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Simple Commercial Lease Agreement Templates PDF Free Download
What is a Commercial Lease?
A commercial lease is between a landlord and a tenant seeking to rent space for business purposes.
The annual rent is calculated as a price per square foot ($/SF) of the usable space with 1/12th due each month.
Unlike residential leases, landlords will sometimes charge the tenant additional expenses such as common area maintenance (CAMs), real estate taxes, and insurance (depending on the type of commercial lease).
How to Calculate Price ($) per Square Foot (FT)
The price per square foot ($/SF) is a number that represents the annual rent for commercial space. It is calculated by the annual rent ($) and divided (÷) by the total square footage (SF) of the space.
Unless it is a land lease, this is for the “living space” of the property which is calculated by measuring the interior walls (the width multiplied by the length).
Getting $/SF from Annual Rent
A landlord is offering 2,500 square feet of space at $50,000/yr.
The calculation would be $50,000 divided by 2,500 square feet which would equal $20/SF.
Getting $/SF from Monthly Rent
A landlord is offering 1,500 square feet of space at $3,000/mo.
The calculation would be $3,000 multiplied by 12 equaling $36,000. Then you would divide $36,000 by 1,500 square feet equaling $24/SF.
Getting Monthly Rent from $/SF
A landlord is offering 4,500 square feet of space at $15/SF.
The calculation would be 4,500 square feet multiplied by $15 equaling $67,500 in annual rent. Divide $67,500 by 12 and $5,625 is the monthly rent.
How to Negotiate a Commercial Lease
Negotiating a commercial lease, whether in the landlord or tenant position, depends on a number of factors primarily market conditions, location, and the property itself.
Due to each parcel of real estate being unique, a lot of the negotiation will be determined by the landlord’s eagerness to rent the space and the tenant’s willingness to pay the asking rental amount.
Step 1 – Hire a Real Estate Agent
A real estate agent is commonly considered an expert in the market area and will know the rental rates for similar properties.
This benefits the landlord and tenant in coming to an agreement that mutually benefits each party.
A Realtor will typically charge a commission that is based on the total lease term.
For example, if the lease term is for 10 years, the annual rent is $50,000, and the commission is 5%, the total commission will be $25,000 upon the lease being signed ($50,000 multiplied by 10 years = $500,000.
Then multiply the total amount by 5% which is $25,000 paid to both agents combined).
Step 2 – Verify Market Conditions
If the landlord is offering a price that seems higher than the norm, the tenant should conduct their own investigation of what rents are going for in the area.
The best websites to view commercial property listings depend on the market area. The most popular sites nationally are as follows:
Loopnet.com
CoStarGroup.com
Redfin.com
42Floors.com
CityFeet.com
If the landlord or tenant hired a real estate agent, they should be able to pull comparable leases that have been signed to show as proof of the rent being paid by other similar tenants and properties.
This should give an idea to both parties of a rental range.
Step 3 – Pull Property Data
Pulling property data is not as difficult as it sounds.
Especially for retail tenants or shop owners that depend on the traffic and demographics.
Traffic counts for example, which is the average daily number (#) of vehicles that drive by on a particular street, are provided free by the Dept. of Motor Vehicles in the State.
In addition, demographic data can be found by going to the US Census Bureau and looking up the county and town income levels.
For example, properties in higher traffic areas and higher median income levels will commonly fetch higher rent amounts due to the excess of disposable income.
Step 4 – Good Credit History
If the tenant has a good history of paying their creditors on time or has a business with multiple locations chances are the landlord will take that into consideration when negotiating the rent.
For example, companies with BBB+ or better credit ratings will give the landlord incredible value for their property if they are ever to sell.
Therefore, landlords will always be encouraged to sign a credit tenant rather than a new business.
Check a Business’s Credit Score
Dun and Bradstreet
Experian Business
Equifax Business
Bad Credit
If the business does not qualify or the business has a poor credit rating, the landlord can always request the tenant sign personally with a personal guarantee.
This will make the owner of the business, provided they have the necessary assets, sign personally for the lease.
In other words, if the tenant defaults on the lease, the landlord will be able to acquire the tenant’s personal assets such as their vehicles, home, and personal finances in order to recoup their losses under the tenant’s obligations under the lease agreement.
Step 5 – Prepayment of Rent
The last option the tenant has in order to attempt to have a lower rent amount is to try and pay as much upfront as possible at the time of lease signing.
Ideally, if the tenant is able to pay, at a minimum, 6 to 18 months in rent it may sway the landlord into a lower amount.
In addition, if the tenant is able to put up as much as possible as the security deposit that also helps the landlord in determining whether to sign the agreement.
| Author | – |
| Language | English |
| No. of Pages | 12 |
| PDF Size | 3 MB |
| Category | Form |
| Source/Credits | eforms.com |
Simple Commercial Lease Agreement Templates PDF Free Download