Whether you have or have not rented commercial space, there are several things you need to know. One, there is no standard lease agreement for all commercial properties. Typically, office, retail, and industrial properties have different leases and while there are some similarities they are also vastly different. Two, a commercial lease is a binding contract and is not easily broken or easily changed to suit your needs.
Over the years I have been involved in all different types of leases and it seems that no two are alike. What I would like to do with this article is to briefly cover some of the leases we use on a daily bases.
- LEASE OF SPACE IN SMALL OFFICE BUILDINGS: Sometimes referred to as a gross lease, we generally use this lease for office space located in office parks. Typically the Tenant pays a set amount of rent each month and the Landlord is responsible for taxes, insurance, and other costs that may be associated with the property, i.e. utilities, janitorial services and maintenance. However, the Tenant is generally responsible for any issues with the space that are the fault of the Tenant.
- LEASE OF SPACE IN HIGH RISE OFFICE BUILDINGS OR OFFICE TOWERS: Leases for high rise office space are usually full services leases but have additional terms that are not usually found in small office building leases. One is an escalator or rental adjustment clause. This is where the Tenant pays as additional rental a pro rata share of increase in real estate taxes, insurance and operating expenses over a base year, usually the first year of the lease. Another addition to a high rise lease is the rules and regulations of the building. This is usually a separate document that is an exhibit to the lease that covers areas not addressed in the lease. Lastly, you may find a parking clause that deals with vehicle parking in buildings that have garages. They usually spell out the number and cost of each parking space to a Tenant.
- LEASE OF ENTIRE BUILDING: These leases can be either net leases where the Tenant pays rent and a portion of maintenance expenses, insurance, taxes and other operating expenses, or they can be triple net leases where the Tenant pays rent and all the fees associated with the building such as taxes, insurance, utilities, maintenance and other operating expenses.
- LEASE OF SPACE IN STRIP OR RETAIL SHOPPING CENTERS: In a shopping center lease, the Tenant pays a base rent and as additional rent a monthly fee of common area maintenance, taxes and insurance. This additional rental is usually adjusted at the end of the year when the annual operating expenses of the center are calculated. Also, some shopping centers have, as additional rental, a certain percentage of gross sales and they usually have a rules and regulations addendum as well.
This is just a small sample of leases that one may encounter. As always, before entering into a lease agreement, I would suggest that one should seek the advice of a seasoned commercial real estate agent as well as a qualified real estate attorney.
Donnie Laurens
Commercial Real Estate Agent
Macon Commercial Office
478-746-9421