Essential Elements of a Commercial Lease Agreement in Washington

A Washington commercial lease agreement refers to a legal document that signifies the temporary transfer of the rights to use or occupy commercial space by a landlord/ lessor to a tenant/ lessee. This document has the terms and the conditions, rights and the obligations of the parties to the lease. Once signed, it is legally binding, and it protects the parties of the lease ensuring that everyone does and follows what they agree upon. For this reason, you need to review and negotiate the terms of the lease before you sign it to avoid future problems. The commercial lease agreement in Washington will be used as the reference point, and the point of clarification of issues and misunderstandings regarding the lease term, repair policies, and other elements ensue.

• The lease agreement is also called a business lease agreement or a commercial property lease agreement. To avoid problems in the future, you should understand all the elements of the lease. You also need to ensure that your Washington state commercial lease agreement terms abide by the provisions of Chapter 62A.2A. These essential elements or contents of the commercial lease agreement include:

• • Specification of The Commercial Premise

• The lease should define the location of the premise and also give an accurate description of its features and size. The description should also include the condition of the premise and its general use. Installations present and existing damage should be documented. So, you might want to take photos of the space.

• • Permitted Use of The Premise

• Despite having commercial space in a property zoned for business, the landlord may have restrictions on the kind of business you may run in the space. For instance, you may not be permitted to run a nightclub in that building. You should, therefore, discuss with the landlord the permitted uses of the space, as well as the types of businesses you cannot run in the space before you sign the lease or negotiate better terms. Understanding this is also helpful should you want to run a different line of business in the future.

• • Lease Term

This is an essential part of the lease. It defines the length of the lease, conditions for the renewal of the lease, timing, and the lease renewal or termination process. The lease may be on a fixed-term or a periodic basis. These two leases differ from each other in various ways. The fixed term lease has a definite end date and doesn’t require a lease termination notice. And the terms of the lease may or may not change depending on the provisions in the lease.

The periodic lease, on the other hand, lacks a specific end date for the lease and the tenant can renew it. They have to issue a lease renewal notice as indicated in the lease agreement, and either party has the right to issue a lease termination notice. The terms of the lease may change, and the rent increased during the lease renewal period.

• Note that lease terms are also differentiated by their length. You may have a long-term or a short-term lease. The short-term lease, though favorable for small business may only work well for you if it comes with an option to renew. The long-term lease, on the other hand, works well if you run an established business.

• • Rent Amount and Associated Fees

This section of the lease describes the details of the rental rate, what a tenant pays for and what they don’t. The rent payable depends on the types of the lease you choose.

A gross lease lets a tenant pay a fixed amount in rent – the base rent only.

The net lease means that the tenant pays the base rent as well as the property expenses like taxes, insurance, and the common area maintenance. Under the net lease, there are single, double and triple net leases. The triple net lease is the most common one and preferred by landlords because the tenant pays for all the expenses above, as well as the cost of utilities and the janitorial services.

There’s also the modified gross lease where the tenant pays the base rent and a portion of the property expenses.

Percentage lease comes in if you are a tenant in a shopping center or a mall. You may have to pay a percentage of your gross profits in addition to the base rent.

• Under rental costs, you should also have the details of the taxes you may have to pay and the ones that the landlord pays.

• • Security Deposit

• This section of the lease specifies the amount of money charged as a security deposit and the conditions for the return of the security deposit.

• • Tenant Improvement

• This section outlines whether or not you can improve the property and if you have to revert it to its initial state at the end of the lease. If you are negotiating a long-term lease, you may ask the landlord for a tenant improvement allowance.

• • Subleases and Assignment

Can you sublease the space and assign a third party the lease when you sell your business, need to move to a bigger space, or for any other reason? The option to sublease should be open especially when taking out a long-term lease.

• Other commercial lease essentials you should know about include:

• • ADA Improvements for Compliance

  • Signage and advertisement

  • Parking

  • Security, insurance, and indemnification

  • Dispute resolution

Are you planning on leasing commercial space in Seattle, Vancouver, Tacoma, Spokane, Bellevue, Olympia, Everett, Yakima, Bellingham or any other city in Washington? Get our free commercial lease agreement forms here to get started.