Understanding a Commercial Real estate Lease Agreement: Tenant and Landlord Must Read This!

commercial real estate lease agreementAn agreement should always be something that benefits both side involved, yet when it comes to commercial leases, it often ends with one side feeling as though they have been burned. Oftentimes, in the haste to get a deal done, one of the two parties will capitulate on something that they feel strongly about, such as the length of the lease, and it usually comes back to haunt them at a later date. Both the tenant and the landlord want to get the best deal possible, but sometimes a little give and take can make for a perfect lease agreement that both side can happily live with.

There are a number of different things that need to be negotiated in order for things to go smoothly, but it all begins with the terms of the commercial lease. Both sides have to be willing to walk away if they cannot get this part of the lease sorted out. If the terms that both sides want are pretty far apart, there really is no reason why negotiations should continue. It is for this reason that a tenant should have a number of properties in mind when they begin negotiations with a landlord. Having all of your eggs in one basket often means taking a deal that is far from what you wanted.

One the length of the lease and rent payments are agreed to, both sides than have to start digging a little deeper to make sure all of the details are suitable to both sides. What many people forget is that there are costs accrued over and above the rent, and someone has to pay for those. Who will be responsible for utilities? Will repairs and maintenance be handled by the landlord or tenant? These are just a few of the extra expenses that can very much have an effect on the monthly budget. There is no point in negotiating a low rent payment if the costs over and above that amount blow your budget out of the water.

Another thing that both sides have to seriously consider are the clauses that will be added to the finished lease agreement. For the tenant, they may require that the landlord does not rent a space to a competitor in the same building. The tenant may also want the ability to sub-lease the property or perhaps expand at a later date. As for the landlord, he may have very specific requirements about what happens when a payment is missed or late. Some landlords will allow an extra period of time to receive payment, while other will put a padlock on the door after one day.

What we have outlined above is really just scratching the surface of what goes into a commercial lease agreement. Both sides need to be on the exact same page and be aware of how the other will react in any given situation. It is much better to take some extra time to get the agreement right than to rush into a deal that one or both ends up regretting.

What should be included in a restaurant lease agreement?

restaurant lease agreementOpening a restaurant can be a very costly venture, which is why it is essential to have a lease agreement that works for you and your business before you sign on the dotted line. You can very easily go online and find a pretty standard restaurant lease agreement form, but you might want to make sure that there is plenty of space to negotiate, as there are definite terms and agreements that you will want in there before deciding whether or not the space is right for you.

One of the most important things to consider is when you will actually start paying the rent. Ideally, your restaurant lease agreement should be set up in a way that makes it so you do not have to pay until you actually open for business. Not every property owner will go for that, but if the location has been sitting empty for a while, you may have a better chance of getting that stipulation in there.

An inspection of the property should be performed before you agree to anything. If you find that there are some areas of concern, your lease agreement should make mention of which items the landlord will be financially responsible for fixing. The fact of the matter is that any and all major repairs should be covered by the landlord, as he will continue to get the benefit of them after your business has vacated the premises.

If you are moving into a building that has a number of different commercial spaces available, you may consider asking for exclusivity to be written into the restaurant lease agreement. What that means is that another restaurant that would be in direct competition with you would not be allowed to open in the same building as long as your lease agreement is in good standing. A break clause is also a good idea, as this will allow you to get out of the agreement early if need be. It is no real secret that a lot of restaurants fail, which is why a break clause is such an important part of any lease agreement.

When it comes to the legal side of things, you should make sure that the restaurant lease agreement is in the name of your corporation and not in your own name. It is also expected that the building owner will pay any and all legal fees that come with putting the lease agreement together. If he or she asks you to pay any or all of that, consider it to be a red flag. Finally, you need to be clear in what action will be taken if you default on the lease payments. Will an eviction notice be served, or will the owner come and lock you out of the premises immediately. This, again, is something that needs to be agreed upon and made clear before you commit to any sort of restaurant lease agreement.

Business Lease Agreements : Things to Consider Before Negotiating or Signing a Lease Contract

business lease agreementThere are a number of different things that need to be taken care of before a business can open and start serving customers. Those who have planned properly will know how important it is to stick to a very strict budget. That budget can be blown out of the water completely if proper care is not taken when signing a business lease agreement. There really is no such thing as a one size fits all type of contract, as there are all kinds of different lease types being offered by building owners. It is what you know and what you ask that can help you land the deal that best suits your business and your budget.

One of the biggest problems that business owners have to deal with when considering a lease is that there are so many different kinds to choose from. There are net leases, percentage leases, fully serviced leases, and many more besides. You need to have a basic idea of what each one entails and what it will end up costing you. There really is no such thing as a lease based solely on the size of the space you are going to occupy, so ask to see a sample lease first, so that you are well aware of what you are getting before you sign.

There are a number of different changes that may need to take place within your business as time goes on. You may need to expand or make interior changes that require the space being changed in a number of different ways. This is why you need to make sure that you have a lease that is negotiable in a way that suits your business. That means talking to the building owner about his level of flexibility when it comes to the length of the lease, the amount paid over time, and a host of other negotiable details. If the owner chooses to stand form on everything, it may not bode well for your business when you want to make changes as your business grows.

It can be easy to focus on the amount of rent you will need to pay each month with your lease, but you also need to think of the other expenses when budgeting. At the top of that list is the insurance that you will be required to pay on the property. This is something that you will need to talk about with the property owner, as the type of lease you are taking on may well dictate the amount of insurance that will be required for the space.

Those are just three of the things that you need to be aware of before signing any type of business lease. It is always a good idea to ask for a sample lease, which you can then take some time to review in full before making your final decision. Doing so could save you a lot of money and hassles in the future.

Commercial Rental Lease Agreement: An Example

commercial rental lease agreementIf you are busy with a commercial rental lease agreement transaction, it is necessary you get the legal rights and obligations of each party’s up-front. Your failure to do this will be much more difficult to make for warring parties – and the right for that matter – to untangle the mess later. Use these tips to your next l/o deal profitable.

Keep the tenant a tenant

If you are using to sell all/o, it is important to keep in mind that the buyer is not a buyer until they shall exercise its “buy” option. Buyers have considerably more rights to the title claim a home than do renters. If you hassle-free, a judge could decide later your tenant was actually a buyer, give her an equitable interest in the property, and force you to put in place to shield then – something you want no part of.

Here’s how to keep things weighted in your favor:

– Keep the lease to separate the option – use the word “buyer” do not use in the lease, and not refer to the option in the rental agreement in any way. The buyer should always be referred to as the “tenant” in the lease and “optional” in the option agreement;

– Pay the taxes and insurance yourself – The more costs of the tenant pays, the more it looks like a sale to a judge;

– Do not use illegal rehab clinic to determine their properties – let Buyers, not tenants. If your tenant wants to fix up the property, make sure your documentation that clearly brings an approval process for the repairs and the appropriate exemptions from rights to reimbursement or claims on the added value of the property.

– Use a year terms – if the l/o should be extended than that, gives the tenant the rent-and/or additional options to the option (in separate agreements, of course). Preparing new documents every time;

– Get a deposit – Tenants pay deposits, not buyers. Keep the Borg a separate escrow account. You can still ask for an extra option the fees below the option agreement, but keep it separate from the deposit, just like your lease and the option agreement must be kept separate.

Let your option rights disappear with the seller

If you are using all/o to buy, a significant period of time can elapse between running the l/o and close on the property. What if the seller dies? What if the seller tries to renegotiate conditions at the last minute? Use the following to protect yourself:

1. Attach an exact copy of the agreed purchase agreement as “Appendix A” to the option agreement. This leaves no doubt as to the agreed conditions. Also it will close by much more efficient, because each side will only need to the pre-agreed command and provide for the title company to go to closing.

2. Notarize and note the option agreement. Most land records clerks will allow you to take this document and, although not an official “lien” on the property, the Act of recording should be enough of a “cloud” law on the title to create problems for the seller.

3. Think of a “deed in escrow.” Don’t try to do this on your own. Ask a real estate lawyer to help you craft this agreement. If properly done, you may only have to pay to the escrow agent tender in Exchange for the deed to the House. It can also be a great safety net in case the seller dies or fails its agreement to sell you the property.

Avoid these lease/option landmines and you will better protect your profits. And always remember to keep a good real estate lawyer on your team to make a solid commercial rental lease agreement.

Commercial Lease Agreement: Choose Tenants!

commercial lease agreement pdfYou have had your open house for that available lease home and you’ve gotten 3 or 4 good uses of people interested in leasing that property. Now, how do you get to choose the right tenant for your property? If you are busy with a lease/option transaction, it is necessary you well the legal rights and obligations of each party’s up-front which you can find it here: commercial lease agreement pdf. Your failure to do this will be much more difficult to make for warring parties – and the right for that matter – to untangle the mess later. Use these tips to your next l/o deal profitable.

Know what you are attracting tenants

One thing to understand with lease purchases in real estate investment is that you are dealing with potential tenants who do not quite get in a mortgage. Many will have bad credit, loss of jobs or even lost a home in the past. So, you want to look out for people who have just become a corner financially. They have a good rental period for say a year. They have a regular job and despite they may have bad credit, you’ll be able to see that they care for the important things like student loan payments and car payments.

It’s okay if they had problems to make mortgage repayments in the past as long as it’s far enough in the past that you to see the potential tenant are making an effort to improve their financial position.

Are they going to buy?

You may also want to inquire with each candidate to see how certain they feel about buying the property eventually. In leasing property, you can just rent out the House until it falls apart as that’s what the tenant wants to do, but every lease includes the ability for the tenant to the property buying whenever they want. So, if you’re a potential tenant who really wants to own the property they lease you have, you have a greater chance of selling that property a nice profit in a few years.

Another thing to keep in mind is the simple gut feeling. You can just feel good about a certain candidate for the rental property. This person may not be as good looking as the next potential tenant programs, but you feel pretty sure he or she work harder to make sure payments are consistent and on time with the property. Ask yourself if you have the time and effort involved in working with any candidate for the lease risk. A good old-fashioned gut check works wonders in the choice between two equally good candidates.

If you are using to sell all/o, it is important to keep in mind that the buyer is not a buyer until they shall exercise its “buy” option. Buyers have considerably more rights to the title claim a home than do renters. If you hassle-free, a judge could decide later your tenant was actually a buyer, give her an equitable interest in the property, and force you to put in place to shield then – something you want no part of. See further info on this commercial lease agreement pdf.

Commercial and Office Property Lease Agreements

commercial property agreementRenting commercial space is a big responsibility and depends on the success or failure of your business because the lease may ride on certain terms.  Remember before you sign, you should understand how commercial leases differ from the more common residential lease and make sure you have a full understanding and agree with the basic terms of the lease such as rent, the length of the lease and physical space.

Commercial leases are not subject to most consumer laws that govern residential leasing.  There are no caps on security deposits or rules protecting a tenant’s privacy.  Many commercial leases are not based on a form of standard agreement; each lease is customized to fit the landlord’s needs.  Carefully read through every commercial lease agreement that is offered to you.  You can’t break or change a commercial lease because its legally binding as a contract and a great deal of cash is usually at stake.

Commercial leases are generally subject to much more negotiation between the business owner and the landlord, since businesses often need special features in their space and landlords are eager for tenants and willing to extend offers.  Make sure the lease will fit your business and pay attention to the length of the lease, rent, and allowable increases and how they will be computed.  Ask what is included in the rent like utilities, property taxes, maintenance costs or are these separate costs.

Ask about improvements or modifications because usually the landlord keeps them when the lease is up and you choose to move.  Ask about subleasing, renewal or expansion of your space, sign specifications and who maintains the premises.  Find out if subleasing is allowable and what are the penalties for early termination.  Ask about whether disputes are mediated or arbitrated as an alternative to court.  Keep in mind that any business employing 15 people or more has to make allowances for disable people under the “American Disabilities Act” (ADA)

Office lease agreements are between a landlord and a tenant and contain all essential language for executing a lease agreement.  This document allows parties to customize price, terms and conditions for leasing out the property as office space for leasing an office from a landlord.  An office lease contains numerous clauses that are commonly used in these types of agreements.  Additional language may be added to allow for customization to ensure the specific terms of the parties’ agreement and to make sure the specifics are being addressed.  This document is used by a landlord or tenant to ensure that any agreement for a lease is clearly laid out and well documented.

The importance of commercial and office leasing is making sure that you do research on any commercial space for rent before you inquire.  Be sure to check the landlord’s credentials before signing a lease as some landlords are notorious for not keeping up their properties. It’s important, as a renter that you don’t have a leaky ceiling when clients arrive.

How to Terminate Lease Agreement Early : Landlord’s Perspective

commercial agreement landlordAt some point you may be faced with the prospect of breaking your lease with the property that you are renting. It could be that you have lost your job, have to move quickly or other factors that make fulfilling your lease difficult, if not seemingly impossible.

While these are understandable situations, before taking such action it is advisable to look at it from the landlord’s perspective. In many cases, landlords are in the same position as you, having to make payments on their property which require being very near full capacity in order to meet the bills.

Understanding their perspective can help you make better choices when faced with breaking your lease agreement.

The Disadvantages of Skipping Out on your Lease

For those who believe that they have no other alternative available except leaving in the middle of the night, you will probably face more dire consequences in the near future if you break your lease without informing your landlord, namely the following;

-       You are still responsible for payments on your lease until completion.

-       Your credit rating will be negatively affected, which affects your ability to borrow money and more.

-       Landlords readily share information, so it may not be possible for you to rent from many other places.

In essence, you could be going from the frying pan into the fire if you skip out on your lease. So at the point when you first realize that you might have to break your lease, here are a few steps that you should take.

Looking for Alternatives

Check your Lease Agreement: Fully read and check your lease agreement to see if there is an “early termination” clause that allows you to legally get out of the contract. Quite often, leases will have early termination payments that you are required to make, but in many cases they may be far lower than the price of skipping out on your lease.

Check Subletting Rules: In most cases, you will not be able to have some random person sublet the apartment from you. Many landlords do not allow for subletting and those that do will put them through the same background check and sign a new, full lease with them.

Consult a Lawyer: Have a lawyer read your lease agreement and offer options. Attorneys understand the laws and may offer valuable suggestions to help you legally get out of your lease.

Of course, there is one action that you should take when faced with the possibility of breaking your lease.

Talk to Your Landlord

Unfortunately, this is the one option that most people should take, but avoid because they are afraid of the consequences that are often in their imagination. Remember, it is in their best interest that you stay, so the fear of being tossed out on their terms is not going to happen.

In many cases, landlords will offer options to help address this situation. In fact, landlords often provide suggestions that many tenant would not even think of in the first place which would help remedy the situation.

In all cases, it is best to consider all the options and see things from your landlord’s perspective before making the drastic decision to break your lease agreement.

How to Terminate A Lease Agreement Early : Tenant’s Perspective

tenant leaseWhen a lease agreement is signed by the landlord and tenant, it is done so with the agreement that both sides are happy with the terms and conditions laid out in the document. There are a number of different factors that can come into play, though, before the agreement runs out. In the case of the tenant, this can be everything from the living conditions becoming unacceptable, a change in their earnings that makes rent payment impossible, or a number of other factors that all result in them having to get out of the lease agreement early.

The first step in getting out of the lease agreement early concerns the legal aspect, which tends to be different depending upon the state in which you live. The terms agreed to on the lease come second to the Landlord Tenant laws of your state. You cannot go any further without first determining what those laws are for the area you live, and how they will impact the decision that you are about to make. If you are unaware of the law and how it will affect your situation, you can find all that you need to know by visiting the official government website of the state in which you reside.

Once you know where you stand from a legal standpoint, you can then turn to the lease agreement signed by yourself and the landlord. Even the most basic of agreements usually contains some sort of verbiage that addresses early termination. A large portion of this is will likely have to do with the penalties that will be accrued should you decide to break the terms of the agreement. The penalty in question is usually a dollar amount based on the amount of damages that the landlord faces when you leave. The Landlord Tenant law is very much in your favor here, as it is made clear that the landlord can only claim “real” damages, as opposed to running up a ridiculous figure out of spite or malice.

The reason why you are moving will also play a role in the amount of money that changes hands when the agreement is broken early. For example, if the reason for your moving is down to the fact that the property has not been maintained by the landlord as agreed, you may be able to claim compensation. This is not a common circumstance, though, as it usually has to be something drastic or catastrophic that makes the home unlivable in order for this claim to be approved. The most likely outcome is that you will have to give up a portion of your security deposit if the reasons for moving are personal and have nothing to do with the state of the property.

If you are in the process of going through and early lease agreement termination, be sure to check the Landlord Tenant law first. Being in possession of your rights as a tenant will make the rest of the process go that much more smoothly.

The Advantages and Disadvantages of Month to Month Commercial Lease Agreement

month to month leaseFor both property owners and those who want to lease the property, there are certain advantages as well as disadvantages in having a month to month commercial lease agreement. The traditional 12 month agreement has its advantages and disadvantages as well, but going month to month offers certain benefits that cannot be secured with a 12 month agreement.

What follows are the general advantages and disadvantages that month to month agreements present. Naturally, there may be individual situations that are different which may alter the benefits or issues that a month to month agreement brings.

Advantages

The 30 Day Period: Not having to make a long term commitment can be advantageous in certain types of situations. For individual renters who are looking for a place to live without having to make a long term commitment, a month to month lease is ideal.

For owners, the 30 day period is also advantageous as bad or disruptive tenants can be easily removed without litigation by simply not renewing the lease agreement.

Better Quality of Tenants: Interestingly enough, many good tenants like the month to month commercial lease agreement because it provides them with the ability to remain flexible. Plus, tenants who move frequently also desire to have such an agreement as well. And while “transient” people may not seem the best renters available, their frequent moving generally means that little damage is done to the property.

Higher Rates: For owners this is obviously a benefit. Because of the time period, you can raise your rent more frequently and create greater profits. You will need to be careful about how often to raise your rent, but for those in college towns or having vacation property, a month to month agreement is a very desirable situation since you can charge more because of the frequent turnover rate.

Disadvantages

Despite the advantages, there are certainly disadvantages to going month to month with your lease. Whether you are the owner or the renter, what follows are the most common disadvantages to this type of agreement.

The 30 Day Period: For business owners who depend on location for success, a month to month commercial lease agreement is not in their best interest. This is simply because the owner can simply not renew the lease for any reason and the business must pack up and go. Whether it’s a simply misunderstanding or the owner just likes to shake things up, a month to month commercial lease is certainly not in the interest of a business owner, particular a retail store or restaurant where location is critical.

Less Stability: The opposite end of the spectrum, month to month commercial lease agreements create more instability and a much higher turnover rate. The stability issue can be problematic for owners who cannot rely upon constant rental payments. Conversely for renters, not having a longer term lease means less security in their location.

Both owners and tenants must be careful when deciding upon a month to month commercial lease agreement to see if it is in their best interests.

Free Commercial Lease Agreement Template

commercial lease agreemeent templateIf you are a business property owner then you need to have a commercial lease agreement in place when you get a new tenant in order to protect yourself and your assets.  Finding a lawyer to write up a commercial lease agreement can be very difficult to do and can cost a lot of money.  Instead what you need is a free commercial lease agreement template.  In this article you will learn the importance of a commercial lease agreement and what to look for and make sure a template contains.

What should a Commercial Lease Agreement Template contain?

A commercial lease agreement template should contain

  • Acceleration Clauses – The acceleration clause allows you as the landlord to accelerate and demand immediate payment upon the tenant defaulting.  Without this clause you will not be able to claim unpaid rent upfront and will have to accept payments or will not be able to collect you pay until the end of the lease agreement.
  • Personal Guarantees – This allows you to claim lost rent payment from the tenant if the tenant is a corporation or a limited liability company without any assets.  Without the personal guarantee you will not be able to claim any lost payments.  With the personal guarantee you are allowing yourself to have a little more security.
  • Attorneys’ Fees – Having attorney fees in the lease agreement to be paid by the tenant in the case of a default on payment.  In order to recover attorney fees from the tenant this must be in the lease agreement.  If this is not than certain states will not award attorney fees to any party.  If

These are the most common things that should be found in any lease agreement.  A good template for commercial lease agreements must contain these three things in order to be well written and complete.

To recap having acceleration clauses allows you to accelerate payment if the rent is defaulted.  The personal guarantee allows you to go after the actual person signing the lease and not the company who signed the lease in the case of a default on your rent payment.  This adds protection to the property owner.  Adding attorney fees to your lease agreement will protect you and your wallet on attorney fees and will be included in your tenant’s lawsuit agreement in the case that they happen to default on their rent payment. You can get more info about free commercial lease agreement template by visiting the banner below.