Commercial Leases

A commercial lease is something that you will likely encounter if you run your own business, whether it is leasing a location for your retail shop or an office space for your service-based business. This will cover a few of the more important clauses involved in almost all commercial leases.

Common Important Clauses

The Parties:

This is usually the first section of any agreement. It is important because labeling the correct parties in this section will let you know who is bound to the contract. If the parties are not accurately identified, this could potentially lead to drastic or complete loss of rights under the agreement. All contracts must accurately list the parties and any misidentification could relieve a party completely.

Description of the Premises:

The description of the property should accurately describe the space you will be leasing. This is simple when you are leasing an entire office or building because simply having the address of the building will likely suffice. But, when limited to a particular space within a larger area, you will want to ensure you understand the exact space you are leasing. Any defects in the description could lead to losing out on your originally desired space or less space than expected. 

Use and Exclusives Clauses:

A use clause dictates what you can and cannot do with the property you are leasing. There can be various and narrow uses you are allowed, or the use can be very broad, but you should ensure you understand what you can and cannot do with the property. An example of restrictive use would be a restriction of the types of businesses that can operate within the space. 

An exclusive clause states that you alone can perform or operate a specific type of business while other businesses within the space cannot. This clause is most often used to avoid having the competition move in next door. This is not part of every agreement but could be negotiated in certain circumstances. 

Insurance Clause:

This is a staple of almost any commercial lease and is typically a requirement of most commercial landlords. A landlord may require some form of business or property insurance in case of any potential issues while leasing the space. You must ensure that you have the insurance coverage in place at the time of the lease or risk breaching the agreement. 

Improvement and Alterations Clause:

This is an important clause because it will dictate whether changes are allowed to be made, or custom build outs. Further, if improvements are made, the lease should spell who is responsible for installing the improvements, and how the improvements will affect rent.

For more information on commercial leases, see our Corporate Law & Commercial Overview and our Industry Focused Legal Solutions pages.