What does a building lease cost? This is a question often asked by landlords and renters involved in commercial real estate. Let’s explore this question and review some general information about building leases.
According to Based on ContractsCounsel’s marketplace data, the average cost of a project involving a building lease is $660.00.
How Much Does a Building Lease Cost?
A building lease is a commercial lease executed between a property owner (landlord) and a commercial renter who wishes to use the building. Building leases are sometimes called an industrial lease, commercial lease, or office space lease. These terms are often used interchangeably but can mean different things. Industrial leases are typically used for industrial properties, where commercial leases are used for commercial properties, and office space leases are for office properties. Building leases are standard when landlords rent their space for an office or a retail store.
Building leases are an essential part of commercial real estate transactions. Leases protect both the landlord and the renter by communicating the terms and conditions of the rental agreement. Lease agreements will include essential information like:
- Rental costs
- Duration of the lease
- Who is responsible for utilities and repairs
- How to terminate the lease
A building lease implies that a renter will only use the property for business purposes. Hence, it is different from a residential lease that someone may use to rent a home. For this reason, many landlords choose to hire a real estate lawyer to draft this important contract.
Contractor agreements are used to protect both parties and ensure that both the contractor and client uphold their end of the business agreement. Therefore, many contractors seek the legal expertise of a contract lawyer to draft this agreement. A knowledgeable lawyer will know what your contractor agreement needs to include to protect you and your client and hopefully avoid legal disputes.
What’s Included in a Building Lease
Building leases are considered commercial lease agreements, so they have more provisions and clauses than a regular residential lease agreement. While the clauses may vary depending on the property type and business looking to rent, the following provisions are typically included in a standard building lease:
- Parties. The landlord and renters’ names should be included at the beginning of the lease, and any business name under which either party may operate.
- Duration of the lease. Leases will always include a duration, whether it is a month-to-month lease agreement or something more permanent. Typically, commercial leases are three-year agreements, but vary depending on the specific agreement between the landlord and the tenant. This clause should also include the date the lease begins and whether there will be a renewal option.
- Property description. A description of the property includes the address, the type of building, square footage, and features available to the renter, like a parking lot.
- Rental price and required deposits. Every lease should clearly state the monthly rental rate and the date it is due. The lease should also include the deposit amount. It also outlines how the deposit will be returned at the end of the lease.
- Utilities. Every building has operating costs like water, electricity, snow removal, and waste removal. The lease should define who is responsible for these costs and how they are paid.
- Property use. The property use clause lays out what the renter can do with the property. It will typically describe the daily operations of the renter’s business.
- Improvements. Over the course of a building lease, it is common for things to need repairs or improvements. The person responsible for covering these costs should be in the lease.
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Types of Building Leases
A landlord can use several types of building leases, and the type of lease determines which party pays for additional expenses like insurance and utilities.
These are the six most common types of building leases:
- Net Lease. Under a net lease, the tenant pays for rent and utilities plus a share of the property taxes.
- Double Net Lease. The tenant pays for taxes, insurance, and the monthly rent but not maintenance costs. The difference between net and double net lease is in a double net lease the tenant pays for insurance plus property taxes, utilities, and rent.
- Triple Net Lease. The tenant pays for all taxes, insurance, maintenance, and rent for a triple net lease. The difference between a triple net lease and double net lease is in a triple net lease the tenant pays for maintenance in addition to insurance, taxes, utilities, and rent.
- Absolute Triple Net Lease. Tenants will be responsible for all fees, which could even include repairs to a building's roof or main structure. The difference between this and a triple net lease is in an absolute net lease the tenant is responsible for paying for major building repairs.
- Percentage Lease. In a percentage lease, the tenant pays a base rent amount plus a percentage of their sales and profits. These are often used with retail tenants or multi-tenant properties.
- Fully Serviced Lease. Also called a Gross Lease, the rent cost includes utilities and all other services, so tenants only pay one bill to the landlord. The rent may include trash pickup, utilities, insurance, and property taxes, depending on the lease agreement.
The building lease agreement should identify the type of lease agreed upon. In addition, it should clearly state which party is responsible for each expense and how it will be paid. For example, sometimes a renter will pay the landlord for things like utilities, or sometimes they must pay the utility company directly. These details should be included in the lease agreement.
Examples of Building Lease Projects
Building Lease Drafting Services
Many landlords hire a real estate or contract lawyer to draft their building lease. An experienced attorney will know which clauses must be included to protect both parties and avoid civil disputes.
Typically, a lawyer will meet with the landlord in a consultation meeting. First, the lawyer will want to learn about the type of property and what the landlord wants included in the lease. Then the lawyer will draft a lease that the landlord can use.
Building Lease Review Services
The landlord typically drafts building leases, and contracts tend to favor the drafter. Before entering into a legally binding long-term agreement, a protentional renter may want to have a building lease reviewed by a lawyer.
A lawyer can advise the renter whether the building lease contract is fair and protects the renter’s interests. The lawyer can also help explain any terms the renter may not understand.
Building Lease Drafting Cost
Building lease costs can vary based on length, complexity, and how many custom provisions must be included in the document.
ContractsCounsel’s marketplace data shows the average building lease drafting costs to be $600.00 across all states and industries.
Building Lease Review Cost
Hiring a lawyer to review a building lease will also come with fees. In addition, the renter will have to pay a lawyer for their time and legal knowledge.
ContractsCounsel’s marketplace data shows the average building lease review costs to be $690.00 across all states and industries.
How Do Lawyers Charge for Building Leases?
Lawyers can charge for contract drafting and reviewing services in various ways. The two most common fee structures used are hourly and flat.
Hourly Rates for Building Leases
An hourly rate fee structure is the most common fee structure used by attorneys across all legal fields. The lawyer will provide a client with their hourly rate, and then after the project is complete, bill the client for the number of hours spent working on the task.
The marketplace data for ContractsCounsel shows the average hourly rate for a real estate lawyer ranges from $225 - $300 per hour.
Flat Fee Rates for Building Leases
When a client hires an attorney for a specific purpose, like drafting a building lease, the attorney may quote the client a flat fee to complete the task.
To develop a flat fee rate, an attorney will consider their hourly rate and estimate the amount of time it will take to finish a client's project. Then they will quote the client a flat rate fee to be paid upfront.
ContractsCounsel's marketplace data shows the average flat fee rate for building leases is $660.00.
Get Help with a Building Lease
Do you need help with a building lease project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.
