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A commercial lease agreement is a binding contract that is often used between a landlord and a business owner. It allows the tenant to rent the property without having issues, and if there are rules that the landlord wants the tenant to agree to, they should also be discussed in the agreement and signed.
There are three basic lease options that can be used for commercial property, so it is important to determine which option will work best for the tenant and the landlord signing the agreement. The types that should be considered are as follows:
- Gross Lease: This is a full-service lease that is designed to be more tenant-friendly. The tenant will be responsible for paying the rent for the unit they are doing business in, but the landlord will need to cover the insurance, the taxes, and the expenses that need to be taken care of in the common space between businesses.
- Triple Net Lease: This is another type of lease that is designed to favor the landlord a bit more than the gross lease. It requires the tenant to take on the cost of the insurance, the taxes, and additional expenses as well as the amount that was agreed upon for the unit being rented.
- Modified Gross Lease: This is a rental agreement that is designed to be a compromise between the other two types of commercial leases. These leases will always differ because the tenant and the landlord will need to find an agreement that will work for them.
Disclosures Required for a Florida Commercial Lease
Each state has different disclosures that will need to be included in a commercial lease. In the state of Florida, some of the most important ones to include while writing the document are discussed below.
Lead Paint Disclosure
When renting a commercial property that was built before the year 1978, a landlord must inform the tenant that is going to be doing business on the premises that there is a possibility that lead-based paint may have been used on the property. This is something that can be hazardous to pregnant women as well as young children, so the tenant will need to be aware of these risks before signing the lease. This is particularly relevant if their business works with kids who may be affected by this issue.
Radon Gas Disclosure
In the state of Florida, every landlord must include a warning about radon gas and the fact that levels of the gas have been found in buildings in the state that are well above what federal and state guidelines permit. Information regarding the gas, the health risks that it presents, and where those with exposure can get tested should also be provided to the tenant.
Additional Lease Concerns
When the lease is written, there are often other things that do not fall under the terms of the lease or the disclosures that need to be included as well. Some of the additional items that should be mentioned in the document include:
It is important that the main business use for the property is written on the document so that there are no liability issues that will need to be dealt with in the future. Ideally, this is where the type of business that is going to be done on the premises should be written. The landlord is going to want to keep the field as narrow as possible so that there is less chance of something being sold on the property that was not agreed upon in the original lease.
This is a great way of preventing illegal activities from occurring on the property and making sure that zoning regulations are followed. This is especially important to note when food or alcoholic beverages are served in the unit. The laws in the state of Florida are strict when it comes to food preparation, and violating the food laws for the state could put the tenant in a situation that would breach the contract and potentially cause trouble for the owner.
Improvements to the Space
A piece of commercial property is not necessarily going to be exactly what a business owner needs for their business to run well, so improvements to the space may need to be done at some point. The rules for the tenant to do this in the beginning of the lease period should be written out and included in this section of the document. Sometimes, a landlord will allow the tenant to have a built-out period that they can use to change the commercial space to what they need. In most cases, they will not need to pay rent during the time period that was agreed upon, but if renovations take longer than that, the landlord may start charging rent.
After the initial build-out time frame, if any improvements need to be made, the procedure that needs to be followed should be explained.
Another important part of the lease that needs to be discussed between the tenant and the landlord will be the renewal process. Commercial leases are typically designed to last much longer than a residential one, and when the lease is about to get to the deadline date that was set, many business owners will not want to change locations. The steps that need to be followed to renew the lease will need to be put on the original lease document, and if the lease automatically renews, it should be mentioned here as well.
Writing a Florida Commercial Lease Agreement
When actually writing the lease, there are several sections that will need to be included in the document.
The first part of any commercial lease should include the names of all of the parties involved in the agreement. This should include the personal names as well as the name of the business that is moving into the space. Also, if there is a management company that manages the property for the company, then they should be listed as well.
The next section should include detailed information about the property that is being rented. It should include the exact address of the unit as well as any specific zoning ordinances that the tenant will need to be aware of while conducting business.
Terms of the Lease
The first thing that the landlord will want to have in this section is the length that the tenant is agreeing to pay rent for the use of the property. The date that the rental agreement begins and ends should be listed here, as well as what will happen if their business fails. Some landlords will allow the tenant to get out of paying the rent that is due if their business fails, but others will still require compensation.
Also, the amount of money that is required as a rental payment each month will need to be included as well in this section. Also, include the amount that the tenant will be required to pay for the security deposit on the unit. If there is a late fee that will be added to the amount that is due for paying rent late, then it should be listed here as well as the date each month that it will be considered late.
Utilities and Additional Expenses
In this section, the utilities that will be used by the business will need to be listed as well as which party is going to be responsible for paying for it. This can include things like electric, water, trash removal, internet, gas, phone, and more. Insurance for the space and anything else that the building will need to have should be included in this section of the document as well.
Maintenance, Repairs, and Improvements
Repairs and maintenance that need to be done on the property will typically be done by the landlord, but if this is not the case or there are extenuating circumstances, they will need to be listed here as well. Some landlords will prefer the tenant to make any repairs that need to be done with their own money. Once it’s completed, in most cases, the tenant will be reimbursed.
In most locations, a business is going to need spaces for the employees and the customers to park. These spaces will need to be relatively close to the building, and if there are other stores in the area and no parking lot, they will need to be marked that they are designated for the use of the store. Sometimes, rent will be charged for additional spaces to be set aside for the business.
Signatures and Notary
The final section of the commercial lease document that will need to be on the agreement is the space for the parties to actually agree to the terms. This will include the full names of the parties, their signatures, and the date that the document was signed. In the state of Florida, a notary is not required for a commercial lease agreement, but some landlords will prefer to have the signatures stamped by a notary.
As with residential leases, commercial lease agreements are subject to regulations by the state and local government. This section discusses some legal considerations regarding commercial lease agreements specific to the state of Florida.
Landlord-Tenant Duties and Obligations
Below is a brief overview of a commercial landlord’s duties and obligations to a tenant
- deliver “possession of premises” at the time specified in the lease
- provide quiet enjoyment of the premises, which assures the tenant that the landlord’s title is not defective and tenant’s possession will not be disturbed.
Conversely, tenants also have duties and obligations in a commercial lease agreement, which are as follows:
- surrender possession when the lease expires
- pay rent for the use or occupation of a commercial property (including after-sales taxes, if these are stated in the lease agreement)
- return the premises in the same condition as when the lease started, with the exception of usual wear and tear
Limited Landlord Liability on Fitness and Suitability of a Commercial Property
According to Florida state laws, commercial landlords are not obligated to ensure the fitness and suitability of a property. It is therefore the lessee’s duty to carefully check the condition of a property before entering into a lease. Furthermore, a landlord cannot be held liable for any injury sustained by a lessee resulting from a defect that has been in existence since the signing of the lease agreement.
There are exceptions to the aforementioned, which are the following:
- if the lease agreement contains a clause on fitness and suitability
- when the lease agreement involves a new building or renovation of the property for the tenant (in which case, an implied warranty of fitness suitability exists)
Statute of Frauds
Under Florida laws, verbal lease agreements for commercial spaces for a period greater than one year are considered void under the Statute of Frauds, a legal doctrine set forth in section 725.01 of the Florida Statutes. This means commercial lease agreements that are good for a year or longer must be put into writing and signed by the party to be charged.
Florida Laws on Tenant’s Breach of Lease Agreement
When a tenant breaches a lease, Florida laws bar a commercial landlord from forcibly entering the premises to reclaim possession, and instead offers these three legal options:
- Consider the lease terminated and resume possession of the property for the landlord’s own purposes.
- Hold possession of the property for the tenant’s account and seek general damages for any amount not recovered by re-renting the premises under tenant’s account.
- Hold off taking immediate action, and instead wait to sue the tenant as future rent becomes due or for an accelerated amount (if allowed under the lease agreement).
Dealing with “Holdover” Tenants
Tenants who breach the lease may sometimes refuse to surrender the premises at the end of the lease term. In cases such as these, Florida laws allow the landlord to pursue any one of the following legal remedies:
- In cases where a tenant refuses to give up possession at the end of the lease, section 83.06 of Florida Statutes allows landlords to ask for twice the amount of monthly rent due at the end of each month. (This does not apply to holdover tenants with a good faith claim of right based on reasonable grounds.)
- Sue the tenant for damages resulting from depriving the landlord his or her reasonable rental value of the premises.
- Demand a rent increase for the new lease term, glossing over the tenant’s wrongful behavior in holding over.
- File eviction procedures against the tenant (but only after tenant defaults on paying rent even after being provided three days’ written notice).
Evictions and Terminations of Lease Agreements
The state of Florida may allow landlords to file an eviction lawsuit against a tenant for various reasons (such as failure to pay rent, violating the lease or rental agreement, or committing an illegal act), so long as it is the landlord who terminates the tenancy first.
In order to terminate a lessee’s tenancy, a landlord is required by the state to give the tenant written notice. If the tenant fails to take action on the written notice, the landlord may then proceed with eviction proceedings. The type of notice to be served depends on the landlord’s reason for terminating the lease.
In Florida as well as elsewhere, commercial lease agreements must cover all possible circumstances in order to protect both the landlord’s and tenant’s rights, as well as to prevent further legal action, which can be costly and time-consuming to all parties involved.