5 Essential Elements To Create An Office Space Rental Agreement

There are several essential elements to create an office space rental agreement. Office space rental agreements are used when leasing or renting out a property for business purposes. The tenant occupies the office space for business, industrial or mixed use under the terms of the agreement. This work agreement contract is used as proof if there is a dispute and the case is brought to court. As a landlord, write a simple but clear contract to protect your business property. Here are some essential elements to create an office space rental agreement.

Type Of Lease

An essential element needed to create an office space rental agreement is the type of lease. There are four types of leases: full service leases, net leases, modified gross leases and percentage leases. Typically, full service leases are the most common type of lease. You charge your tenant one gross total payment each month. The services included are janitorial services, property insurance and utilities. A net lease allows you to charge lower annual rent but tenants pay utilities, janitorial expenses and base rent. Modified gross leases allow you to charge a fixed rate with property insurance and tax payments. Percentage leases allow you to charge tenants a base rent as well as a percentage of the gross sales made from doing business. Certainly know the type of lease you want when creating an office space rental agreement.

Rental Term

Next, the rental term is an essential element to create an office space rental agreement. Decide how long you want to rent out your space. You can rent for couple of months up to 20 years. In the agreement, definitively state a start and end date. This gives the tenant a clear understanding of their lease length. Additionally, give the tenant the chance to automatically renew their lease every month or year. This contract will be renewed until one party decides to terminate the lease. You can also set up a payment schedule depending on how you decide to accept rent. Certainly, address the rental term when creating an office space rental agreement.

Operating Expenses

Another essential element when creating an office space rental agreement is operating expenses. Operating expenses are the fees associated with operating and maintaining your property. This can include rent, utilities, and taxes. Typically, depending on the lease agreement, tenants are responsible for paying for operating expenses. They can be included in the gross rent payment or in addition to the rent payment. These expenses should be listed in your bill so that they can directly benefit you under the lease and they should follow the generally accepted accounting principles (GAAP). Of course, include a precise and simple definition of the operating expense items. Certainly, include an operating expenses clause when creating an office space rental agreement.

Exclusive vs. Permitted Use

Of course, exclusive vs. permitted use is an essential element to remember when creating an agreement. When you enforce an exclusive use clause, tenants are promised that no one else in the building may engage in a particular business type or carry certain merchandise. Typically, only powerful brand tenants get exclusive clauses. Permissive use clause allows tenants to state all activities their brand will do, such as a private post office allowing customers to photocopy documents. If the post office does not state that activity in the agreement, they cannot start doing it. Certainly discuss exclusive vs. permitted uses when creating an office space rental agreement.

Maintenance And Renovations

Finally, maintenance and renovations are essential elements needed to create an office space rental agreement. Typically, you are in charge of maintenance such as landscaping, heating, ventilation and air conditioning. However, you can manage how maintenance is being outsourced in the agreement. Additionally, verify cleaning processes, such as if the tenant has to pay for cleaning or if there is a cleaning service, in the lease to avoid arguments. Of course, when it comes to renovations, you are in control of how it is managed. Generally, landlords pay for initial renovations to make the area suitable for long-term renters. Make sure you thoroughly state and explain maintenance and renovation responsibilities in your office space rental agreement.

Certainly there are several essential elements to create an office space rental agreement. First, decide the type of lease you want to enforce for a payment agreement. Additionally, create a rental term agreement to know how long the physical space will be occupied. Of course, explain the operating expenses clause for rent, utility and tax responsibility. Definitely specify if the lease is exclusive or permitted use so tenants know what to include in the agreement. Finally, address maintenance and renovations so tenants understand how things around the building will be managed. These are the top essential elements to create an office space rental agreement.