WHAT IS COMMERCIAL LEASE AGREEMENT?
Or
WHAT IS THE MEANING OF LESSOR AND LESSEE?
A Commercial Lease Agreement is an agreement that is executed between the owner (Lessor Meaning) and the individual/entity (Lessee) who is willing to buy the immovable property for commercial purposes [Meaning lessee]. This Agreement states the terms and conditions that each party is bound to fulfill and is usually executed by the Lessor, which may be one- sided and against the interests and protection of the Lessee. A Lessee is suggested to always read carefully the terms and conditions of the Agreement prior to its execution, and must be aware of every clause and provision, and its interpretation.
WHICH ACTS ARE APPLICABLE TO COMMERCIAL LEASE AGREEMENT?
Following are the acts that are applicable to the execution of such an Agreement:
- The Indian Contract Act, 1872
- The Transfer of Property Act, 1882
- The Registration Act, 1908
- The Indian Stamp Act, 1899
- The Arbitration and Conciliation Act, 1996
WHAT ARE THE IMPORTANT ELEMENTS TO BE INCLUDED IN COMMERCIAL LEASE AGREEMENT?
Following are the important elements that have to be mentioned in the Agreement:
- The Parties to the Agreement
- The description of the leased property
- The terms and conditions of each party to the agreement
- The duration for which the property is being leased
- The monthly rent of the property being leased
- The amount of security deposit to be paid by the Lessee
- The purpose for which the commercial property is being used is to be mentioned
- Representation and Warranties
- Miscellaneous and Boilerplate clauses
- The termination of the Agreement is to be mentioned; when it will be terminated, by whom, if it is being terminated during the Agreement then what are the requirements to be fulfilled, etc.
WHAT TYPES OF COMMERCIAL LEASE ARE THERE?
- Net lease- in this the tenant is responsible of paying most of the taxes, insurance and maintenance.
- Double Net Lease- the tenant has to pay all the taxes, insurance, maintenance and monthly rent.
- Triple Net Lease – In a triplet net lease, the tenant is responsible for paying three main types of expenses in addition to the base rent, that are property tax, insurance, maintenance and repairs.
- Absolute Triple Net Lease- absolves the landlord from paying any taxes, insurance and maintenance.
- Percentage Lease- if the tenant signs the percentage lease, the tenant has to pay a base rent amount in addition to the percentage of their sales and profits.
- Fully Serviced Lease- it states that the rent amount is inclusive of all the utilities and all other services that a tenant would usually have to pay for separately.
WHICH PROPERTIES ARE CONSIDERED TO BE AS COMMERCIAL?
The following properties are considered as commercial:
- Office space
- Retailed stores
- Industrial buildings
- Warehouses
- Restaurants
CONCLUSION
A commercial lease or Contact of lease is a legally binding contract that should be utilized whenever a business owner intends to rent a property for the purpose of operating their business. This type of lease agreement serves to safeguard the rights and interests of both the landlord and the tenant. When entering into a commercial lease, it is essential to be well-prepared for unexpected situations and to ensure the protection of your rights and interests. Managing a commercial space involves various certifications, insurances, and No Objection Certificates (NOCs), which are typically the responsibility of the landlord to obtain and maintain throughout the lease term.
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Also see : JOINT VENTURE AGREEMENT
