Importance of a Commercial Lease Agreement

Published: 03rd November 2008
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Choosing a commercial space is very important because it may dictate the success of a certain business. The location wherein the business will operate can be responsible if the business will be a hit to its target market.

Choosing a location in which to conduct business is a major and critical decision for a company. A company who takes the option to rent a commercial space must consider the advantages of having a good and strategic location to operate a business.

When you find the commercial space that you think will be beneficial to you, a commercial lease agreement will be signed. This lease will authorize you to use the space. In addition, also included in the lease are the details of agreement between you and the other party.

A commercial lease agreement is a thorough written document for a rental by a tenant of a landlord's commercial property.

Brief Definition of Terms

The following are the usual terms that will be encountered in commercial leases:

• Landlord/Lessor- A landlord is the owner of the space which is rented or leased to a business or individual.

• Tenant/Lessee- The tenant is the one who pays to occupy or use a building, a land, or other property which is owned by another individual.

• Premises- This is the one that is usually found near the beginning of the lease. Premises name the space that you will be occupying.

• Commercial property- A commercial property is primarily used in commercial or business purposes.

Difference between Commercial and Residential Leases

Although there are similarities between residential leases and commercial leases like the scenario that both cover a tenant paying the landlord in order to use a certain space owned by the latter. However, there are remarkable differences between the two. The differences between commercial and residential leases include:

• Commercial leases are binding and for long-terms purposes- One cannot easily change or break a commercial lease because it is a legally binding contract. In addition, a huge sum of money is usually often at stake in these leases.

• Fewer laws on consumer protection- Commercial leases are not under most of the laws on consumer protection that cover residential leases.

• Flexibility and Negotiability- A commercial lease is generally subjected to more negotiations between the landlord and the tenants or business owners because businesses are likely in need of certain features for their spaces.

• No standard forms- A large number of commercial leases are not based on a standard agreement or form because they are usually modified according to the needs of the landlord.

Purpose and Elements in a Commercial Lease Agreement

Commercial leases are made in order to set down regulation, obligations, and conditions for both parties to follow. It is a kind of contract in which:

• the tenant agrees to pay the rent for a specific period of time

• the landlord consents to physically change

• both landlord and tenant agree to follow specific conditions

• the landlord agrees that you use the space for a certain amount of time

Meanwhile, in order for a commercial lease agreement to be efficient and useful, the following elements should be present:

• names and signature of the tenant, landlord, and other parties involved

• complete details regarding the rent deposits

• the property address

• the amount of rent to be paid by the tenant

• dates pertaining to the start as well as the termination of the contract

It will be unlikely that a legal problem may surface if a commercial lease agreement is efficiently and skillfully made and agreed upon by the two parties involved. In addition, it will be successfully implemented if there is cooperation between the tenant and the landlord.

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