What does a California commercial lease agreement cost ? This is a common question for commercial property owners in California who need a lease agreement. So let’s explore this question and review general information about commercial lease agreements and what they need to include.
How Much Does a California Commercial Lease Agreement Cost?
Most businesses in California operate out of a building that the business doesn’t own but rents from a landlord. When a commercial property owner rents their space to a business, they use a commercial lease agreement to lay out the terms and conditions of the rental.
There are several types of commercial lease agreements. The agreement used will significantly impact how a business must pay for the rental space, utilities, taxes, insurance, and maintenance.
The three most common lease agreements are:
- Gross lease. In a gross lease, a tenant pays a monthly rent, and the landlord pays for all property expenses.
- Triple net lease (NNN). In a triple net lease, the tenant pays monthly rent and all property expenses.
- Modified gross lease. In a modified gross lease, the tenant pays monthly rent and a portion of all property expenses.
Commercial leases are important real estate documents that must be drafted correctly. The landlord is typically responsible for providing the lease to the tenant, so many landlords choose to hire a California real estate lawyer to draft a commercial lease agreement.
Based on ContractsCounsel's marketplace data, the average cost of a commercial lease agreement in California is $741.67.
What's Typically Included in a California Commercial Lease Agreement
No two commercial lease agreements will be the same. The terms in these agreements can be customized and negotiated to fit the needs of the landlord and the tenant. Each property and business occupying the property will have different characteristics that need to be addressed in the lease agreement.
In California, a basic commercial lease should cover the following important terms and conditions :
- Cost of rent. Rent is calculated based on the square footage and location of the commercial property. In addition, the type of lease will also affect the cost of the rent. Typically, a NNN lease where the landlord must pay all additional property expenses will have cheaper rent than a gross lease where these expenses are included.
- Rent increases. It is common for commercial leases to include an annual percentage-based rent increase. Tenants should negotiate a cap on this increase.
- Security deposit. Landlords have the right to require a security deposit. Therefore, it is important to outline the deposit amount and how it will be returned upon termination of the lease agreement.
- Duration of the lease. Commercial lease agreements are usually three-year agreements. If the tenant wants a shorter lease term, the landlord will typically charge a higher monthly rent.
- Additional expenses. The lease needs to state which party is responsible for the cost of utilities, taxes, repairs, and maintenance.
- Property description. A commercial lease needs to describe the property being rented in detail. For example, some buildings may have bathrooms or shared areas not covered under the lease agreement. A clear description of the property will allow the tenant to know which areas they can access.
- Signage. Commercial property is rented so the tenant can operate their business. A sign is essential for a business, so the lease agreement must include where and how signs can be displayed.
- Use clause. This clause defines how a tenant can use the property for their business. A use clause protects the landlord and their property from damage and liability.
- Exclusivity clause. An exclusivity clause or exclusivity agreement prevents the landlord from renting neighboring space to any potential competitors to the tenant's business.
- Compliance with the Americans with Disabilities Act (ADA). All businesses in the United States that are open to the public and have more than fifteen employees must comply with the ADA. This means the property must be accessible to people with disabilities. A commercial lease will dictate which party is responsible for updating the property to meet these standards.
Examples of California Commercial Lease Agreement Projects
Commercial Lease Agreement Drafting
It is highly recommended that a landlord hires a lawyer to draft their commercial lease agreement. Mistakes or omissions of an important clause could open a landlord to legal and financial liability. A California real estate attorney with experience drafting commercial lease agreements will know which clauses must be included to protect the landlord’s interests and avoid disputes.
When drafting a commercial lease agreement, a lawyer will consult with the landlord to learn about the property and what conditions the landlord wants to include in the lease.
A lawyer can guide the best type of lease for the landlord’s rental and any additional clauses that need to be included.
Commercial Lease Agreement Review
Before a tenant signs a commercial lease agreement, they should have the contract reviewed by their attorney.
Lease agreements are almost always drafted by the landlord and tend to favor the landlord’s interests over the tenant. Without guidance or legal expertise, the tenant could sign an unfair or illegal agreement.
Suppose a tenant has their attorney review the lease. In that case, the attorney will suggest revisions and clauses that benefit and protect the tenant. The lawyer can even negotiate updated terms on the tenant’s behalf.
Drafting a California Commercial Lease Agreement Cost
Lease agreement drafting costs can vary based on the length, complexity, and how many custom terms need to be included in the agreement.
According to ContractsCounsel's marketplace data, California's average commercial lease agreement drafting costs are $775.00.
Reviewing a California Commercial Lease Agreement Cost
When tenants hire an attorney to review a lease agreement, they will be responsible for their legal fees. The lawyer will charge for their time reviewing the contract, suggesting edits, negotiating, and meeting with the client.
ContractsCounsel's marketplace data shows California's average commercial lease review costs to be $725.00.
How Do California Lawyers Charge for a Commercial Lease?
Hourly Rates for a Commercial Lease
Lawyers in all legal fields commonly use hourly rates. Under an hourly rate fee structure, the lawyer will provide a client with their hourly rate. If the client agrees to the rate, the lawyer will begin working on the task while keeping track of their billable hours.
At the end of the job, the lawyer will bill the client for the total number of hours spent working on the case.
The marketplace data for ContractsCounsel shows that the average hourly rate for a California real estate lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for a Commercial Lease
A flat fee rate is a more straightforward way to bill clients. Instead of charging hourly, the lawyer will quote the client a total fee for all legal services. This fee is typically paid upfront before the lawyer begins work on the case.
Clients should be sure they understand what services are included in the flat rate fee. For example, suppose the commercial lease agreement requires revisions or the client requests additional meetings with the attorney. In that case, this additional time may not be included in the fee and could result in more legal fees.
ContractsCounsel's marketplace data shows that the average flat fee rate for a commercial lease agreement in California costs $741.67.
Get Help with a California Commercial Lease Agreement
Do you need help with a California commercial lease agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from real estate lawyers who are licensed to practice law in California. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.