Elements of a Commercial Lease Agreement  

        A commercial lease agreement is a legal contract between a property owner and a tenant when the tenant wants to have temporary possession of a property for a particular period of time in lieu of money. In the contract, the property owner is referred to as the lessor, while the tenant will be called the lessee.

        This type of lease agreement is different from the one signed while renting a home because of the purpose for using the property. The property is used solely for business purposes. Usually a commercial lease is in the written form. However, even a verbal agreement is considered to be legal and valid. Nonetheless, when it comes to verbal lease contracts, they cannot stand up in court as there is no way of proving the agreement. So, the court cannot decide which party is liable.

        While the law does not require a particular format when drafting a commercial lease agreement, certain elements are mandatory. Here are some elements of a commercial lease agreement that have to be mentioned when drafting the agreement:

  • Address of the Property: The exact address of the property and the space that is being rented should be mentioned. The agreement should also mention other areas besides the rooms or space that the lessee will be renting. This can include parking space, attic, storage, balconies or roof deck. The boundaries of the property should be included so that the lessee will not trespass into adjacent properties.
  • Start and End Date of the Lease: The length of the lease should be mentioned in the agreement. Usually, commercial properties are rented on an annual or monthly basis. In case the agreement is broken before the lease can expire, the penalty for the same should be included in the agreement.
  • Names of the Lessor and Lessee: The agreement should mention the names of the lessor and lessee, along with the conditions that the lessee has to follow and what his or her rights are.
  • Mode of Payment: The agreement should mention how the lessee will make the payment and when. Usually the first and last month's rent along with security deposit is paid in advance to the lessor. Thereafter, the rent is paid monthly, annually.
  • Lease Renewal: There should be a clause that states when and how the lessor and lessee should start negotiating the renewal of the lease. This process has to be started before the agreement expires.



Elements of a Commercial Lease Agreement

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Elements of a Commercial Lease Agreement )
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