Special Considerations for Commercial Leases

Complex Fee Structure

Whereas residential leases generally only charge a monthly rental fee and late fees, commercial leases may have several fees including: (1) monthly rental amount; (2) CAM (or Common Area Maintenance) fees which are charged to tenants in shopping centers, office parks and other multi-unit buildings to pay for the upkeep of common areas including sanitation and landscaping; and (3) allocated fee for property insurance costs for the entire property.

Provisions for Annual Escalation

Landlords can charge a base fee for the first year of a commercial lease. Landlords may also have a provision within the lease agreement that increases the fee annually by a set percentage or amount to keep up with inflation and market appreciation.

Options to Extend or End the Lease

Commercial leases can include a set of provisions concerning the duration of the lease favorable either to the landlord, tenant or both. A tenant may want to be secure in knowing that the lease will last for a minimal amount of time to give the business a good chance to prosper. Conversely, a tenant may want to escape the lease after a couple of years so as not to be burdened by a lengthy, expensive obligation. Landlords may likewise want to ensure that a tenant will stay on the property for an extended period of time, but have the option to terminate if the tenant demonstrates lack of trustworthiness by failing to pay rent or properly maintaining the leased premises.

Allocation of Duties of Each Party

Often landlords will be responsible for the structure of a leased building, including the foundation and roof, whereas tenants are responsible for the maintenance of the interior and fixtures. Effective commercial leases need to spell out these differences with specificity.

Default

The landlord or lessor has an interest in having a lease that spells out what events can cause a default, such as failure to pay lease amounts, destruction of property or violations of other lease provisions. This can allow the landlord to terminate a lease if necessary and protect their legal rights in the event of an eviction or other legal action.