Customize an Indiana commercial lease agreement (above) and read further about required disclosures in Indiana, optional addendums by business type, and what Indiana landlord tenant laws apply to commercial lease agreements.
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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.
Commercial leases are some of the most detailed leases for a reason; these leases tend to last longer than residential variations and they need to cover a wider range of situations. For this reason, it’s critical that both the business owner and his or her landlord establish firm rules for just about every aspect of the tenancy, which can be expected to last for years or even decades. These leases sometimes also need a certain fluidity because the business owner may want to upgrade the property in the future.
Specific terms will still need to be outlined so that all parties are satisfied during the rental period, so some know-how and due diligence will be required to write an ironclad commercial lease agreement. Before getting into the process of writing one of these, let’s take a look at the kinds of business leases that are available in the state of Indiana:
- The Triple-Net Lease: With one of these, the tenant is expected to shoulder not only the rent, but the property taxes, insurance, and maintenance fees on a property.
- The Percentage Lease: With a percentage lease, the arrangement on how much the lessee pays is based off of the profitability of the business. This is only used in retail, and the tenant pays a percentage of the gross profit from sales on a property. This is on top of a minimum base rent.
- The Gross Lease: With a gross lease, the commercial tenant primarily is responsible for the rent and not the insurance, property taxes, or maintenance. To help offset the cost to the owner, the rent may be slightly higher than market.
- The Modified Gross Lease: This is the style of lease that has the most hybrid format. The commercial business pays the rent, and the tenant and his or her landlord each share in the agreed-upon operating expenses.
Required Disclosures for a Commercial Lease Agreement in Indiana
In Indiana, there are a few disclosures that must be followed for both commercial and residential leases:
Lead Paint Disclosure
Federal law states that any property that has been built prior to the year 1978 must have the landlord disclose the presence of lead-based paint. This is due to the fact that this type of paint is dangerous when exposed to or ingested by children or pregnant women. To ensure legality, the landlord must provide a disclosure form, which should be initialed and signed by the commercial business owner.
Manager and Agents
For those people that represent the landlord, their names must be disclosed if they are going to be entering the premises with notice. The addresses for notices and repairs should also be provided as well.
Indiana State Law § 32-31-3-12 explicitly states that landlords and their agents must provide written or oral notice before entering the unit. This makes it illegal for these parties to enter the property in a non-emergency situation.
Additional Lease Considerations
Commercial leases can be very different from residential leases, especially when it comes to liability, so these considerations should be added:
- Storage: For the sake of avoiding liability and keeping all parties safe, each commercial lease should strictly prohibit the storage of certain dangerous materials. These can include items that could be considered flammable, explosive, illegal, or explicitly dangerous. For clarity, the agreement should also state that the sale of these is prohibited as well.
- Rules on Subleasing: For the sake of additional profitability and making rent more easily payable, some business owners opt to add on a sublease business. The state of Indiana permits these subleases as long as they aren’t forbidden on the original lease. When writing one of these leases, it’s critical that rules on subleasing parts of the property are outlined clearly.
- Improvements to the Property: From time to time, a business may undergo significant change in order to keep up with the market. Some of these enhancements can be fairly extensive, so it’s important for a lease to establish what’s acceptable when it comes to adding on to the property or adding signage.
Writing an Indiana Commercial Lease Agreement
Here are a few sections that must also be included when writing one of these types of leases:
Party and Property Information
At the start of the document, the parties that will be involved in the lease must be established in order to affirm the lease’s legality. Include the full names of both the landlord and the renter as well as the name of the business. If there is a management company involved, then this should also be added. Finally, the address of the property, which should include county, back streets, unit numbers, and the zip code, needs to be included in the beginning of the document as well.
Terms of the Lease
Next, the beginning of the lease as well as when the lease will need to be renewed must be included. For commercial leases, the term tends to be a bit longer, so there needs to be no confusion as to when the lease ends. Additionally, for the sake of clarity, the renewal process for the lease can also be included here.
Utilities oftentimes fall outside of the lease type, which is why it’s critical that the lease outline the utility responsibilities for lessees and lessors alike. Some typical utilities include electricity, water, sewage, gas, telephone, or water. Since some commercial properties have singular services for a utility, many landlords opt to pay the amount of utilities and invoice the cost of utilities to each commercial tenant. If this is the case, the breakdown of the tenant’s percentage of the meter needs to be clearly stated. Additionally, if the landlord is sweetening the lease by personally covering a utility, this needs to be stated as well.
Signatures and Notary
As a business agreement, the final document should be notarized, but it is not required by law. Before that, both parties should sign and print their full names and date the document for the sake of legality.