Since the owner owns the building, they will often have insurance in the event of fire, flood or other disasters. However, some commercial leases pass these costs directly on to the tenant instead of including them in the rent. In a commercial lease, the landlord is usually responsible for routine maintenance such as HVAC repairs or landscaping. However, the rental agreement may transfer this responsibility in whole or in part to the tenant. The landlord-tenant relationship is based on obligations that are prohibited by law, common law or the individual tenancy agreement. The implicit commitment of quiet enjoyment is fundamental to all leases. This agreement ensures that the tenant`s property is not disturbed by someone who has a higher legal right to the land, including the owner. Whether you`re signing your first lease or preparing for a move or extension, you need to have a thorough understanding of commercial leases. Unlike residential leases, commercial leases are very „buyer`s foresight“.
Your rights are exactly as stated in the lease, with little or no other protection. There are several types of commercial leases that go beyond a simple monthly or annual apartment rental agreement. With respect to the „commercially reasonable“ standard, the courts will use a balancing test in which the court weighs economically reasonable and unreasonable factors to determine whether the landlord rejected a sublet because of economically reasonable or economically inappropriate factors. If the refusal was economically unreasonable, the court will ask the landlord to allow the subletting. There are other elements that are usually included in a commercial lease. Although most are fairly standard, they only apply if they are included in the lease during negotiations with the landlord. A commercial lease can include virtually any other condition that the landlord and tenant agree to. In general, everything contained in a commercial lease is enforceable unless it is illegal or the term is too vague for a court to enforce.
As already mentioned, this article is by no means an exhaustive explanation of commercial leases; There are a lot of nuances and negotiation and design are key. Please consult a lawyer in business or real estate law to ensure that your lease meets your objectives and that your rights are protected. Renovation provisions are also common in commercial leases. Office tenants may need to move walls, restaurants may want to have a specific layout, and manufacturers may need to bring special equipment. The tenant must have permission to do so as part of the rental agreement. The lease should also specify who pays for the renovations. This is a joint rental concession for the landlord to pay for an initial renovation in order to make the property suitable for a tenant in the long term. Tenants may also have the right to sublet the commercial space to a new tenant. The original lease may prohibit or restrict subletting. If this is not the case, tenants are usually allowed to sublet. The lease must specify the type of lease and the basis for calculating the rent. The above terms are standard agreements, but, like other parts of a commercial lease, are subject to negotiation.
In addition, commercial leases are much more customizable. While most residential leases use virtually identical standard wording, you should carefully negotiate and review a commercial lease to make sure it includes everything you think it does. While the basic concepts and terms of a commercial lease are similar to those of a lease you may have signed for an apartment, there are still differences between commercial and private leases that you need to be aware of. Residential leases are often heavily regulated with certain conditions that cannot be changed by law – even if both parties agree to waive those conditions. On the other hand, commercial leases have virtually no restrictions beyond basic contract law. Many commercial leases include an arbitration clause to resolve this type of dispute. An arbitration clause requires the parties to use and accept an arbitrator`s decision instead of taking legal action. Previously, I wrote about the process for a landlord to evict a residential tenant. (See: Introduction to Real Estate for Landlords: Your Tenant Stops Paying) While the process of evicting a commercial tenant is the same as in a residential environment, the requirements for the lease itself vary widely.
Parties to a residential lease are subject to strict legal and customary requirements, while parties to a commercial lease have ample leeway to define their rights and obligations. For example, the Truth in Tenancies Act and the Landlord-Tenant Relations Act, which govern the special duties, rights and obligations between landlords and tenants, do not apply to an office lease. In this article, I highlight two notable differences between residential and commercial leases and outline three of the many common law rules that apply unless the lease is negotiated and drafted differently. If the tenant does not pay the rent or pays it too late, the landlord can usually take debt collection measures or initiate eviction proceedings. Tenants should be aware that commercial evictions are often much faster and less protected than residential leases….