Find out what a commercial lease is. How to make a commercial rental contract? What is the minimum term? Simple contract template adapted to the new Tenancy Law to print in Word and PDF.
How many people do not decide daily to open their own business, be it a beauty salon, a candy store or some other business?
And how many companies, after having a good growth in sales, realize that they need a bigger place, with more rooms, to hire more employees?
When finding the ideal place, such as a room in a shopping mall or a building, it is very important that you make a commercial lease, so that he and the owner feel protected, avoiding that in the future either one of them requires something that does not was agreed.
Thus, this document must record everything that was agreed between the parties (tenant and owner) so that, if any doubts arise during the term of the contract, they are resolved as soon as possible.
However, it cannot be done by just anyone as there are some requirements that most people do not know and if they are not in your contract, it will not be valid.
1. What is the Simple Commercial Lease Agreement?
Also known as commercial lease agreement or of commercial property rental term sheet is a type of document that proves the business conducted between two people and the object is the rental of a commercial property.
The correct name of the commercial property owner is lessor or landlord. Those who rent the property are called tenants or tenants.
In it, the owner of a commercial property (owner) rents his property to a legal entity, that is, someone who owns a business, such as a store, a company or an office.
In return, the other person pays an amount to the owner of the property, and you’re just in luck as because nova city is offering great commercial plots to invest in.
Since the function of the property is different, some characteristics of the commercial lease contract will not be the same as the residential one, such as the term of validity.
Another is that the establishment needs to be created point, or make your customers know the services that are offered on site.
Many of these properties are also rented already furnished. If this is the case, this information must be included in the Inspection Report, attached to the document, in detail, to prevent any furniture from disappearing, by the lessee, when the lessor takes back the property.
2. How to make a Commercial Lease Agreement?
There are some requirements that are very important to be observed when negotiating commercial rental. Let’s look at some below:
It is important to research the real situation of the property before entering into the commercial rental contract, to avoid being surprised by a court decision stating that the landlord is no longer the owner of the property, for example.
Is the property used as a guarantee for any contract (examples: banks, loans etc) made by the owner? Is it subject to fiduciary alienation?
Is there any restriction indicated in the registration certificate that could hinder the maintenance of the contractual term? Are there property-related tax debts?
Is this property prepared to receive the business activity you want to carry out in this commercial point? Are there any impeding environmental restrictions?
However, it is not because they have restrictions on this property that it means that the rent cannot be made.
The difference is that the commercial lease contract must fulfill clauses that talk about the existing risks, such as guaranteeing that if the property changes owner, the deal will be fulfilled by the end of its term.
Lessor’s legal and financial analysis
It is always good to look at the lessor’s legal and financial situation, to avoid future problems, such as having to leave the property in a hurry because it was pledged in a lawsuit.
Therefore, one should seek answers to the following questions, such as: Can the property be pledged during the lease to guarantee the owner’s debt?
Does the landlord (or landlords) really own the property? Is this information indicated on the property registration?
In order to carry out a long- term rental contract, is it necessary for the landlord’s spouse to authorize it?
All this information must be observed, so that the commercial rental contract protects the lessee from possible problems, such as the contract not being fulfilled until the end of its term due to the change of owner.
Commercial Rental Agreement
Personal information of the parties
Few are the contracts that have all the personal information of the lessor and lessee, such as full name, address, profession, and number of identification documents.
Without this information, it may not be possible to identify one of the parties in a possible lawsuit, for example.
If one of the parties is married or has an attorney, or in the form of a guarantee a guarantor or insurance company has been chosen, the data of these people must also be in the document.
Description of the rental property
The property to be rented must be described in the commercial lease agreement, indicating the address where it is located and any other information that can be used to identify you.
It must be clear in the document the information about the structure of the house at the time of the contract, through an Inspection Report that must be attached to the document.
This report will contain the structure of the property before the transaction is carried out for comparison at the end of the contract term, where it will be possible to identify a possible need for repair.
Therefore, this opinion must be very detailed and include photos, which facilitates the verification of repairs, in addition to being able to be done by the parties or by third parties, if the contracting party so wishes.
Thus, if there is any damage to the property during the contract, the tenant will have to carry out the repair.
Structural reforms to the property
This is a point that deserves the entrepreneur’s attention because it can cause confusion between their responsibilities and those of the owner.
Thus, the tenant must take care of the maintenance of the leased property, that is, painting on the walls, repairing doors and windows, among other essential works to serve the client well, are the tenant’s duties.
The lessor, in turn, is responsible for preventing problems from occurring in the structure of the property.
If the entrepreneur needs to carry out works to better serve his customers, they should only be done with the owner’s authorization — respecting the structure of the building and the laws of the municipality.
Registration of the Lease Agreement in the Property Registration
There are people who prefer to register the rental agreement when registering the property.
This registration makes the document safer for both parties, as everything that is agreed will be registered in a property document.
However, this procedure is common for large companies, but little used by smaller businesses.
Therefore, this document also follows rules provided for in several Brazilian laws, such as the Civil Code and Law nº 8.245/91 (law of tenancy).
That’s why having a complete Official contract in hand made in accordance with the New Tenancy Law is rare nowadays, because those who don’t work in contact with the legislation, don’t have the knowledge of everything it recommends.
3. What are the Essential Documents for hiring?
There are some documents that must be attached to the Commercial Lease Agreement, as listed below.
- Get in;
- Electrical Inspection Report;
- Business license.
The Habite-se , also called the Charter of Habite-se, is a document that proves that the work is regular before the City Hall.
This document is issued by the State Inspection Agency where the property is located.
The AVCB (Fire Department’s Inspection Report) is a document issued by the fire department.
There is discussion about who is responsible for issuing it, but as it is a property document, the lessor should be responsible.
However, this can be resolved through an agreement between the parties to define who will provide and who will bear the costs.
The Electrical Inspection Report, on the other hand, is another important item for those who want to rent a commercial property, as it is with it that the situation of the electrical installation of the leased property is known, in addition to the quality of the energy supplied.
There is also the Operation Permit, a document that many companies work without, but this can be a problem and the company suffers a great loss.
Despite the lack of inspection, if there is an incident and people get hurt on its premises, the company will have to pay a fine, in addition to running the risk of being closed and the entrepreneur losing his professional license.
4. What are the payment terms of the Commercial Lease Agreement?
For the avoidance of doubt, the amount of the rent must be stated in full and in number, as well as informing how the payment will be made.
The most preferred ways are payment by bank transfer, bank transfer or check. It also has to be informed what the expiration date will be.
Something very important is to explain in the contract who will pay the charges for the property, such as property tax, condominium, electricity, among others, so that debts to the property do not appear due to non-payment.
Therefore, the private rental instrument cannot be written by anyone, as it proves the agreement made by the parties.
Commercial Rental Agreement
5. What are the payment guarantees allowed in a Commercial Rental Agreement?
The rent guarantee is also a fundamental clause of the contract, because if the tenant cannot pay the rent, there are some ways to ensure that he receives that amount.
The best known types of guarantee are surety, surety and surety bond, as shown below:
Also called security deposit, it is when the landlord asks the person who is renting their property for an amount as a guarantee of payment.
The most common is that this payment is made in cash, and the amount must be the value of up to three months’ rent.
This guarantee is for the owner to have protection in case there is a problem that does not allow the tenant to pay the rent, such as being unemployed.
If the duration of this contract expires and there is no problem, the amount of the deposit will be returned to the tenant.
When the tenant appoints another person responsible for paying the rent, if there is any reason that does not allow him to pay, skymarketing.com.pk call that third person a guarantor.
If this is the chosen form of guarantee, the contract must contain all of the guarantor’s personal information, such as full name, address and contact telephone number.
This information is necessary so that the lessor can contact the guarantor, if necessary.
The Surety Insurance, in turn, is when the tenant chooses the option of paying an insurance company an amount so that, if he cannot pay the rent, the insurance company will do so.
The contract must contain information about this insurance company, so that the owner of the property can get in touch with it, if that happens.
6. What is the minimum term for the Commercial Lease Agreement?
According to the Tenancy Law, commercial rental contracts can be made for an indefinite period.
However, the most recommended is that they be done with a minimum period of 5 years , and an amendment to the commercial lease agreement can be made, if the parties so wish.
However, if the tenant wants to renew but the landlord refuses without presenting a reason that justifies his refusal, it will be possible to file a renewal action, which team of park view city lahore will talk about later.
7. What commercial rent readjustment index?
To avoid surprises when updating the value, it should be made clear what the readjustment value will be every 12 months.
It is important that this amount is not linked to the fixed amount of the minimum wage or exchange rate variation, for example.
After fully filled out, the contract must be signed, in two equal copies, by both contracting parties and, equally, by two witnesses.
It is very important to know what Brazilian legislation says about this type of document, in order to avoid some problems.
It may happen, for example, that the owner asks for the property to be vacated without prior notice, either orally or by letter.
That’s why you should be very careful when preparing the contract, as there are many free contract templates on the internet in word and PDF to print , but they do not fulfill all the essential requirements to be valid.
Therefore, it is recommended that it be done by a notary or lawyer, who knows exactly what mandatory clauses it must have.
Commercial Rental Agreement
8. What if the rental property is sold?
This is a clause that many people do not put in the contracts, although it is very important, since if the owner decides to sell the property, the purchase preference belongs to the tenant.
If the landlord decides to sell the property to a third person, that person can simply terminate the lease with the tenant.
However, if there is a clause in the document guaranteeing that in case of sale of the property during the lease, the rental agreement must be respected, the new owner will have to respect it until the end of its term.
9. Renewal Action
The Renewal Action is used to ensure that the lessee of a commercial lease can renew his contract with the owner of the leased property.
The main purpose of this action is to protect the commerce created by the entrepreneur in the years in which he is installed in the place.
Otherwise, he would lose the investments made in the commercial property, the clientele built over the years through advertisements and publicity inserted there, not to mention the property’s valuation.
It is applicable when, although the tenant wants to renew the lease, an amicable renewal is not possible.
This way, if the tenant has spent at least 3 years in the same activity, he can file a renewal action to guarantee the renewal of this business.
As the main document proving the realization of the rent is your contract, care must be taken when making it.
10. How is the Commercial Rental Agreement terminated?
In a commercial lease agreement it is essential that there are penal clauses.
They are the consequences suffered by each of the parties if they fail to respect an obligation and a breach of contract occurs.
The most well-known reason for contract termination is late payment. If the monthly payment is only made after the monthly payment expires, it is customary to apply a 10% penalty on the rent amount.
It may also happen that one of the parties, landlord or tenant, wishes to terminate the contract before the end of the term, either because the landlord no longer wants to rent the property or because the tenant is no longer able to pay the rent, for example.
In this case, the amount of 3 months’ rent to be paid as a fine or ⅓ of the amount that would be paid if the contract were fully fulfilled must be calculated.
Brazilian law does not say exactly what penalties should be in the commercial rental contract, which makes this information so important, because if someone does not comply with any clause, the contract will have the penalty to be applied.
All about the Topic
Legislation: Civil Code and Law No. 8.245/91 (Tenancy Law)
Concept: a person gives up the use of their commercial property for another person to use, receiving an amount in return.
Term: a minimum term of 5 years is recommended for this type of contract
Payment guarantees: the most used are surety, surety and surety bond.
What can’t be missed:
- know how the legal and financial situation of the property and lessor is;
- qualification of the parties;
- object description;
- payment conditions;
- readjustment clause;
- breach of contract clause.