Commercial Lease Agreement

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Growing or established businesses might look to acquire new office spaces for varied reasons. However, buying an office or industrial space might require a huge amount of capital, which the business might find challenging to generate. In such cases, companies look towards the next best option – renting a commercial space. To do so, commercial lease agreements are generally drawn up by using a commercial lease agreement template.

Commercial lease agreements are slightly more complicated than residential lease agreements as the lease terms are highly negotiable and tend to vary vastly from lease to lease. Let us take a look at commercial lease agreements in more details to get a better understanding of how they work.

How Does A Commercial Lease Agreement Work?

A commercial lease agreement or a commercial rental agreement is a written contract between a business that wants to rent office space and a landlord. A simple commercial lease agreement can be drawn up for a lease specifically for business activities instead of housing. Such a lease is usually given to either small and growing businesses with a sole proprietor or even large multinational corporations.

A commercial lease form is legally binding, and it generally outlines the duties and responsibilities of both the landlord and the tenant during the period of the lease. The lease also works to ensure the rights of both parties.

When And Why Is A Commercial Lease Agreement Necessary?

A commercial rental agreement is usually necessary when renting a commercial space for a long time, i.e., between 1 and 5 years or even longer.

A commercial lease agreement is an important document that needs to be drawn up between the landlord and the tenant to ensure a harmonious relationship between the two and protect the rights and responsibilities of both parties. The agreement sets down clear rules and obligations and enforces the financial obligations that need to be fulfilled by the tenant.

What Are The Different Types Of Commercial Lease Agreement?

As we have already mentioned before, commercial lease agreements tend to be slightly more complex than residential lease agreements. As such, there are several different types of agreements that the parties can enter into, in addition to the simple monthly or annual rent arrangement. The different types are:

  • Percentage lease – The rent paid in this lease is based on a certain percentage of the sales or profits made by the business renting the space.
  • Fully serviced lease – Here, the rent paid includes the bills for all utilities and other services that the renter would generally pay for separately.
  • Net lease – In a net lease, in addition to the rent agreed upon, the renter would have to pay for either all or a part of the taxes, insurance, and maintenance costs as well.
  • Double net lease – Here, the renter pays for taxes and insurances along with rent.
  • Full Renting and Insurance lease – Here, the renter pays for taxes, insurance as well as maintenance along with rent.

Types Of Commercial Property

There are several types of commercial property, but they can all generally be grouped into the below 6 categories:

  • Offices: Office buildings can either have a single tenant or multiple tenants, and office spaces are generally ranked into three different tiers based on the building quality and rent paid – Class A, Class B, and Class C.
  • Retail: The retail category comprises different shopping centers, malls, retail stores and so on.
  • Industrial: In this category, industrial buildings tend to house various industrial operations that are sometimes grouped into industrial parks.
  • Multifamily: This sector covers all kinds of residential real-estate apart from a single-family independent house. The buildings that come under this include condos, apartments, co-ops, and townhomes.
  • Hotels: This category covers all properties that provide meals, accommodation, and other services for travelers.
  • Special purpose: All kinds of property that do not fall into the above categories come under the special purpose category. This includes property used for amusement parks, storage, bowling alleys, and so on.

How Do You Lease Commercial Properties?

If you are a landlord looking to lease a commercial property, there are certain things that you need to keep in mind when doing so.

  • Square footage: The amount of space that you will be leasing out for the business space.
  • Base rent and rent increases: Base rent is calculated on the square footage, and rent is increased yearly based on a percentage of the base rent.
  • Security deposit: The amount you wish to charge as a security deposit until the paperwork is finalized.
  • Date: The beginning and end dates of the lease agreement.
  • Taxes, maintenance, and insurance: You need to decide the person who will be responsible for taking care of taxes and insurance.
  • Late fee: The fee you will charge the tenant in case they are late in paying the rent.

There are several other things you will need to keep in mind as well before leasing commercial properties. It is best to conduct in-depth research and consult experts before coming up with a commercial lease agreement.

That said, if you are looking for a commercial lease agreement PDF, CocoDoc is here to help. Browse through our collection of commercial lease agreement templates now.


Can tenants sublease the commercial space?

Yes, if the original lease does not prohibit subletting, then the tenants are allowed to do so.

Can the landlord amend the lease on their own?

No, they will have to either wait for the next renewal or convince the tenant to agree to the amendment.

Can a tenant break a lease if their business is struggling?

Yes, they can, but the landlord might have the right to sue the tenant for the rent remaining on the lease.

What happens if a tenant does not pay the rent?

If a tenant fails to pay the rent, then the landlord reserves the right to either take collections action or start eviction proceedings.

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