California Commercial Lease: Types, Key Terms To Know, Costs
Quick Facts — Commercial Lease Lawyers (California)
- Avg cost to draft a Commercial Lease: $890.00
- Avg cost to review a Commercial Lease: $680.00
- Lawyers available: 83 California real estate lawyers
- Clients helped: 100 recent commercial lease projects in California
- Avg lawyer rating: 5.0 (24 reviews)
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.
Key Terms Related to California Commercial Lease
-
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
Contact our expert attorneys at ContractsCounsel to avoid any compliance issues or legal issues regarding your commercial lease agreement. Get free pricing estimates from a wide pool of screened lawyers and spend 60% less on legal services than with traditional law firms.
Frequently Asked Questions
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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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Meet some of our California Commercial Lease Lawyers
November 7, 2023
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Jana B.
I am a Silicon Valley tech lawyer with over 13 years of in-house experience and additional years in BigLaw. I provide tech licensing, data privacy, employment, international expansion, go to market, and other corporate and commercial legal services to clients in software, SaaS, bio-tech, cryptocurrency, financing, and construction business. I currently run my own practice concentrating on transactional, commercial, corporate or employment matters. Prior to starting my own practice, I joined as the first in-house counsel to lead the global legal strategy to bring tech products to market, increase revenue, decrease exposure to risk, and raise venture funding for HashiCorp Inc., currently an unicorn technology company with evaluation over $5 billion and venture funding over $350 million; Sysdig Inc., a technology company with venture funding of $195 million; and Anaplan Inc., currently a publicly traded company on the US Stock Market. Furthermore, I acted as in-house counsel advising leading technology enterprise companies such as HP, VMware, and Genentech and currently act as member of strategic advisory boards to several technology companies located globally
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McCoy S.
P. McCoy Smith is the Founding Attorney at Lex Pan Law LLC, a full-service technology and intellectual property law firm based in Portland, Oregon, U.S.A and Opsequio LLC, an open source compliance consultancy. Prior to his current position, he spent 20 years in the legal department of a Fortune 50 multinational technology company as a business unit intellectual property specialist; among his duties was setting up the free & open source legal function and policies for that company. He preceded his in-house experience with 8 years in private practice in a large New York City-based boutique intellectual property law firm, working simultaneously as a U.S. patent litigator and U.S. patent prosecutor. He was also a patent examiner at the U.S. Patent & Trademark Office prior to attending law school. He is licensed to practice law in Oregon, California & New York and to prosecute patent applications in the U.S. Patent & Trademark Office; he is also a registered Trademark and Patent Agent with the Canadian Intellectual Property Office. He has degrees from Colorado State University (Bachelor of Science, Mechanical Engineering, with honors), Johns Hopkins University (Masters of Liberal Arts) and the University of Virginia (Juris Doctor). While in private practice, and continuing into his in-house career, he taught portions of the U.S. patent bar exam for a long-standing and well-known patent bar exam preparation course, and from 2014-2020 was on the editorial board of the Journal of Open Law, Technology & Society (JOLTS), and starting in 2023 will be on the editorial board of the American Intellectual Property Law Quarterly Journal (AIPLAQJ). He is the author or co-author of chapters on open source and copyright and patents in “Open Source Law, Policy & Practice” (2022, Oxford University Press). He lectures frequently around the world on free and open source issues as well as other intellectual property topics.
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December 6, 2023
Eliza J.
Eliza brings a distinguished track record of delivering outstanding results for her clients, showcasing expertise across a spectrum of legal areas. Eliza is not just an attorney; she's your dedicated advocate with a proven record of achieving excellent results for her clients. Her representation spans numerous family law cases, including dissolutions, custody, support, probate, and civil litigation matters. Eliza's unique background as a Registered Nurse and licensed Attorney sets her apart. Before establishing her law practice, she served as a Registered Nurse in various hospitals across Los Angeles and the Bay Area. Notably, she contributed to prominent institutions such as Los Angeles County Public Health and the City of Anaheim. Additionally, Eliza ventured into entrepreneurship, managing her own Professional Fiduciary and Consulting business. Her legal acumen extends to civil litigation, personal injury, medical malpractice, nursing home abuse, worker's compensation, and family law matters. Eliza earned her Bachelor's Degree in Nursing and Public Health from CSU Dominguez Hills. In 2008, she furthered her education, obtaining a Master's Degree in Nursing, Administration, and Healthcare Management, along with a Quality Improvement Certificate. Eliza culminated her academic journey by earning her law degree from the JFK University of Law in 2016. Eliza's multidisciplinary background uniquely positions her to navigate the intricacies of legal matters, offering a comprehensive and compassionate approach to her client's diverse needs. Eliza's diverse background uniquely positions her to understand and address your legal needs comprehensively. Trust her to navigate your case with care and dedication, ensuring you receive the support you deserve.
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Real Estate
Commercial Lease
Florida
How long is a typical commercial lease agreement?
I am a small business owner looking to expand my operations, and I am considering leasing a commercial space. I understand that commercial lease agreements vary in length, but I am unsure how long the typical agreement is. I would like to know this information so I can better plan for my business needs and budget.
Moss S.
The term of a commercial lease typically is no less than 3 years, and could be either 5 or 10 years. Both the Landlord and Tenant usually like long term leases.
Real Estate
Commercial Lease
Texas
Should I use a lawyer for commercial lease?
It is a very long lease and I'm not sure what it says. I also don't want to pay a fortune to have it reviewed to eat into my budget.
George O.
Yes! Before signing any contract/agreement/lease, or anything that appears to be a binding agreement, it is worth the money to have a lawyer review it. I charge a flat fee to review any and all agreements, so my clients know up front what they are paying, and they consider it a cost of doing business. The alternative, i.e. not having a lawyer review your agreements prior to signing, can be, and usually is, exponentially more expensive should a conflict arise (and they often do).
Real Estate
Commercial Lease
Ohio
Can a landlord terminate a commercial lease early?
I have been running a small retail business for the past two years in a commercial space rented under a 5-year lease agreement. However, due to unforeseen financial difficulties, my business is struggling to stay afloat and I may need to close down. I have heard rumors that my landlord has the right to terminate the lease early, and I want to know if this is true and what my options are in such a situation.
Michelle M.
The answer to your question is contained in the lease. All rights and obligations of parties to a commercial lease are controlled by and provided for within the lease. If your lease provides for early termination by the landlord, then the landlord can exercise that option. If it doesn't provide for early termination and you are in compliance with the lease, then they can't terminate early (at least not without your consent). You should retain a local attorney who can review the lease and provide advice concerning your specific situation. Best of luck!
Landlord
Commercial Lease
Ohio
Can the rent be increased during the lease term?
I am an entrepreneur who is looking to rent a commercial space for my business. I recently found a space that fits my needs and the landlord is offering a lease agreement. I am wondering if the rent can be increased during the lease term, as this could have a significant impact on my business. I understand that the lease agreement may contain provisions that allow for rent increases, but I would like to confirm this before signing the agreement.
Jeffrey K.
The lease agreement should specifically provide when and in what amount any rent increases would occur. Usually on a lease with a five year term, rent would increase yearly. If you have a build out credit, you may have free rent for a term if you pay for the build out. If it is a net lease, meaning you pay rent and, either taxes, insurance and/or common area maintenance, you would have a base rent plus the other fees that could increase during the initial lease term usually yearly, but it could be more than one time a year if the costs of these items increase. The rent would also likely increase yearly. If the lease is a gross lease, you will have one monthly rental payment that would increase (most likely) yearly.
Commercial Real Estate
Commercial Lease
Maryland
Can the tenant make alterations to the property?
I am a tenant of a commercial property and I am interested in making some alterations to the property. I understand that I will need the landlord's permission to make these changes, but I am unsure of what the landlord's policy is regarding tenant alterations and what the legal implications of making such changes might be. I am looking for clarification on the tenant's rights and obligations when making alterations to a commercial lease agreement.
O.T. W.
Hello! There should be an alterations clause in your lease that speaks to what is or isn't allowed in your space. Your safest bet is to have your landlord review and sign a letter of consent for more substantial improvements (beyond paint, mounting items, etc.)
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