Commercial Lease Agreement template

Free commercial lease agreement template

Leasing a commercial property is a major step for both landlords and tenants. This free commercial rental agreement template simplifies some of that process by providing a structured, customizable contract that’s tailored for business use of office space, retail shops, commercial restaurants, storage facilities, and other types of storefronts. Our commercial lease agreement is designed to help both parties align on expectations before the keys are handed over.

The commercial lease template includes commonly used terms such as the base rent, square footage, and exclusive use clauses. It also offers room to specify NNN lease provisions, security deposits, and maintenance duties, as well as options for subleasing, signage rights, and compliance with zoning or licensing requirements. And the editable agreement is flexible enough to accommodate gross leases, modified gross, or net lease structures, depending on your deal.

You can easily fill out and send this commercial lease agreement through Docusign eSignature, making the process fast and secure to get everything signed and finalized. After completion, the document is stored in your account, ready to be downloaded or printed out any time you need the agreement again.

What is a commercial lease agreement?

A commercial lease agreement is a legally enforceable contract between a landlord and a tenant for the rental of a property for business purposes. Unlike residential leases, commercial leases are often more complex and tailored to the specific needs of the business operating in the space. The agreement outlines the terms and conditions of the rental, including the base rent, lease duration, security deposits, maintenance responsibilities, and any additional provisions like subleasing or signage rights.

A commercial lease agreement is essential for establishing clear expectations and protecting the interests of both the landlord and the tenant. The commercial lease agreement can also serve as a critical document for helping ensure compliance with zoning and licensing requirements.

What is included in a commercial lease agreement?

A commercial lease agreement should clearly outline the following: 

• Premises: Detailed description of the leased property.

• Lease term: Duration of the lease, including fixed-term or month-to-month options.

• Rent payments: Amount, due date, and method of rent payment, along with any penalties for late payment.

• Security deposit: Amount and terms related to its use and refund.

• Use of premises: Permitted use and any restrictions.

• Maintenance and repairs: Responsibilities of both landlord and tenant.

• Insurance: Required insurance policies for both parties.

• Utilities and taxes: Allocation of responsibility for payments.

• Default and remedies: Conditions constituting default and landlord's remedies.

Additional (optional) provisions

A commercial lease agreement may also include optional clauses tailored to specific needs that can help to enhance the document:

• Percentage Rent: Additional rent based on tenant's sales.

• Rent Increases: Scheduled increases in rent.

• Renewal Options: Terms for lease renewal.

• Alterations and Improvements: Guidelines for tenant modifications.

• Parking: Availability and terms for parking spaces.

• Signs: Specifications for tenant signage.

• Assignment and Subletting: Conditions for transferring lease rights.

Types of commercial lease agreements

Commercial lease agreements can be structured in various ways, primarily differing in how expenses associated with the property are allocated between the landlord and the tenant. Understanding these different lease structures is crucial for both landlords and tenants to ensure a clear understanding of their respective financial responsibilities.

Gross leases

A gross lease, sometimes referred to as a full-service lease, is characterized by a single, fixed rent payment made by the tenant to the landlord. Under this structure, the landlord is responsible for paying most, if not all, of the property's operating expenses. These expenses typically include property taxes, insurance, common area maintenance (CAM), and sometimes even utilities.

Key characteristics of a gross lease:

• Simplified budgeting: Tenants benefit from predictable monthly rental payments, making budgeting for occupancy costs straightforward.

• Landlord responsibility: The landlord manages and pays for most property-related expenses, relieving the tenant of these administrative and financial burdens.

• Less control over expenses: Tenants have limited direct control over the operating expenses, even if they fluctuate, as these costs are absorbed within the fixed rent.

Net leases

A net lease requires the tenant to pay a portion or all of the operating expenses associated with the property in addition to the base rent. There are several variations of net leases, categorized by the number of "nets" included in the tenant's responsibilities:

• Single Net Lease (N): The tenant pays the base rent plus one type of operating expense, typically property taxes. The landlord covers insurance and CAM.

• Double Net Lease (NN): The tenant pays the base rent plus two types of operating expenses, usually property taxes and property insurance. The landlord is responsible for CAM.

• Triple Net Lease (NNN): The tenant pays the base rent plus the three primary operating expenses: property taxes, property insurance, and common area maintenance (CAM). In many cases, the tenant is also responsible for utilities and repairs.

Key characteristics of a net lease:

• Lower base rent: Generally, the base rent in a net lease is lower than in a gross lease because the tenant is directly responsible for some or all of the operating expenses.

• Tenant responsibility for expenses: Tenants bear the risk of increases in the operating expenses they are responsible for.

• Variable costs: The total occupancy cost for the tenant can fluctuate depending on changes in property taxes, insurance premiums, and CAM charges.

Net leases are common for single-tenant buildings or retail spaces where the tenant has more direct control over the property and its maintenance. Triple net leases are particularly prevalent in these scenarios, offering landlords a more predictable net income stream.

Modified Gross Leases

A modified gross lease represents a hybrid approach, blending aspects of both gross leases and net leases. In this structure, the base rent is typically fixed, but the agreement specifies how certain operating expenses will be shared between the landlord and the tenant.

Key characteristics of a modified gross lease:

• Shared responsibility: The landlord and tenant agree on which specific operating expenses the tenant will be responsible for, in addition to the base rent. Common examples include CAM, property taxes, or insurance.

• Negotiability: The allocation of expenses is often negotiable between the parties, allowing for flexibility in tailoring the lease terms.

• Base year concept: Many modified gross leases utilize a "base year" for certain operating expenses. The tenant pays a pro-rata share of any increases in these expenses above the base year amount.

• Transparency: This structure offers more transparency compared to a gross lease, as tenants are aware of and contribute to specific operating costs.

Modified gross leases are a common compromise, offering a degree of predictability in rent while also allowing landlords to pass through increases in certain operating expenses.

The choice of commercial lease agreement type depends on various factors, including the type of property, the number of tenants, the negotiation power of the parties involved, and their respective preferences for risk and responsibility regarding operating expenses. Each structure has its advantages and disadvantages, and a thorough understanding of these differences is essential for a successful and mutually beneficial landlord-tenant relationship.