Business Office Lease Agreement: A General Guide

What is a Business Office Lease Agreement?

A business office lease agreement, also known as a commercial lease or office space lease, is a legally binding agreement that establishes the terms and conditions between a tenant (lessee) and landlord (lessor) for renting an office space. Some of the details this lease agreement will include are:

• Rent amount
• Lease length
• Maintenance and repairs
• Permissible use of space
• Modifications and improvements
• Subleasing rights

Tenants that are asked to sign business office lease agreements are typically business owners looking for office space to house their business and employees. Landlords are typically individuals or businesses that own office buildings that rent to tenants for the purpose of making rental income.

The terms of a business office space lease will vary from other types of commercial leases, like leases for retail space, since the rent amount is typically not tied to the performance of the business. It is common for office leases to have a term of five to ten years, but varies depending on the agreement.

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Common Types of Leases Used for Business Offices

There are many different versions and flavors of lease agreements used for commercial real estate. Below are commonly used lease types for business office space:

• Net Lease. A net lease requires the tenant to pay a base rent amount, plus fees associated with maintenance, utilities, repairs, etc. There are different types of net leases, but a good way to think about them is that the tenant is responsible for base rent and costs associated with the day-to-day property.
• Gross Lease. A gross lease is simply when a tenant agrees to pay monthly base rent, and the landlord pays for everything else related to running the property.

Key Terms in a Business Office Lease Agreement

Business office lease agreements can vary based on their terms, but below are some common terms to know and understand:

Rent Amount and Rent Escalations

One of the most important terms in a business office lease is the amount the tenant will be paying in rent. This will be clearly outlined in the lease agreement. There may also be rent escalations included for future years.

Lease Term

The lease agreement will outline how long the length of the lease will be. It is common to see lease terms for office space at five to ten years.

Modifications to Property

Given office space is typically built out to support the business renting it, office leases will have language included that indicates what the tenant is allowed to do in terms of improving and modifying the property. It is important for the tenant to make sure this language aligns with the plans they have for the office space.

Maintenance, Repairs, and Utilities

There are typically month-to-month costs associated with running a property, which can be categorized as maintenance, repairs, and utilities. The lease will outline who is responsible for these costs.

Lease Termination

If a business files bankruptcy or there is a dispute between the landlord and the tenant, there may be a reason to terminate the lease. The lease will outline what qualifies as acceptable reasons to terminate the lease and the process by which the landlord or tenant can use to terminate the lease.

Subleasing

Some businesses may want to sublease part of an office space they have leased, given it can help supplement income to help pay for the rental. The business office lease agreement will outline if subleasing is permissible, and if so, anything the tenant will need to do or be responsible for.

Seeking Professional Advice

If you are needing to draft a business office lease agreement or have one reviewed, we recommend seeking professional legal advice. Given the size of the potential transaction (five to ten years of rent payments), you want to make sure your rights are protected and you’re setting yourself up for success. Hiring a commercial real estate lawyer to guide you through the process will help, since they are well versed in the lease terms you will need to know.