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If you have rented residential property before, you are likely familiar with what a tenancy agreement should have in it. If, however, you are looking to rent commercial property, the lease agreement you use may have different terms than what you are expecting. You have more obligations as a tenant in a commercial lease, but you also have more room to negotiate your lease agreement to cater to the exact needs of your business. It is crucial to understand your lease agreement so you can protect your interests. This article will cover the essential terms of a lease agreement to give you some guidance as to what to expect.

What Is a Lease Agreement?

A lease agreement is the lease document that you and your landlord draw up that outlines the terms of your lease relationship. This is usually done so in a deed to lease or an agreement to lease. You negotiate this contract according to your own position, and it is beneficial to obtain legal advice to make sure you are getting the most out of your lease, and there are no unexpected issues.

In your lease agreement, there will be certain terms that are essential to the functioning of the contract. If these terms did not exist, then you would not have entered into the lease agreement. This varies by lease, but there are a few general terms that you need for the contract to function as a whole. These include provisions covering the:

  • exact description of the premises;
  • parties to the lease;
  • duration of the lease; and
  • tenant’s exclusive possession.

Other terms could also be essential. For example, you may have required that the lease agreement include an early termination clause. If you need that term in the contract, it is an essential term.

Key Provisions in Lease Agreements

Definition of Premises

In your lease agreement, there has to be an accurate and detailed description of the property that you are leasing. This will define what you, as the tenant, have exclusive possession of as part of the agreement.

For example, if you are renting an office space in a building, the lease agreement would detail the exact perimeter of the office space in the wider area.

Parties to the Lease

It is crucial to have a clause in your lease agreement that defines who the parties to the lease are. This may seem like a simple measure, but it can get complicated if one of the parties is a company.

You need to note in the contract if your company is the tenant, rather than you personally. In some cases, a landlord may require a personal guarantee from a representative of the company, as security if something goes wrong. Usually, this is a director or major shareholder. You should outline this in your lease agreement as well.

Term and Duration of the Lease

You also need to define how long the lease is for and whether there is an option for renewal. This is so that you know how long your obligations exist, and how long you have to pay rent. Some lease agreements will define the term in sets of time. For example, your lease may be for nine years total, but it is split into three sets of three years, with an option for renewal at the end of each of those three-year sets.

Payment

Your lease agreement will also outline how much you pay in your regular rent payments. This may also include any outgoings you contribute to as part of the maintenance of the property. You should also check your agreement for any provisions relating to rent reviews, and how rent increases are calculated. 

Permitted Use

In your lease agreement, there needs to be a clause outlining what you are going to use the property for. If you are selling goods, you will specify that. If you are using it as a car park for your fleet vehicles, you would need to specify that as well.

Property Maintenance

It is also a good idea to have terms outlining what maintenance is expected to be done by both parties relating to the property.

For example, the landlord may be responsible for making sure that common areas like elevators or lobbies of the building are in good repair. If any renovations are happening on the property that need to happen before you can move in, you should also outline this in your agreement.

Key Takeaways

Each lease agreement is different and will reflect the negotiation process that you and your landlord went through to sign it. The essential terms of your lease agreement may vary, depending on what you thought was needed in the contract so that you would sign it. There are general terms that every lease agreement should include so that the lease agreement functions as a fair contract. 

It is, therefore, essential to read through and understand your lease agreement in its entirety and get legal advice if there is anything you do not understand. If you would like more information or help with your lease agreement, contact LegalVision’s property lawyers on 0800 005 570 or fill out the form on this page.

What are the terms used in a lease agreement?

You will need to define the nature of the premises and the parties to the lease. You will also need to outline the tenant’s exclusive possession and the obligations of both landlord and tenant.

What is a commercial lease?

A commercial lease is when you rent out property from someone else for commercial purposes. This is more flexible than a residential lease, and you have more options for negotiating terms that benefit you.

What is an essential term?

An essential term is a term in a contract that you would not have entered into the contract if it were not present. These can be general terms that the contract needs to function or specific terms that you negotiate to include.

How do I get out of a commercial lease?

You can get out of a commercial lease if your lease agreement has an early termination clause that details you you can end it early. Or, you can negotiate a surrender of the lease with the landlord. Alternatively, you can also assign the lease to someone else, or sublet it to a third party.

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