Last Updated March 15, 2024
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What is a Commercial Lease Agreement?
A Commercial Lease Agreement is a contract you use to rent business property to or from another individual or company. This document outlines the terms and conditions of a tenancy, including the rights and obligations of the landlord and tenant.
Generally, a standard commercial lease includes information about the landlord, tenant, guarantor, rent, duration of the lease term, and any additional information that constitutes a term or condition of the lease.
A comprehensive commercial lease is more inclusive and allows for precise specifications of the lease terms. A standard lease is more general and only includes necessary clauses.
A Commercial Lease Agreement is also known as a/an:
- Commercial property lease
- Commercial lease agreement
- Business lease
- Industrial lease
- Commercial real estate lease
- Office space lease
If you’re looking to create a lease for a residential property, use LawDepot's Residential Tenancy Agreement.
What is a landlord responsible for in a Commercial Lease Agreement?
A landlord’s responsibilities regarding a commercial property generally include providing:
- Maintenance: The landlord has an obligation to maintain the property by providing essential repairs.
- Insurance: The cost of insurance may be recoverable from the tenant depending on the lease’s terms and conditions, but it’s the landlord’s responsibility to ensure the property is insured.
- Quiet enjoyment: This refers to the tenant’s right to occupy the property without regular interference from the landlord.
- Health and safety: A landlord is considered a Person Conducting a Business or Undertaking (PCBU) under the Health and Safety at Work Act and must ensure the health and safety of anyone working on the property.
- Assignments of lease: The landlord needs to act reasonably when considering a tenant’s request to transfer the lease to another party.
How do I write a Commercial Lease Agreement in New Zealand?
You can easily create a Commercial Lease Agreement by completing LawDepot’s questionnaire. Using our template ensures you complete the following necessary steps.
1. State the type of commercial property
Start your Commercial Lease Agreement by selecting the type of property. The options include:
- Building
- Industrial
- Office
- Restaurant
- Retail store
- Warehouse
2. Select the type of lease
Choose between a standard or comprehensive agreement.
The standard version of the commercial lease contains all the essential terms for creating a legally binding contract but doesn’t allow you to revise the standard clauses. Most people only require a standard Commercial Lease Agreement.
The comprehensive version is a highly detailed and customisable lease agreement designed for those who need more control over the contract’s wording.
Provide the names and phone numbers of all the parties involved in the Commercial Lease Agreement:
- Landlord: The person or entity who owns the property and allows the use of the space in exchange for rent.
- Tenant: The person or business who signs the commercial lease and is responsible for paying rent.
- Guarantor (if applicable): The person liable to the landlord for any breach of the agreement by the tenant. They can’t be a tenant.
- Property manager (if applicable): The person who deals with the tenant and manages the property on behalf of the landlord, typically in return for a fee.
4. Outline details about the property
Provide as many details as you have available in your commercial lease. Generally, it’s not necessary to describe the property using more than the property address. However, providing additional details can prevent disputes by further clarifying the property’s boundaries.
Additional details can include:
- A diagram of the property
- The property’s area in square feet or metres
- A legal description of the property
- Any other details about the property
The legal description refers to a property's identification in a real estate transaction. You can obtain the description from Land Information New Zealand or in the mortgage documents.
5. Permitted use
Describing the permitted use of the property in the commercial lease helps prevent disputes and confusion over what is considered acceptable use of the property.
Determine and outline whether the tenant will have exclusive use and protection from direct competition on the property. A direct competitor is someone who operates a similar business on the same property as the tenant.
6. Outline the tenant’s parking privileges
Describe the parking area at the property location in the Commercial Lease Agreement. It’s common for commercial buildings to have designated parking spots for the businesses inside them.
7. Set the length of the agreement
Generally, leases outline fixed-term or periodic tenancies.
Fixed-term
A Commercial Lease Agreement with a fixed-term will end on a set date. It can benefit both the landlord and tenant because the terms and conditions stay the same for the lease’s duration.
The landlord doesn't have to worry about the tenant breaking the lease early without breaching the agreement because the tenant is responsible for paying rent for the entire length of the agreement. On the other hand, the tenant doesn't have to worry about the rent increasing in price unless the lease includes terms that allow rent increases.
If the tenant remains past the specified date, the landlord can either:
- Create and sign a new lease with the tenant
- Start eviction proceedings against the tenant
- Continue the tenancy as month-to-month with the same terms as the expired fixed end date lease
Periodic
A periodic tenancy continues until the landlord or tenant terminates the lease. In our template, the terms to choose from are:
Under periodic tenancies, landlords and tenants must give notice of their intention to terminate as specified by local laws. At the end of the notice period, the tenant must move out, or the landlord can start eviction proceedings against the tenant.
A landlord can usually raise the rent or change the lease terms in periodic agreements by providing proper notice as required by law.
Early possession
Some landlords may allow tenants to take possession of a rental property early. In this case, state the date the tenant is allowed to enter the property if it differs from the date the lease begins. There are occasions where the landlord grants early possession to the tenant to make any necessary changes to the property.
8. Decide on a method for rent payments
State the type, cost, date, and how often the tenant will pay. If the landlord intends to charge for late payments, include the interest rate that will apply as a penalty.
Choose from the three types of rent:
- Gross rent: Gross rent is where the total rent is a fixed base rent without any additional costs charged to the tenant.
- Net lease: Net lease is where the tenant is responsible for the fixed base rent plus some additional costs. These costs can include certain outgoings or a portion of all the landlord’s outgoings for the building and common areas.
- Gross rent plus all outgoings: This is where the tenant pays a fixed base rent plus the outgoings.
Outgoings are the routine costs of renting a commercial property, such as utilities, maintenance, insurance, and cleaning.
9. Outline the rent review
A rent review is when the landlord reviews and changes the rent to account for changes in market conditions during the lease.
Choose between having a rent review every three years, five years, or not at all.
10. Outline who will pay for services and amenities
Decide which utilities and services the landlord and tenant will each pay. There’s also the option of the tenant paying the landlord, who then pays the service provider. The cost of utilities is usually separate from the price of rent unless specified otherwise in the lease agreement.
Utilities and services generally refer to:
- Electricity
- Natural gas
- Water
- Sewer
- Telephone
- Internet
- Cable TV
11. Decide who is responsible for maintenance
Maintenance of a commercial property may include upkeep of grass and gardens, pavement and driveways, and light fixtures. Decide and state if the tenant or landlord will be responsible for maintaining the property.
12. Outline deposit details
State if the tenant will pay any deposits before gaining possession of the property.
Prepaid rent
Prepaid rent is a rent payment made to the landlord at the outset of the lease, which the landlord holds as security for the applicable rent payments.
Security deposit
A security deposit is a payment made to the landlord at the beginning of the lease. The landlord holds the deposit for damages. It’s a refundable sum of money the tenant pays to the landlord to guarantee they will fulfil their lease obligations.
The landlord may use the deposit to cover damage caused by the tenant or failure to pay rent. However, the deposit doesn’t cover normal wear and tear.
Inspection report
An effective way to determine whether a tenant will receive their security deposit is by completing an inspection report. An inspection report is a written record of the property's condition when the tenant takes possession. A second inspection is done at the end of the lease to compare the property's current state to when the tenant initially gained possession.
13. Sort out insurance details
Use a standard agreement to have the standard insurance clauses. It allows you to state who is responsible for insuring the commercial property and its contents between the landlord and tenant.
If you wish to modify some lease terms, use a comprehensive agreement to change the wording of the standard clauses. You can then edit the paragraph in the text box to change the terms to suit your needs.
14. State who is responsible for property improvements
Landlord improvements
A landlord improvement is an improvement to a property completed by the landlord. It’s any expense that contributes to the permanent improvement of the leased property.
Tenant improvements
Tenant improvements are permanent improvements made by the tenant to the property.
15. List the moveable property details
List the moveable property that each party will provide.
Moveable property are any personal items that aren’t significantly attached to the property, such as curtains, microwaves, lamps, desks, and personal computers.
16. Signing incentives
A signing incentive is any incentive given to the tenant in exchange for entering the lease agreement. A typical example is a period of free rent.
17. Customise Standard Clauses
Customising standard clauses is an option in the comprehensive version of a Commercial Lease Agreement.
Revising a standard clause is optional and should be done if you have a specific need or requirement that the standard clauses don’t address.
18. State the required notice for evicting a tenant
The landlord must provide the tenant with written notice of their intention to cancel the lease. A written notice has specific legal requirements for the manner and time it's given to the recipient.
You must state how many days notice the landlord needs to give the tenant before eviction for failing to pay rent or breaching the lease in any other way. The landlord needs to provide a minimum of 10 working days notice for failure to pay rent when due or a reasonable period of time for breaching other terms of the lease.
Usually, written notice must be delivered in person, by registered post, or affixed to the door of the premises. Consult your local laws before providing written notice to ensure you meet all requirements.
19. Outline renewal options upon expiry (for fixed-term leases)
A Commercial Lease Agreement has the following renewal options for the landlord and tenant to choose from:
- No option specified
- Same terms
- Same terms except rent renew at market rates
- Revise the standard clause
When the lease term is for a fixed period, the lease will automatically close at the end of that period. The tenant must then leave the property. However, if the landlord and tenant wish to continue the relationship, renewing the lease is available if the tenant gives the landlord 60 days notice before the end of the lease.
20. Outline miscellaneous details
The landlord and tenant can add additional terms and details as needed. These details may include rights and responsibilities regarding:
- Subletting the property
- Legal costs of resolving disputes
- Pets on the property
- Carpet cleaning
- Damages and liabilities
21. Provide the signing details
Provide the date the landlord and tenant will sign the Commercial Lease Agreement.
Can a landlord break a Commercial Lease Agreement?
The landlord can break the lease if the tenant breaches the terms and conditions of the commercial lease. While it’s usually preferable that the two parties come together to negotiate a solution to the problem, the landlord has no obligation to do so.
New Zealand’s Property Law Act 2007 provides the guidelines for cancelling a lease.
