Standard Commercial Lease Terms

Written by sam grover
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Standard Commercial Lease Terms
Offices are an example of a commercial lease. (Office image by ultraman from Fotolia.com)

Commercial leases vary a lot from one landlord to the other, so it is difficult to ascribe specific terms. However, there are broad-based elements that do tend to apply to the majority of commercial leases. These are by no means universal, though, so it is important to make sure you know what your exact lease's requirements are before you sign it.

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Length

Commercial leases break into two major groups with regards to length: fixed-term and renewable. A fixed-term lease is generally longer, in a period measured in years. Once that time period is up, an entirely new lease agreement needs to be negotiated.

A renewable lease, on the other hand, gives a shorter term and the option to renew the lease. To do this, the leaseholder only needs to let the owner know that he wants to renew during a set period of time before the end of his term; neither party has to go through the negotiations again.

Rent and Inclusions

Rent is almost universally paid on a monthly basis. However, what it includes is at the landlord's discretion. Some landlords include utilities, while others do not. In addition, some landlords take on the responsibility of repair and maintenance while others do not.

What is important to note is that these costs never disappear. If you do not pay for utilities, then you are going to pay higher rent than someone who does. The same goes for maintenance, insurance, and property taxes.

A characteristic of all commercial lease agreements, then, is that the rent and amount of inclusions will be directly proportional: the higher the rent, the more inclusions, and vice versa.

Negotiation

A final point that makes commercial leases unique is the fact that the renter has a great deal of negotiating power. This is not a residential lease, where everyone needs somewhere to live, and demand is therefore relatively high. For one thing, most people do not need commercial space, so the market is smaller. Commercial leases are also more expensive, so they represent bigger proportions of your landlord's income. These facts are very important to bear in mind when you go to sign (or not sign) a commercial lease--you have bargaining power here.

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