3 Considerations Before Drafting Your Commercial Lease for Tenants


After you’ve found a tenant to rent your commercial property, you’ll need to hash out the terms of your lease. As you’re thinking of draft points to include within your commercial tenant lease, consider that it’s important to include a balance of clauses to protects your interests, while allowing your new tenant to feel that they can continue to operate and expand their business for years to come.

Here are some clause points for you to consider so that you can create a win-win environment between you and your tenant:

Permitted Use clause: A permitted use clause addresses the overall use of the space that you can expect from your tenants. You’ll spell out in legal terms how your tenant will be allowed to use the space they’re renting.

While stating in writing the ways that the lessee will be able to use the space, it’s crucial to keep in mind that you don’t want to create a clause that’s too restrictive. The goal is for you to generate income from renting out your space. You’ll be hard-pressed to find tenants if they learn that you’ve included too many restrictions upon the type of business they conduct, along with how they chose to conduct business.

That said, a permitted use clause can come in very handy if you’re the owner of a mixed-tenant commercial property. For example, one tenant might use the space to conduct a family-friendly business, while another might use the space for operations that some might find offensive. Therefore, it’s important for you as the owner to create legal boundaries that satisfy all involved, while also striking a healthy balance for everyone.

Zoning and regulations: Speaking of considering the operations of a mixed-tenant facility, it’s also important to educate yourself about the types of business operations that would be allowed inside the units of your property.

For example, hair salons and nail salons are highly-regulated operations. They’re legally required to operate inside of units outfitted with specialized HVAC, in order to protect salon clients from the skin and respiratory issues from the chemicals being used. And if your units can’t pass certain health inspection codes, then your tenants wouldn’t be able to operate a business where food is cooked or stored.

Exclusive Use clause: One way that you could leverage a bump in revenue in your favor is by offering tenants’ rights to the unit they’re renting on an exclusive-use basis. For example, someone selling high-end accessories might not want to compete with another tenant selling similar products. On the one hand, you could help the tenant to position themselves by including an exclusive-use clause in their lease.

But be careful! Another highly-qualified tenant might want to use their unit to sell products that aren’t exactly like another but might fall under a gray-area of classification. You don’t want your lease to contain language that’s so broad; it alienates other prospective tenants.

As you’re drafting your NSW commercial lease agreement, these are just a few things you’ll need to consider. If you feel that you’re better off generating revenue from your rentals than hashing out the language of your lease agreements, then think about using a kit that will allow you to draft a legally-binding tenant lease, without all the inherent expense of hiring an attorney.


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