Questions to Ask Before You Sign a Commercial Lease Agreement in Colorado
A Commercial lease agreement (also a commercial property lease agreement or a commercial real estate lease agreement) is a legally binding contract that comes to life when a landlord/ lessor agrees to give a tenant/lessee the rights to run their business from their commercial property on a leasehold that runs for a specific duration and a specific amount of money.
Once signed, the contract indicates the commitment of the tenant to honor the terms agreed on in the lease. It may be presented as proof in court or the presence of an arbitrator when trying to resolve a dispute. Besides its legal powers and its use as a sign of commitment, the Colorado commercial lease agreement answers common questions that affect leaseholds. For instance, can the tenant sublease part of the property? Will landlord rent the adjoining space to a competitor? Are there restrictions to the maximum term of the lease?
Fortunately, this page will answer most of the common questions around commercial lease agreements in Colorado.
What’s the maximum allowable term of a lease?
The state has no restrictions, but landlords and tenants cannot enter into leases that last longer than 99 years, even with renewals.
Do landlords have the right to allow tenants to renew leases?
While no statutory provision requires landlords to allow tenants to renew their leases, there is a precedent that states: if a tenant holds over, the landlord will continue to collect rent with the lease being silent to the consequences of the lease holdover. If this happens, the lease may be regarded as a renewed lease for a period that is equal to or less than the original terms agreed upon, depending on the duration of your original lease and the intention of the landlord and the tenant.
Which are the main types of lease terms and which one should you use?
Fixed end date leases: this lease gives certainty of terms to the landlord and the tenant because the end date of the lease is predetermined. Neither party is required to give the notice to terminate the lease, and the landlord cannot change the terms of the lease or increase rent with this lease.
Fixed number of weeks, Months, or Years Lease: this lease gives a start date and the exact number of weeks, months or years the lease will run. To terminate this lease, either party has to issue a termination notice. The landlord cannot raise the rent or adjust the terms of the lease unless they included specific reservations in the lease.
With the fixed end date and the fixed number of weeks, months, or years leases, if the tenant stays in the business premises past the agreed duration, the landlord may: accept the rental payments allowing the tenant to continue with the past payment process; ask the tenant to sign a new lease; or begin eviction proceedings against their tenant.
Periodic lease: this lease runs for an unspecified duration unless one party terminates it.
Note: there are no laws that permit tenants to terminate their leases before expiration.
How much rent do you pay?
The amount of rent payable varies depending on the type of lease one signs. While the base rent is the minimal amount of rent in the lease, it is not the final amount paid. When leasing commercial property, you have to take care of operating expenses too. Types of leases dependent on the rent and rental expenses include:
Gross Lease: with this lease, the tenant is responsible for the fixed rent while the landlord pays specific expenses related to the operation and the maintenance of the property.
Net lease: here, the tenant pays the base rent and some or all of the operating expenses. The expenses are pro rata, and they include the property taxes, insurance, and common area maintenance (CAM). The most common net lease is the triple net lease where the tenant pays the base rent, property taxes, insurance, and CAM.
Percentage leases: this lease create a unique arrangement where the tenant has to pay a percentage of their gross income on top of the base rent to the landlord.
Modified gross lease: with this lease, the operating expenses of the business are shared between the landlord and the tenant.
Note that there are no restrictions on how much rent a landlord charges.
What is the legally acceptable eviction process?
If in contravention of the terms of the lease, the landlord should serve the tenant with a 3-day written notice demanding compliance or risk possession of their possessions.
The lease contract should have the agreed terms for the security deposit as well as the procedure for refunding the security deposit.
The other details that are covered in the commercial real estate lease contract include those on leasehold improvements and the provisions for renewal of the lease.
Keep in mind to input the names and addresses of the tenant and landlord, the nature of the business you intend to run in the space, and an accurate description of the office space. Lastly, the parties should sign the contract.
If you are looking for prime office space in Denver, Colorado Springs, Boulder, Aurora, Fort Collins, Aspen or any other city in the great state of Colorado, you may download our free commercial lease agreement forms online today.