California Commercial Lease: Types, Key Terms To Know, Costs

Reviewed for legal accuracy by Forest Hamilton JD

Quick Facts — Commercial Lease Lawyers (California)

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:

  • Triple Net Lease

    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.

  • Gross Lease

    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

  • 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.

  • 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.

  • 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.

  • 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

How do I hire a lawyer to draft a commercial lease in California?
How much does it cost to hire a lawyer to draft a commercial lease in California?
How much does it cost to hire a lawyer to review a commercial lease in California?

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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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Real Estate

Commercial Lease

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Asked on Apr 13, 2023

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.

Answered Apr 28, 2023

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.

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Real Estate

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Asked on May 12, 2021

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.

Answered May 12, 2021

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).

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Asked on Jan 14, 2025

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.

Answered Jan 26, 2025

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!

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Asked on Apr 12, 2023

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.

Answered Apr 14, 2023

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.

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Commercial Real Estate

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Maryland

Asked on Apr 12, 2023

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.

Answered Apr 14, 2023

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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