Customize an Iowa commercial lease agreement (above) and read further about required disclosures in Iowa, optional addendums by business type, and what Iowa 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 lease agreements, in many cases, differ significantly from standard lease agreements, especially since these tend to have much longer terms. Like fixed-term residential leases, these usually have a preset lease period, and the agreement is between a lessor and a lessee. Terms for a commercial lease, on the other hand, may last for more than 10 years, so it’s important for the lease agreement to have aspects that appeal to both parties. In addition, since businesses are prone to upgrades and additions, it’s absolutely critical that the lease agreement includes aspects of this so that there is a legal framework.
For all of these reasons, the agreement will need to shore up any vulnerabilities for both parties so that there’s also a good level of stability during the lease period. Fortunately, there are several types of lease agreements for commercial lessees that can ensure that there are options for just about every type of business owner. Here are a few examples for both parties to consider:
- Triple-Net Leases: This is a style of lease will see that the business owner will be responsible for many of the operating costs of the property. This will include property taxes, insurance, maintenance fees, and the standard rent. This is a good arrangement for just about any business that is renting an entire unit, and it also frees up the property owner from much of the responsibility on the property.
- Gross Leases: These leases work similar to standard residential leases because of the fact that the landlord will be responsible for many of the operating costs of the property. This means that the commercial business will pay the rent and utilities in most cases but not the insurance, property taxes, or maintenance fees. Some landlords charge more money for one of these.
- Modified Gross Leases: These serve as a sort of hybrid commercial lease because, with a modified gross lease, the landlord and renter decide which bills are paid by which party. So, with a modified gross lease, the commercial business owner may pay the rent, utilities, maintenance, and fees, but the landlord may still pay for insurance and taxes on the property.
Required Disclosures for a Commercial Lease Agreement in Iowa
Once the lease type has been decided upon, the state of Iowa requires that residential and commercial leases provide the tenant with some important disclosures. These include:
Lead Paint Disclosure
If a building predates 1978, federal law stipulates that the landlord must disclose to the renter whether or not there is lead paint being used on the property. Lead paint is known for its deleterious effect on both small children and women who are pregnant, so if there is this form of paint on the property, its location must be disclosed. Also, based on this disclosure law, the landlord should provide all required lead paint pamphlets to the tenant.
Additionally, before a commercial tenant moves into the property, based on Iowa state law, the landlord must make them aware of any defects that are on the property.
Writing a Commercial Residential Lease
Now that some of the basic functions of a document of this type have been established, here are a few sections that every Iowan commercial lease will need to feature:
Information about the Involved Parties and the Property
This section is designed to clearly outline everything involved in the agreement. This means that the names of the lessor and his/her commercial lessee will need to be marked at the top of the document. Additionally, since this is a commercial lease, the name of the business should and any management companies involved should be included as well. Finally, the zoning information and physical address should be included.
Terms of the Lease
These types of leases have a tendency to run for at least five years, so the duration of the fixed term should be noted in the next section as well as the date that the lease starts. Some landlords allow lessees to officially begin the lease once their property is ready to be opened to the public. The means in which a lessee can renew their lease should also be explicitly explained.
For some businesses, parking availability can really make a difference, especially in major metropolitan centers in the state. For this reason, having a set of parking spaces for the business can sometimes be justified by adding an extra monthly charge for the tenant. If there is a charge, outline it in the lease.
It’s critical that a tenant complies with Iowa state laws, so include a section that establishes that all ordinances, laws, and public requirements must be adhered to during the tenancy. If illegal activity happens on the premises, it must explicitly explain that this is grounds for eviction and/or legal action.
Finally, there should be a signature block so that the document is legal. In addition to the signature, both parties should include their printed name and the date of the signing. During the signing process, a notary public should be present so that the agreement can hold up in court.
Additional Lease Considerations
For a fully legal arrangement, it’s essential that specific considerations are covered in the lease agreement. Here are a few to consider:
- Subleasing considerations: It’s common for properties like gas stations to sublease to smaller businesses during a tenancy. This means that the tenant may become a sub-lessor in order to make some extra rental income by adding on a sub-lessee business. The arrangement will be entirely between the sub-lessor and sub-lessee, so it’s important that this agreement not affect the original commercial lease. Some landlords may require that the tenant seeks consent before adding a sub-lessee, so the lease will need to state this in no uncertain terms.
- Storage considerations: As a place of business, sometimes, there can be various materials stored on the premises. That being said, a commercial lease should state that no materials should be stored on the property that may be a danger to visitors of that property unless explicitly agreed upon by the landlord. This can include flammable materials or toxic chemicals.
- Property alteration considerations: It’s common for businesses to undergo renovations during the course of their tenancies. This can mean a total structural overhaul or a simple signage change. A section of the lease should firmly establish best practices for this type of change, and it should outline what’s acceptable and what is not.