Commercial property leases can be tricky things. There are a lot of standard terms that get thrown around, and it can be hard to know what everything means. In this article, we will break down each of the standard lease terms and explain what they mean for you as a tenant or landlord. By understanding these terms, you can avoid any surprises during the leasing process!
The Term of the Lease
This is the length of time that the lease agreement is in effect. The term can be anywhere from a few months to several years.
As a tenant, you will want to make sure that the term of the lease is long enough for your needs. You don’t want to be stuck in a short-term lease if you are looking for stability. On the other hand, you also don’t want to be locked into a long-term lease if you think your business might outgrow the space.
As a landlord, you will want to consider how much turnover you are expecting in your property. If you are constantly turning over tenants, it might not make sense to sign them to long-term leases.
Most leases will have an option to renew at the end of the term, so that can give you some flexibility as well.
Rent
This is the amount of money that the tenant pays to the landlord for use of the property. Rent is usually paid on a monthly basis but can also be paid weekly or yearly.
The rent amount will be determined by several factors, including the size and location of the property, as well as the current market rates. As a tenant, you will want to make sure that you are getting a fair rent price. You can do this by shopping around and comparing prices for similar properties.
As a landlord, you will want to make sure that you are charging a competitive rent price. If you charge too much, you might have trouble finding tenants. But if you charge too little, you could be leaving money on the table.
It is important to remember that the rent amount can be negotiated as part of the lease agreement. So if you are a tenant who wants to lower your monthly payments or a landlord who wants to increase your rental income, make sure to bring it up during negotiations! Rent prices can also increase over time, depending on the terms of the lease agreement. This is called a rent escalation clause, and it is typically used to keep pace with inflation or market rates.
Security Deposit
This is a sum of money that the tenant gives to the landlord at the beginning of the lease. The security deposit is typically equal to one month’s rent but can be more or less depending on the agreement.
The security deposit is used to cover any damage that the tenant causes to the property during their tenancy. It is important to remember that the security deposit is not meant to cover normal wear and tear. So if you are a tenant, make sure to take good care of the property!
As a landlord, you will want to hold onto the security deposit in case there are any problems with the property when the tenant moves out. You can use it to pay for repairs or cleaning fees. Just make sure to return any unused portion of the security deposit to the tenant.
Utilities
Utilities are the services that keep a property running, like electricity, gas, water, and sewage. In most leases, the tenant is responsible for paying for all of the utilities. However, there may be some cases where the landlord pays for some or all of the utilities.
As a tenant, you will want to find out who is responsible for paying the utilities before you sign the lease agreement. This way, you can budget accordingly and avoid any surprise costs.
As a landlord, you will want to determine whether or not you want to include utilities in the rent price. If you do include them, make sure to state that in the lease agreement so there is no confusion later on.
Including utilities in the rent can be a good way to attract tenants, but it can also be a headache if something goes wrong. For example, if a utility is not working properly, the tenant will likely contact you to fix the problem. So if you decide to include utilities in the rent, make sure you are prepared to handle any issues that might come up.
Utilities can also be used as a bargaining chip during lease negotiations. So if you are a landlord who wants to increase your rental income, you could try to negotiate for the tenant to pay for all of the utilities. Or, if you are a tenant who wants to lower your monthly payments, you could try to negotiate for the landlord to pay for some of the utilities. The bottom line is that utilities can be a complicated issue, so make sure to discuss it with the other party before you sign the lease agreement.
These are just some of the most important terms that you should be aware of when signing a commercial lease agreement. Of course, there are many other clauses and provisions that could be included in the agreement. But if you understand these basic standard commercial property lease terms explained, you will be well on your way to signing a fair and balanced lease agreement.
