Building Your Business Office Setup Sections in Commercial Real Estate Lease Documents Subleasing, Defaults, Disputes, Deposits, Restrictions—Here's What They All Mean By Jean Murray Jean Murray Facebook Twitter Jean Murray, MBA, Ph.D., is an experienced business writer and teacher who has been writing for The Balance on U.S. business law and taxes since 2008. She has taught accounting, business law, and business finance at business and professional schools for over 35 years, has authored several books on saving money and simplifying your business, and was the owner of startup-focused company Emence Enterprises, LLC. learn about our editorial policies Updated on September 13, 2022 Fact checked by Hilarey Gould Fact checked by Hilarey Gould Twitter Website Hilarey Gould has spent 10+ years in the digital media space, where she's developed a passion for helping people understand economics, saving, investing, credit card perks, mortgage rates, and more. Hilarey is the editorial director for The Balance and has held full-time and freelance roles at a variety of financial media companies including realtor.com, Bankrate, and SmartAsset. She has a master's in journalism from the University of Missouri, and a bachelor's in journalism and professional writing from The College of New Jersey (TCNJ). learn about our editorial policies Share Tweet Pin Email Photo: filadendron / Getty Images As you finalize the process of negotiating your commercial lease, you will be handed a commercial lease document. This document is a legal and binding contract between you (the tenant) and the other party (landlord or property manager). If you breach the contract (fail to fulfill your part of the bargain), your business could be sued and have to pay damages to the other party. Be sure to read it and ask questions before you sign it. To help, here are all the sections in the documents that you can expect. Key Takeaways Commercial real estate leases come with a document that is a legal and binding contract between you, the business owner, and the landlord or property manager.The main sections in the lease document include parties, definitions, premises, rent, term, deposit, hold over, utilities, use/restrictions, taxes and insurance, parking, maintenance, and more.It's wise to have an attorney read the lease and help you understand all of the terms and sections before you sign. Sections of a Commercial Real Estate Leases Here are the common sections of commercial leases, and a brief explanation of these sections. Parties The parties are the official names of the tenant and landlord. Make sure your business is the party described in the lease, not you personally. If something goes wrong, you don't want to be personally liable. You may be required to give a personal guarantee for the lease, but the documents can still be in the business name. Definitions Terms used in the lease are defined, like what "common areas" include and the "leasable area" is defined specifically. Pay attention to these definitions, so you know what you are paying for. Premises Describes the space you are renting. Verify that you understand how space is assigned and what specifically you are paying rent on. That includes CAM—common area maintenance—which can be a hidden cost if you aren't careful. Rent Explains how the rent is calculated and when and how it must be paid, including what happens if the rent is not paid on time. Other costs associated with the lease, including common area maintenance (CAM), may be included in this section. Common terms such as "gross lease" or "triple net lease" may be included here; make certain you understand what these terms mean. Term Explains when the lease begins and ends. This section may also describe how the lease may be re-negotiated. Deposit Describes the security deposit the tenant is required to provide when it is considered to have been received, and the circumstances under which it may be forfeited or returned. Hold Over Explains what happens if the tenant does not leave at the end of the lease. Utilities If utility costs are included in the lease, it explains how they are metered and distributed among the tenants. In some cases, each tenant may have a separate meter. If the tenant is paying the utilities, this section may explain the requirement to pay utilities and what happens if they are not paid on a timely basis. This protects the landlord if the tenant fails to pay utilities. Use/Restrictions Lists the restrictions on the use of the premises, including signs, hours of use, and limits on occupancy and sub-lessees. Note Have an attorney review the terms of the lease to explain any specific terms that you don't understand, and to look for issues that might be a problem for you or are not what you thought you agreed to. Taxes and Insurance Discusses who pays property taxes and insurance on the property. This section usually includes a requirement that the tenant provides proof of insurance on property and equipment in the leased space and liability insurance, to protect the landlord. Usually, the tenant is required to indemnify the landlord [hold him/her harmless) in any liability suits against the tenant. Parking Describes the parking available for the leased space. Some lease documents differentiate between where employees may park and general customer parking. Make certain that the parking space conforms to ADA standards by providing adequate handicapped parking. Maintenance Describes who is responsible for making and paying for maintenance and repairs. Most leases require tenants to pay for repairs due to "wear and tear" (common usage), with the landlord being responsible for extraordinary repairs due to major damage or failure of equipment. Assignment and Subletting Some leases have a separate section describing the conditions under which you can sublet the space. Options Describes the options you may have to rent additional space in the building if it becomes available, or options to buy the property. Defaults and Remedies Describes what happens if one party defaults (breaks the agreement), and the remedies available to the other party. Destruction/Condemnation These clauses describe what happens if the leased space is destroyed or condemned. Subordination, Non-Disturbance, and Attornment Describes the rights of the tenant if the landlord's lender forecloses on the property. This section protects the tenant from being ejected by a new landlord or the bank. Estoppel Explains what happens if there is a change in the landlord's situation, to verify that the tenant is living up to his/her duties as a tenant. Attorney Fees Agreement about who pays attorney fees in the event of a lawsuit between landlord and tenant. Dispute Resolution Some leases provide for alternate forms of dispute resolution, like mediation and arbitration. Many contracts these days include a mandatory arbitration clause. If you find this in your lease, you should discuss the implications with your attorney before you sign. Frequently Asked Questions (FAQs) What is commercial real estate? Commercial real estate is property that's used for business, not personal, purposes. Commercial real estate could be a store front in a downtown shopping area or a large office building with several floors, offices, and rooms. How do you lease commercial real estate? To lease commercial real estate, you can start by finding a real estate agent who works with commercial properties. You may easily see a commercial real estate property in your area with a sign that says leases are available. You may be able to contact the commercial property directly for more information and a tour. In order to lease the property, you may need a down payment or security deposit, and you'll need to sign the document, which is a legal and binding contract. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Berger Commercial Realty Florida. "What Are CAM Charges?" Cornell Law School, Legal Information Institute. "Triple Net Lease." United States House of Representatives. "Estopple Certificate." New York City Small Business Services. "Comprehensive Guide to Commercial Leasing."