The Basics of a Commercial Lease Agreement in Kansas
If you are ready to set up shop at a physical location to meet all the rising needs of your customers, start looking for prime locations for your business and make lease applications. While you may require a single lease application to get the space that suits your business, that is not the case all the time.
In most cases, the terms of the lease may not be as favorable, and you will have to negotiate. To negotiate, you must understand all the elements of a commercial lease agreement in Kansas, as well as the terms used in commercial leases.
So, we’ll hit things off from the top.
What is a commercial lease agreement?
It is a legal contract that gives a lessee the rights to run their business activities in a commercial property owned or managed by the lessor. The contract becomes legally binding once it has the signatures of both parties. In the Kansas commercial lease agreement, the lessee commits to use the property for a specific duration, and they pay the lessor a specific amount of amount of money agreed upon. Both parties have to commit to the responsibilities created when the document is signed.
Note that the agreement is known by other names like the commercial real estate agreement or the commercial property lease agreement, among others.
Which are the main types of commercial property leases?
When negotiating the terms of your lease, you will learn that the type of lease you choose determines how much you will pay as rent and what you will pay for. The main types of commercial real estate leases include:
• Full Service or Gross Lease
With a gross lease, the rental payment charged is inclusive of the base rent, utility costs, janitorial services, and CAMs (Common area maintenance). This means you will pay a specific rate per square foot for just about everything involved in the leasing process. Though you may pay more than what you would with other leases, the rental payment charged is standardized, fixed and predictable. The only problem is that you have to deal with annual rental increases.
• Net leases (Triple net leases/ NNN)
This lease will put all the financial responsibilities for the commercial property on the tenant. What this means is that you have to pay the base rent, CAM, property taxes, property insurance, janitorial services, and utility bills. In this case, the tenant pays the base rent to the landlord, and then they pay for the other expenses to the service providers. Although it might look expensive, it gives you transparency, and you may bed up paying less money than you would if you chose the gross lease.
Other than the triple net lease, there’s also an option of choosing a single or a double net lease. In the single net lease, you pay the base rent and the property taxes, and in the double net lease, you pay the base rent, property taxes, and the property insurance.
The triple net lease is, however, common compared to the single and double leases.
• Modifies Gross Lease
This lease is a hybrid of the gross and the net lease with the tenant paying CAM on top of the base rent. In all modified gross leases, there is a base year expense stop which protects against raising the operating costs for the business. The tenant will be responsible for the janitorial expenses and the utilities. The base rent goes to the landlord and CAM is payable to the service providers directly. It’s common with office spaces.
• Percentage Lease
In this lease, the tenant pays the base rent, as well as a percentage of their gross income.
Other than leases that determine how much you pay; some leases determine the duration of the lease. They include:
• Fixed term lease
This lease has a predetermined end of tenancy date, week, month or even year. The terms of the lease will not change in the course of the lease’s term unless expressly noted in the agreement. If the tenant does not move out when the tenancy expires, they will have to sign a new lease or risk getting evicted.
• Periodic lease
This is an automatic renewal lease. It runs for an unspecified time, but the terms of the lease may change during that time, after the landlord issues a notice. The tenancy runs until the tenant or landlord issues a written notice terminating the lease.
Are leases renewable?
Some are, others are not. When negotiating the terms of the lease, review the terms for renewal.
What’s in the relocation clause?
This is the clause that addresses the course of action taken if the landlord asks you to relocate to a location that is comparable to the space your business currently occupies for whichever. While removing the clause is an option when you have different definitions of comparative, you may leave it if the landlord promises to cater for the moving expenses and the renovation costs. Also, ensure that the lease does not change after relocation.
Is there adequate parking?
Is there adequate parking on the premise? Is parking covered in the lease? Will they reserve your spot? Will the parking meet your needs and those of your clients and visitors?
Can you sublease the space?
Should the lease include details about subleasing and assigning? Is it acceptable? Will you be obligated to pay the rent after you sublease?
Other factors to review include the accessibility of the building, working hours, accessibility over the weekend, signage, security deposits, letters of credit, and the density restrictions.
To get started on the commercial leasing process, you may download our free Kansas commercial lease agreement form accessible online from Wichita, Kansas City, Topeka, Lawrence, Manhattan, Overland Park, Olathe or any other city in Kansas.