Overview of Commercial Rental Agreement

A Commercial Rental Agreement is a recognized Document to rent business property between a landlord and a tenant. This agreement permits both parties to formalize the Rental and their relationship if the tenant plans to execute a business on the landlord’s premises, through a legally Documented agreement.

A Commercial Rental Agreement assumes the property is being used for business purposes, not like a Residential Rental Agreement. It believes that it is not for residential purposes. The rented property can be an entire building, a new restaurant, a simple office, an independent retail store, or even an excellent warehouse for manufacturing purposes like a self-storage facility or factory. The landlord can address particular concerns and duties about common areas if the property being rented is part of a larger building, such as lobby areas or parking spaces.

Easing commercial space requires hefty investments, which is a big decision overall. A Commercial Rental agreement should not be treated in a hasty way like most of the other legal agreements. For that reason, it is important to ‘investigate’ the market thoroughly and have a fair idea about the types of commercial Rentals available in India while renting business space for the first time.

There are Few Queries to be Discussed Concerning Commercial Rental Agreement Which should Address the Following Questions-

• What happens if a fire/other disaster damages cause partial or substantial damage?
• Who should pay for utility services?
• When can the landlord scrutinize or inspect the premises to make repairs?
• Why should a tenant’s bankruptcy establish a breach of the Rent?
• Whether future problems should be litigated, arbitrated, mediated in court?
• Where should disagreements be controlled (i.e., jurisdiction)
• How will the tenant and landlord manages instances of eminent domain if the local government takes all or part of the premises for public purposes?
• Which laws should govern? Etc.

What are the Essential Elements of a Commercial Rental Agreement?

This Document formalizes their Renting relationship and allows both parties to through a legally standard Document. The essential elements are as follows-

Landlord

The Landlord is the party who is renting out the commercial property for an exchange of money.

Tenant

The Tenant is the party who is paying for the rented property and operating a business.

Term

The Term is the number of years/months for which the physical space will be needed.

Demised Premise

The demise premise is the space being rented out by the tenant, including a property map (like a store in the mall). It includes details about the size also. It is a condition to the fact that whether the tenant has admission to services like snow removal/landscaping, parking, cleaning, security, and heating/air conditioning

Real Property

The Real Property is the landlord’s entire property, which includes shared common areas (like the shopping mall, where the market store is situated). It may include the premises such as parking lots and walkways that will be utilized by other tenants also.

Base Rent

The Base Rent is the starting cost of renting the space on an annual or monthly basis.

Operating Costs

The Operating Costs is something where the landlords may ask tenants to share in the cost of maintaining common spaces. It includes real property taxes, utilities, and collective advertising costs. It operates the entire building as either a designated percentage based on the tenant’s footprint or store size or fixed flat fee.

Security Deposit

The security deposit is the landlord’s amount of money not to break the Rental early or irreparably damage the property and to demonstrate the tenant’s good faith & efforts.

Property & Occupancy Details

The Property & Occupancy Details are the details associated with both parties in which they can clearly describe what is and is not allowed in the rented space. Those may include common areas after-hours noise, such as smoking, whether certain business activities like food services can occur in an office building, and where the place for dumping garbage is.

Developments

Both parties should illuminate who is responsible for paying and overseeing the construction project if the tenant plans on operating a restaurant or another business that necessitates improvements or construction in the ‘demised premises.’

Who Should Use a Commercial Rental Agreement?

A Commercial Rental Agreement can be used to shelter many diverse types of rented spaces, which are as follows:-

• Accounting Firm
• Business Office
• Child Care Facility
• Factory
• Hotels or Guesthouses
• Legal Office
• Medical Clinic or Health Care Facility
• Restaurant
• Startup Company
• Self-Storage Facility
• Shopping Mall Store
• Trade Businesses
• Warehouse