensure the landlord and tenant agree on who will create and pay for any modifications.
Will a Commercial Lease Fit My Business?
It is a wise idea to hire an experienced real estate attorney to carefully review the terms to ensure it meets the needs of your business before signing the contract.
- The amount or rent and whether or not you can afford it.
- The desired size.
- The length of the lease.
- That your business may outgrow the space before the lease is up.
- That a short-term lease may be a safer option.
- What physical space your business may need. Do you need additional cubicles, loading docks, or specifics to make communication easier?
- Whether your rent includes insurance, property taxes, heat, electricity, and maintenance costs.
- The amount of the security deposit and the conditions for its return.
- If there are elevators, accessible restrooms, common areas.
- Who will maintain or repair the premises, including air conditioning?
- Whether or not there is an option to sublet or renew the lease.
- If the lease can be terminated and how.
Paul J. Burkhart
Paul J. Burkhart can help if you are seeking to rent commercial property. Paul J. Burkhart is an experienced business attorney who can review your lease and ensure it has the features you need and is the right lease for your business before you sign on the dotted line.
Our team assists both individuals, and business clients with all their legal needs, including business and Corporate Transactions, Business/Commercial and Civil Litigation, Real Estate, Intellectual Property, Family Law, and Estate Planning matters. We are a full-service private law firm ready to assist you with any request, large or small. Call 561-880-0155 or visit our website.
Law Offices of Paul J Burkhart, PL
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Palm Beach Gardens, FL 33410
Phone: (561) 880-0155
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