Everything You Should Know About The Commercial Lease Agreement in Alaska
Leasing commercial space for business allows you to choose the right location for your business with regards to traffic, and the prime location of the leased property will also free-up working capital. It’s also cheaper than buying property, especially when your business is setting up its roots. But, for your business to get off to a good start, you have to sign a commercial lease agreement.
A commercial lease agreement is a legal contract that signifies and solidifies the relationship between the landlord/ lessor and you, the business tenant or lessee. The contract allows the tenant to tent out the space for business purposes. This contract is also called a business lease or a commercial real estate lease.
Why is it Necessary?
It turns out that unlike residential properties, the government doesn’t offer as much protection to renters of commercial property as it does renters of residential properties. The reason for this is that the parties involved in commercial real estate leases have bigger bargaining power. There’s also the fact that an oral lease is insufficient considering what’s at stake in regards to the value of the property and the assets of the tenant. On top of that, there is the risk of financial loss should either party fail to meet the terms of the agreement. Being legally binding, this document could be used in court when necessary.
What Makes The Document Legally Binding?
Before its execution, the parties to the agreement have the agreement. Signing says that the parties agree to the terms stipulated. The terms are varied, but in the state of Alaska, the terms in your agreement must be as per the requirements of Title 45, Chapter 12 of the statutes.
If this is your first time leasing commercial property, you might be unsure about where to get a draft that meets the statutory requirements and also about the essential parts of the document, right? Fortunately for you, you can download a free Alaska commercial lease agreement form online to get started. Now that you have the form, here’s a look at the essential elements of the lease.
Vital Sections that Make an Airtight Lease Agreement for Commercial Properties
Here, indicate the date that you sign the lease. The introduction section will also carry the details of the name and addresses of the lessor and the lessee. The introduction defines the parties to the agreement.
The use of The Premises
In this section, the tenant highlights what they will use the leased space for.
Terms of The Lease
Under the terms, the duration of the lease (months or years) is highlighted. The duration should be written out in words and numbers with the number placed in the parenthesis. Next up, you have to indicate the date, month, and the year that the lease takes effect, as well as the day, month, and year that the lease terminates.
Option to Renew
Can the tenant continue the maintenance of the space by renewing the lease? The lease agreement form has an option to renew checkbox for this. And, if renewal is acceptable, how long is the renewal period?
Rent and Expenses
One of the main reasons why renters clash with landlords for commercial spaces is the lack of clarity regarding the rental expenses and other expenses that the tenant might have to pay. For this reason, every tenant must read through the terms on property expenses, as well as the types of business leases to avoid disputes. The main elements to be addressed under this section include:
Base rent: this is the base or the minimum amount of rent set in the lease. It’s exclusive of operational or other expenses.
Additional expenses: the extra expenses payable by tenants will always vary depending on what you agree upon – gross lease, modified gross lease, or the Triple Net Lease (NNN).
If the tenant has to pay extra money, it should be described in this section, and the dollar value of the cost indicated.
A lease is incomplete without the value of the security charge.
This section outlines the terms applicable to improvements to the space by the tenant. And, if alterations have already been made, is the tenant responsible for anything else?
Default and Possession
This addresses what happens in the event of a late payment, and how long the tenant has before a penalty is charged. This section also indicates how the penalty will be calculated.
Details of The Municipality
This is the address of the municipality the space is rented
Name and Contact Information
Where are payments and notices addressed to and delivered?
To show that both parties agree to the terms of the commercial lease agreement in Alaska, there should be a binding effect. The binding effect has the day, month, and the year of that commercial property lease, the names and the signatures of the lessor and the lessee. Taking into account the weightiness of the document, it should be signed and acknowledged at the notary public.
Types of Commercial Lease Agreements
As mentioned under Rent and Expenses above, you might have to pay some additional expenses on top of the base rent. If you’ve heard or read about CAM, this section will clear the air. Note that the extra expenses will vary depending on the type of lease you agree on.
Gross (Full Service) Lease
Under this type of lease, the charged rental rate includes all operating expenses and real estate taxes.
With this type of lease, the base rent is exclusive of the operating expenses. These other expenses include the property insurance, property taxes, and the common area maintenance (CAM). The net lease is further divided into three:
Triple Net Lease (NNN)– where the tenant pays the property taxes, insurance, and CAM on top of the base rent
Double Net Lease – tenant is responsible for the property taxes and insurance on top of the rent.
Single Net Lease – on top of the rent, the tenant will only pay for the property taxes.
Modified Gross Lease
This lease is a hybrid of the net and the gross lease. What this means is that the operating expenses are negotiable between the tenant and the landlord. In most cases, the tenant pays the base rent and CAM, and the landlord pays the property taxes and insurance.
With this type of lease, the tenant only pays the property’s rent and a percentage of the tenant’s gross income.
Renting commercial property without signing a lease agreement that stipulates what is expected of you and your landlord might result in financial losses and a soiled reputation. To avoid exposure to such risks, you could download our free commercial lease agreement form available online. The online form is accessible from Anchorage, Juneau, Wasilla, Fairbanks, Sitka, Ketchikan, North Pole, and any other city in Alaska.