Negotiating commercial lease is a difficult task and requires lot of clarifications regarding terms, clauses, negotiations and requirements of different types of lease. All these aspects of commercial lease appear to be very confusing to a layman. A proper understanding of all the terms and conditions of commercial lease help a lot at the negotiation stage. This article is an attempt to shed light on various aspects of commercial leasing

Some basic concepts of lease are:

It always involves two sides: The tenant and the owner. The owner is represented by a Management Company or law firm who draw up the lease and tenants are often self represented.

Types of leases    

Many types of lease can be made in leasing a commercial property. Some of the common leases are:
 
Gross lease

In this lease the owner will pay all the expenses, which are associated with the operation and maintenance of the property. A fixed amount of rent is paid by tenant. It is from the rent only, the owner will pay the operating expenses for the property. These expenses cover property taxes, insurance, maintenance, utilities, janitorial and security costs.

Net Lease

The entire or some of the operating expenses included in the Gross lease are paid by the tenant. This lease is beneficial for owner as it gives him to pass on as much responsibility for operating expenses to tenants as possible. The lease varies depending upon the location and the local market as well as the ability of both the parties to bargain or negotiate.
 
Absolute net lease    

Tenant pays all operating expenses, which are related to the operation and maintenance of the property.

Percentage Lease

It is a lease of property in which amount of rent depend on the volume of sales made by the tenant. This type of lease will usually have a minimum or base rental along with a commission on the volume of sales. It is used for retailers

Before signing a contractual agreement, it is really important for you to understand the terms, type and financial implications of the lease.

What makes a lease valid and enforceable?

Valid leases are same as valid contracts. Apart from being lengthy, complex and having financial consideration, enforceable lease contain following elements:

Identification of the owners and tenant
A Description of the property to be leased
Financial consideration – It clearly defines that tenant will pay rent on time and the owner can not occupy the property till the lease period is not over.
The legality of the objective – The proposed use of property or lease should not violate federal, state or local laws.
Offer and acceptance – It basically states that owner has agreed to lease a property for specific time period and the tenant has agreed to pay fixed amount of periodic rent for the property
The written lease – The leases for more than one year must be in writing.

Leasing a commercial space can be very complicated. Therefore, obtaining professional guidance about negotiations and legalities of lease is beneficial for both tenant and owner.