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The Elements of a Commercial Lease Agreement in Oregon
A commercial lease agreement in Oregon refers to a legally binding instrument drawn between a lessor (landlord) of commercial property and the lessee (tenant). It allows the lessee the right to use the property for business for a specific duration and at a specific cost. Although a lease agreement is a contract like any other, you have to take your time before signing it. You need to make sure that the terms of the lease are fair and favorable to allow the growth of your business. Whole outlining your obligations, the business lease agreement should also protect your interests.
So, whether you are setting in motion expansion plans or are opening up a new business, you need to ensure that the lease is what your business needs.
First, determine its suitability in relation to your business needs
What this means is that you need to make sure that the location you have in mind is zoned for that kind of business. The space should be adequate for your business and accessible. Accessibility and the presence of human resources and human traffic, as well as the level of competition in that location are crucial. Without taking into consideration your business, you may sign a short-term lease which could mean looking for a different location for business or signing a new and an expensive lease too soon.
The lease term refers to hold old the lease will be in your name. Depending on how established your business is, you may choose a short-term or a long-term lease. A long-term lease is suitable for established businesses, and the short-term lease works well with startups.
The leases can also be fixed term or periodic. With the fixed term lease, the end date or tenancy termination time is predetermined. So, you don’t have to issue a tenancy termination lease to terminate it. With the fixed-term lease, the landlord cannot increase the rent charged or change the terms of the lease until the end of the lease duration where the tenant signs a new lease or if the lease has a provision that allows change of terms.
On the other hand, there is the periodic lease which is renewed automatically. There is no known end date, and either party gets to terminate the lease when they wish to, as long as they issue a lease termination notice. Periodic leases are common, and they can last as long as 99 years. The terms will, however, change periodically.
In the Oregon commercial lease agreement, you will have to choose one type of lease over the other. The selected type of lease determines how much money you will pay monthly and what the money is for. There are three main types of leases: Net, Gross, and Modified Gross.
Gross Lease: this is the most common type of lease. If you agree on this arrangement, it means that you will only pay a specific amount in rent monthly. You do not pay for any other expenses because the landlord caters to them.
Net Lease: in this arrangement, you will be responsible for some or all the expenses for the property, as well as the base rent. The most common net lease is the triple net lease which involves payment of the base rent, the property taxes, insurance, common area maintenance (CAM), utilities, the janitorial services, and any other expenses. The landlord gets their rent, and they don’t pay for anything else. The other types of net leases include the single and the double net lease allowing the lessee to pay one or two of the essential property expenses – taxes and insurance.
Modified Gross Lease: here, the tenant pays the base rent and a shared portion of the property expenses.
In most cases, the security deposit charged equals one month’s worth of rent, though it could be higher. Make sure that your commercial property lease agreement outlines the terms for returning the security deposit clearly.
Repairs and Maintenance
In your business lease agreement, you should ensure that there is a clause that makes the landlord responsible for all the major repairs and maintenance of the building. Some maintenance costs may be shared, but the repairs and maintenance clause should show what you are responsible for and what you are not. Of course, you will have to keep the property clean and in good order, and you have to repair nonstructural problems you cause. This is because it is your role to keep all the non-structural elements in the space in excellent shape.
Wondering what you cannot do in the commercial property? Well, you cannot destroy the property intentionally, and you should ensure quiet enjoyment.
Before moving in, that space may require a lot of work. Though you need to renovate the space to start your operations, you may ask for tenant improvement allowance from the landlord. The allowance enables to improve the space and even elevate its value.
Landlords and tenants are required to keep their commercial premises in good shape and also accessible to persons with disabilities. Before signing the lease, make sure the landlord has made the place accessible; if not, they should improve the space so that it meets the requirements of the ADA. The interior spaces should be accessible as well.
Other elements to review and negotiate in the commercial property lease agreement include escalations, subleasing and assignment, parking, and termination/ renovation rights.
If you are in Salem, Eugene, Portland, Medford, Bend, Beaverton, Astoria, Roseburg, Ashland or any other city in Oregon and looking to get started with commercial leases, download our free commercial lease agreement form here today.