COMMERCIAL LEASE AGREEMENT
ASSIGNMENT
2
Question 1
According to Schuk Law LLC (2023), a commercial lease is a contract between a landlord and a
business tenant and a residential lease is signed between landlords and individuals looking for a
place to live. In commercial leases, the properties are designated for commercial and business
use, and it outlines the specific types of business that can be conducted and how the property is
used. The tenant is required to maintain the property, sometimes the responsibilities can be
shared but it must be specified in the lease. Responsibilities for maintenance and repairs can vary
from lease to lease because these terms can be negotiated. The landlord can increase the rent at
the end of the lease unless otherwise specified. These leases are more complex, longer and more
binding with fewer legal protections for the tenant. Whereas, residential leases provide safe
living conditions for the tenants, and the landlord is responsible for maintaining the property.
Because of this there is an implied guarantee that tenants have a clean, safe and comfortable
place to live. These properties can be rent-controlled. The lease is not as complex. (Crawford,
2020)
In a commercial lease the law should protect the commercial tenant. Commercial leases are
normally written by the landlords and/or their legal team which makes it more favorable for the
landlord. These leases are more difficult to come out of. They are longer and more complex and
involves a higher financial risk. The lease terms can affect the business for years, therefore, when
negotiating think ahead for the success of the business. (Crawford, 2020)
COMMERCIAL LEASE AGREEMENT
ASSIGNMENT
3
Question 2
In commercial leases, there can be various types of leases that dictate what the responsibilities of
the commercial tenant and the commercial landlord are based on the negotiations. On one end,
the commercial tenant’s monthly payment includes all expenses and repairs associated with the
premise, which is referred to as a gross lease. Then on the other end, the commercial tenant’s
monthly payment does not include all expenses for repairs but the commercial tenant reimburses
the landlord, which is called a net lease. Therefore, repairs, changes and enhancements to the
property are the responsibility of the commercial tenant. But there are variations to these two
extremes with negotiations. One variation can state which expenses should be included and
which should not be included in the commercial tenant’s monthly payment. Another variation
can include that the commercial tenant pays for taxes, insurances and operating expenses in
addition to the monthly payment. A commercial landlord should be responsible for structural
repairs and major repairs such as the roof and foundation, however, a commercial landlord can
shift these responsibilities to the commercial tenant. This favors the commercial landlord, where
all risk and expenses associated with the premises including maintenance and repairs are the
responsibilities of the commercial tenant. (Chmurski, 2020). Whatever is negotiated fairly should
be upheld. Galatians 3:15 (English Standard Version 2001/2023) states, “To give a human
example, brothers: even with a man-made covenant, no one annuls it or adds to it once it has
been ratified”. Therefore, before signing off on a lease, both parties should have their attorneys
check to see that if it serves their best interest. Nonetheless, the commercial tenant should get
approval from the commercial landlord before conducting repairs.
COMMERCIAL LEASE AGREEMENT
ASSIGNMENT
4
Question 3
According to Laura Dixson-Kruijf (2022), mitigation is when a landlord lessens the amount of
money that a tenant owes by taking normal/reasonable steps to allow another prospective tenant
to rent the property under similar lease terms. The landlord is required by law to mitigate its
damages. When a tenant breaks a lease, it could mean they are moving out before their legal
obligation is over. The landlord has the duty to mitigate damages once the tenants move out and
the landlord can work with a real estate broker or property manager to look for new tenants. Or
based on their relationship with the former tenant, they can work together to find a replacement
tenant. Bear in mind, the unit does not have to be rented before the other available units, but it
must offered to prospective tenants. In addition, when a tenant breaks a lease, it could mean that
they failed to meet their monthly payment obligations. The landlord can charge tenants for rent
for the time the unit was empty and any other monetary obligations according to the lease
agreement. However, the landlord cannot charge for repairs that were not the fault of the former
tenant, nor for rent while they are trying to rent the unit or if the landlord did not make the unit
available to prospective tenants. (Dixson-Kruijf, 2022)
Question 4
In Sections 2 and 19, the security deposit that the tenant pays favors both the landlord and tenant.
Security deposits are appropriate for commercial leases. For the landlord, the security deposit is
a payment that is made before the lease begins, it is considered to be a safety net. The amount of
the deposit varies based on negotiations but it can range from one month’s rent and higher. The
negotiations should include the conditions under which the landlord can use the monies.
However, it can be used for various reasons by the landlord, but mostly to cover any damages at
COMMERCIAL LEASE AGREEMENT
ASSIGNMENT
5
the end of the lease in preparing the unit for new tenants. It cannot be used for repairs during the
terms of the lease, however, non-payment of rent can be taken from the security deposit. For the
tenant, security deposits are refundable. During the negotiations, it should include the conditions
under which the security deposit is to be refunded to the tenant. Therefore, if the tenant paid their
rent on time and there were no major damages, they will receive 100% of the security deposit. If
the tenant did not pay rent during the terms of the lease, that amount will be taken from the
security deposit and the balance would be refunded. (Will, 2023).
Question 5
Section 29 requires mediation, followed by arbitration, in lieu of litigation, to resolve disputes is
typical for commercial leases, because it avoids the expense and delay of litigation and they
reduce the burden on court systems. Advantages of mediations are that they are less formal, they
are flexible, but they can also be binding. The mediator is not a judge and does not make
decisions nor do they give advice. Mediation does not require attorneys which makes it a more
affordable option. It gives guidance to both parties as they discuss their concerns, needs, wishes
interests and issues. One disadvantage of mediation is that unless the parties know the law or
have a lawyer present, they can run high on emotion with little progress. Advantages of
arbitration are that it is cheaper than litigation, it is binding and requires an attorney, it allows
parties to conduct research to gather more information and evidence from either side; and the
final decision is normally upheld by the courts. However, recently some courts have found the
agreements from arbitration to be invalid as contrary to public policy and this is a disadvantage.
(Newburn, 2022)
COMMERCIAL LEASE AGREEMENT
ASSIGNMENT
6
Mediators and arbitrators selection is based on the needs of the parties involved. The mediator or
arbitrator should be neutral. Parties, when selecting on a mediator or arbitrator, have to decide if
they want a person who is well-versed in the subject matter or someone with good
communication skills. They must decide if they want a mediator whose approach is more
evaluative or more facilitative or a combination of both. When deciding on an arbitrator, they
must decide if they want a flexible arbitrator or they need a strong case manager. Parties can also
consult with other colleagues who have had success with similar situations. (Shelby & Serdar,
2023).
Question 6
According to Numbers 30:2 (Amplified Bible, Classic Edition 1987/2023) states that, “If a man
vows a vow to the Lord or swears an oath to bind himself by a pledge, he shall not break and
profane his word; he shall do according to all that proceeds out of his mouth.” In a lease
agreement, the terms are negotiated by landlord and tenant, therefore, the lease agreement is a
written copy of their obligations that is binding to each party. In the lease this author would
specify that the security deposit be held in an account where interest can accrue, and that interest
is split between the landlord and the tenant no matter how the lease ends. This would mean, that
if the tenant was unable to pay the rent or had a major damage and they lost their security
deposit, they will still get half of the interest accrued. In contrast, if the tenant paid consistently
and had no major damages, they will get 100% of their security deposit and half the interest
accrued. This author would include in the lease, during mediation, they use a Christian justice of
the peace who is familiar with the subject matter. This person will be neutral, they will know
God’s Word and the law and can evaluate and facilitate the resolution of the dispute.
COMMERCIAL LEASE AGREEMENT
ASSIGNMENT
7
References
Crawford, R. (19 May, 2020). How Commercial Leases Differ from Residential Leases.
Millennium Properties R/E. Accessed on July 16, 2023.
https://www.mpirealestate.com/about-us/news/differences-leases
Schuk Law LLC. (2023). Commercial V. Residential Leases: Do You Know the Difference?
Schuk Law LLC. Accessed on July 16, 2023.
https://www.schuklaw.com/commercial-v-residential-leases-do-you-know-the-
difference#:~:text=It%20might%20sound%20obvious%2C%20but,for%20a%20place
%20to%20live.
Chmurski, N. (March, 2, 2020). Beware of Maintenance and Repair Responsibilities in
Commercial Leases. O’Neil Cannon, Hooman Dejong & Laing S. C. Accessed on July
16, 2023. https://www.wilaw.com/beware-of-maintenance-and-repair-responsibilities-in-
commercial-leases/
Dixson-Kruijf, L. (April, 12, 2022). Broken Leases, Mitigation for Landlords. Tenant Resource
Center. Accessed on July 16, 2023.
https://www.tenantresourcecenter.org/mitigation_for_landlords#:~:text=Mitigation%20is
%20when%20a%20landlord,property%20under%20similar%20lease%20terms.
Sikora, Will. (2023) Understanding Security Deposits in Commercial Real Estate Leases.
COMMERCIAL LEASE AGREEMENT
ASSIGNMENT
8
Aquila. Accessed on July 16, 2023.
https://aquilacommercial.com/learning-center/understanding-security-deposits-
commercial-real-estate-leases/
Newburn, R. (August 16, 2022). Pros and Cons of Mediation vs. Arbitration vs. Litigation.
Newburn Law Legal Articles. Accessed on July 16, 2023.
https://www.newburnlaw.com/pros-and-cons-of-mediation-vs-arbitration-vs-litigation
Shelby, Honorable Robert, J. & Serdar, Gary P. What Should I Consider When Selecting An
Arbitrator or Mediator? United States District Court, District of Utah. Accessed on July
16, 2023. https://www.utd.uscourts.gov/content/what-should-i-consider-when-selecting-
arbitrator-or-mediator
Bible Gateway (1987/2023). Numbers 30.2 Amplified Bible, Classic Edition Online. The
Lockman Foundation. Accessed July 16, 2023.
https://www.biblegateway.com/passage/?search=Numbers+30%3A2&version=AMPC
Bible Gateway (2001/2023). Galatians 3:15. English Standard Version. Online. Crossway
Bibles, a publishing ministry of Good New Publishers.
https://www.biblegateway.com/passage/?search=Galatians+3%3A15&version=ESV
Powered by TCPDF (www.tcpdf.org)
