Published on May 4, 2023
Commercial real estate leases are legally binding agreements between the landlord and the tenant, outlining the terms and conditions of renting a commercial space. Unlike residential leases, commercial leases are typically more complex and involve more negotiation between the parties involved. Understanding the key terms and provisions of a commercial lease is essential to avoid misunderstandings and ensure a successful leasing experience.
In this post, we will discuss everything you need to know about commercial real estate leases in Florida, including the types of leases, lease terms, and essential considerations.
Related: The South Florida Commercial Real Estate Guide
Types of Commercial Real Estate (CRE) Leases
There are several types of commercial real estate leases. Understanding the differences between them can help you determine which type of lease is best suited for your needs. Some of the most common types of commercial real estate leases include:
- Gross Lease: This type of lease requires the tenant to pay a fixed amount of rent each month, The Landlord is responsible for all operating expenses and property taxes.
- Net Lease: In a net lease, the tenant is responsible for paying a portion of the property's operating expenses, such as property taxes, insurance, and maintenance costs, in addition to the base rent. Net Leases come in different forms from a single net where the tenant is responsible for one of the following three landlord expenses, property taxes, insurance or maintenance. A Double Net Lease, commonly referred to a double net (NN) is where the Tenant is responsible for paying 2 of the 3 aforementioned expenses.
- Triple Net Lease: This type of lease (NNN) where the tenant is responsible for paying all operating expenses, including property taxes, insurance, and maintenance costs.
- Percentage Lease: In a percentage lease, the tenant pays a base rent plus a percentage of their gross sales.
The lease terms refer to the length of time the lease is in effect, as well as other key provisions that define the landlord-tenant relationship. The lease terms typically include the following:
- Lease Commencement Date: This is the date the lease term begins.
- Rent Commencement Date: The date the Tenant commences making rent payments
- Lease Expiration Date: This is the date the lease term ends.
- Rent Amount: This is the amount of rent the tenant is required to pay each month.
- Rent Escalation: This refers to any increases in rent over the lease term, such as annual rent increases.
- Security Deposit: This is the amount of money the tenant must pay upfront to cover any damages or unpaid rent.
- Use Clause: This defines how the tenant can use the space.
- Maintenance and Repair: This outlines the responsibilities for maintenance and repair of the property.
- Subleasing: This outlines the tenant's ability to sublease the property to another tenant.
- Termination: This outlines the circumstances under which the lease can be terminated by either party.
- Renewal Options: This outlines the tenant's ability to renew the lease for an additional term.
Before signing a commercial real estate lease, there are several essential considerations to keep in mind. These include:
- Location: The location of the property is a critical factor that can impact the success of your business. Is your business activity permitted in the location. Are special licenses or permits required to operate your business at the location.
- Premises: Are the premises sufficient for the growth of your business.
- Tenant Improvements: Consider the condition of the property and whether any improvements are required to make it suitable for your business. How much will it cost to make suitable for your business. How long will it take. Will Landlord contribute to the cost of buildout.
- Rent: The rent amount should be affordable for you and your business, competitive and reasonable for the location and property condition. With respect to the CAM/Opex component of a Triple Net Lease (NNN) be sure to understand the costs being passed thru by the Landlord. Understand the difference between those landlord cost which are controllable and those which are non-controllable (i.e. Property Taxes and Insurance). If you will you not be able to operate your business day one of the lease ask for a rent free period to enable you to get the business up and running.
- Lease Term: The lease term should be long enough to provide stability for your business.
- Space Flexibility: If you and your business have the potential to outgrow or you may need to downsize your space during the course of the lease term build in flexibility which will enable you to relocate to another location within the landlords premises.
- Security Deposit: The security deposit amount should be reasonable and affordable.
- Maintenance and Repair: The responsibilities for maintenance and repair should be clearly defined in the lease.
- Parking: Consider the availability of parking for your business and customers.
- After Hour Services: Will you need access and services to the property, which may otherwise be restricted during certain hours, outside of restricted hours.
Signature Knows Commercial Real Estate
Working with experienced professionals when dealing with commercial real estate is crucial because the commercial real estate industry is complex and involves various legal and financial aspects that require in-depth knowledge and expertise.
A professional commercial real estate organization, like Signature Commercial Real Estate, has years of experience in the industry, including expertise in negotiating leases, understanding zoning regulations, assessing property values, and identifying investment opportunities. Moreover, a reputable commercial real estate organization can provide valuable advice and guidance throughout the leasing or buying process, helping clients make informed decisions and avoid costly mistakes. Overall, partnering with experienced professionals can help ensure a successful transaction and maximize the return on investment.
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Our Commercial Agents Are At Your Service
Understanding commercial real estate leases is essential when considering leasing commercial property in Florida. Signature Commercial Real Estate has the expertise to guide you through the leasing process, from start to finish. Have questions or want to learn more about commercial real estate in the State of Florida? Our commercial agents are at your service. Contact us today!