Understanding The Commercial Lease Agreement in Massachusetts

A commercial lease agreement in Massachusetts refers to a written and a legally binding document that delegates and outlines how the terms of the lease will be executed in future. Within the lease are the description of the property on lease, the duration of the lease, and the amount to paid in rent.

Your business’ success depends on its location and how much you spend on rent, utilities, and other costs of operation. As you may have heard countless times before, a business that manages to keep its operating costs is more likely to succeed. With rent being one of the biggest expenses incurred by businesses, you want to make sure that the lease you signed gives your business room for expansion. Does the landlord offer tenant improvement? Can you get a free rent period when starting?

What this means is that you must review all the terms of the lease, negotiate for better terms, or find a lease that fits your needs better.

Here are some of the things you need to know about before signing your lease:

Effective Delivery Date

In a Massachusetts commercial lease agreement, the lease should have an effective date for delivery. Presumably, this date is the date the agreement is delivered, and it may be expressed or implied.

Description and Suitability of The Space

Before signing a lease, confirm that the dimensions of the space are accurate and suitable to meet your needs. We recommend scouting the potential locations you can run your business to ensure that the one you choose will allow success and growth of the business.

Check how accessible the commercial space is to you and your customers. With accessibility in mind, you need to confirm that the property is ADA compliant beforehand. If non-compliant, the landlord should pay for the improvements needed to make the space ADA compliant. This is essential because the ADA has clarified the fact that landlords and tenants bear the responsibility for making commercial spaces accessible to disabled persons.

You also need to confirm zoning, availability of an employee and customer pool. Don’t forget about the availability of parking for you, your employees, and your clients.

Leasehold Improvements

The state of Massachusetts has made it clear that leasehold improvements are the responsibility of the landlord. The tenant only pays for trade fixtures.

Term of Lease

How long will your lease be? Should you choose a fixed term or a periodic lease? Fixed term leases have predetermined end dates, and the terms of the lease remain unchanged for the entire duration of the lease unless the landlord states expressly their intention to change the terms or increase the rent after a specific duration.

On the other hand, periodic leases are renewed automatically and periodically. With this lease, the landlord can change the terms by giving notice as per the legal statutes. To terminate a periodic lease, either the tenant or the landlord issues a termination notice.

Note that if a lease term is more than 7 years, notice should be issued at the land court or the registry. And leases that are more than one year must be in writing according to the provisions of the state’s General Laws Part III, Title V, Chapter 259.

Rent Payable

• While most leases attract a base minimum figure for the rent, the figure changes often depending on the type of lease you choose. The lease chosen corresponds with the operating expenses you pay on top of the base rent. The main types of leases that determine how much rent you pay include:

• • Gross/ Full Service Lease

• In this lease, the landlord sets a standard (though negotiable) rental rate that is inclusive of some property maintenance expenses. However, the landlord will pay for repairs. In this case, the rent is predictable.

• • Net Lease

• The net lease could be single, double and triple. These three leases are differentiated by the expenses the tenant pays on top of the base rent. A triple net lease is the most expensive because, on top of the base rent and the utilities, the tenant pays the property taxes, property insurance, and the common area maintenance (CAM) costs. A double net lease means base rent, property taxes, and insurance, and the single net lease means paying the base rent and the property taxes.

• • Modified Gross Lease

• The terms of this lease are such that the tenant and the landlord share the maintenance costs for the property.

• • Percentage Lease

• Here, the tenant pays the base rent and a predetermined percentage of their gross income.

Real Estate Escalation

Inflation on the market will affect the rent charged. To protect the landlords, there’s escalation – a legal element that gives landlords the right to increase how much they charge in rent every few years. Confirm that the rate charged by your landlord is within the acceptable legal limits.

Security Deposits

This section of the lease outlines how much the tenant pays as the security deposit and how much they will get back at the expiry or termination of the lease.

The lease agreement in Massachusetts will also outline the consequences of non-payment or improper use of the space.

Note that while the tenant is required to keep the commercial space in good order and repair, the tenant is not responsible for normal wear and tear, fire, omissions of the land act, or delays beyond the control of the tenant.

To get started with your commercial lease in Boston, Salem, Plymouth, Worcester, Nantucket, Andover, Cambridge or any other city in Massachusetts, get started with our free commercial lease agreement forms easily downloadable online.