What Should be Included in a Commercial Lease Agreement?
A commercial lease is a contract between a landlord and a tenant describing the terms and conditions under which the tenant is allowed to occupy the commercial property. Here’s a summary of what should be included, and avoided, when drafting a commercial lease in California.
Common Lease Clauses
A California commercial lease agreement should generally contain the following:
Landlord’s name and contact information
Tenant’s name and contact information
Description of the leased property
Term of the lease
Rent Payment due date
Penalty for late/non-payment of rent
Authorized use of the leased property
Designation of the responsible parties for certain expenses and utilities
Designation of the responsible parties for repairs and maintenance
Security deposit and refund requirements
Permissible leasehold improvement(s) by the tenant
Option to renew the lease (if any)
Asbestos Disclosure (required by law)
Disability Access Inspection Disclosure (required by law)
Proposition 65 Warning Notice (required by law)
Common Problems with Commercial Lease Agreements
One common problem with lease agreements is the parties’ failure to adequately memorialize key aspects of the arrangement, which can lead to disputes or legal complications down the line. This is especially prevalent on the issue of the parties’ rights and responsibilities for maintenance and repairs. It is also crucial for both parties to familiarize themselves with relevant local laws before finalizing any agreement.
Problems can also arise when the lease agreement fails to document pre-existing conditions of the rental property. This omission can lead to disputes regarding security deposits and damages at the end of the lease term. In the residential context, California has sought to minimize this problem by requiring photos to be taken of the property before move-in. Another prevalent mistake is to ignore the parties’ rights and obligations regarding expenses other than the payment of rent such as taxes and insurance. All property expenses should be identified and responsibility for the payment of such obligations should be clearly delineated in the lease agreement.
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