Updated on October 12, 2021
The California commercial lease agreement is a legal document that governs the relationship between the landlord and the tenant in a commercial property. Although there are decreased regulations compared to other leases, the California commercial lease agreement complies with the state laws. The lease agreement must follow the provisions provided by (CIV Code § 1710.2(a) (1) (A)), (CIV Code § 1938) and CIV Code § 1938(e).
The first paragraph requires the date the parties agreed and the names and addresses of both the tenant and the landlord.
Description of the premises
- Size of the premises
- Type of space
- Address
- An additional description where needed
Use of the premises: highlight the purpose and use of the leased premises
Term of lease
- Duration of the lease (years, months)
- Commencement and expiration dates
- Base rent and the date for monthly payments
The next section has an option of choosing where necessary in regards to lease renewal and rent increase as agreed by both parties.
Expenses
- Gross: requires both the landlord’s and tenant’s initials. Gross means that base rent is paid on monthly basis and the tenant is not liable for additional expenses such as utilities, or anything related to the premises.
- Modified gross: requires both parties’ initials. It highlights the extra expenses on the tenants’ side in addition to the base rent. It also highlights what the lessor is expected to pay.
- Triple net: operational expenses, taxes, and insurance policies are the obligations of the tenant and doe according to the landlord’s satisfaction.
Security deposit: an agreeable amount is paid before signing the lease agreement and cannot be used as last month’s rent unless with permission from the lessor.
The next sections briefly touch on:
- Leasehold improvements
- Licenses and permits
- Obligations of the lessee
- Insurance
- Subletting/assignment- the tenant cannot assign or sublet the premises without the approval of the landlord
- Damage to the leased premises
- Default and possession
- Indemnification
- Bankruptcy- insolvency
- Subordination and atonement
- Miscellaneous terms in terms of the condition of the premise, pets, right to entry, and usage by the tenant
- Estoppel certificate
- Holdover
- Waiver
- Governing laws
- Notices: fill in the addresses of the lessor and the lessee
- Amendment
Binding effect: both parties sign the document with the acknowledgment of the notary public to indicating that the lease agreement is now effective.
The commercial leasing process can be daunting and therefore crucial to seek the services of a licensed commercial realtor or attorney before entering into an agreement. The tenants have an advantage as they can negotiate the provisions provided to suit their business needs.
California Laws
- (CIV Code § 1710.2(a) (1) (A))
- (CIV Code § 1938)
- CIV Code § 1938(e)
