What Is a Commercial Lease Agreement?

A Commercial Lease Agreement, or business lease agreement, is a signed document that:

• Provides a tenant with a space to conduct business in exchange for regular payments to a landlord
• Describes the rights and responsibilities of both a landlord and a tenant during the rental term
• Sets expectations around fees and payments, property use, maintenance, and improvements

What Is Commercial Real Estate?

Commercial real estate is property used for business purposes. A landlord can lease commercial property in exchange for rental payments from a tenant.

Commonly leased commercial properties include:

• Office space, such as rooms, suites, or floors in a professional office building
• Buildings, including industrial properties, warehouses, and medical centers
• Leisure locations, such as retail stores, shopping malls, and restaurants

What Information Should I Include in a Commercial Lease Agreement?

Your Commercial Lease Agreement should include essential information such as:

• Property location and description, such as a diagram or square footage
• The type of business being conducted in the space
• Landlord and tenant information
• The length of the lease: fixed term or automatic renewal
• Financial details, including rent, utilities, taxes, and a possible share of operating costs for the whole property
• Provisions for prepaid rent, security deposit, and penalties on late payments
• Tenant maintenance responsibilities for the leased space, including fixtures, landscaping, and sidewalks

How Is Rent Calculated in a Commercial Lease Agreement?

When leasing commercial property, you can calculate rent in a few different ways:

• Gross lease: the tenant pays a fixed monthly rent, while the landlord is generally responsible for all operating costs
• Base rent plus specified operating costs: the tenant pays a fixed monthly rent as well as designated expenses for the whole property, such as common area utilities and janitorial
• Triple net lease: the tenant pays a fixed monthly rent plus a proportion of operating costs for the whole building, including property taxes, insurance, and maintenance

How Long Does a Commercial Lease Agreement Last?

The rental term varies based on the type of commercial lease. It can be either a fixed term or a periodic term.

A fixed term lease:

• Ends on a set date and typically doesn't require notice before it ends
• Lasts longer (usually over one year) and therefore provides more stability for both parties

A periodic lease:

• Renews every month or year until the tenant or landlord gives notice
• Is best for short-term or uncertain arrangements, and allows more flexibility for both parties