Commercial Lease Issues: Summary of Terms

When entering into a commercial lease agreement, it is important to understand the legal terminology that you will be presented with on the contract.  Commercial leases use a variety of different legal terms, some of which carry vastly different meanings from the terminology used in a residential lease or other type of leasing agreement.  Understanding the meaning of these terms is a key factor in determining whether or not you are getting a commercial lease that is fair and balanced and that will suit your purposes.  The most common terms that are found in commercial leases can be defined and explained by your lawyer if you have any questions.

Understanding Commercial Lease Terms

  • One of the most prevalent commercial leasing terms is the premises clause. 

The premises clause appears at the beginning of the commercial lease and it defines the scope and nature of the specific area that you are renting.  If you are renting an entire building, the premises clause should contain the address of that building.  However, if you are leasing a portion of a building, or an entire building without certain rights to other portions of the property, the premises clause should clearly define the area that you are occupying as well as what areas are off limits or are otherwise not included in the terms of the agreement.

  • Another prominent commercial leasing term that will appear many times in your commercial lease agreement is the term “parties.” 

The parties to a commercial lease are the organization or owner of the property that you are leasing, and you as the lessee.  In traditional terms, these parties are known as the landlord and the tenant.  You will want to make sure that both you and the landlord are properly identified as the parties to the lease, by whatever full legal designation is applicable – corporation, LLC, etc.  Failure to properly identify the parties can lead to problems later on with the leasing agreement.

  • Two other terms that will have an impact on your commercial lease agreement are the use clause and the exclusivity clause. 

The use clause is simply that – an explanation of how you are legally allowed to use the property under the terms of the lease.  The exclusivity clause indicates whether or not there are any exclusive rights issued by the lease issuer regarding whether other businesses with similar products or services may operate in the same space.  These clauses are important portions of your commercial lease agreement.

Getting Help

Before you sign any commercial lease agreement, it is a good idea to have an experienced real estate attorney look it over. He can explain any terms you may not understand and can assist you in making sure you get the best and fairest deal.

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