Demystifying Commercial Lease Agreements: What You Need to Know

Demystifying Commercial Lease Agreements: What You Need to Know

From higher earning potential to limited hours of operation, there are many benefits of a commercial property investment. If you're looking to create commercial lease agreements in Dallas-Fort Worth, Texas, you're making a great choice. Read on to demystify commercial leases and begin drafting a high-quality agreement.

The Basics of Commercial Leases

A "commercial lease" is a broad lease category that encompasses rental agreements for any commercial building. These buildings may include, but are not limited to:

  • Office spaces
  • Warehouses
  • Industrial facilities
  • Retail storefronts
  • Restaurant or cafe venues

Those signing commercial leases have fewer laws in place to protect them than residential lessees do. They also will be signing on for longer rental periods of several years at a time. They're harder to break than residential leases as well, so they're ideal for landlords looking for a long-haul investment with low vacancy rates.

However, this comes with a slight catch: commercial leases need to be completely customized to meet both your needs and your renters'. They're flexible but harder to draft up. Luckily, a commercial property management company can help you create a well-worded and binding document.

Types of Commercial Lease Agreements

There are three core types of commercial leases.

The most basic is a "gross lease." In these agreements, the tenant you're leasing to will pay a fixed monthly sum for rent. This amount will never change, and they won't cover any additional utilities or expenses. These fees fall to the owner.

A "net lease" is often a better deal for landlords like you, but it may be harder to find a lessee. A net lease means that the tenant pays utilities and maintenance expenses as well as the fixed base rental rate. They also will sometimes be responsible for property taxes depending on the terms of the lease.

A "percentage lease" is great for office buildings, retail venues, and restaurants. The lessee pays their fixed rental rate but does not pay for utilities or maintenance directly. Instead, though, they give a predetermined percentage of their enterprise's gross income to the landlord.

All three of these lease types have their pros and cons, so make sure that your Dallas-Fort Worth property manager goes over each possibility with you.

Drafting Lease Terms

You will need to work with each tenant to come up with terms that realistically suit both parties. No commercial lease is one-size-fits-all because businesses are all different. If you're leasing out warehouse space to multiple businesses, your lease will look a lot different than a landlord who's offering a small retail storefront for rental to one tenant.

Ask a property manager to sit down with both you and the tenant. Discuss what terms make sense for the specific situation. Then, have the Texas property management professional draft up a well-worded, legally binding lease.

Negotiate when necessary to come to favorable terms. You're probably not going to get a tenant to sign your first offer, so keep that in mind before creating terms and haggling with them.

Start Leasing Commercial Properties in Dallas-Fort Worth, Texas

Now that you know the ins and outs of Texas commercial lease agreements, it's time to begin collecting rental income. Our team is committed to helping you draft lease agreements and foster great tenant relations. Contact PMI DFW for a free rental analysis.