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Office Rental Lease Agreement

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What is an Office Rental Lease Agreement?

An office rental lease agreement, also known as an office space lease or commercial lease, is a legally binding agreement made between a tenant (lessee) and landlord (lessor) that outlines the terms and conditions for renting commercial office space. The tenant is typically asked to review and sign the lease agreement that is prepared by the landlord.

Commercial leases will outline terms, like rent amounts, rent escalations, what the property can be used for, who pays for expenses, and more. Understanding these lease terms is critical for both the landlord and tenant to make sure both are legally protected and happy with the deal negotiated between the two parties.

Office space lease agreements are commonly agreed for five-to-ten-year periods. The term of the lease can vary, but this is a common length. The reason is the landlord does not want to re-negotiate with a new tenant each year, and would rather find good tenants that pay rent on-time.

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Common Types of Office Rental Lease Agreements

There are many different types of commercial lease agreements, all of which have different implications. Common office rental lease agreement types are below:

  • Net Lease. A net lease is when the tenant is responsible for paying base rent, as well as utilities, maintenance, and insurance.
  • Gross Lease. The tenant pays a fixed rent payment each month, with the landlord being responsible for all other expenses.

Standard Terms in an Office Rental Lease Agreement

A office rental lease agreement will have varying terms depending on the property, but below are lease terms you will typically find which are important to understand:

Rent Amount, Escalations

Within a lease agreement, there will be a section that outlines the monthly rent to be paid by the tenant. There may also be built-in rent escalations over time. It is important to understand the full costs of the lease, not just for the first year, but for all outer years where there may be rent escalations.

Lease Length

The term of the lease will be outlined in the lease agreement. For commercial leases for office space, it is normal to see a five to ten year lease term.

Modifications, Improvements

Offices typically requires modifications to the commercial space, so that the business can build out what they need. There is typically a section in the lease that outlines what the tenants can and cannot do as it relates to renovating the property.

Maintenance, Repairs

With most commercial spaces, there is maintenance required and a need to repair things. A commercial lease will outline which party is responsible for these costs.

Subleasing

It can be common for tenants to sublease part of their space to another party, especially if they are leasing square footage that isn’t being used. A lease agreement will address the rights of the tenant to sublease, and the process by which they can do it.

Lease Termination

Occasionally, businesses can get into financial trouble or a relationship between a landlord and tenant can becoming contentious. For these situations, the lease agreement will outline the acceptable reasons and process for terminating the agreement.

Seeking Professional Advice

Whenever you are asked to sign a commercial lease agreement, we recommend seeking professional legal advice. A commercial real estate lawyer will be able to help you draft or review a commercial lease, and make sure your rights and interest are best protected.

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