Do you know what commercial real estate lease clauses are included in a commercial real estate lease agreement? Learning the basic clauses of a commercial real estate lease will help you to properly draft a commercial real estate lease agreement. You must include an introductory clause in your rental agreement that does the following:
• Describe the place
• Determine the rental period
• Show the amount of rent or rent payment
Often times, you will be dealing with a five-year lease. Therefore, you need to explain in the lease, how the rent increase will occur each year during the lease term. You can also include additional tenant behaviors, which indicate what the tenant can or cannot do. This is where you will determine whether they can assign the lease, lease it back, or limit it to sub-leasing (subject to owner approval).
Sign
Signage is a problem in some places, like Florida, because of hurricanes. One of the most serious threats to life and limb in a storm is not wind per Se, but wind-blown debris.
If you have a sign that isn’t anchored properly and a storm comes in and rips pieces of glass or plastic, this can be a lethal projectile. Therefore, you get into a lot of code issues about how signage should be constructed, material types, and other similar issues. So, in your lease, you must ensure that it includes a clause stipulating that no markings may be erected on the property without:
1. Owner approval
2. Correct licensing through local regional officials or local city officials, so that the signs comply with the code and comply with local rules and regulations
Additional Rent Fee
Include language in the lease that details expenses the tenant is responsible for, such as taxes, utilities, and insurance. A wise policy is to require that all your tenants carry a million dollar liability policy for whatever happens on the premises.
Otherwise, if something happens as a function of their business and they are not covered enough, the problem will come back to you, because it is your build. Make sure your tenants provide proof of insurance before you allow them to occupy the space.
Tenant rights, landlord services, common areas and common area fees that you will incur and pass on to tenants are all standard clauses. Other clauses may relate to preserving the premises, making repairs, maintaining, and handing over the property.
Tip: If your tenant wants to change something in the building, they must come to you for approval. After all, it is your building!
You should also consider the rules for alteration, surrender, destruction of damage, and protection of owner subordination. Be sure to specify that you have the right to enter and inspect the premises.
Other commercial real estate lease clauses to consider are clauses for indemnity – presumed harmless, proof of default and recovery, performance guarantees, security deposits, and other similar entitlements. Get an experienced real estate attorney who specializes in commercial rentals, and can review and revise your lease appropriately.
Building Owners and Managers Association (BOMA)
BOMA publishes a standard method for measuring floor area in industrial buildings. You may not think of this subject as an important issue, but there are many ways to measure it that can impact your rental income.
Landlords have been sued, sometimes after years, for leases found to include inaccurate descriptions of square footage. To protect yourself, always use the BOMA method and include that description in one of your lease clauses.
Including proper commercial real estate lease clauses in your commercial real estate lease agreement will help protect you and your tenants, which is always good business.