Commercial leases, such as shop leases, involve concerns that are different from those of residential leases. Tenant costs are usually much higher, the duration of the lease is often longer and commercial landlords typically restrict the use of the property more than residential landlords do. State law also plays a role in how such an agreement should be drafted.
The rental property should be clearly described in unambiguous language. In many cases, the tenant will be renting part of a building along with shared use of common areas. The parties should also be identified by their legal names. In many shop lease agreements, one or both parties are companies, such as corporations or limited liability companies (LLCs). In this case, the company should be listed by its legal name, not its trade name. Since individual representatives rather than companies sign agreements, the signature line should clearly indicate that the representative is signing on behalf of the company, so that he will not be held jointly liable for breach of the lease.
Payment and Duration
The agreement should identify the rental period. In residential leases the period is usually one month. In many commercial leases, the period is three months or even longer. The amount of the rental period should be stated in terms of the period — if rent is due every three months, for example, the rent should be quoted as "$3,000" rather than "$1,000 per month." The duration of the lease should be stated, and the agreement should state whether the term is renewable. If it is renewable, there is normally a deadline — if neither party notifies the other of an intention not to renew the lease by 90 days before the end of the term, for example, the lease is automatically renewed.
The amount of the security deposit should be stated, along with the terms of its return to the tenant and the deadline for its return. In some cases a delay of return is permissible; for example, if the landlord needs to wait for the telephone bill to arrive to find out if any amount needs to be deducted. Many states prohibit deduction from the security deposit for normal wear and tear.
Many shop owners want to alter the rental property — such as by putting up advertising signs. The agreement should specify what types of alternations are permitted. By law, major alternations are not permitted unless specifically authorized. For example, a landlord may sue a tenant for paving a grassy area for a parking lot, even if it increases the market value of the property (this is known as "ameliorative waste" in legal terminology). The tenant might also be forbidden from changing the use of the property during the term of the agreement — by turning an appliance shop into an adult bookstore, for example — so that the landlord does not run afoul of municipal zoning laws.
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.