A California commercial lease agreement is used by landlords to rent a commercial property to a person or business for commercial purposes. As a lessee of a larger commercial owner, there are numerous aspects you must consider before signing a commercial lease agreement in California. In a commercial lease, every section and provision can considerably affect your business, so having a real estate lawyer check the agreement before signing is essential.
Different Forms of Commercial Properties
A business in California can lease multiple forms of commercial property. In addition, each may have a diverse set of lease clauses, and these property clauses comprise the following:
- Garage
- Office
- Hospitality
- Warehouse
- Storage
- Industrial
- Retail
Types of California Commercial Lease Agreements
There are three primary types of commercial leases prevalent in California. Each commercial lease type assigns property expenditures differently between the tenant and the property owner. In addition, property expenditures typically comprise insurance, real estate taxes, and Common Area Maintenance (CAM) expenses.
The three types of commercial leases prevalent in California are as follows:
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A triple net lease is commonly known as an NNN commercial lease. Triple net leases are the most prevalent for retail properties and multi-tenant industrial units. While operating expenditures can be more expensive than other commercial spaces, these Triple net leases are more suitable for the owner, as the lessee is accountable for unexpected expenditures.
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In a gross commercial lease, the landlord reimburses all property expenditures, including maintenance, utilities, and repairs. Then, the lessee only needs to document a bill for each month's commercial property rent. They don't need to stress about unforeseen expenditures and can concentrate on running their company.
- Modified Gross Lease
A modified gross lease is a settlement between a triple-net lease and a gross lease. Under this type of commercial property lease, the landlord and lessee share property expenditures. Interior cleaning and utilities services are general tenant-paid expenses under a gross, modified lease.
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Key Terms Related to California Commercial Lease
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Subletting and Assignment
Unless the California commercial lease states the opposite, a commercial tenant can transfer or sublet the space according to the lease provisions for a specific time period or the rest of the lease period.
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Security Deposits
Most commercial property owners in California demand a security deposit and California property regulations have no limitations on the amount an owner can request for an area. The primary objective of a security deposit is to cover the repair expenses after the lessee moves out or pay the rent if the lessee fails to do so.
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Non-Waiver Provisions
A non-waiver provision is a security for the lessor to execute the lease provisions that may have let slip in the past. For example, if a landlord does not execute a late payment when a lessee delays rent payment the first time but does implement it the second time. Moreover, if feasible, a lessee should guarantee that a non-waiver condition goes both ways for the owner and lessee.
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Evictions
Landlords have the right to evict a tenant for the following reasons:
- Failing to vacate the property when the lease term ends.
- Causing damages to the property that affect other tenants' businesses.
- Failing to pay rent.
- Doing illegal activities.
While drafting a commercial lease agreement, a landlord must specify the reasons they could evict a tenant from the office space or rental property.
Conclusion
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Meet some of our California Commercial Lease Lawyers
Gregory B.
I love contracts - and especially technology-related contracts written in PLAIN ENGLISH! I've worked extensively with intellectual property contracts, and specifically with IT contracts (SaaS, Master Subscriptions Agreements, Terms of Service, Privacy Policies, License Agreements, etc.), and I have built my own technology solutions that help to quickly and thoroughly draft, review and customize complex contracts.
Tabetha H.
I am a startup veteran with a demonstrated history of execution with companies from formation through growth stage and acquisition. A collaborative and data-driven manager, I love to build and lead successful teams, and enjoy working full-stack across all aspects of the business.
Chia-Fen Y.
Attorney Yu represents clients in business and real estate transactions and has successfully handled more than 200 cases. She has experience in corporate law, including forming legal entities, employment law and workers’ compensation law matters pertaining to wage and hour violations, industrial injuries, misclassifications, and other employment-related torts and contracts. Attorney Yu works with employers to address employee relationship issues, develop effective policies and craft employment agreements. Attorney Yu regularly advises clients on the legal and business aspects of potential investments, ongoing business operations, debt collections, shareholders and partners disputes, business purchase agreements, risk assessment, intellectual property disputes, and potential contract disputes. She regularly handles real estate law matters such as landlord-tenant disputes, lease agreements, buy-sell disputes, title disputes, and construction disputes. She also has substantial experience settling debts, and she drafts, reviews and negotiates settlement agreements. Attorney Yu conducts extensive legal research and provides on-point legal advice to both corporate and individual clients.
October 22, 2021
Thaddeus W.
Experienced legal counsel to entrepreneurs, small businesses, and investors. Advising clients starting, buying, selling, operating, financing, and investing in businesses // U.S. Army Veteran // Ironman Triathlete, Marathoner, Open Water Swimmer, USAT Triathlon Coach // Lover of Dogs, Cribbage, Craft Beer, Bourbon, and Cigars
October 26, 2021
Steve C.
I am a corporate and business attorney in Orange County, CA. I advise start-ups, early-growth companies, investors, and entrepreneurs in various sectors and industries including technology, entertainment, digital media, healthcare, and biomedical.
October 29, 2021
Yoann E. A. L.
For over 15 years, I accumulated both hands-on technical and business experience as an IT engineer and entrepreneur, enabling me to understand your challenges probably better than anyone else on the legal market! My California-based full-online practice focuses on: - Intellectual Property (Copyright / Trademarks) - Privacy / Data Protection - Commercial matters (e.g. service contracts) - Corporate (e.g. incorporation, restructuring)
November 10, 2021
Josiah Y.
Attorney licensed to practice in both California and New York, Josiah is focused on helping people understand what's in their contracts, and do business with confidence.
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Commercial Lease
California
What's the property description in a commercial lease?
I am a small business owner who is looking to lease a property for my business. I am currently reviewing a commercial lease and am trying to understand what is included in the property description in the lease. I am hoping to gain more clarity on what the property description entails and how it affects my business.
Gagandeep K.
A property description in a commercial lease has to sufficiently identify the extent and boundaries of the property being leased. For example, it can be described by a map reference or by metes and bounds, or include a description such as "that certain building on the south-westerly corner of California and Larkin Streets." The commercial lease will include defined terms such as "Building," "Property," and "Premises". The defined terms define/describe the "Property" on which the "Building" is located which has the "Premises"/"Space" that is being leased. A sample definition of is Property Description in a Commercial Lease: ""Property" means the real property on which the Building is located together with the Building and all appurtenant fixtures and personal property of Landlord used in the operation of the Building and/or the Property, and any other improvements now existing or hereafter constructed thereon[, including the parking lot, walkways, and landscaped ground as depicted on the site plan attached hereto as Exhibit [LETTER]]."
Commercial Real Estate
Commercial Lease
North Carolina
How is the rent determined in a commercial lease agreement?
I am a small business owner looking to rent a space for my business. I am currently in negotiations with the landlord of a commercial property and we are discussing the terms of the lease agreement. We have reached a point where we need to discuss the rent and how it will be determined. I need to understand more about how rent is determined in commercial leases so that I can negotiate a fair and reasonable agreement.
N'kia N.
In North Carolina, commercial rent is commonly calculated as a set dollar amount per square foot. This dollar amount is usually based on factors like location, age, condition, accessibility, and amenities. However, there is no requirement for rent to be determined this way. Unlike a residential lease agreement, the terms of a commercial lease agreement can be almost anything that the parties mutually agree to. As a word of caution, in North Carolina, commercial tenants do not have the same degree of legal protections as residential tenants. For just one example, a tenant who wishes to terminate a commercial lease early may be responsible for the entire remainder of the rent unless the lease agreement says otherwise.
Real Estate
Commercial Lease
Florida
What's permitted alterations in a commercial lease?
I am a small business owner looking to rent a commercial space for the first time. I am considering signing a commercial lease and want to know what kind of alterations are allowed in the agreement. I would like to avoid any potential legal issues or disputes in the future by clarifying what is permitted before signing the lease.
Moss S.
Usually permitted alterations are cosmetic, and non-structural in nature. Often times the Landlord will require the Tenant to submit plans, or in the alternative the lease will describe the fit and finish that would be allowed.
Commercial Real Estate
Commercial Lease
Massachusetts
Can the tenant assign the lease to another business?
I am a business owner who recently signed a commercial lease for a retail space. I was recently approached by another business who is interested in taking over my lease, and I am wondering if I am able to assign the lease to them. I am looking to understand the legal implications of assigning the lease, as well as any other requirements or restrictions I should be aware of.
Joseph M.
In Massachusetts, a commercial tenant can assign or sublet the unit to a third party - UNLESS there is a specific prohibition in the current lease. However, even if there is such a prohibition, it might still be worth speaking to the landlord about since it might be mutually beneficial.
Real Estate
Commercial Lease
Texas
What is a triple net lease?
I want to understand these better.
George O.
A triple net lease designates the tenant (lessee) as having the sole responsibility for any and all costs associated to the asset being leased in the agreement, with those costs being the net real estate taxes on the leased asset, net building insurance, and net common area maintenance. The lease received its name from the three “net” fees and may also be called a Net-Net-Net Lease.
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