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

Reviewed for legal accuracy by Forest Hamilton JD

Quick Facts — Commercial Lease Lawyers

The Virginia commercial lease agreement is a contract between a landlord and tenant used for renting office space, retail stores, industrial buildings, or other commercial spaces.

When planning to deal in a commercial property in Virginia, you must always remember the principle of "caveat emptor" which means “let the buyer beware”, before executing a commercial lease agreement in Virginia.

Steps to Follow Before Executing Your Virginia Commercial Lease

Below are some steps you must follow before signing your Virginia commercial lease.

  1. Signing the Letter of Intent

    People involved in a commercial lease generally sign a Letter Of Intent (LOI) that comprises the preliminary provisions of the conclusive written contract, such as the square footage, base rent, lease provisions, etc. In addition, such contracts are generally nonbinding, but the vocabulary used in this letter of intent is an enforceable and valid contract. However, you must always weigh the pros and cons of each policy before signing the letter of intent. And some letters of intent comprise a "nonstop" requirement that keeps the lessee from viewing other places while negotiations are in headway.

  2. Rent Provisions

    Rent is one of many expenditures a commercial lessee must pay during the commercial lease provision. Furthermore, rent is typically described as primary base rent, with extra rent comprising the tenant's proportionate allocation of real estate taxes and common area maintenance (CAM) expenses.

    • Step-up Expenses: These are specified modifications to the primary rent at specific phases of the commercial lease. They are developed to assess the market worth of the leased buildings at a specific time. Moreover, the lessee would want to restrict these costs to limit paying more rental expenses when the commercial building's value or the site's condition declines.
    • Pass-Through or Rent Escalation Provisions: Guarantees there are no pass-through or rent escalation clauses that could be a possible shock during the commercial lease term.
    • Real Estate Taxes: A commercial lessee generally pays real estate taxes on their proportional percentage of the taxes for the premises. In addition, the real estate taxes are usually charged as extra rent that increases statically per month.
    • Common Area Maintenance (CAM) Expenses: These are typical expenses related to the operation of the premise and which profit all the lessees in general, including heating, cleaning, and maintenance-related expenses. Moreover, the commercial lessee usually spends a proportionate allocation of the CAM expenditures for the rental premise. Therefore, a comprehensive description of the common areas could end in higher proportional common area maintenance payments by the lessee. And you might want to try mediating the cost increase on CAM expenses.
  3. Personal Guaranty Provision

    Personal liability provisions in commercial lease agreements are drafted to have the tenant completely and unconditionally accountable for the whole lease rent settlement in case of any default. In addition, most commercial lease contracts allow the lessor to fasten all rent settlements pending until the end of the lease period if there is a default by the lessee. These provisions are considerably expressed and give the commercial owner rights to dispose of and attach the defaulting lessee's business and private assets to fulfill any unpaid payments owed.

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Conclusion

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Frequently Asked Questions

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What's the repair responsibility in a commercial lease?

I am a small business owner in the process of signing a commercial lease for a retail space. I am trying to understand my responsibilities as the tenant regarding repairs and maintenance of the property. I want to make sure I understand what my repair responsibility is in the lease before signing it.

N'kia N.

Answered May 30, 2023

In a North Carolina commercial lease agreement, it is common for the landlord to be responsible for major maintenance and repairs (including structural issues) and the tenant to be responsible for minor maintenance and repairs (including general wear and tear). However, the landlord and the tenant may agree to alternative arrangements in the written lease. The best way to more fully understand your specific maintenance and repair responsibilities under a specific lease agreement is to have an attorney review the agreement and discuss it with you. Good luck!

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I am a small business owner who recently signed a commercial lease for my business premises. I am concerned about the “entire agreement” clause in the lease, as I am not sure what it covers and what the implications are for me and my business. I am looking for clarification on the clause and any potential risks associated with it.

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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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Can the rent be increased during the lease term?

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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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