A commercial lease agreement (CLA) is the legal document used when a landlord wishes to rent commercial real estate such as a store, office, warehouse, or other property. This written lease agreement documents the terms, conditions, and obligations of the lease, and is signed by both the landlord offering the property and the tenant renting the property. Having such an agreement in place offers protection to both parties by clearly spelling out what each agrees to do. The CLA can help also help avoid or resolve future problems. If a dispute or misunderstanding should arise with regard to issues such as rent, lease term, repair policies, or other matters, the parties need only refer to the CLA for clarification.
It is important to note that a business lease is not the same as a residential lease. Following is a list of the minimum terms which should be specified in a commercial lease agreement:
- Premises. This section defines the location and description of the premises. The description should contain a statement of the general use and condition of the facility, including any noteworthy features such as new installations or existing damage. Photos of noteworthy features are also advisable.
- Lease term. This section specifies the length of the lease. It should also mention any renewal conditions, timing, and process. If the tenant has first right of renewal before other potential future tenants, this right should be noted, as well as any rent control on renewals. If early termination is an option for either party, the conditions and penalties should be included here.
- Rent amount and fees. This section describes rental cost, when and how rental payments are made, and penalties for late payment or insufficient funds.
- This section sets forth the landlord’s and tenant’s responsibilities with respect to payments for general real estate taxes, special tax assessments, personal property taxes, and taxes on fixtures and equipment.
- Security deposit. This section specifies the amount of the security deposit and conditions for the return of the deposit.
- This section describes permitted and prohibited uses of the property, noise restrictions, signage requirements and restrictions, and building rules and regulations.
- Construction, damage, and obligations for repairs. This section outlines the obligations and procedures for any alterations, improvements, maintenance, and repair of the premises. It should clearly specify what is required and permissible for both landlord and tenant and should define notice required prior to execution of any improvements.
- Security, insurance, and indemnification. This section outlines each party’s responsibility for the security of the tenant and the premises, who will maintain insurance, and who has liability in case of loss, claim, or injury.
- Possession and inspection. This section describes when a tenant may take possession of the property and sets forth the landlord’s right to inspection including timing, notice, and what type of inspection will be performed.
- Default. This section explains what will happen in the event of default and defines both physical and financial remedies.
- Dispute resolution. This section outlines a process for resolving any disputes that arise during the lease term, including what sort of mediation will be utilized and who will be responsible for the costs of the mediation.
- Floor Plan (optional). While not required, maps and floor plans can be useful in establishing a baseline about the facility. This is particularly important if improvements are intended for the property during the term of the lease.
While the preceding list constitutes the majority of considerations that should be agreed upon and documented in a commercial lease, each facility and occupancy is different. Both parties would be wise to confer with an experienced real estate attorney for advice on additional material that might be useful to include prior to finalizing or signing the lease.
If the Tenant Presents a Problem
The law in Washington protects landlords from non-paying or destructive tenants, but proper procedures must be followed in order to secure this protection. These procedures include:
- Determine proper notice to be served. If the tenant fails to pay rent, a “3 Day Notice to Pay Rent or Vacate” may be issued. If the tenant fails to comply with a rule in the lease agreement, a “10 Day Notice to Comply or Vacate” may be issued. If the tenant is doing something illegal, a “3 Day Notice to Vacate” may be issued.
- Serve notice. In the state of Washington, the landlord must first attempt to deliver notice to the tenant in person. Whether the tenant is served in person or not, a copy of notice should also be sent via the US Postal Service.
- File a Complaint of Unlawful Detainer. If the tenant does not comply with a notice, the landlord must file a Complaint of Unlawful Detainer with the Superior Court in the county where the property is located. The court will schedule a hearing for the judge to rule on the dispute. If the tenant does not show up, the landlord wins by default.
- Request a Writ of Resolution. If the court issues an order for the tenant to vacate and the tenant does not comply, the landlord may file a Writ of Resolution with the court. A sheriff will deliver the Writ of Resolution specifying a vacate date to the tenant. If the tenant does not comply, law enforcement will forcibly remove the tenant from the property.
If the Landlord Presents a Problem
If a landlord either does something or fails to do something that he is legally obligated to do (for example, the landlord refuses to provide heat or water to the facility) and this action or lack thereof renders the property uninhabitable, the tenant has legal recourse. This situation is known under real property law as “constructive eviction,” meaning the landlord has effectively evicted the tenant by rendering the facility unusable. A tenant who suffers constructive eviction may terminate the lease and seek damages.
To maintain an action for damages, the tenant must show that:
- the uninhabitable conditions (substantial interferences) were a result of the landlord’s actions, not the actions of some third party, and
- the tenant vacated the premises in a reasonable time.
A tenant who is constructively evicted is entitled to all the legal remedies available to a tenant who was actually told to leave.
We Can Help
If you are a landlord or tenant about to enter into a commercial lease, or if you have executed a lease and are experiencing issues, you should seek the guidance of experienced legal counsel. We at the Deno Millikan Law Firm have deep experience in this area and stand ready to guide you, help you resolve issues, and ensure your legal rights are protected. Contact us today.