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If a tenant intends to do business on the premise, then he or she will need to enter into a commercial lease agreement with the landlord. This type of lease, like other leases, is executed using a legal document that has similarities to other types of leases. That said, there are differences that sometimes entail outlining protections for both lessee and landlord that relate to the commercial nature of the lease and property. For example, in many cases, a guarantor is utilized, which can serve as a type of protection, especially if the renter has an imperfect credit history.
There are three types of commercial lease agreements to consider:
- Triple Net Lease: With a triple net lease, the tenant pays all of the associated costs for a property. This includes rent, taxes, insurance, and any expenses for the common area.
- Gross Lease: With a gross lease, the renter pays the rent for the property, and the landlord uses this rent payment to cover the property tax, insurance, and the common area expenses.
- Modified Gross Lease: This is a hybrid of the two types of lease agreement. With one, the expenses that are covered by each party is negotiated. As a result, a tenant may pay for property tax in addition to the monthly rent, but insurance and common area expenses might be covered by the landlord.
Guarantees and Disclosures
For those composing a lease of this type, all of the disclosures for the state must be included. It’s also critical that this information is read by both renter and owner and fully understood. Here are a few to consider:
Use of Premise
To start, the purpose of the business should be outlined in its entirety on the lease. This will clearly define the space that is to be used, what kind of business will be done on the property, and whether any other business will be performed on-premise. This firmly established that if any business, whether legal or not, occurs on the property, the tenant will be in breach of the lease. For this reason, for the sake of protection, the landlord may wish to use reasonably restrictive language in this part of the lease agreement.
Lead Paint Disclaimer
In many cases, prior to the year 1978, lead was used in the paint for many properties. Federal law states that if the property was built during this period, a landlord must disclose this information to a potential renter. This is because lead paint can be hazardous to children visiting the business.
If the area is prone to flooding and there’s been flooding three or more times during the past five years, then this must be disclosed in this part of the lease agreement.
A landlord must provide any information about any managers, agents, or licensed individuals that may be coming to the property.
Guarantees of Non-Abandonment
When signing a lease of this type, the tenant agrees that he or she will not abandon the property during the active term of the lease. This also ensures that he or she will not use the premises for any purpose outside of what was outlined in the lease.
How to Write a Georgia Commercial Lease Agreement
The first thing that needs to be included in a commercial lease agreement is the information for the involved parties. This includes names for the owner and renter as well as any contact information that’s available for both. In addition, a full description of the property should be provided. This should include the address.
Terms of the Lease
With commercial leases, the lease term can be quite long. For example, it’s not uncommon for a lease of this type to span a 60-month period or longer, which is significantly longer than residential leases. As a result, it’s critical that the dates for the lease term be clearly outlined in a “Term” section. In addition to this, a section outlining the amount of notice before a tenant moves out should be provided. Typically, a 60-day period is recommended. Finally, the annual rent should also be demarcated here as well as the monthly rent payment.
Business Operating Hours
It’s essential that all operating hours for a business be noted somewhere in the document. Effectively, this section should mention when the tenant is most likely to be on-premise as well as establishing when a business might expect customers. This can help the landlord to know when the best time will be to contact the tenant during operating hours.
Repairs and Alterations
During the term of the lease, these types of improvements may be required. Typically, as long as there is expressed consent, then the tenant can improve the property by eliciting repairs and alterations. It’s a good idea to label sections, “Repairs by Tenant,” “Repairs by Landlord,” and “Alterations.” Each of these sections will outline the responsibilities and capabilities of each party when it comes to these changes to the property.
Utilities and Expenses
The costs of maintaining the building can vary based on the type of lease, so whether the tenant or the landlord pays expenses like the insurance or the property taxes will depend on the arrangement. In most cases, the tenant will be required to pay utilities like water, electric, gas, heat, and sewage. What’s to be paid by which party should be established in a “Utility Bills” section.
Additional Information to be Included
- Whether or not the use of exterior signage must be approved by the landlord first.
- The appropriate behavior of tenants and customers of the tenants in the common areas of the building.
- Whether subletting the property is allowed.
- Whether a tenant is responsible for escalations in taxes or insurance for the property.
Once the lease agreement has been agreed upon, it’s imperative that both parties sign and date the document to make it legally binding. In addition to a signature space, there should also be a space for both parties to print their name as well. If working with a guarantor, this individual must sign and print as well.