A commercial lease agreement is a legally binding contract between an owner of a property and a tenant who wishes to have temporary possession of the property for a certain period in exchange for money paid.

There are two parties involved in a commercial lease agreement:

• The lessor or the property owner

• The lessee or the tenant/renter

This is also different from a residential lease agreement because of its purpose.

A commercial lease is used by a lessee for business purposes while residential lease is used to rent a house or living space to reside in. A commercial lease agreement is usually in written form although verbal agreements may also be valid.

However, most courts prohibit oral lease agreements as it is difficult to enforce and prove. With no written or hard copy, the courts will have no reference as to the contents of the agreement.

As a result the liable party in a lease dispute will be difficult to tell.

There are no general forms though, that is required by law to be followed. The involved parties can use any for as long as it contains the following elements:

• Property Address – Refers to the rented property like a building, office space, suite, land, farm or just an inside/outside space. The premises may include not only rooms but other areas such as off-street parking, basement or attic storage, roof deck, balconies, etc. The boundaries should also be included so that the lessee won’t be trespassing into other properties.

• Start and Termination Dates – The duration of lease should be specified in the agreement. Typical lease is either annual or month-by-month, and the amount of payment may be different for long term lessees because of the low rate of turnover. The penalties for breaking the agreement before the expiration of the contract should also be stipulated.

• Parties involved – The names of the lessor and the lessee should be identified in the lease agreement. The agreement should also specify the conditions of the lessor like rules about animals and pets on the vicinity. On the other hand, it should also specify the rights of the lessee that includes privacy. The lessor cannot barge in the leased property without invitation from the lessee even if he/she owns the property. It will be considered trespassing.

• Mode and Interval of Payment – Usually lease is paid monthly, annually or in advance. The typical arrangement is first and last month rent plus security deposit. A last month rent is rent that is not yet earned by the lessor while a security deposit is owned by the lessee but is held by the lessor until the property is surrendered in good condition.

• Provision of lease renewal – It discusses the process of how and when the two parties can start negotiating and bargaining for the renewal of the lease before its expiration.

If you are a lessor or lessee who encountered some legal concerns with your commercial lease agreement, seek assistance from an expert business attorney to help you understand and come up with a solution.