What is a Commercial Lease Agreement?

A Commercial Lease Agreement is a binding contract between a landlord and a business (the tenant) renting a property. Unlike a Residential Tenancy Agreement, this contract is specifically used for tenants leasing commercial property. This agreement outlines the terms and conditions for renting the business space, including rent terms, use of the property, and lease duration. 

A Commercial Lease Agreement is also known as a:

• Commercial property lease agreement
• Commercial tenancy agreement
• Commercial letting agreement
• Commercial rental contract
• Business lease agreement
• Shop lease agreement

LawDepot’s template is available for renting commercial spaces in the United Kingdom (England, Wales, Scotland, and Northern Ireland).

Why it’s essential to use a Commercial Lease Agreement

Having a written Commercial Lease Agreement is essential for both landlords and tenants, especially for providing the following protections and guidelines:

• Defines the terms and conditions of renting the space, like the lease duration, rental fees, and renewal options
• Establishes the responsibilities of both parties, such as who is responsible for maintenance, repairs, and utilities
• Outlines the permitted use of the commercial space, ensuring that the property is used for the correct business purposes and activities
• Protects both parties to ensure their rights are outlined and followed (e.g., the tenant pays rent on time or the landlord maintains the property as the lease specifies)
• Provides evidence in case a future dispute occurs

Additionally, some business lease terms, like the renewal terms or repair obligations, can be negotiated between the landlord and potential tenants. The final decisions can then be used to help draft a mutually agreed-upon contract. 

Both parties can have a solicitor review their agreement before signing to ensure it’s fair and complies with legal requirements within their respective countries.

Types of Commercial Lease Agreements

The different types of Commercial Lease Agreements vary by their form (short-form vs. long-form) and term length (fixed-term vs. periodic leases).

Short- vs. long-form agreements

There are two forms that a contract for a commercial lease can come in:

• Short-form, or standard, commercial leases typically include basic information and clauses to protect both the landlord and the tenant. 
• Long-form, or comprehensive, commercial leases include extra clauses and terms that make the contract much more detailed. If your rental requirements are more complicated, a long-form agreement is recommended.

LawDepot’s Commercial Lease Agreement template comes in both short-form and long-form agreements.

Fixed-term vs. periodic leases

There are two primary types of lease terms in a commercial lease, designed to accommodate different landlord-tenant situations and preferences. 

A fixed-term lease has a specific end date and may be for any number of weeks, months, or years. At the end of the term, the contract can be renewed, terminated, or the tenant can continue to let the property on a month-to-month basis. Conditions of this lease cannot be changed until the lease is renewed (e.g., rent cannot be increased until renewal).

In the UK, fixed-term commercial leases vary depending on the business’s needs and size, with terms ranging from 1, 3, or 5 years to longer agreements of 10 to 25 years.

A periodic (month-to-month or year-to-year) lease automatically renews every month or year until either the tenant or landlord terminates it. These leases are considered more flexible because either party can end the agreement by giving the appropriate notice, without waiting for a fixed term to expire.

LawDepot offers both fixed-term and month-to-month or year-to-year leases to fit the purposes of your commercial property. 

Key components of a Commercial Lease Agreement

A Commercial Lease will often include information such as:

• Property details like location and description. In England and Wales, if a lease is for 7 years or more, a complete description is required for Land Registry purposes.
• Names of the parties involved and their contact details.
• The lease term, meaning the duration of the contract.
• Payment terms like rental fees, deposits, and the payment schedule.
• Early renewal or break clause, if applicable.
• Permitted use of the property, specifying what the tenant can do with the property.
• Allowed alterations or required improvements for the property. 
• Any included utilities, insurance requirements, and other expenses.
• Dispute resolution guidelines to help if any disputes occur in the future.

When should I use a Commercial Lease?

If you’re renting out business property, you should use a Commercial Lease Agreement to protect both you and your tenant. This can be for properties such as:

• Office spaces, like suites for corporate purposes
• A building for a larger company
• Retail shops for boutiques, supermarkets, or other forms of retail businesses
• Restaurants or cafes for spaces with kitchen facilities and seating areas
• Industrial facilities or warehouses for operations that need the appropriate size of space and storage

LawDepot’s template is available for many types of businesses and commercial properties, but may not be suitable for all types of leases, such as those concerning charities or agricultural leases. In those cases, consider consulting with a local solicitor.

Can I write my own Commercial Lease Agreement?

Yes, you can create your own Commercial Lease Agreement with LawDepot’s customisable template. Writing your own contract can help you tailor it to your rental needs, based on any negotiations between the parties and the type of property you’re leasing, which can help protect your investment.

How to write a Commercial Lease Agreement?

Use LawDepot’s template to write your Commercial Lease Agreement to download and print in minutes. Simply choose the kind of property you’re leasing, then complete the following steps:

1. Choose a contract form to determine the next prompts for your contract (i.e., a standard contract for set terms or a comprehensive contract to customise particular standard clauses) 
2. Add the property details (e.g., location, property description, permitted use, and parking)
3. Include the lease term (i.e., fixed, month-to-month, or year-to-year) and start date of the lease
4. Add additional terms like early possession, a break clause, or assignment and subleasing permissions
5. Outline the fees (e.g, rent type, rent due date, and applicable late payment charges)
6. Add any additional fee details like prepaid rent, and who is responsible for expenses, service charges, and insurance
7. Provide both the landlord's and the tenant’s details (e.g., name and contact details)
8. Specify if a guarantor is required
9. Add any additional applicable terms, such as landlord and tenant improvements, signing concession, and who covers legal costs in a dispute
10. Finally, add the notice period for evictions and signing details