Commercial leases differ quite a bit from residential leases. If you are new to commercial property investing, it is a good idea to become familiar with common provisions found in commercial leases.
According to REoptimizer, commercial lease provisions are a way to include some conditions on the agreement that may differ from the standard terms. There are several common provisions you should know about.
Use clauses
Use clauses can allow you to restrict how the renter uses the space. It can allow you to also place restrictions on the use of the property, such as hours of business. An exclusive use clause benefits the renter in that it ensures no other similar business will operate in the same building.
Rent escalation clause
A rent escalation clause allows you to increase the rent legally according to a schedule or based on triggers, such as an increase in property taxes. It provides you with the ability to avoid misunderstandings or have renters abandon their lease due to an increase.
Renewal clause
Commercial leases generally contain a renewal clause. Residential leases will often automatically renew unless the renter gives notice of moving out or you decide to end the lease, but commercial leases often require some type of confirmation and lease renewal at the end of the term. This clause will spell out the requirements to renew or end the lease.
Improvement clauses
Improvement clauses or alterations clauses cover what improvements are changes you or the tenant will make to the space. It outlines responsibility for costs as well. It may cover if the tenant must get permission before making changes.