A Brief Introduction About Gas Station Lease Agreement
A gas station is where petroleum products that are used as fuel for vehicles are distributed in exchange for money. The gas station can be owned by one person and operated by another. When the owner of the gas station leases the property to another person in the form of a lease, a gas station lease agreement is required.
Who Takes the Gas Station Lease Agreement?
Building a gas station is one thing: operating it is another. The agreement is entered into by a person who owns a gas station but is not willing to undertake the business of distributing petroleum products and another person who is willing to lease the property of a gas station and conduct business. Any person, company, or organization can enter into the contract.
Purpose of the Gas Station Lease Agreement
The purpose of the agreement is to set down the rights and obligations of the lessor and lessee, in a way that it is legally enforceable in a court of law. The agreement protects both parties and serves as a record of what is agreed upon in terms of consideration, operation, management, termination, and other important clauses. It is a way to ensure that there are no unfair practices.
Contents of the Gas Station Lease Agreement
A well-drafted gas station lease contract contains the following:
- The names and contact details of both parties.
- The name and location of the gas station.
- The term period of the lease.
- The payment for the lease, and any other payment provisions like sharing of profit. The frequency and mode of payment are also included.
- The rights and obligations of both parties.
- Mode of modifying and termination of the agreement.
- Dispute resolution procedure.
- Signatures of the parties.
How to Draft the Gas Station Lease Agreement?
Follow these points while drafting the agreement to create a loophole-free document:
- Define the terms used in the contract.
- The draft clearly, eliminating ambiguity.
- Mention the governing law.
- Mention the procedure for dispute resolution.
- Include the general clauses of the entire agreement, force majeure, severability, etc.
- Refer to a gas station lease template online before you begin drafting the agreement.
- Clearly, state the profit-sharing ratio for the gas station’s sales.
- Mention whose responsibility will it be to undertake the costs for repairs, taxes, upgrades, or damages in case of any human-made or natural calamity.
- Mention how the agreement can be terminated or reformed. The notice period and the mode of the termination should also be stated in the document.
- Mention after what time will the lessor have the right to sell the premises.
- Include a clause talking about the insurance policies about the agreement.
- Mention the details of the leasing permit acquired by the lessor, if local laws require it.
- Determine what constitutes a default.
- If a deposit is required, mention how much and when can it be returned. Also, mention in what circumstances can the deposit not be returned.
Negotiating between the parties can prove useful in case of determining the rent and the profit-sharing ratio, if any. Even though the discretion of operating and managing the premises is with the lessee, the lessor can set rules for the same. The parties can negotiate and create a win-win situation.
Benefits & Drawbacks of Gas Station Lease Agreement
- The agreement is a record of what was agreed upon between the parties.
- It is legally enforceable in the court of law.
- It helps the gas station owner to earn profit from the property, with everything jotted down on paper.
- It helps the gas station lessee the ability to run a business without investing in real estate.
- It avoids misunderstandings and helps in the smoother handling of a gas station lease.
- It can be complicated to draft.
- Because it can be complicated, the assistance of a legal professional may be required, incurring additional fees.
- It is not a guarantee against litigation.
What Happens in Case of Violation?
Generally, a gas station lease agreement contains a section where it is mentioned what happens in case of a breach of contract or default on the side of either party. If the breach is done by the lessee, the lessor can repossess the premise, sue the lessee in court, terminate the lease or give the lessee more time to perform the obligation. The clause for breach of contract in the agreement can also contain a pre-decided amount that will be paid as monetary damages or penalty by one party to another.
How Much Do Gas Stations Pay for Gas?
A gas station buys gas on a wholesale market at about 10-20% less than the market price. But after paying wages, taxes, and other costs, they make only a few cents per gallon of gas. According to the National Association of Convenience Stores, a gas station makes a profit of 3 cents per gallon of gas sold. The numbers are a little different according to U.S. Energy Information Administration – at 7-10 cents per gallon.
How much gas station costs?
In most countries, the cost of building a gas station of a small to medium scale can be around 2.5 million dollars. To buy the fuel deposits and to get it fully operational can incur another 500 thousand to one million dollars.
The gas station lease agreement is a must to provide legal protection to the parties entering into the contract. It promotes understanding between the parties about their rights and obligations and sets rules to follow. It is also a way to avoid any disputes related to money in the future.