How to Create a Commercial Lease Agreement Montana
A commercial lease agreement is a legally binding document recognizing the transfer of possession rights to a commercial property from a lessor (landlord) to a lessee (tenant). The right to use the property lasts a predetermined or an unspecified duration often not exceeding 99 years. In exchange for leasing the property for the agreed duration, the lessee pays the lessor rent. The lessee might also have to pay for property taxes, insurance, and other expenses.
The duration of the lease and the expenses paid, other than rent determine the type of commercial lease one signs up for. Before looking at how to prepare a commercial lease agreement in Montana, also called a commercial real estate lease or a business lease agreement, let’s take a look at the main types of leases.
Types of business lease agreements
Type of leases by lease term
Fixed End Date Lease
With this lease, the termination date of the lease is predetermined and certain for both the landlord and the tenant. As a result, neither the landlord nor the landlord has to issue a notice to terminate the lease. Also, the landlord cannot change the terms of the lease or increase the lease. The only exception to the change of lease or increase in rent is if the landlord specifically reserved the rights to make such changes when/before the tenant signed the lease.
Fixed Number of Weeks, Months, or Years Lease
With this lease, the start date is given in the lease, but the expected expiry date is not as a specified date, but rather, after a specific number of weeks, months or years. Like the fixed-end date lease, neither party has to issue a notice to terminate the lease. Also, unless it’s expressly stated in the lease, the landlord cannot change the terms of the lease or raise the rent.
In these two types of leases, the tenant can only extend their stay at the business premises if they accept to make new or old rental payments, or if they sign a new lease. If these terms are not agreeable, the landlord has the right to start the eviction proceedings against them.
This lease comes with an automatic renewal feature. This means that the lease runs for an indefinite period as agreed. The agreed term may be weekly, monthly, or annually. Since it lacks a specific end date, either party can terminate the lease by issuing a lease termination notice as per the statutes. As the lease runs its course, the landlord can increase the rent or even change the terms of the lease, as long as they issue a notice as per the statutory requirements.
Type of lease by rent paid
Gross or Fully Serviced Lease
This is the most common type of commercial lease. The tenant pays the base rent as agreed, and the landlord covers everything else. Gross comes from the fact that the landlord pays for the gross expenses: property taxes, insurance, and property maintenance. This means that the rent payable is a fixed, predictable figure.
In this type of lease, the tenant pays base rent plus a portion or all the operating expenses for the property. There are three types of net leases: single, double, and triple.
Single net lease: with this lease, a tenant pays the agreed upon base rent and a portion of the property expenses; in this case the property taxes. This lease the landlord with the responsibility to pay for the property insurance and CAM (Common area maintenance). Tenant pays the utility bills and for the janitorial services.
Double Net Lease: here, in addition to the base rent, a tenant pays the property taxes and the insurance costs, as well as utilities and the cost of janitorial services. The landlord pays CAM.
Triple Net Lease: with this commercial real estate lease, the tenant shoulders the responsibilities for all property-related expenses (taxes, insurance, CAM, utilities, and janitorial services) on top of the base rent.
Modified Gross Lease
In this kind of lease, the tenant pays the base rent, but the operational expenses of the property are shared between the landlord and the tenant.
In this arrangement, the tenant will pay the base rent in addition to a percentage of the gross income/ profits. It’s an arrangement common with multiple-tenant malls, and shopping centers.
Now that we have that covered, how do you create a Montana commercial lease agreement?
First, enter the name and addresses of the landlord and tenant.
Next enter the type of property to be leased and the address of the property.
Then fill out the details below after negotiation.
The term of the tenancy
Business to be run on the property. Note that the business to be run on the property depends on the zoning or the property, and whether or not the landlord permits a specific type of business to be run on the property.
Leasehold improvement ownership
Security deposit payable
Provisions for lease renewal
Termination rights and provisions.
Keep in mind that the terms of your lease should be in compliance with the Montana laws.
If you are looking to get started with commercial leases Helena, Bozeman, Missoula, Kalispell, Billings, Polson, Whitefish or any other city in Montana, download our free commercial lease agreement forms today.