When business owners share office space with other businesses, it is important to have an office share agreement written.
What Is an Office Sharing Agreement?
An office-sharing agreement is an agreement between the tenants of the office space. It should include the terms of the office sharing arrangements such as rent and course.
Further, this agreement assumes that all tenants are the master tenants, making them joint and severally liable for one another and that the landlord consented to this arrangement. If the landlord does not let all tenants be the master tenant, the office sharing agreement should include an extra provision to bind the non-master tenants to the commercial lease terms.
What Is Joint and Several Liability?
For tenants, joint and several liabilities mean that the landlord can request the whole amount of rent from one co-tenant regardless of how the rent is deducted. Yet, any tenant held liable by the landlord for the entire rent can seek repayment.
What Should the Office Sharing Agreement Include?
An office-sharing agreement may be prepared any way you want. Especially in business situations, a personalized agreement may be essential and may best meet your needs.
Typically, an office sharing agreement should include:
- Who may use the space
- Future commercial sublease
- The course of the sharing
- Rent owned and at what frequency
- Start and ending of the agreement
- What constitutes a breach
- What to do with common areas
- Who pays for what business costs such as internet
What Is a Commercial Lease?
A commercial lease is a contract used when a commercial tenant rents space from a landlord. Like all leases, a commercial lease gives a commercial tenant the right to inhabit the area and conduct business activities for a certain amount of time to make monthly rent payments to the landlord. The lease also acts as a compass for both parties regarding their legal privileges and obligations.
For example, a commercial tenant will create a commercial lease with a landlord when they rent business property, such as office space, a restaurant, or a retail store located in a mall.
Depending on the kind of commercial lease the parties enter into, it will supply instructions like which party is liable for making repairs, who is responsible for paying real property taxes on the space, etc.
The terms and conditions of a commercial lease are controlled by a distinct area of real estate law known as “commercial lease law.” Commercial lease law dictates the privileges and responsibilities of both parties and tells them what needs to be included in the final commercial lease agreement. Commercial lease law is a relatively complex field, so you may need to consult a local real estate attorney before signing any commercial leases.
How Are Commercial Leases Different From Residential Leases?
Although there are many distinctions between a commercial lease agreement and a residential lease agreement, the most glaring contrast is the nature of the rented property. For example, the terms of a commercial lease agreement are deliberately concentrated on the requirements of running and maintaining a business on the premises.
In contrast, a residential lease is precisely crafted to ensure that a tenant will live in habitable conditions and enjoy their time and space while living on that particular property. In other words, residential lease terms are created for dwelling, whereas commercial lease terms are geared towards running a thriving business on the property.
While both types of leases have some features in common, such as the covenant to pay rent, commercial leases afford fewer rights to business tenants and are much more complicated.
Commercial leases tend to have more extended rental periods than residential leases. For example, residential leases are usually created for one year or less, whereas commercial leases generally exist for several years. This is so that the business does not have to interrupt its operations and move to a new place every year.
As mentioned, business tenants have fewer rights than residential tenants. This is because the law regards businesses to be savvier than general residents. Therefore, commercial leases offer a lot more flexibility and opportunities for negotiations.
For instance, conditions, such as rent payment amounts, security deposit amounts, lease length, accessibility, etc., can all be negotiated.
Residential leases, on the other hand, generally use boilerplate language. Also, since residential tenants enjoy many more privileges and protections under the law than commercial tenants, it is easier to evict a commercial tenant.
Ultimately, it is much more difficult to break or amend the terms of a commercial lease than a residential one. Commercial leases also tend to involve higher rental installments.
What Are the Basics of a Commercial Lease?
The basics of a commercial lease will vary by jurisdiction, the kind of commercial lease used in the transaction, and the exact terms agreed to by the parties. Yet, because of commercial lease laws, there are some essential elements that every commercial lease agreement must contain.
- A covenant to pay rent: A commercial lease should state how much rent is, when the rent is due, and whether the business tenant will be subject to rent increases. If there are rent increases, the tenant may want to negotiate a limit on the percentage of them.
- The lease’s duration: The lease’s duration, or the lease term, must be included in the lease. This provision should state when the lease begins, ends, and whether there are opportunities to renew the lease.
- The security deposit amount: How much the tenant has to put down for a security deposit, the date of return, and any conditions that need to happen before the tenant gets their security deposit back.
- The property: Both the type of property being rented and the address of the property being rented should be included in the lease terms.
Some other things that a commercial lease may identify include which party is responsible for repairs or maintenance (e.g., tenant versus landlord), whether or not the tenant is entitled to assign or sublet the rental property, and whether the landlord or tenant will be responsible for things like property taxes and insurance.
What Should the Lease Say About the Commercial Property?
As discussed above, all commercial properties must define and identify the commercial property in question. This means that the lease must contain:
- A straightforward description of the rental property.
- The address of the property.
- The dimension or size of the property.
- Any other items that would clarify (e.g., in the event of a dispute) what property the parties are discussing.
The lease should also determine what method the landlord uses to gauge the area, what types of rooms are included on the property (e.g., bathroom, kitchen, etc.), whether a parking lot is attached, etc.
In addition, the parties may want to include details about improvements, modifications, and fixtures on the property, such as whether they are permitted, who owns them after the tenant moves or the lease lapses, and how one can go about making them (e.g., is the landlord or tenant responsible for expenses).
Do I Need a Lawyer?
Although you may attempt to draft an agreement without a landlord-tenant lawyer, your contract may contain errors that cannot be fixed later and make you legally bound by it.
A landlord-tenant attorney is well versed in the law and can prepare a contract that best matches your needs and concerns. Overall, a lawyer-drafted contract will save you the cost of future lawsuits.