Commercial Lease Cost

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How much does a commercial lease cost? A commercial lease is a legal contract executed between a landlord and a tenant to use a commercial business property. Commercial leases differ from residential lease agreements . There are fewer legal protections, varied and negotiable terms, and the terms are usually longer.

Commercial leases are important real estate documents that must be drafted correctly. The landlord typically provides leases to the tenant, so many landlords want to know how much it will cost to have a lawyer draft a commercial lease. Let's explore this question and go over some general information about commercial lease agreements.

How Much Does a Commercial Lease Cost?

Many landlords opt to hire real estate lawyers to draft a commercial lease agreement to ensure the contract includes all vital information necessary to be legally enforceable. Depending on where the landlord's property is located, various laws can affect commercial lease agreements and how they must be executed.

Based on ContractsCounsel's marketplace data, the average cost of a commercial lease is $507.22 .

Commercial lease costs will vary depending on many factors. The type of lease, the complexity of the agreement, and the property's location will all impact the cost of a commercial lease agreement.

What's Typically Included in a Commercial Lease

Even though commercial leases are highly customizable and have varying terms, the following information is typically included in all commercial leases:

  • Cost of rent. Rent is usually calculated based on the square footage of the commercial property. Rent is typically negotiable in commercial leases based on what areas are used to calculate square footage and whether the rent will cover additional costs like utilities, taxes, insurance, and repairs.
  • Rent increases. Unlike a residential lease, it is common for a commercial lease to include an annual percentage-based rent increase. Many tenants will negotiate a cap to this increase.
  • Security deposit. Like many leases, commercial leases can include a security deposit. 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 leases tend to have a longer duration than residential leases. The owner of a commercial property wants to ensure that their property is rented and they are receiving a sustainable source of income. Many new businesses are hesitant to sign lengthy leases. They will attempt to negotiate a shorter lease with a renewal option. Shorter-term leases usually result in a higher monthly rent.
  • Additional expenses. Renting a commercial property comes with several additional expenses on top of rent. The cost of utilities, taxes, repairs, and maintenance must all be considered. Who is responsible for these expenses should be defined within the agreement to prevent disputes or misunderstandings.
  • Property description. A commercial lease needs to describe the property that is being rented in detail. Some buildings may have bathrooms or common areas that are not covered under the lease agreement . A clear description of the property will allow the tenant to know which areas they can access.
  • Signage. A commercial property is rented so the tenant can operate their business. A sign is essential for a business, so where and how signs can be displayed need to be included in the lease agreement.
  • Use clause. A Use Clause is added to a commercial lease agreement to define how a tenant can use the property for their business. This clause protects the landlord and their property from damage and liability.
  • Exclusivity clause. It is not uncommon for commercial property to be a complex that can house several businesses. An exclusivity clause protects the tenant because it prevents the landlord from renting 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 15 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 and the property to meet these standards.

How to Calculate the Cost of a Commercial Lease

Whenever a lawyer is involved in a contract project, the client will incur fees for the lawyer's time and legal services. If a landlord hires an attorney to draft a professional, legally enforceable commercial lease agreement, the landlord will pay for the services.

The cost of services will vary depending on the number of hours the attorney worked on the project, the complexity of the agreement, and the commercial property's location.

Types of Commercial Leases

There are several types of commercial leases that a landlord can use to rent out their property. The most common types of commercial leases include:

  • Net Lease. A net lease requires that the tenant pays for most, if not all, taxes, insurance, and maintenance costs in addition to the monthly rent of the property.
  • Double Net Lease: Under a double net lease, the tenant pays for taxes, insurance, and the monthly rent but isn't responsible for maintenance costs.
  • Triple Net Lease: In a triple net lease , the tenant pays for taxes, insurance, maintenance, and rent.
  • Absolute Triple Net Lease: Under an absolute triple net lease, the landlord has no responsibility to pay for taxes, insurance, or maintenance. Tenants will be responsible for all fees, which could even include repairs to a building's roof or main structure.
  • Percentage Lease: If a tenant signs a percentage lease, they will pay a base rent amount in addition to a percentage of their sales and profits.
  • Fully Serviced Lease: Also called a gross lease, under a fully serviced lease, the cost of rent is inclusive of utilities and all other services.

A commercial lease agreement should always state which type of lease is being used, how rent is calculated, and which party is responsible for each additional expense.

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Examples of Commercial Lease Projects

Commercial Lease Drafting

A landlord who needs a commercial lease drafted should contact a real estate lawyer. After an initial consultation which allows the landlord to express what kind of lease agreement they need, the lawyer will draft a commercial lease to fit the landlord's specifications.

A commercial lease agreement is extremely important in real estate. This document needs to be drafted correctly to protect the rights of both the landlord and the tenant. A knowledgeable real estate lawyer will know what clauses should be included in the lease.

Commercial Lease Review

It is fairly common for a potential tenant to get a commercial lease agreement reviewed by a lawyer before signing. Given the real estate is a big cost for business owners, you will want to make sure you’re signing a lease that is fair and does not leave you in a bad situation should business conditions change.

Real estate lawyers will review the lease and provide you with suggested edits to negotiate with the landlord.

Commercial Lease Disputes

A dispute over a commercial lease agreement can be very time-consuming and costly. For this reason, it is essential to have a legally enforceable agreement in the first place.

If there is a dispute over a lease agreement, an attorney can be hired to represent either party in a breach of contract lawsuit.

Drafting a Commercial Lease Cost

Drafting a commercial lease agreement can be a long process, especially if negotiations are being made during the drafting process

According to ContractsCounsel's marketplace data, the average commercial lease agreement drafting costs are $600.00 across all states.

Reviewing a Commercial Lease Cost

A potential tenant can save themselves a lot of future trouble by having a lease reviewed by a real estate lawyer. The review will take time and there may be need for negotiation beyond the review.

ContractsCounsel's marketplace data shows the average commercial lease review costs to be $495.63 across all states.

How Do Lawyers Charge for a Commercial Lease?

Attorneys typically charge clients one of two ways: an hourly rate fee structure or a flat rate fee structure. Both fee structures are common and depend on the lawyer's preferences and the project that is being completed.

Hourly Rates for a Commercial Lease

Under an hourly rate fee agreement, the lawyer will communicate to the client what they charge for each hour of work spent on a project. The client agrees to pay that rate for however long it takes the lawyer to complete the job. Clients tend to feel uneasy with an hourly rate fee agreement because they can easily be surprised by a large legal bill.

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 a Commercial Lease

Clients tend to prefer flat rate fee schedules when hiring an attorney to complete a project. When using a flat-rate fee, the lawyer will assess the project then provide the client with a flat fee quote to complete the job. The client benefits from knowing exactly what they need to pay, and the lawyer benefits by collecting their fee upfront. The downside for the attorney is that if a project takes longer than expected, the lawyer will not be compensated for additional time.

ContractsCounsel's marketplace data shows that the average flat fee rate for a commercial lease agreement costs $507.22 .

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