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Read further to learn more about commercial lease agreements in Connecticut, such as what disclosures are required and what else should be included.
What is a Commercial Lease Agreement?
A commercial lease agreement is a legally binding contract between a landlord who owns a commercial property and a tenant who wishes to rent the commercial property with the intention to operate a business. The commercial property being rented generally falls into a retail, office or industrial space category.
Three basic types of commercial leases exist. Each one has positive and negative aspects for the landlord and tenant. The three variations of commercial leases are defined as:
- Gross Lease – also known as a full service lease, this type of agreement is considered to be tenant-friendly. In this situation, the tenant pays a predetermined amount for monthly rent. The landlord uses these funds to pay for related property expenses, also known as “nets.” Nets include taxes, insurance and common area expenses.
- Triple Net (NNN) Lease – favorable type of lease for the landlord, this type of agreement requires the tenant to pay all taxes, insurance and common area expenses associated with the property, in addition to their base rent amount.
- Modified Gross Lease – this type of agreement serves as a compromise between a gross lease and triple net lease. In a modified gross lease, the landlord and tenant negotiate which nets each party is responsible to pay.
A commercial lease is very similar to a residential one, but it is a legal agreement that is used between a business owner and a landlord. This type of lease will typically have longer terms because it’s designed for a successful business that will most likely plan to have the same physical location for an extended period of time. If there is a dispute in terms of the agreement, the Connecticut courts will rely on the specific wording of the lease agreement, so it is essential to know how to write one up so that it will not cause issues in the future.
Required Disclosures for a Commercial Lease Agreement in Connecticut
When a commercial lease is drawn up, there are going to be guarantees, disclosures, and other important information that you will need to include. This information must be read and understood by the renter before the agreement is signed.
Use of Premise
One of the critical things that need to be included in the lease is the type of business that will be done on the property. The landlord is likely to want to keep the business that is being done in the space as narrow as possible so that they cannot be held responsible if the tenant is caught selling things in the store that do not fall into this category. For example, a shoe store may only sell outer footwear, so that will be what is listed from the landlord’s point of view. The tenant, on the other hand, may want to have a broader category so that they have more options, which could include selling socks.
Food Use Rider
In the state of Connecticut, it is important that any business that serves food follows all of the food laws of the state. Serving food in an unsanitary place can cause customers to get ill. In addition, serving alcohol is not permitted in some businesses, so to have adult beverages on the premise, all of the guidelines to serving it must be followed. When the rules are followed, the terms of the lease are not being broken as well. Any breach of the commercial lease agreement could cause the tenant to be evicted if the problem is not rectified immediately.
When there are changes that need to be done to the property before the tenant can start doing their business, the landlord may permit them to do the changes with their own money before they begin charging rent for using the property. This period is often called a build-out period, and it will give the tenant more freedom to arrange the space, create aisles, and make the store their own before opening day. The amount of time that is allowed to make these changes should be listed here, whether or not an extension can be made. If there are any specific rules about making repairs or improvements in the future, they should be listed here as well.
Signs can also be used on the premise to let the public know what the business is, but the landlord will have the right to deny specific signs that do not match the zoning laws of the state. This sign must also be removed by the tenant when the lease expires.
Writing a Commercial Lease in Connecticut
Commercial lease agreements exist to protect the rights and business interests of the landlord and tenant. Here is a list of all sections necessary to include in a legally-compliant commercial lease agreement in the state of Connecticut, along with descriptions of list items as applicable:
The first thing that should be seen on a commercial lease agreement is the names of the parties that are involved. In addition to the full names of both the landlord and the tenant, a phone number for both individuals should be listed as well. The address of the location must also be in this section of the lease, which should include a floor, building number, and other details for the property.
Terms of the Lease
In this section, the dates that the lease will be in effect are important to list as well as the length of the term. For a commercial lease, it is not uncommon for a tenant to have a lease that is going to last for five to 10 years. The amount that is due each month and the date when the rent is considered late will need to be added. The security deposit that is required of the tenant should also be listed in this section as well as the regulations that must be followed when repairs need to be done on the premise.
To make sure that the landlord does not disrupt the flow of customers in the business, the hours of operation should be listed here as well. Don’t forget to add the renewal terms for the lease, the amount of time that will need to be given if leaving the premise, and whether or not smoking is permitted on the property.
In general, a tenant will be responsible for paying for the cost of the utilities. This will include the sewage, the water, the gas, the electric, the phone, and the internet if it is required. Some commercial properties in the state may not charge a specific utility, but if that is the case, the utilities that will be covered need to be listed here. Property taxes and insurance will be paid for by the landlord, but if a fire or other damage results because of the tenant’s negligence, they will still be responsible for paying rent during the repairs. In addition, any repairs that are not covered by the insurance shall be covered by the tenant.
With any business, the tenant is going to need a few parking spaces for their customers and their employees to park. This may not be a large lot, but having a few spaces dedicated to the business is only going to be beneficial. The number of spaces the tenant needs should be discussed, and the provided spaces provided should be listed here.
The final section of the lease will be the same as with any other agreement of this type. Once the terms are agreed upon, the tenant and the landlord must both sign and date the document.