Commercial Lease Addendum: A General Guide

A commercial lease addendum gives you a chance (as a lessor or lessee) to demand a modification in key provisions of your existing lease agreement. Nevertheless, before executing the amendments, the other party must consent to the new terms and get approvals and signatures from the concerned signatory.

What is a Commercial Lease Addendum?

A commercial lease addendum, also known as a lease modification, is a provision that formally alters the terms and conditions of a commercial lease. It lets the parties consent to modifications without executing an entirely new lease. However, for the commercial lease addendum agreement to be binding in a court of law, the lessor and tenant must agree to the latest terms and conditions in the same sense.

In addition, common modifications to be made in these commercial lease addendum agreements include the duration of the lease, subletting terms, the amount of rent, approvals for pets, property use, or the number of inhabitants. Apart from this, a commercial lease addendum also entail the particulars specified below:

• Term
• Fixed Annual Rent
• Additional Space
• Condition of the Premises
• Fixed Annual Rent and Escalations for the Existing Premises
• Electric Service
• Air Conditioning
• Successors and Assigns
• Extension Option
• Miscellaneous Lease Modifications
• Entire Agreement
• Effectiveness
• Miscellaneous
• Ratification
• No Brokers/Indemnification

Why Should You Hire a Commercial Lease Attorney?

A commercial lease attorney will assist you in getting the most from your commercial property lease at the beginning of the contract. Moreover, a sequence of stipulations can be mediated — especially for commercial leases — that will significantly affect how you conduct your business. Also, remember that things change over time, and your company could encounter rapid expansion beyond what was anticipated before signing your lease. The area itself could see some comprehensive changes that impact your business.

The contracts are sealed and signed, holding each party to their initial arrangements for potentially extended periods. However, many individuals don’t recognize this, but these commercial lease contracts are not set in stone. And there is always room for modification— particularly with assistance from a commercial real estate lawyer who can help draft a commercial lease addendum contract.

Modifications You Can Make During a Commercial Lease Addendum

With a commercial lease addendum agreement, you can make several changes to your current agreement. Below are some key modifications you can make in lease provisions during a commercial lease addendum.

• Extend the commercial lease term.

  When leasing a commercial lease property, the lease agreement only lasts for a specific period. However, what happens when the lease term is over? Yes, you can ask for an extension through a commercial lease addendum. Furthermore, if you conduct business in a rented establishment and intend to keep your commercial lease contract intact, you can ask for an extension from your lessor.

  Nevertheless, during the commercial lease addendum, the lessor may also ask for a specific modification in provisions and other points. For instance, if the lessor agrees to the modification recommendations, they may also incorporate a clause that mandates a transformation in the monthly rent. It may also happen during any forthcoming lease modification for your standalone commercial lease agreement.

• Enhance or alter an occupied area.

  Lessors usually make modifications and updates to their commercial properties. Also, a good owner always wants to make the lessee comfortable and retain them from desiring to shift to another place. Therefore, either party (lessee or lessor) can start this kind of transformation. Besides, you can change the rented area differently with a commercial lease addendum agreement. These comprise:

  1. Upgrading paint and decor
  2. Creating separate offices or cubicles
  3. Installing new wiring for telephone and internet connections
  4. Creating a loading block
  5. Partitioning a more extensive space
  6. Making modifications to accommodate disabled lessees

  Additionally, before making these modifications or improvements, the lessor and the lessee must decide in lease provisions on who:

  1. Comes up with the new strategies
  2. Pays workers
  3. Pays for supplies

  Before making significant modifications, you must incorporate these aspects in the commercial lease addendum agreement for personal lease contracts. You must decide on prospective rent adjustments through an adequate policy for the lessor and lessee.

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• Modify the size of the leased area.

  As time passes, your choices for the leased area may vary. Maybe your company has expanded, and you require more room. Or possibly you need to switch to a smaller space due to the yearly rent increment. It is where you would need a commercial lease addendum agreement.

  In a commercial lease contract, you can ask the lessor to adjust the space allotted in the existing lease. You can ask this through a commercial lease addendum document rather than making a separate lease. Nevertheless, you must remember that this modification might also lead to a difference in the rent cost.

  And when you ask for more commercial space, the lessor may increase the rent by a specific ratio in your lease agreement. Hence if you’re worried about this element of lease administration and know that you will use the property for a long term, you can lock into a more extended lease (like a 10-year lease duration) to avoid future rent increments.

Key Terms

• Offer to Lease: An offer to lease summarizes the specific provisions of the lease contract in bullet points utilized to direct the drafting of the formal commercial lease contract. In addition, it is generally used during mediation to define key terms such as lease period, base rent, and incidental expenditures.
• Incidental Expenditures: Incidental expenditures on a commercial lease contract refer to the expenses of handling and preserving the property. They are expenses added to the primary rent that either the tenant or landlord must settle. Examples include utilities, property taxes and insurance, common area maintenance, and repairs.
• Trade Fixtures: Trade fixtures refer to any objects the lessee decides to install in a commercial establishment, which can be carried with them when they leave the property. Generally, trade fixtures refer to inventory, furniture, and hardware. However, commercial lease contracts should describe any assets tenants plan to take when they depart. Generally, the clause defines the lessee’s obligations for any impairment installation or removal might cause.
• Exclusive Right: An exclusivity clause or exclusive right is especially crucial for commercial lease contracts. This provision gives the tenant the right to be the only provider of a specific product or service.

Conclusion

After preparing the commercial lease addendum document, the primary way to create a binding agreement entails both parties putting in their signatures. Also, you must ensure that the tenant and the landlord make the signatures before a notary public to make it all valid in court.

However, if you are confused about creating a commercial lease addendum document, our attorneys at ContractsCounsel are there to assist you. Our commercial lease attorneys can help streamline these discussions to ensure everything is conducted accurately and fair for everyone concerned.