A standard industrial commercial multi-tenant lease agreement is entered into between a landlord and his tenants when he/she lets out a single premise to more than one entity. It serves as a master document and contains all the terms and conditions, rights and obligations and other contractual clauses which would apply to the entire tenancy as a whole. It facilitates the leasing process by reducing negotiations to a minimum. However, the commercials may vary from tenant to tenant.
What is a Standard Industrial Commercial Multi-tenant Lease
A Standard industrial commercial multi-tenant lease is a contract which enables the landlord to lease out his/her premises to multiple tenants on a gross basis. For example, an industrial or commercial complex wherein different floors are occupied by different commercial businesses. The resources of such premises are shared among the multiple tenants. Typically, this lease is on a gross basis wherein the landlord collects rent from the tenants and pays out taxes and maintenance out of the same. There can be a commercial multi-tenant lease and an industrial multi-tenant lease, while in the former premises are let out to commercial businesses, the latter are rented out for industrial activities. One should have the following information at hand before drafting this contract: Names of the tenants, the rent being levied, the premises being let out, the duration of the lease and any other specific conditions which need to be incorporated.
Purpose of a Standard Industrial Commercial Multi-tenant Lease
A standard industrial and commercial multi-tenant lease serves as a master document which governs the relationship between the landlord and the tenants. It reduces to writing the terms and conditions of the lease and the obligations of both the landlords and the tenants. Having a standard multi-tenant lease saves time in negotiations. It also serves the purpose of having the same terms for all the tenants, hence preventing any disputes later on.
Inclusions in a Standard Industrial Commercial Multi-tenant Lease
A standard industrial multi-tenant lease or commercial multi-tenant lease needs to have clarity on a few basic points. The foremost of these is the number of parties to be incorporated in such a contract. Being a multi-party agreement, it is pertinent that the names and registered addresses of all the parties are to be included clearly in the agreement. Other standard clauses such as interpretations, dispute resolution, waiver, remedies, notices, termination, etc. need to be included in such a contract.
Key Terms in a Standard Industrial Commercial Multi-tenant Lease
The following key terms must be included in the contract:
- Premises: A proper description of the premises to be leased out should be included in the contract.
- Term: The term of the lease should be mentioned. The form of the lease too should be included in the contract.
- Date of possession: This is a very important clause, as it establishes the date from which the lease would begin.
- Rent and its components: The amount of rent and what all does it constitute should be mentioned therein. The rent should ideally be charged on per square foot basis.
- Obligations: The obligations of both the landlord and the tenants should be mentioned. For example, a tenant should, inter alia, be required to maintain the premises in good condition, pay the rent by a stipulated time and not use the premises for any other activity.
- Security deposit: The amount of security deposit and the manner and timing of return should be mentioned.
Drafting a Standard Industrial Commercial Multi-tenant Lease
The following guidelines should be followed for drafting an industrial multi-tenant lease/commercial multi-tenant lease:
- Have all the information required at hand before you start drafting.
- Check if the rent being levied is in compliance with the applicable laws.
- Make sure that the termination clause is included in the contract and an exit option based on default is provided.
- The security deposit should be proportional to the rent.
- Effective date or date of possession should not be missed. Ideally, both should be the same.
- Fix a date for payment of the rent.
- What type of lease is being granted should also be mentioned.
- Permitted uses should be enumerated.
- Party names and addresses should be included.
- Dispute resolution and severability clauses should also be in-built in the contract.
Benefits of a Standard industrial Commercial Multi-tenant Lease
Benefits of an industrial multi-tenant lease and a commercial multi-tenant lease are as follows:
- It acts as the guiding document for defining the relationship between the landlord and the tenants.
- Having standard terms and conditions reduces the level of negotiation required.
- It helps avoid the cumbersome task of executing a separate lease agreement with each tenant.
- It defines the rights and obligations of the landlord and the tenants clearly.
Cons of a Standard Industrial Commercial Multi-tenant Lease
This contract has the following cons:
- Standard terms and conditions at times do not work well if the needs and requirements of each tenant are different. This may pose a problem in drafting permitted uses clause.
- In an industrial multi-tenant lease, such contracts may pose an issue as there may be a scope of negotiation which is otherwise curtailed by a standard agreement.
- Having standard clauses also poses difficulties in termination.
A lease agreement especially with multiple tenants is a nuanced contract and should be drafted with care. As this is a lease agreement, and suits for possession, eviction proceedings, etc. it may be resorted to in the event of a breach. The rent under the agreement should be fixed for a certain duration. Any departure from the same may result in a lawsuit. Such leases are governed by real estate laws and hence proceedings for violating the law would also emanate.
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